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Gager @ NFMT: How to implement a successful outsourcing program

The National Facilities Management & Technology Conference (NFMT) Conference & Expo offers a wealth of facility management education, March 29-31, in Baltimore. Andy Gager, CEO, AMG Consulting, discusses the best ways to implement a successful outsourcing program that benefits both facility managers and the outsourcing provider.

Gager will present Making Outsourcing Work: Strategies and Tactics during NFMT.

by Mackenna Moralez, assistant editor, FacilitiesNet

Outsourcing maintenance services is playing a necessary role in business operations right now as the pandemic continues. However, there are certain factors that facilities managers should take into account before signing on the dotted line. It is essential that managers find the balance between the outsourced services and optimizing operations, and the only way to do this is to have a strategic plan in place. 

Andy Gager, AMG Consulting

FacilitiesNet (FN): Why should facilities managers look to outsource some roles? What should they take into consideration? 

Gager: Finding skilled and competent personnel has become a challenge. I hear it all around the world — the workforce shortage, the shallow pool of competency managers has to choose from, the aging staff, technicians moving onto other organizations or just outright quitting. These are all real challenges for managers. 

Cost reduction or avoidance is another issue managers must consider when discussing the possibility of outsourcing. We are all striving to reduce costs, optimize our resources, work smarter not harder, and do more with less. The pressure that managers and their staffs face every day in carrying out their duties is tremendous 

Investments in technology and innovation also come under close scrutiny when discussions turn to outsourcing. Although technology continues to advance rapidly, so do the associated costs. Many operations either do not have the funds available to invest, or they lack the skill set to maintain the installed systems. 

FN: What are some strategies facilities managers can use when they begin to outsource? What are some ways to make the transition easier for both parties? 

Gager: What managers are trying to achieve with contracting maintenance is evaluating service vendors to strike a balance between costs and service that optimizes operations. My first recommendation is to clearly understand why you want to outsource any service. If it’s primarily to “Save Cost”, don’t hold your breath. By outsourcing services, you are not saving money. The number one reason for outsourcing maintenance is to cut costs, according to a recent survey of managers. But let’s be crystal clear here: Outsourcing maintenance does not save money. What you are trying to achieve is cost reductions or cost avoidance. 

Second, understand what your true costs of maintenance are. A typical maintenance technician utilization is somewhere between 17 percent – 24 percent. Understanding what the true cost of a maintenance staff or outsourcing having will help with determining the value you are seeking 

By focusing on these six specific areas and strategies, managers can improve their chances of success: 

Scope of services. In order to successfully identify and clearly define the requirements and service specifications, objectives, expectations, and constraints of the service to be provided, managers can focus on the following factors related to the scope of service: 

Inputs. Appropriate inputs are crucial to the scoping process. They include services to include and exclude; departmental maintenance policies; strategic maintenance plan; and condition assessment and other processes that require careful consideration so contractors can provide the full scope of services required 

Efficiency. The evaluation process must ensure coordination with other maintenance tasks, as well as other departments and regions. 

Specifications. This outcome of the scoping stage contributes to the service arrangement used for procurement in order to perform condition assessments and other inspections or data collection that might be required 

Outcomes. One result of this process is a service specification that is delivery focused, including performance requirements, that enables a service provider to respond with an effective, efficient value proposition. 

Support. Contractors need to understand the necessary hours of support and emergency service the department will require. 

Future. The process needs to identify long-term maintenance needs. 

FN: What are the pros to outsourcing? What are the cons? 

Gager: Managing contracted maintenance activities effectively and efficiently has always been a struggle for maintenance and engineering managers. Where I see the most issues between managers and outsourced service providers are the contracts themselves. Clearly defined scope of services, deliverables, and having the right KPI’s in place so there is no grey area when it comes to expectations. 

The contract details the responsibilities the service provider will be held accountable for. Facility or procurement managers often review the activities of the contractor and its employees to ensure they adhere to the terms of the agreement. 

Risk management. The specific approach to managing facility risks varies depending on the size and scope of the facilities. The most visible part of facility risk is the day-to-day operation. Managers outsourcing maintenance services need to review key areas of potential risk 

Data. Managers need to decide what system to use to capture work history data — the contractor’s maintenance management software or the software used in-house 

Environmental. Assuring that the contractor is compliant with federal, state, and local environmental and safety laws. The department needs policies, procedures and audits in place to ensure compliance 

Equipment. Managing equipment to minimize risk involves three key considerations: operation, storage and maintenance. Using specialized equipment can cause risk not only to the operator but those around. Contractors must provide documentation that equipment operators are trained and qualified to operate the equipment 

Liability. Insurance, specifically liability insurance, is critical to protect the organization and the contractor. 

FN: How often should facilities managers review outsourcing contracts? When is the best time to renew? 

Gager: There should always be a formal annual performance review of the contracted services, but this should only be a formality. There should be no surprises in this review, two specific ways to avoid any issues (and defined in the service contract) are: 

Conflict resolution. Conflict is inevitable, but if managers do not address it properly, it can be bad for business, and it can negatively impact both parties involved. Managers need to resolve most conflicts in their earliest stages. Focusing on these issues can help managers avoid and resolve conflicts before they interfere with the relationship between the contractor and the department. 

Communication. It is important to have a documented plan that establishes clear lines of communication covering the service provider working in the facility, the customer and facility occupants. 

It is always a good idea to review options at the end of the current contract or termination of the service agreement whenever that happens to occur. 

FN: What will NFMT attendees gain from your session? 

Gager: What managers are trying to achieve by contracting maintenance is a balance between costs and service that optimizes operations. In this session, I will offer managers proven insights and strategies to make outsourcing work for their departments, their staffs and their organizations. 

NFMT takes place March 29-31 in Baltimore.