9 January 2014
On 6th December, FM World published a new story entitled 'Cost and risk to top 2014 property agenda'.
When it comes to looking at the role of a property director, cost and risk are always going to be key drivers in encouraging tenant satisfaction. They need to ensure that the 'asset' maximises its potential growth, and they have to work hard to fill vacant space within a building, particularly in the present climate where space is in abundance and the competition to attract tenants is fierce.
An empty building produces zero revenue and void periods mean that the property is - effectively - leaking cash. So what are the options? Does it boil down to disposal, or finding a way to manage the property so that it is operating to full potential?
Any procurement programme can, and usually will, cut costs but at what expense? The key deliverable has to be sustainable cost control. Simply cutting suppliers margins will not benefit the supplier or the service delivery to the building. Working in partnership with your suppliers to manage their productivity and efficiency will pay dividends. You need to breed a culture that lets the supplier know you are 'in it together' for the benefit of the asset.
A strong FM team with a long-term objective is crucial. FM's have the responsibility to ensure the building runs and tenants are satisfied with the space they are paying for. The FM requires support from various areas, procurement being one. How do you know the contractor working on your building has the relevant insurances, health & safety documentation, training, competencies? The risks associated with contractors working on site are undeniable. One of the biggest risks still regularly misunderstood by FM's and contractors alike is the Construction Industry Scheme (CIS). How do you ensure the contractor working on your building is CIS registered, how do you manage them and how do you know you are making the right payment to them? This is undoubtedly one of the biggest risks to property owners. A single building, a single job, completed to a high standard could be the downfall of an entire portfolio. Pay the contractor gross when they are not CIS registered and run the risk of losing your own or your clients' CIS status. Payments to you would then be subject to the relevant deductions, cash flow stutters; the risk grows...
Outsourcing to a procurement specialist greatly reduces this risk and can produce measurable results, both in terms of cost and improvement to service. The big spend areas of a service charge, M&E, security and cleaning are relatively easy to manage, there is a lot of planned work that can be pre-approved and monitored on an ongoing basis.
Reactive maintenance, and specifically fabric maintenance, is one of the highest risk areas for any property. By its very nature it is unplanned, and can entice FM's to make decisions in the spur of the moment, for example to prevent water penetrating through a ceiling. It is in these moments that risk heightens and costs usually increase. They don't need to; sustainable procurement works to reduce risk and cut costs. And - in turn - this protects the asset, maximises value, breeds loyalty and ensures compliance.
Chris MacDonald is managing director at Propertyserve UK, a facilities management helpdesk provider and managed procurement service for commercial buildings.