Other Case Studies
How many times have we heard, after the fact, that new buildings or tenancies have been acquired at great cost (not just for the property but the fitout as well) when in fact there was ample surplus room in the existing facilities?
This situation is a costly and a time consuming waste of effort for the organisation. The disruption to normal business it causes and the effect on the bottom line is huge.
If the facilities you operate are critical to the performance of your business, and these days most are, then any disruption/relocation is going to cost, not just money, but an interruption to the business and thus affect its capability to generate profits in this time frame.
Example
In making a high level decision about the capacity to accommodate a planned growth in their business, a tertiary institute made a costly mistake. The organisation tendered and started construction of the building at a cost of $10’s of millions of dollars.
In planning for the occupation and operation of the new building a space management system was implemented for existing buildings and it was discovered that the organisation had more than enough of the right type of space for the functions intended for the new building.
A costly business decision had been made and more than just the money a great deal of effort was then undertaken by the property management group to plan, organise and execute the fit out, the relocation of equipment and people to meet the necessary deadlines, as well as doing their own current workload.
Results: minimum $10million saving
One of the forgotten items in all property and asset management environments, the lease contracts once signed are filed away for reference purposes only. These documents usually represent a high monetary commitment by the organisation and an ongoing day-today use of the data contained within them to be available to others in the organisation.
Also lease documents by their nature define an end time frame for that commitment and thus implicitly a new commitment period starting. This is very important data for ongoing strategic and tactical planning, beyond the financial impacts that need to be taken into account.
The cost to an organisation of not having the data available to decision makers at all levels can be extreme but the following example shows how this cost was saved by having an effective Facilities Management system in place.
Example
A large multi-national company lease high value space in a CBD location. With the lease the tenant was provided with a number of car parking spaces. These spaces were subject to a clause in the lease, which meant that the car spaces renewal occurred at a different period from the overall lease. The agent missed the date by which they could change the rental cost and thus the tenant was not obliged to pay. The tenant had a FM system which allowed them to manage their data; the real estate company did not have an effective system to undertake their duties in this case. The cost saved by the tenant in the next three years paid for the operation and expansion of the existing FM system and allowed them to invest the saving into productive work for their organisation.
Results: minimum $100,000 saving over 3 years
This situation is common. Many companies spend a significant amount of money and effort on establishing an asset register. Usually driven by, and as a part of the financial system that is in place in the organisation. This is the traditional way of managing assets through the financial systems. As most operational people know, and the organisation finds out to its cost, this does not tell the whole story about the assets the organisation has (or has lost), and their condition and of course their fitness for purpose.
Example
A government department has a large property portfolio across the entire state. The department had been created by political change, which had meant a number of departments merged. This merger produced a huge portfolio of land and assets but when the State treasury wanted an asset breakdown by value and condition and replacement cost this was found to be impossible given the state of the data stored in their financial asset system. The department recognized the constraints of the system and that it was difficult to use and thus was not up to date, so they purchased and used an FM system in order to gather the necessary data and used this data to manage the state owned assets and bring the financial system up to date. The FM system has been extended to manage assets and space within facilities.
The system now provides extensive management reporting on condition, replacement values, and structural details and provides a comprehensive land and building inventory. This services Treasuries needs, and allows the Departmental managers to have greater macro and micro information for more effective operational management.
Results: savings for each region and the head office management are in the many $100,000’s per annum.
This issue occurs in most organisations and is exacerbated where multiple properties are routinely occupied. In this era of outsourcing, cleaning is the base service that is often first to be addressed. It may also be part of a larger outsourcing contract. The problem is that rarely does the organisation have the data to accurately estimate the floor area and types to be cleaned and thus the contract is influenced by the estimation of these metrics by the tenderers themselves. An effective FM system will provide up to date and accurate information for the letting of the contract and informing the tenderers of the exact areas and floor covering types to be included in the tender. This puts you, the buyer, in the driving seat.
Example
A state government department purchased their FM system and used it in the first instance to measure the floor areas and the floor covering types for all their 100 plus sites. Originally the plan was to be able to account for space usage by the funding types that are common between Commonwealth and State based institutions. This data gave them an immediate return on their investment by allowing them to accurately calculate the area of the different floor types. They then issued their next statewide cleaning contract based on the figures and saved millions of dollars over the new 3-year contract.
