Government must beef up the way it manages outsourced contracts

Facilities managementAny poorly-performing facilities management contract can result in financial and reputational loss, but where a government contract has been mismanaged, and there is a thirst for information on how the public purse has been spent, the repercussions can be major and the casualties high. The UK Government is the biggest spender on FM services, with £40 billion of outsourced contracts each year. However, in a recent report from the Public Accounts Committee and National Audit Office, contract management came in for stinging criticism. Evidence of overbilling, capacity issues, and poor governance and recordkeeping led to a very clear message that the Government must beef up its contract management. Procurement and contract management have been viewed traditionally as low-status in the civil service and, as a result, have been at the mercy of administration cuts and lack of investment.

This therefore seems the perfect time for the supply side to look at these issues and challenges, evolving and adapting alongside government to meet these changes, and to demonstrate its future value to public sector FM. At the same time, there is increasing awareness in the industry that facilities managers could do more to use performance management to maximum effect as a valuable part of the strategic FM function. In a recent BIFM FM Leaders Forum, Cabinet Office Crown Representative, Julie Scattergood, openly criticised private contractors that take advantage of the public sector’s lack of scrutiny when a contract has been won: “A lot of contractors see they are not in a competitive environment, they have won it, and they can do what they want.”

The success of a contract often hinges on it being properly managed. In order to achieve this, there should be regular reference to the contract document, which should be used as a basis for making necessary changes, in addition to a partnership approach, with all parties working towards a shared goal, with realistic expectations and clear visibility.

The key principles of performance management can range from using service level agreements and key performance indicators in order to measure performance and imposing penalties for poor performance, to understanding the influence that the intelligent client can have on good performance and recognising whether gain share can help drive performance.

Good performance management starts with setting objectives and targets. Without the envisaged performance being defined, through a high quality contract specification with SMART (specific, measurable, achievable, realistic and time-bound) objectives, it cannot be measured and managed.

Key performance indicators (KPIs) are metrics that are used to measure the efficiency and effectiveness of a service, whilst service level agreements (SLAs) define the agreed level of desired outcomes from the client/supplier relationship. They provide the key performance criteria by which success or failure will be measured. SLAs must be detailed but they should not be so prescriptive about inputs that they prevent a supplier from seeking ways to do a better job. The SLA can also outline the procedure for incorporating any changes that occur in the targets. When determining the success criteria for an SLA, the factors that are critical to an organisation’s success must be considered. This ensures that the performance aims are directly related to the organisation’s business objectives.

Another essential component for ensuring the delivery of a quality service is performance management reporting. There is a growing trend towards automated measurement reporting, supported by a growing number of software solutions which offer real-time, historical, and projected performance analysis and visualisation of the end-to-end performance. This enables service providers to improve performance through early detection and proactive monitoring, as well as tracking KPIs, and their impact on the business, and contractual SLAs.

Once performance has been measured and analysed, in order to achieve real value, it’s important to take action on the information: whether that is to change the supplier or the service levels, introduce new services, or question the status quo. In order to demonstrate value for money from public investment, it is now more necessary than ever for the FM team to optimise performance. This may mean leveraging existing systems and methods to measure current performance, but it also means evaluating the benefits of new concepts and technologies to be able to improve future performance and lay the foundations for growth.


Gary Watkins high resGary Watkins is the CEO of Service Works. This article is based on the white paper ‘Performance Excellence in Facilities Management. For a complimentary copy, email or call +44 (0)20 8877 4080.