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DISCUSSION ON THE

OUTSOURCING OF FACILITIES MANAGEMENT SERVICES

FOR

TERTIARY INSTITUTIONS

21 October 2010



TABLE OF CONTENTS

Introduction

Comprehension of Facilities Management Services required by a

tertiary institution

Service offerings

• Capability

• Business and operational models

• Organisational structure

Outsourcing – a practical approach

• Mobilisation philosophy

• Pricing

• Client confidentiality

Differentiators

ConclusionSlide 2



INTRODUCTION

In recent years, some major players in the property industry have

embraced the concept that facilities management is a growing discipline

and that it has developed faster than almost any other discipline in the

property industry.

Grigg (1993: ix) summarises this trend by indicating that “…facilities

management has developed faster than almost any other professional

discipline…” and then goes on to state that “…recognition of these issues

(growing facilities management services) is rapidly transforming the way

facilities are managed in the public and private sectors – from offices

through to healthcare, leisure and educational buildings.”

Slide 3



INTRODUCTION

This emerging management discipline can be described as the practice of

co-ordinating the working environment with the people and processes of

the organisation.

It is a combined / integrated approach at all levels within an organisation

to plan and implement support facilities in line with prime business

objectives.

Facilities management therefore becomes an integral part of the strategic

thrust of an organisation and is recognised as such by organisations

worldwide.Slide 4



INTRODUCTION

The philosophy of integrated facilities management is based on the

perception that facilities should seamlessly support the core

business of organisations and that the physical management of

these facilities should be separated from the management of the

core business activities.

Slide 5



INTRODUCTION

Subsequently, in all spheres of business, top management has come to

realise that they are actually running two distinct businesses within their

organisations namely:

• their core business comprising products and/or services, and

• the non-core business consisting of all infrastructure and services thatsupport the core business.

Slide 6



INTRODUCTION

• The current school of thought is that organisations should focus their

expertise and resources on products or services that create wealth / add

value - their core business - and that all non-core activities should be

managed by entities that are more suitably structured and resourced.

• Increasingly organisations achieve this objective through the

establishment of a facilities management entity to act as a single point

of accountability and responsibility.

• A single source of knowledge and management support is created.

Slide 7



INTRODUCTION

• It is imperative to understand that the establishment of a facilities

management entity does not necessarily entail outsourcing.

• The key is that an independent entity must exist. Whether this entity

is an “in house”–structure or whether this function is outsourced, will be

determined by specific circumstances relating to the organisation’s

needs and requirements.

Slide 8



COMPREHENSION OF FM REQUIREMENTS FOR

TERTIARY INSTITUTIONSNote: This discu ssion addresses pro perty related faci li t ies management s erv ices

only .

Gleaned from JHI’s involvement with tertiary institutions, JHI’s view is that the following

parameters are essential to guide the Facilities Management requirements for a tertiaryinstitution:

• The institution mus t have an “in-house” facilities management entity capable of

managing service providers in their respective fields of expertise;

• This entity must form a pivotal part in the planning and managing of the institution’s

facilities;

• This entity must be placed in a position where it functions autonomously with

regard to the execution of required tasks/projects;

Slide 9




TERTIARY INSTITUTIONSThe envisaged deliverables required by a tertiary institution can be summarised as follows:

• Condition assessment of immovable assets; - Example

• Maintenance management:

• Planned preventative maintenance;

• Day-to-day maintenance;

• Services management;

• Product management;

• Space planning and “churn”;

• Project and construction management;

• Utilities management;

• Risk management (OHS and COID acts, regulatory requirements, insurance, etc.);

- Example .

• Budgetary control and financial management;

• Reporting.Slide 10

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TERTIARY INSTITUTIONSThe primary drivers of these deliverables are:

• Consolidation of operations within the tertiary institution;

• To enable the institution to deploy a comprehensive FM model through the process

of governance, compliance and ethical business practices;

• To improve the overall service delivery to all stakeholders;

• To drive efficiencies and potential savings;

• To identify and deliver sustainable service levels.

