Controlling Cost & Quality of Facilities Across Large Estates

1. Controlling Cost & Quality of Facilities Across Large Estates

2. Benchmarking as a Tool of Value Management presentation by Prof. Bernard Williams FRICS (IFPI Ltd) to the Breakfast Briefing: ‘State-of-the-art Benchmarking and Cost Management of Facilities in Large Estates’ held at The Royal Institution of Chartered Surveyors 14th June 2013

3. Contents • Benchmarking definition • Facilities in context • Purpose of benchmarking • Methods of benchmarking • Cost benchmarking • Value management of facilities

4. What is Benchmarking? ‘Benchmarking is the process of comparing a product, service, process - indeed any activity or object - with other samples from a peer group, with a view to identifying ‘best buy’ or ‘best practice’ and targeting oneself to emulate it’ (An Introduction to Benchmarking Facilities – Williams 1992)

5. Facilities costs in overall context Pre-tax profit 5% I.C.T. 5% Business and staff support costs 5% Overall Facilities costs – 15% Total revenue cost Premises costs 5% e.g. Revenue costs p.a. = £50m (profit p.a. = £2.5m / facilities costs p.a. = £7.5m)

6. The Outsourcing Conundrum • Facilities Costs are the outsourced contractor’s sole source of profit • Constant pressure to reduce costs – from all sides • Facilities Costs are in reality of comparatively minor significance to users • Users’ profits are put at risk by reduced costs of facilities • Conflicting interests?????

7. The 3 Facets of Cost Control Source: Facilities Economics ã BWA 1994

8. Value Engineering • The process whereby products and services are provided to the required performance for the least cost. • Value engineering requires the elimination of any ‘redundant performance’. • Value Management identifies what performance is redundant – you need to prove it. (Facilities Economics – Williams 1994)

9. Risks to Value Engineering • Over-Stated Performance Requirements • Excessive Budget • Poor Management • Too Little Time • Intransigence • Poor Procurement • Poor Budgetary Control • Inaccurate Estimating

10. Facilities Value Management ‘The process whereby all investment in facilities, whether capital or revenue expenditure, is continually and formally evaluated for cost- effectiveness and cost-efficiency from concept to completion’ (‘Facilities Economics’ - Williams 2000)

11. Value Management

12. Why Bother with Benchmarking Facilities? • Demonstrating efficient purchasing • Justifying levels of quality/performance • Preparing to outsource – understanding what you’ve got • Seeking to optimise value added in the business case

13. Benchmarking -How? • Informal group • Facilitated group • Compare to published data-set • Internal/external • Compare to ‘normalised’ data-set

14. ‘Normalised’ Data-set EstatesMaster Facilities Cost Prediction and Benchmarking Tool • Intelligent decision-making tool • Benchmark whole estates accurately using categories of buildings • Isolate individual buildings as required • Bespoke site-specific benchmarking

15. Conclusions • Without a formal, properly substantiated, business case the provision of any facilities above zero-base performance levels is totally unacceptable in business terms • By identifying and benchmarking options you can establish a business case based on true value for money.

16. Next…. • Jo Harris of BSRIA will next explain the pros and cons of the Benchmaking Group run by BSRIA and how BSRIA used the EstatesMaster normalised database in a high-level maintenance benchmarking study.