controlling cost & quality of facilities across large estates

Controlling Cost & Quality of Facilities Across Large Estates

Benchmarking as a Tool of Value Management

presentation byProf. 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

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

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)

Total revenue cost

Overall Facilities costs – 15%

e.g. Revenue costs p.a. = £50m (profit p.a. = £2.5m / facilities costs p.a. = £7.5m)

Pre-tax profit 5%

I.C.T. 5%

Business and staff support

costs 5%

Premises costs 5%

Facilities costs in overall context

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?????

FIG. 2.2.1.A: Three facets of cost control - inter-relationships

Costcontrol

Budgetarycontrol

Competitiveprocurement

Value engineering

Source: Facilities Economics ã BWA 1994

The 3 Facets of Cost Control

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)

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

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)

Value Management

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

Benchmarking -How?

• Informal group • Facilitated group • Compare to published data-set • Internal/external• Compare to ‘normalised’ data-set

‘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

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.

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.