Slide 11



Documents and processes required as foundation must inc lude the establishment of an

asset register as well as the standardisation of aspects such as contract documents,

specifications, work flow processes, etc in order to:

• Ensure that facilities are performing the function that they are designed for;

• Gauge the condition of the various buildings and all its installations;

• Benchmarking;

• Reduce risks for the tertiary institution;

• Manage facilities efficiently and effectively.Slide 12

SERVICE OFFERINGS - CAPABILITIES



Condition

AssessmentPlan for Maintenance

Budget for

Maintenance

Planning & Scheduling

Information Technology

Procurement & Logistics

Special Purpose Vehicle (SPV)

Outsource

In-House

Day-to-DayPlanned/

PreventativeEmergency

Execution of Facilities Management

FM Works Programme

Strategic plans for FM

M a n a g e m e n t

R e p o r t i n g

F i n a n c i a l / R e g u l a t o r y R e p o r t i n g

Standards for FM Strategy for FM

FM Policy FrameworkUmbrella

Personnel(Management, Operational,

Technical)

Capacity

Resources(Materials, Tools,

Transport, Infrastructure)Finance & BudgetingFoundation

Develop, Lease,Procure

MaintainFix, rebuild/refurbish

or dispose

Life-Cycle of Properties

BuildingBlocks

A

d j u s t m e n t & M a n a g e m e n t o f C h a n g e

M o n i t o r i n g o f P

e r f o r m a n c e

Pillars

Slide 13



FM– IMMOVABLE ASSET LIFE CYCLE MODEL

PLAN & DEVELOP

CREATEOR

ACQUIRE

OPERATE&

MAINTAIN

REFURBISHOR

ENCHANCE

DISPOSEOR

UPGRADE INFORMATIONMANAGEMENT

SYSTEM&

PROCUREMENT

Collect & update:

•Asset register

•Technical & operational

documents

•Maintenance budgets

& strategy

•Guarantees and/or

warranties

DISPOSE OF IA

NEED FOR IA

•Med. To long term

maintenance plans

•Upgrade or refurbish

facilities

•Applications for special

funds

•Disposal of or

removal of asset from

original requirement

or use

•Upgrade to new

requirement & extend

asset life cycle use

In compliance with policy,

standards & strategy, prepare &

conduct:

•Condition assessments

•Rating & prioritisation

•Budgets

•Works programme s(re-active

or pro-active)Affected:

•In-house•Out-source

•JV

Acquire Or Create Via:

•Development

•Purchase

•PPP Deal

•S & LB Deal

•Lease

•Upgrade

Policy, Standards & Strategy

Slide 14



SERVICE OFFERINGS – BUSINESS MODEL

POOL OF

KNOWLEDGE

• Logistics

• Project consultants

• Planning consultants

• CADD consultants

• Services consultants

• External service

providers

CLIENT

BUSINESS

WORK SCHEDULING ANDRESOURCE ALLOCATION

DRIVERSPV

ENABLERS

• CAFM

• CALL CENTRE

• VARIOUS PACKAGES

OF SERVICES AND

FEES

• VARIABLE FEE

STRUCTURE TO SUIT

CLIENTS

• VARIABLE

STRUCTURE

TO SUIT CLIENTS

• EXTERNAL SERVICE

PROVIDERS

SERVICE

OFFERINGS

• LOGISTICS

• MAINTENANCE

• MANAGEMENT

• SERVICES

MANAGEMENT

• PRODUCT

MANAGEMENT

• PROJECT AND

CONSTRUCTION

• MANAGEMENT

• SPACE PLANNING

• UTILITIES MANAGEMENT

• CADD SERVICES

• RISK MANAGEMENT

• TECHNICAL EVALUATIONS

(AUDITS)

Slide 15



DOCUMENTS

ANDPROCESSES

SERVICE OFFERINGS – OPERATIONAL MODEL

MAINTENANCE

MANAGEMENT

Planned /

Preventative

maintenance

General

maintenance

SERVICES

MANAGEMENT

Security

Cleaning

Hygiene

Pest control

Garden services

Refuse removal

PROJECT AND

CONSTRUCTION

MANAGEMENT

Project definition

Design concept

Value engineering

Appraisal

Tenders

Contractdocumentation

Quality control

Quality assurance

Cost management

Final accounts

OFFICE

INSTALLATIONS

Interior design

Space planning

Asset tracking

ProgrammesBudgets

Tenderdocumentation

Contractadministration

Quality control

Quality assurance

Cost management

Final accounts

DebriefingRelocation

“Churn”

