Building and Ground Maintenance Outsourcing: A Maturing Cost Reduction Trend That Requires a Disciplined Approach

Today’s post is from Howard Gutman, a Manager in the Hackett Group’s Strategy and Operations Practice who consults to Fortune 1000 clients in operations improvement, sourcing and procurement, supply chain, and cost optimization. He was previously associated with MMG, KPMG, and PWC PRTM.

Many companies currently have their building and ground maintenance function (e.g. security, janitorial, and HVAC) managed by their own employees and/or a set of local suppliers for individual offices/ manufacturing sites. However, the success of companies such as AT&T and BMW, who have outsourced their building and ground maintenance function to integrated facilities management firms such as Jones Lang LaSalle and ABM, has caused many companies to question whether they should change their approach to the building and ground maintenance (BGM) function. Based on our recent client work, the outsourcing of BGM is an increasingly maturing trend across several industries but it requires a disciplined approach to develop an understanding of a company’s current demand and specifications in order to maximize the overall savings opportunity.

Before a company can consider outsourcing this function, a company should utilize a disciplined approach to understand demand for BGM by collecting the following information:

  1. Number of building sites;
  2. Basic information about each site (e.g., address information, total square footage, building population, number of bathrooms, outdoor square footage);
  3. Total spend for each major building and ground maintenance category by site (e.g. janitorial, HVAC, and environmental services).

Once this basic understanding of a company’s demand is established, a company must work with their operational leads to gather detailed specifications for each of their BGM services (e.g., frequency and requirement for HVAC maintenance at each site). After the development of the demand set and specifications, a company can pursue a strategy of outsourcing this function as the information mentioned above is essential for any RFP process involving integrated facilities management companies.

Two recent clients utilized the above approach to outsource their BGM function but each had initial concerns about outsourcing this function due to business culture and regulatory reasons.

Our first client, a Fortune 500 telecommunications company, liked the operational benefits of moving to a single integrated building provider, which includes centralized reporting and 24-7 support. However, they had concerns about regulatory issues such as maintaining continuous 911 service at rural locations. Through the RFP process, our client discovered that all of its major competitors had moved to an outsourced BGM solution, particularly at their rural locations.

Our second client, in the manufacturing space, had concerns about moving control of building management from their plant managers to an outside building and ground maintenance provider. Through the RFP process, it discovered that many of its competitors had moved to integrated facilities management companies who were deeply experienced in the manufacturing space.

The results of these two projects are projected to result in cost savings of 10% to 12.5% over the next two years along with increased maintenance standards and visibility into building issues through 24/7 online reporting. However, the main benefit for these organizations was that they could better focus on their core business functions, while delivering continuous savings through a disciplined approach for outsourcing BGM that has already been implemented by their peers.

Thanks, Howard for some insight into this often overlooked spend category!