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The Next Big Thing?

15 March 2005

Michael Cant reflects on his experience in infrastructure and FM change within the higher education sector, and argues that FM is failing to see the opportunities and not meeting the challenge of playing a more central role in the future

OVER THREE or four hundred years Britian’s universities have accumulated a steady and sometimes well funded series of buildings ranging from offices and quadrangles, study and sports fields, libraries and laboratories and learning resource centres, to research space and residences. Newer universities have entered the market, and bring with them much needed teaching and learning capacity, and a management agility to refresh and challenge historic ‘education’ conventions.

Estate teams are working hard just to keep up. The University of Leeds has almost doubled its students in only a decade and with over twice as much accommodation under management in the same time, but its total estates budget has only marginally grown over this period. They work wonders at providing a high quality service at a reduced cost per square metre. And this is the challenge.

There is an underlying and growing malaise in the higher education sector. These huge and valuable estates are also falling into decline. They need maintenance they cannot afford and require high quality management and technical skills. Managers have to think hard about the type of environment and facilities required for the future in order for their institution to compete in the new global market. For many years this was not much of a contest. Universities grew and developed, became protected by Government and other policy, secured regular funding from HEFCE and tended to prevent outside parties from invading their comfortable life and grounds. Money was an object - but only to a limited extent.

Lucrative contracts
A vast array of facilities need to be supported and the FM sector has indeed been eagerly rubbing its hands at the thought of getting its hands on total outsource contracts worth many £millions per annum to run entire university support facilities. But this has not really transpired.

Outsourcing FM started quite well. Universities needed somewhere for students to sleep. Residences are expensive to build and potentially expensive to manage and maintain. Quite often 1,000 bed units or more are required, with costs often exceeding £10m. This is a significant investment, and when one adds the cost of funding, managing, and maintaining/ operating, it becomes an even larger and more interesting FM opportunity.

And so many universities experienced PFI/DBFO, and the ebb and flow of commercial versus intellectual endeavour in FM. What has emerged, particularly in recent years, is a challenge on many fronts. At one time, and until fairly recently, growth targets became almost exponential – 20 per cent per annum in some cases. Student growth needed space and space cost money. Maintenance and servicing has to be undertaken on all the extra space that has been created. But there is a much bigger prize, and it’s tantalisingly close in some regards.

The KDK survey review undertaken over a decade ago highlighted the sheer scale of backlog maintenance facing the education sector. The sums were so enormous that it had politicians and institutes running for cover. HEFCE and the Government suddenly faced a challenge they didn’t expect when they commissioned the Report. It is now freely acknowledged that for all but a tiny fraction of the university and college sector, providing sufficient funds to maintain the buildings at their current state, much less bring them back to high quality grade A standards, is nigh on impossible in funding terms. Billions of pounds are required, and this is beyond the means of any single organisation or public sector capability.

In house
Facilities operations within universities are still very firmly based on in-house teams providing the majority of the support services although external contractors and consultants, cleaning and security operations are provided by third parties. However, the complete outsource under a TFM (total facilities management contract) is still largely off the agenda, despite persistent efforts to convince universities this would be a good thing.

The first challenge to those determined to become one the FM contractors viewing the 100 acre estates with 3-4m sq ft of accommodation and £20m per annum estates FM budget, is they must demonstrate and prove (the logic) as to the value that they could add through operating such a large undertaking under a third party arrangement, rather than the current in-house FM service. I am not addressing (say) only catering or cleaning contracts, but the entire facilities and estates management service, and beyond to the wider corporate infrastructure services such as ICT and HR, to name but two. We are talking about £100m per annum budgets here! The big prize on offer is just in focus.

Global learning
Global competition is now providing the opportunity for education to grow its market reach well beyond physical boundaries, but this will require a support infrastructure that is very different from the traditional, location specific, model. Learning environments are just as much about being in the living room as they are about being in the library. Reading rooms are often almost empty, because researchers and other specialists don’t need to go there to look at a valuable Collection item. They access the digitised version from their back room office at home (or on the beach). The current university asset base (the property and its infrastructure) is neither capable of meeting future needs nor is there sufficient funding to bridge the gap in an incremental or modest way. Continued fragmentation in a university’s academic infrastructure is unsustainable – it is inefficient, unnecessary and lacks capacity to be flexible enough to adapt to the everchanging sector and economic dynamics. Universities need FM, but the proof is not yet there.