UTILITIES

Accounts

Electricity

Sewerage

Water

Refuse

CAD SERVICES

Record drawings

SAPOA records

Office installations

Workstationlayouts

Asset registers

Evacuation plans

Databases

RISK

MANAGEMENT

OHS and COID Acts

Regulatoryrequirements

Disaster prevention

Emergencyprocedures

Housekeeping

Inspections

Legal liability

Insurance

TECHNICAL

BUILDING

EVALUATIONS

(Condition

Assessments)

COMPUTER

AIDEDFACILITIESMANAGEMENT

STRATEGIC

OBJECTIVES

APPROVAL

FRAMEWORK

RESOURCE

ALLOCATION

EXPENSE

MANAGEMENT AND

CONTROL

ASSET REGISTERS

STANDARD

DOCUMENTS

WORK FLOW

PROCESSES

DATA

FINANCIAL

CADD

CALL & QUERY

APPLICATION

LOGISTICS FM SERVICES /DELIVERABLES

PROCUREMENT

Supply chain re-engineering

Standardisation

Contractor

selection

Slide 16



The Facilities Management entity, whether outsourced or “in-house” must be

autonomous as far as work flow processes, scope of work and method of execution

is concerned, but control is exercised by linking job descriptions and task lists to

outputs.

Structured co-ordination between top management and the Facilities Management

entity has to take place and operations are standardised throughout the

organisation.

In essence the execution must be managed in an IT-environment achievingcentralisation and standardisation of information, streamlining of administration, the

driving down of costs and the countering of the lack of skills.

Slide 17

OUTSOURCING – A PRACTICAL APPROACH



Project Setup

Confirm Steercomm

Confirm

Scope of works

Confirm:• Structure;

• Financial Proposal;

• Reporting

• Mobilisation;

• Execution.

Sign

Project Charter

Component 1

Mobilisation

Workstream 1:

Setup of:

• Section 197 Transfers;

• Vacancies;• University Staff;

Workstream 2:

Review and understanding

of:

• Policy and procedures;

• Systems (Operational &

Financial);

• Reporting

Workstream 3:

Review and take-on of:

• Building maintenance

plans & Budgets;

• Soft and hard service

contracts;

• Utilities.

Workstream 4:

Consolidated of take-ondata and confirmation of

start up programme

Component 2

Facilities

Maintenance Plans

Workstream 5:

Building technical audits to

determine:

• Scope of hard & soft

services (Condition and

requirements);

• Preparation of short -to

long-term maintenance

plans & budgets;• Short term Risk & OHS

Act requirements.

Component 3

Documentation &

Reporting

Workstream 8:

Preparation of all technical

documentation in order to:

• Draw up scope of works;

• Generic or Project

specifications;

• Tender documentation;

• Review, analysis &

recommendations.

Workstream 10:Preparation of relevant

tender documentation

Component 4

Conclusion of

Mobilisation

Sign off

Scope of Works &

Deliverables

Operational Start-up

Workshop:

Stellenbosch University

& JHI

Operational Phase:

Ongoing management,

reporting, review &

change management

accordingly

Ad-hoc projects and

small works as and when

required.

Component 5

Slide 18

OUTSOURCING - MOBILISATION PHILOSOPHY

Workstream 6:

Preparation of hard & soft

service contracts:

• Conclude maintenance& service contracts for

both soft and hard

(Mechanical, electrical &

Civil) requirements;

• Conclude necessary

inspection contracts &License Agreements

(e.g. WAC, SAMRO,

ASIB, etc)

Workstream 7:Sign-off & approval to

proceed

Workstream 9:

Preparation of the

necessary reporting

documentation for:

• Performance evaluation

based on the SLA;• Effectiveness &

efficiency of Facilities

Management of portfolio;

• Financial control within

budget and works

orders;

• Management and review

of service contracts.



OUTSOURCING - STAFF TAKE-ON METHODOLOGYShould a “staff take on” be required (outsourcing), the process is summarised as follows:

• The appointed external company will meet with the Human Resources Department of

the university to obtain the details of the employees and their conditions of

employment, retirement fund, medical aid schemes and other benefits for comparison

purposes with that offered by the external company.

