Interviewee: Bruce McDonnell, managing director, Incentive FM
Issue: the FM market
05 February 2018 | Bruce McDonnell
Bruce McDonnell, managing director at Incentive FM, discusses the market and the universe.
It is the week of the collapse of Carillion. What are your thoughts?
It's obviously a shame for the industry and for the clients and those who work there. It reinforces a little why, intentionally, we are in a different market. We don't go for any public sector contracts. Those who go for them bid so low and accept such demanding terms from public sector bodies that are going through the procurement exercise The thing that surprises me most is that despite the profit warnings over the last 12 months they were still winning contracts!
Incentive is a smaller £110m turnover company. How do you do business?
We choose contracts where we can add value and that are right for us. Being independent, we are in a relatively unique position in the market to be able to be selective about what the opportunities are. The challenge for corporates is that they have people who go out to sell the business and they are so far removed from the guy who's close to the operation they don't realise the impact of what they are selling.
How will Carillion's collapse affect the FM industry?
Everyone is profit and loss-driven - a lot of them seem turnover-driven. And some of the margins there - I don't know how they are making a decent return. There are a proportion of them that are going through a non-sustainable business, but I don't think anyone would try to get themselves in a position like Carillion's.
Because Incentive is small and agile, we understand the impact of the sale on the result. In the middle, it is the customer and how you deliver the service to the customer. There are people at the top of the business that are absolutely focused on the bottom line return, the valuation, the plc - how the market perceives them. The results are driving the business - and it's a little bit the wrong way round.
What should happen now?
I was having a conversation with someone assisting with a public sector procurement project (nothing to do with us). There are things like scoping meetings to decide what scoping meetings look like and then meetings to look at the minutes of those meetings - and the result of these huge and convoluted processes is that they get to where they can afford next to nothing as far as contract delivery is concerned.
Public sector procurement needs to be more appealing to businesses that want to deliver great service for the right reasons.
We have sensible conversations with any commercial business owner/client and it's about the value proposition. It is about getting into the position where you become their trusted adviser and you give them the right solution at the right price.
If the industry can find a way to open up those sorts of areas - relationship, value proposition - it will open up the market to those who will bid for work and become less fixated on huge framework deals that don't necessarily deliver true benefit.