However, FM sector is still many a mile away from demonstrating its credibility and capacity to add more than marginal value. It fails to make a substantive case to be able to address anything but a relatively minor part of the total infrastructure expectation. Building and managing residences is not enough. A combined cleaning and catering contract is small beer. FMs need a track record in being part of a larger ‘consortium’ of suppliers with wider remit to manage and deliver services reflects inadequate and (sometimes) inappropriate processes, procedures, technology and competence. Am I being overly critical? Perhaps, but it is better to challenge and encourage the FM sector to focus on deeds rather than words.

Working with leading education institutions such as Leeds, Kings College, Imperial College, Cambridge, Birmingham and the University of London over the years, we have reflected upon their approach compared to other organisations we have advised - a diverse range as Barclays, ABN Amro, Mars Confectionery, Hammerson, GCHQ Scottish Executive and De Beers (DTC). In all cases, they are open and committed to innovation and alternative strategies that will secure FM and infrastructure support to meet exceptional rather than average standards. However, these and many more organisations would rather have providers stop sending marketing brochures, and prefer they demonstrate the ability to genuinely deliver to meet their specific and future needs. Both parties are probably waiting for the next big thing.

Aspiration
Therefore, here is our aspiration for FM providers in the market (and it isn’t a negative proposition, or one that leaves all the commitment or effort to the supply-side).

Universities need to see FM providers with the demonstrable capability to exceed internal (inhouse) competence in location-centric services such as cleaners, catering staff, trades etc. Undertaking a wide-ranging outsource contract, usually under TUPE, does not mean a great deal if all that is being secured is transferred staffing, inflexible contract terms, VAT, management layers and profit margin.

Universities need an assembly of ‘best in class’ providers honest enough to acknowledge they individually don’t have expertise in MIS as well as catering, or cleaning and ICT, or construction, finance and consultancy, or in move management and health and safety. It isn’t there. It may never work as a business model, and it is unfair to university clients to purport that such a wide-ranging competence is readily (or at all, or ever) available. The best we will get is an aggregation of high quality niche providers working properly together, within an integrated financial and operational framework, with minimal management input. But it will be a good thing - for us and them - if the suppliers can get their act together.

An approach by universities that is based upon a planning horizon that is wider and deeper than is generally used, or accepted at present. In the emerging education landscape, a single infrastructure management and decisionmaking platform permits flexible, balanced and integrated support to academic activities. Many universities are busy breaking down their academic and administrative silos, but I am surprised that the FM sector throws up as many divisions as educational establishments break down!

Disposal
Take the plunge – universities need, and indeed must, get rid of or replace quite a bit of their property portfolio, and as quickly as possible! The way forward is either to continue to push large but insufficient sums of money around trying to cover backlog maintenance, or improve fundamentally inappropriate classrooms and research space into higher levels of utilisation, or invest in a highly focused core of exceptional buildings/environments that are exceptional at every level.

So what should we focus on in the new university portfolio?
....A smaller but much higher quality physical university footprint – within a tighter physical space.
....A significantly higher utilisation of space and variety and flexibility of use.
....A higher level of infrastructural support on offer, and of a standard that competes with the leisure industry for customer service and availability/variety, the City for business service support, and the leading cultural centres for entertainment
....An integrated infrastructure system – embracing the best that can be offered in the market for each of the service functions – be it cleaning, catering, reception, printing, ICT, or sports facilities, residences, pubs, clubs, coffee areas, plazas, touchdown, libraries and quiet space
....A consortium of the very best in infrastructure providers, but with an efficient and transparent management and operational methodology capable of surpassing the current largely internal and fragmented support service providers.

All of these present huge challenges to both university and FM provider. But it will address a number of critical challenges facing both purchaser and provider. Universities will be able to compete nationally and globally, and FM providers will be able to deliver deeds as against words – to mutual benefit.

....Michael Cant is a Founding Director of Larch Consulting, and a specialist in business infrastructure & FM. Michael has recently been elected Vice Chair of the Royal Institute of Chartered Surveyors (RICS) FM Faculty and is currently a member of the University of Leeds Estates Board.


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