(Caveat: The university will need to discuss the business reasons for change,

operational requirements and management agreement conditions or transfer of a

business or part of a business as a going concern, with their employees affected by the

Section 197 requirements);

• After the external company has developed an understanding of the service conditions

of the affected staff, we will do a gap analysis on conditions and propose a wayforward. We will take care not to put employees in a worst off position;

• It needs to be ensured that relevant trade unions, if applicable are invited to participate

in the process at inception;

• The external company and the university will then arrange a meeting / meetings withthe employees affected by the Section 197 transfer and explain the process; Slide 19



OUTSOURCING – STAFF TAKE-ON METHODOLOGY

• Both the external company and the tertiary institution have to embark on acomprehensive change management process to smooth out the transit, including

culture management. (Facilitated sessions, workshops, induction programmes, etc.);

• As part of the consultation process a communication strategy will have to be

implemented which will incorporate the following: Weekly progress feedback updates,

mailbox for staff concerns and comments on the consultation, comprehensive list of

questions and answers available to all staff affected and “roadshows”;

• ICAS counseling support must be provided to the affected staff ( ICAS = independent

counseling and advisory service, including physiological, legal and financial support);

• Affected employees must be invited to visit the external company’s offices, meet their

new colleagues, familiarise themselves with the office environment and their new

working area;

• The external company will draft letters of appointment confirming the new employees’

continued employment and confirm an effective date.Slide 20



OUTSOURCING - PRICING

A “cost plus” fee structure is proposed when considering outsourcing is

considered.

However, it should always be borne in mind that fees/costs must not be the

major factor in the decision to outsource or to manage facilities “in-house”.

Although affordability is a vital aspect of the decision, the seamless support

of the organisation’s core business must guide the decision.

Fees payable should therefore be market related and based on the

finalisation of the scope of work and the involvement required from the

external organisation.

Slide 21



OUTSOURCING - CLIENT CONFIDENTIALITY

When considering outsourcing, the tertiary institution must ensure that it engages with a

value driven organisation with a professional credibility.

As a minimum, the following controls must be put in place:

• Client focused structures;

• Separate physical location of staff in offices;

• Firewalls between client operations (System, mindsets, data, etc.);

• Ring-fenced data and systems;

• Access control on systems;

• Confidentiality is part of every staff member’s conditions of appointment.

.Slide 22



OUTSOURCING MAY ADD THE FOLLOWING VALUE:

• Utilisation of “battle-tested” procedures, processes and documents;

• Exposure to the latest facilities management trends in the commercial property

industry;

• Lowering of costs due to economies of scale;

• Benchmarking with industry norms;

• Countering of the shortage of skills;

• Countering of shortage of capacity.

Slide 23

DIFFERENTIATORS



The following are examples of savings achieved by means of outsourcing exercises

in the commercial property industry

Procurement Soft Services : Financial institution

Cleaning : R10-million p.a

Security : R14.4-million p.a. Total saving : R26.6-million of R85-million portfolio spend

o Procurement Soft Services : Listed property loan stock company

Cleaning : R130,649 p.a

Security : R339,883 p.a

Hygiene : R129,926 p.a

Saving : R691,501 p.a of a total R3.46-million p.a portfolio spend

o Procurement Soft Services : Private property company

Cleaning : R399,280 p.a

Security : R340,537 p.a

Hygiene : R124,700 p.a

Saving : R1,012,582 p.a of a total R5.38-million p.a portfolio spendSlide 24

DIFFERENTIATORS - SAVINGS



Although there are many “value-add” aspects

evident when outsourcing, there is no clear cut

answer whether tertiary institutions shouldoutsource the management of their property

related facilities and infrastructure or not.

Slide 25

CONCLUSION



Should outsourcing be considered, the following aspects are crucial to consider:

• The institution mus t have an “in-house” facilities management entity capable of

managing service providers in their respective fields of expertise;

• This entity must form a pivotal part in the planning and managing of the institution’s facilities – it must have the “ear” of top management;

• When considering outsourcing, the tertiary institution must ensure that it engages

with a value driven organisation with a proven professional capability and credibility;

• A phased approach must be implemented;

• The human aspect of outsourcing must be managed professionally.

Slide 26

CONCLUSION



Thank you