An Inside Look at FM Outsourcing, Research Report #27

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ABOUT THIS REPORT

As part of its responsibility to inform its members on issues relevant to the facility management profession, the International Facility Management Association (IFMA) has conducted a tracking survey on the practice of outsourcing in the facility management field. In 1993 and 1999, IFMA conducted surveys of its members on outsourcing issues. Again in 2006, IFMA conducted another study of its members to measure use and practices of outsourcing. The research objectives were to help facility professionals better understand the functions, reasoning, advantages, disadvantages and trends typically involved in the outsourcing decision and process.

Table of Contents

METHODOLOGY

The present study was completed to track the data collected from the previous two surveys and to better understand how the outsourcing process is managed. While previous versions of the research were completed by mail, this study was conducted online by a contracted research provider, Intelliscan. A total of 4,816 North American members, including 316 members from Canada, were randomly selected to receive the email invitation to complete the survey online. Survey participants followed a unique link provided in their email invitation and completed the survey online. The survey data was collected from July 11th – 27th, 2006. A total of 487 complete surveys were collected from IFMA members, for a final response rate of 10 percent.

SUMMARY

In fifteen years, business process outsourcing has become an accepted business practice but not always a popular decision by those affected. In the realm of facility management, outsourcing is more commonly accepted for some responsibilities, but not all. Unlike other functions such as manufacturing or call center support, facility management (FM) is not being transferred offshore to other countries but rather FM functions are being managed by on-site contractors.

Outsourcing Management Practices

• Over the past 13 years, the use of out-tasking (i.e. the hiring of individual, specialized vendors to provide one or more services) has decreased from 91% in 1993 to 77% in 2006. The steepest decline has come in the past seven years with a corresponding increase in the number of companies that are outsourcing (i.e. the hiring of a full-service vendor to provide many functions bundled together who in turn employ their own staff or hire subcontractors.)
  
  
• Organizations choose to outsource for a number of reasons. The most important criteria when deciding whether or not to outsource are financial in nature: controlling costs, freeing capital funds, improving ROI, and reducing turnover and training costs.
  
  
• Most facility managers are satisfied with the operation of their facility management function at their organizations. Companies that out-task tend to be more satisfied than those who outsource or those who do neither.
  
  
• Over one-half of companies have saved money through outsourcing/out-tasking and one-third have seen a quality improvement. These results are consistent regardless of whether the company is outsourcing or out-tasking.
  
  
• Two in five companies have brought services back in-house after outsourcing the service. Typically the reasons are to regain control of the service, either in terms of costs, quality, or response time.

Managing the Outsource Contract

• Facility managers tend to closely monitor the contracts with service providers and the providers’ fulfillment of their contractual obligations. Most companies either specify every detail in the contract or retain overall management responsibility as means to ensure that the service is provided at an acceptable quality level.
  
  
• In recent years, the standard length of outsourcing contracts has stayed the same at most companies. One-fourth of facility managers now use longer-term contracts and 15% use shorter contracts.

Trends in Outsourcing

• Trends identified in this 2006 study are not significantly different than those identified in previous studies. Several of the trends that emerged in this study are that outsourcing is implemented to save costs, it is better for some service than others, and that outsource providers are offering more services.
  
  
• Over the past five years, one-half of companies have consolidated their vendor base to use fewer service providers. The result is that for nearly one-half of companies, service providers are in a position of receiving substantially larger contracts than just two to five years ago.

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