05 April 2018 | Mark Brooker
Mark Brooker, managing director at McFT, says service is not a commodity in the FM sector.
The recent turbulence in the FM sector has led us to reflect on something we have long believed in - that service is not a commodity. You can't just buy it off the shelf or at a special sale price, or even 'buy one get one free'. But some FM companies approach buying services as if they were buying tins of beans. Cost savings are being forced without consideration of consequences.
Here are four recent scenarios we've encountered:
New clients asking for a fee to be on the suppliers' list (like a 'slotting fee' in supermarkets) paid up front with no guarantee of the value of future work.
Selection based purely on lowest price. In a proposal for a national bank via a FM company we were told by the FM company "price is the most important aspect" with no questions about what would be sacrificed / lost / not deliverable if the price were reduced. We walked away from the proposal and learned 18 months later that both the FM company and chosen service provider were fired for failing to deliver.
Discounts requested with no justification. Our senior management team attended a procurement meeting with an existing client and was asked for a 20 per cent rebate to continue the relationship.
Payment terms drawn out to 90 or 120 days - 'back-to back' payments in a global consumer goods company, passing on bad debt down the line.
Buying on cost alone is madness. Without a full understanding of the job that needs to be done (time, frequency, extent and depth of service) how can one supplier be compared with another?
In one case we worked out that a company we were competing with for a contract would be charging less than £14 an hour - the cost of a cleaner, not a skilled engineer.
Any service contract needs to be deliverable and, most vitally, sustainable. Slash the prices, slash the sustainability.
Quality staff need training and development. Innovation requires investment in technology, tools and techniques. But such investment pays dividends and creates a strong commercial proposition.
Mark Brooker is managing director at McFT