Strategically SourcingFacilities Services

Gary Rudkin, Senior Facilities ManagerSpirit AeroSystems- Wichita, Kansas

Determining the long-term strategic sourcing plan

Developing proposals and supplier qualification process

Awarding contracts and managing supplier relationshipsfor long-term value

Maintaining strong relationships with employees andunions

Course

Objectives

Reduce operating cost

Increase competitive spirit with employees

Focus on core activities

Staff to the valleys of the business cycles

Offset demographics, attrition and decline of entrants

Reduce employee health and safety issues

OutsourcingOpportunities

Increase cost- price escalation

Impact to customer satisfaction

Cost and effort to manage service providers

Loss of skill and control of services

Liability of safety and environmental risks

Damaging relationships with employees

Risks of Outsourcing

Long-term Strategic Sourcing Plan

• Take advantage of the opportunities and mitigate the risks

• Analyze your companies long-term growth plan• Asses the skills and age of your facilities staff• Identify customer service and cost issues• Determine possible sourcing opportunities

Long-termSourcingStrategy

100%

75%

50%

25%

0%

2009 2010 2011 2012

Service Provider

Self-Performed

Determine Possible Sourcing Opportunities

• Identify facilities processes and services– Building and grounds maintenance

• Janitorial service• Painting service• HVAC and chiller maintenance service

– Capital and expense projects• Project management service• Engineering service

Rating the Services

• Asses the importance and need of all services– Core competencies and operational impacts– Technology may eliminate the need– Requirement went away but the service remained

• Identify the workload and size of the services– Opportunity must attract service providers– Bundle with other services

Rating the Services• Identify the cost of the services

– Understand internal cost to perform services and internal competitive advantages

– Perform market research on service provider costs

• Consider response time requirements– Identify response time impacts for each service– Asses internal ability to respond

Rating the Services• Asses the skill and ability requirements to

perform the service– Higher skilled service generally cost more– Physical demands raise safety concerns– Maintaining internal ability and control– Future risks if internal skill is lost

Rating each service provides a short list of possible sourcing opportunities!

Proposals and Supplier Qualification Process

• Identify a clear and thorough Statement of Work (SOW)

• Base-line internal performance• Develop Request for Proposals (RFP)• Identify and qualify potential service

providers

Developing a SOW

• Involve the employees if possible• Determine level of scope

– Process level- Building and grounds maintenance– Service level- Janitorial

• Describe the tasks, frequency and volume (headcount optional)• Provide work management data

– Process flow diagrams– Work order history– Project logs

Developing a SOW

• Identify tools, equipment and software needed• Provide material and inventory requirements if

applicable• Describe roles, responsibilities and expectations• Identify Key Performance Indicators (KPI)

Base-line Internal Performance

• KPI examples– Cost to self-perform

• Labor• Burden• Tools and equipment• Efficiency and effectiveness

– Response time– Schedule compliance– Customer satisfaction

Develop Request for Proposals (RFP)

• Develop a proposal team– Procurement– Facilities Management– Legal– Operations customers

• Embed the Sow into the RFP

Develop Request for Proposals (RFP)

• Incorporate KPI’s as a performance scorecard• Identify performance incentives

– X% of implemented cost reductions– $X for an X% increase in customer satisfaction

• Include standard terms and conditions• Develop selection criteria matrix

Selection Criteria Matrix

Targets Weight In-house A B CTotal Operating Cost $1.1M 30%Response Time 4 hrs 10%Schedule Compliance 95% 10%Customer Satisfaction 85% 10%Compliance to RFQ 95% 5%Compliance to T&C 95% 5%(Other Requirements) 10%Intuition 99% 20%Total Rating

Service Provider Selection Criteria Matrix

Identify and Qualify Potential Service Providers

• Research the Web, FM consultants, peers in the FM community and suppliers

• Contact and meet the potential providers- Data/intuition

• Understand their capabilities and financial position

• Visit their customers’ sites

Identify and Qualify Potential Service Providers

• Distribute RFP’s to qualified service providers with a timeline

• Schedule on-site visits to answer questions• Receive and review proposals for compliance• Narrow the list of potential service providers to

three or less based on best value• Consider your in-house team as one of the

options

Awarding Contracts and Managing Supplier Relationships for Long-term Value

• Schedule pre-contract clarification meetings with the remaining service providers

• Perform final negotiations• Complete the selection criteria matrix

Awarding Contracts and Managing Supplier Relationships for Long-term Value

Targets Weight In-house Acme Joe's Sam'sTotal Operating Cost $1.1M 30%Response Time 4 hrs 10%Schedule Compliance 95% 10%Customer Satisfaction 85% 10%Compliance to RFQ 95% 5%Compliance to T&C 95% 5%(Other Requirements) 10%Intuition 99% 20%Total Rating

Building Maintenance Service Provider Selection Criteria Matrix

Awarding Contracts and Managing Supplier Relationships for Long-term Value

• Select provider based on best value • Develop contract document- Mitigate risks

Increase cost- price escalation clauses, CPIImpact to customer satisfactionCost and effort to manage service providersLiability of safety and environmental risks

– Incorporate SOW and RFP– Determine contract duration- Three year, option for two more– Define audit rights and record retention– Develop scorecards with quarterly reviews- Criteria matrix

Awarding Contracts and Managing Supplier Relationships for Long-term Value

• Identify Contract Manager– Provide supplier management training– Develop implementation plan and timeline with supplier and

affected employees• Sign the contract• Anticipate upfront energy and effort developing a

partnership and working through the implementation• Keep in contact with the customer- seamless transition• Conduct quarterly reviews with diligence

Maintaining Strong Relationships with Employees and Unions

• Job security is a major issue• Most craftspeople and Facilities Professionals

are proud of what they do• Change can be painful• Outsourcing may violate their trust• Unions lose work, members and dues

Maintaining Strong Relationships with Employees and Unions

• Secrets are hard to keep in most companies• Be upfront and open with employees• Strategically sourcing Facilities services can

minimize employee impact long-term• Involve the employees and union when possible• Communicate, communicate, communicate

Questions?

Thank You!