Results: $10 million saved over 3 years
The problem is that many Facility/Property teams use multiple data storage systems (paper and/or computer based) that have evolved over time to solve problems as they arise. Some of these systems are corporate and do not cater for relevant operational issues and longer term analysis. Others are home grown such as spreadsheet or Access based recording mechanisms, and then there are the fundamental paper based, documents which are difficult to store and retrieve data from, in order to meet the managers’ strategic and tactical information needs. In all of these circumstances it takes a lot of time and effort in providing correlated data for strategic decision making.
This could involve individuals or their key staff spending many hours and possibly days in getting comprehensive and accurate reports on the status of many aspects of the area of their responsibility.
Also the purchase of specific systems for specific functions, over time can produce a disjointed approach to both management and work processes leading to information in each system that is not easily correlated and macro management information not readily available.
All of these scenarios are common in most organizations and ERP systems were touted as addressing these Facility/Property management issues although to a large degree they do not.
Examples
A tertiary institute had multiple systems, incorporating all of the above elements and was finding it increasingly difficult to manage their diverse (geographically) portfolio of properties. The maintenance system was too “data heavy” and no work order had been produced in 12 months of ownership; a clerical person was spending 3 weeks producing a single spreadsheet report for upper level management every 6 months. There were large desks with A-Zero sized paper plans with paper cutout fit-out details laid out for planning space usage and spreadsheets with room areas (estimated).
Eighteen months after implementing an FM system, all of this data and more was managed through these systems. Giving consistent and accurate information at the touch of a button, also allowing accurate data to be passed to other internal systems just as easily.
Work orders were being produced and provided key management information on the cost of operational issues.
Results: At least $100,000 saved over 2 years
A government department purchased an FM system and discovered that key data was missing to populate the system. Research found some of this data but then it was discovered that everyone in key positions were using spreadsheets in lieu of a standard systems approach to storing and managing data. The implementation of the FM system started to address the correlation and integration of this data but then it was discovered a key new system in another department would produce some data on spatial utilization as a by-product and so the integration of this was also planned from its early inception.
Results: At least $38,000 saved in the first year
Outsourcing functions of the property and facilities team is a common practice and has major ramifications and potential dangers for the company outsourcing its compliance management. These non-core functions are handed over to specialist companies thus gaining access to expertise they need occasionally and thus the promise of reducing the in-house operational costs.
Specifically organisations’ Property and Facilities teams now outsource a range of business functions (depending on their organisational structure), some of which are described below but there are many others.
> Maintenance and service of assets (to varying degrees)
> Essential Services Compliance auditing
> OHS consulting and audits
> Safety Audits and consultancy
> Security
> Cleaning
> Hazardous materials management
> Property and tenant management
> Travel
> Printing and Mailroom
> Catering
> IT infrastructure
> Relocation management
This feature of our business operation today has wide ramifications and potential dangers for the company outsourcing its compliance management. Some of these are explained below.
The property owner or leaser will still retain responsibility for the compliance of properties. Thus it would be sensible to minimise the risks to the organisation to retain an internal function which is accountable for the performance of the outsourcer, and match this to legal requirements, internal benchmarks and Government compliance regulations.
The organisation doing the audits and/or the actual maintenance should be made (as part of the contract) to provide data (records) of all audits, and work done in a customer defined electronic format back to the customer at regular periods. These records should meet the company’s internal and external legal, environmental and social obligations. It is not enough that access to this data via the
WEB or some other closed system is provided unless they can be downloaded into an electronic format to be stored by the customer. If a change in outsourcer is required at some time in the future this historical data may have to be retained by the outsourcee for a lengthy period of time.
The loss of staff expertise and knowledge during the outsourcing process, either directly to the company taking over the function or though job attrition due to the letting of the contract, has an impact both long and short term on the organisation due to loss of key knowledge. This can be alleviated greatly if systems are in place before the handing over of functions such that long term knowledge and experience can be captured to some extent in the FM system put in place.
Implementing an FM system to manage the outsourcers is a business imperative for successful outsourcing and business risk management and continuity planning.
> To provide a tool for storing key data created by externally managed systems
> To provide management tool with SLA and KPI
> To provide data for risk assessment
> To provide data for disaster planning
> To provide continuity of knowledge between in-house to external transitions and the ongoing transitions to other outsourcing companies.
