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16 January 2019
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05 February 2018 | FM World team


This month, we asked you what the biggest challenges for service providers were. Here are the findings.

Facilities management service providers have been facing stagnating profitability, buffeted by factors such as rising cost inflation from the National Living Wage and the uncertainty surrounding Brexit as EU nationals leave the labout force. 

Now Carillion’s collapse has put the sector in the national spotlight, raising questions about how outsourcing should be carried out.

And a report from professional services consultant EY suggests that to this can be added the problem of increased competition from SMEs. 

We asked what you consider the biggest challenges for the sector. Here are some thoughts from industry figures. 

Bruce McDonnell

Brexit and Living Wage call for communication

Brexit is an interesting one. No one yet fully understands the ramifications of that. It might be a challenge or it might be a white elephant – we are in an industry where a lot of workers are non-UK nationals – we need to stay close to it and understand what that would mean for those people. That’s the biggest challenge. We’ve done a lot of work communicating to people, telling them their jobs aren’t under threat.

The Living Wage – London and national – is a definite challenge for the industry but we are part of the Living Wage Foundation so we are focused on it in advance so it’s not a surprise when the numbers jump up by 30p or whatever – we are already having discussions with clients. If we can deliver efficiency for clients it is about deciding how it can be reinvested back into the client.

This Carillion issue will turn into a challenge for the industry. I hope it will tie some of those big infrastructure organisations up and create more opportunities for mid-sized players. 

In terms of the CCS framework – we have obviously been approached, but it is not on our radar. It’s a framework concept but it will take some time to prove to cynics in the market that it is different 

from other framework deals. I don’t know or certain whether it is focused on delivering a different result or not.

Bruce McDonnell, managing director, Incentive FM 

Antony Law 

No more wafer-thin margins

The outsourcing market typically offers little room for error – the margins are often thin, with some being quoted without fully understanding the commercial position.    

This creates a volatile race to the bottom. While these margins are improving in certain areas of FM, this scenario looks to continue for the foreseeable future, so it’s likely that other providers will run into difficulty. This will have a drastic effect on the market, but will also open the door to SMEs and single-service providers that have often been priced out of lucrative contracts. This is good for healthy competition, but bad for the industry’s reputation and stability. I hope that the above will be a wake-up call to clients, suppliers, and procurement teams, showing that there is more to outsourcing than wafer-thin margins. 

Improvements to procurement will alleviate some of these issues. Getting a stronger understanding of customers’ wants and needs at the tender stage will give providers an indication of where they stand and how to best prepare themselves. Some customers will inevitably go for the lowest price, but others will place emphasis on the value of what service means to the core business. Understanding this from the outset will stabilise the market and stop the ‘race’ accelerating. RICS’s global professional framework is offering direction in this respect, but more needs to be done if the market is to settle and succeed with its long-term planning. 

Securing front-end investment in technology is another big challenge. In a time of unprecedented uncertainty, the need for digitisation is apparent – it gives customers a platform to communicate and assess a provider’s service delivery in transparent fashion. It also gives FMs greater capabilities on the ground, helping them to make decisions with live data. This is an industry issue that needs coordination – technology will secure the future of FM and equip it with the tools it needs to align with customers in an ever-changing built environment. But with no long-term vision this will be tricky. 

Antony Law, managing director, London, Churchill Services 

Rob Legge 

Delivery models need to evolve using technological know-how

Customer requirements now exceed the scope of the traditional FM offering. Delivery models need to evolve. FM providers that offer a range of solutions bring the best of both worlds to the end user. They offer the specialism necessary to execute a diverse array of functions, but with a streamlined approach – meaning the customer only has to deal with one party.

The outsourcing trend, reduced to its most basic level, stems from the desire to find a way to make things work in the business as cost effectively as possible, while maintaining and enhancing customer expectations. As we’re all too aware, organisations are under increasing pressure to cut costs on their real estate footprint. But they must do this while simultaneously implementing measures to help improve engagement, productivity and the bottom line. 

As the nature of our work becomes more complex, so too does the FM requirement. We must respond to the challenges of customers by offering a wider set of service delivery options – without sacrificing the level of expertise required to deliver successful FM and consequently optimum colleague experience. The industry is witnessing the dawn of an era of user and occupant experience requirements, coupled with business productivity, service integration and the integration of smart, cognitive technology. Technology is transforming FM in remarkable ways, but it comes with challenges. From robotics and wearable technology to IoT, FM is becoming more interconnected and artificially intelligent. 

Each of our sector experts is exploring the ways they can use IoT and tech to enhance the customer experience; whether that’s by interacting in a more efficient way or collating real-time business data to provide a more proactive and predictive offering. 

Rob Legge, group CEO, Servest