The market for facilities-management has, and will continue to, become more fragmented as companies impress upon suppliers or ask them to produce contracts tailored to their own individual needs.

New emphases

At the same time, new emphases of contracts will increase the options for clients. In addition, there is a blurring of the distinction between facilities managers and their clients, which will become more frequent as companies provide more services and at a higher level.

For this reason the forthcoming BSRIA market report on this area involves interviewing both suppliers and clients.1 The following information includes early results from the first 50 or so interviews for this study, where some trends are already becoming apparent.

While contracts are increasing in length, there is evidence to suggest that some companies will not look at contracts for over five years, and the majority feel that the ideal term of contract is around four years. The reasoning is that contractors would have enough time to invest in the necessary elements to deliver the right level of service and understand the client’s requirements, but not long enough to allow for possible complacency. In general the initial sample was hostile to the idea of longer-term contracts (five years or over) as tying down too much money and restricting flexibility.

Outsourcing

BSRIA also asked about other possible types of outsourcing contracts, and the responses are represented in the pie charts. Despite a reluctance of the sample to use management contractors, the number of non-manpower contracts is much higher than in the previous report. This is, however, unsurprising with the use of more project-orientated techniques such as planned preventive maintenance. Joint ventures were the most positively received by respondents, who felt that this approach would improve expertise without excessive additional cost.

The table shows the importance attached to the final decision by the first 50 or so respondents to the latest BSRIA questionnaire. As can be seen price and quality are the two most important factors, whilst subcontracting, range of service and whether a company is a large contractor are considered lower priorities. Health and safety, innovation and reliability were a high priority for those who mentioned it.

BSRIA will have a clearer idea of where it thinks the market is going once the fieldwork and analysis has been completed. It is probable that the market for facilities management continues to grow at an impressive rate — and that it will do for the foreseeable future. This is not because the market is ‘recession proof’ but because of the broadening of services offered as part of the contract. Areas of growth include consultancy, contracts in Europe, IT and services relating to the business process (e.g. tax compliance or human resources), as well as management of the premises and the more traditional areas where term contracts are used (cleaning, building services and security).

Skill shortages and the rise of techniques such as planned preventive maintenance have played their part in the rise of the management contracts and related consultancy work, as has the private finance initiative. The main driver may be the increasing willingness of companies to transfer liabilities to a third party.

One area highlighted by our research was that some medium-sized companies felt that even contractors with large workforces did not respond effectively to their problems and preferred to use small companies but still wanted to transfer the liability.

Standardisation of contracts has played a part of the managerial element of outsourcing, which has led to more complex portfolios and higher contract value. In addition, with greater risks, the client will be more willing to consult a third opinion about the suitability of their suppliers, which could lead to facilities-management work for mechanical-and-electrical consultants rising from an estimated £55 million in 19992 to around £120 million in 2002, with other management disciplines showing similarly impressive growth.

Standardisation also includes service provision such as catering, cleaning and building, and there is no reason to believe that the grouping of services will not continue to improve the buying power of purchasers. A more recent development is the grouping of geographical areas. Almost all the facilities-management companies that have been interviewed to date have seen enquiries in this area increase, particularly in the last few months.

The definition of facilities management is also broadening, with some financial services and IT-related disciplines increasingly linked to the facilities-management contract. The proposed European legislation on recycling of electrical equipment, for example, will make IT decisions ultimately linked to waste management.

However, the pendulum could swing the other way, just as PFI emphasised the link between real estate and service provision, so stories about difficulties with services may build contracts around reliable contractors in key areas such as provision of a continuous electrical supply or hygiene, even bringing these areas back in house.

Despite the many headlines caused by facilities-management contracts, it is important to remember that they still form a minority of contracts (probably less than 10% in value) and contract value.

The forces driving facilities management.

	Base	Replies	Average Score (out of 10)
High quality of workmanship	57	55	8.78
Other (including health and safety and innovation)	57	19	8.58
Price	57	55	8.45
High level of professionalism	57	55	8.36
Technical expertise	57	55	8.22
Successful in our industry	57	55	8.11
Financial stability	57	55	7.93
Flexible approach	57	55	7.84
Management expertise	57	55	7.82
Good labour relations	57	55

Client views on facilities-management contracts show an unwillingness to be committed for more than five years and a sizable proportion favouring joint ventures