> To provide operational data which supports and tracks obligations to all levels of Government and all manner of compliance issues.
Examples
A large multinational organisation had asbestos removed from a CDB building in the late 1970’s. A specialist contractor did this removal work. One of the contractors employees subsequently won a court case 20 years later winning damages from both his employer and the company who contracted his employer.
Results: Saving may have been reduced if records had been kept more precisely
A regional company that manages a substantial infrastructure portfolio outsourced its maintenance and its inventory of spare parts, with all the computer systems that managed those functions, to an external company. The day-to-day operations by the retained internal work force had no system, no records or parts, prices and no purchasing processes expertise in place to function effectively.
Results: At least $75,000 lost in the 3 years of the outsourcing contract
This can be achieved by outsourcing the function to specialist companies but this has ramifications as described above if the outsourcing contract is not correctly managed.
It also can be managed by FM systems, which are periodically updated with the latest regulations such that the system automatically schedules the work to meet compliance reporting for all government agencies.
The combination of using FM systems to both drive and manage compliance work and audits and specialist expertise to do these tasks is good management practice.
Example
A large property manager who has a significant number of owned properties has now implemented an FM system to do this as one if its functions. The benefit for this company and its outsourcing company is that it is tailored to meet the specific needs of one of the most advanced green buildings in the country. The contractors who do the outsourcing for the building now have a consistent system and documentation to work with standard receiving and completion process. The building managers have a system, which guarantees that the recording process for Essential Services is met as the regulations change over time.
Results: Estimated savings are $120,000 in the next3 years
This function has been a major issue in our work place and has implications on insurance costs and the accountability for individual line managers.
It is imperative that organisation assess their work practices in light of the regulations that are current for their industry and work places, and also in light of the nature of their business and the social obligation to their employees. This is often done in conjunction with external industry experts in this field and thus plans and policies are produced as a result.
Once established the OHS plan for each workplace is put into action with again more employee training and awareness programs. All these activities are expensive exercises. It is therefore important for companies to have systems that record OHS instances (thus complementing their policies) and the activities during the incident, recording work done before and after the incident.
Keeping historical records including condition assessments, maintenance records and photographic images are essential in this discipline for better OHS management and reporting. These systems can also provide an online access to all employees on the regulations, company policies and locations to which each of the specific regulations apply. They also allow policing of the standard used and the consistency of reporting incidents.
Results: Having a system in place to record and fix OH&S problems ASAP could save thousands, possibly millions of $'s if someone was to file a suit for negligence.
Example
A major Australian public building had a problem with floor tiles, which kept lifting and were often causing people to trip up.
No major incident was recorded but in a simple way the problem was resolved, to a large extent, in the short term (until budget could be found to relay the flooring) by getting the cleaners to report damaged and lifting tiles every time they cleaned the area.
Thus the maintenance recording system scheduled the work to be done prior to incidents. This process alleviated action after the event of an incident and the public, and their employees saw the company as taking proactive measures.
This function is an emerging business imperative after terrorism has become factor in our society although it has always been a sensible and important discipline in the running of any business.
The problem with this discipline is that existing asset systems and company recording systems focus on the financial not on the operational needs of the company. In doing so they don’t have the accurate and necessary data to do this exercise.
What is required is an FM system that records accurate location information and configurations, usage and purpose. It also needs to record the key assets, their purpose, the criticality and why this is so.
If operational systems have this database of information the line managers, senior executives and risk planners have a good data basis for assessing options. In the near future FM system will address these operational needs with comprehensive reporting and planning tools.
Example
A department in a state government that had a large exposure with equipment placed in over 800 locations across a very large geographic region was charged with the responsibility to service and maintain the equipment and keep it in optimal use. It also had to have contingency plans for equipment replacement or for temporary use if natural disaster struck within this area.
They used a modern FM system to document locations, service, configurations, equipment types, spare and their locations and also disaster plans for replacement in key areas based on historical data about disasters in those areas most prone. They are now able to assess the impact of non-natural disasters on their responsible areas with their current data but are also adding additional criteria to help them with this more insidious threat.
Results: Possibly saving people lives, because now they have a detailed rapid response plan in place with contingencies.
If one of these case studies does not compare to your situation please contact us on 03 9600 1646 or email and we will detail how we can help you.
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