Week of January 28, 2002
Snapshot from the Field
LOOKING FOR A PREVIOUS STORY? CHECK THE ARCHIVE.
Study: Facilities Management Outsourcing Rising, Hasn't Yet CrestedBy JACK LYNE, Site Selection Executive Editor of Interactive Publishing
Eight FM functions, for example, are being outsourced by at least 45 percent of respondents, the survey found. And one FM function, custodial and housekeeping, is being outsourced by a whopping 72 percent of respondents.
"There has been a definite trend toward more outsourcing in recent years," concludes the survey report, published by Bethesda, Md.-based FMLink (www.fmlink.com), an online publication for facilities and building managers.
And that growing trend means that facilities managers are spending significant amounts of time in managing outsourcing contracts, the survey found. More than 40 hours a month of in-house staff time, in fact, is being spent in managing outsourced contracts for three FM functions, respondents reported. Those three functions are engineering, at 44 hours a month; preventive maintenance, at 43 hours; and design and architecture, at 42 hours.
"The importance of outsourcing in today's FM climate cannot be understated," FMLink Publisher Peter Kimmel said in discussing the survey results.
Administered in May and June of 2001, the study was co-sponsored by FMLink and Encompass Global Technologies (EGT at www.encompassglobaltech.com), a Beltsville, Md.-based provider of outsourced facilities systems and solutions. The survey was conducted online on the FMLink Web site; 202 subscribers responded.
Managing Some Outsourced Functions Taking 40-Plus
The survey further suggests that FM outsourcing hasn't yet crested. Within two years, 36 percent of respondents said "that they likely would be outsourcing at least one additional function that they are not outsourcing at present," said the survey report. The most likely candidate to join the outsourcing ranks over the next two years: preventive maintenance, picked by 40 percent of the group of respondents who anticipated increased outsourcing. Here's a more detailed look at the survey's findings.
38 Percent Of FM Operating Budgets Going to OutsourcingWhy Outsource? "The two most important reasons stated for outsourcing were 'cost savings' and 'the need for special skills, services or tools/equipment'," the survey report noted. "In-house staff reduction," the third most frequent rationale for FM outsourcing, was "mentioned by significantly less respondents," said the survey report.
What's Spent on Outsourcing? "The average percentage of the annual FM operating budget spent on outsourcing is 38 percent," the survey found. That marked a 6 percent increase from the level recorded two years ago.
What's Outsourced? Cited by 72 percent of respondents, the aforementioned "custodial and housekeeping" function is No. 1 here. Ranked next as most frequently outsourced FM functions are "design and architecture," cited by 65 percent of respondents, and "landscape management," cited by 63 percent. (See accompanying chart for most frequently outsourced FM functions for all facility types.)
What's Most Likely to Remain Outsourced? The three "least likely services to be brought back in-house" are the same three now most frequently outsourced: "custodial and housekeeping," "design and architecture," and "landscape management."
Where Are Outsourcing's Greatest Savings? The greatest number of survey respondents reported cost savings in the three most frequently outsourced services. The order of the top three changes slightly, however, from the cost savings perspective: "Custodial and housekeeping" again ranks No. 1, cited by 52 percent of respondents. "Landscape management," however, ranks No. 2 for cost savings, cited by 34 percent of respondents. "Design and architecture" was the No. 3 area for reported cost savings, cited by 27 percent of respondents.
'Competitive Procurement' Ranked
How Are Outsourcing Contractors Evaluated? "The most important way to evaluate the contractor's performance was through direct oversight by the in-house FM staff," said the survey report. "Three other reasons were listed as secondary: regular meetings with the contractor, staff surveys and/or customer complaint files, and performance-based measures."
What's the Most Difficult Aspect of Outsourcing? "Selecting the right contractor" finished first here, cited by 39 percent of respondents. Ranked next, with 17 percent, was "managing the contractor," followed by "writing the proposal to select the contractor," with 13 percent.
On the other hand, the kinds of functions that were outsourced differed somewhat for "mission-critical facilities," defined in the survey as "facilities that must be fully operational at all times." (See accompanying chart for most frequently outsourced FM functions for mission-critical facilities.) For example, "security," cited by 51 percent of respondents moved from No. 5 to No. 3 for mission-critical facilities. Similarly, "preventive maintenance" moved from No. 6 to No. 4 for mission-critical facilities.
Conversely, the "major moves" function migrated in the opposite direction. Ranked No. 4 on the most frequent outsourcing list for all types of facilities, "major moves" drops all the way down to a distant No. 8 for outsourcing for mission-critical facilities.
What Outsourced Functions Are Most Likely to Be Brought Back In-House? Nothing really seems to stand out in the survey.
Granted, 24 percent of respondents said they had "already brought back in-house a service that had been outsourced or would be doing so." "Cost" and "service quality" were "the two largest reasons by far" for bringing those functions back in, the survey report noted.
The survey found no one area, however, that qualified as "most likely" to be returned in-house. Of the FM functions listed in the survey, none drew more than 7 percent of total respondents as a likely candidate to again become an in-house activity.
And that adds weight to another observation by FMLink's Kimmel on the survey results: "We also see continued major growth of the outsourcing industry, which until a few years ago, was populated by very few companies able to serve a nationwide clientele. Now many of the companies are global."
©2002 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.