Dan Diehl, Paul O’Malley & Lou Ronsivalli.
Demonstrating Better Value10 July 2014 / by Peter Ankerstjerne (author) / Copenhagen
ISS Facility Services is one of the largest providers of facilities management (FM) services to public sector organisations in the world. How important is price in contract awards?
Price is very important at a time of enormous pressure on public sector spending.
Even now, despite the climate of austerity that has followed the global financial crisis, public expenditure still represents between 40 and 50 per cent of gross domestic product (GDP) in many developed countries.
However, many governments are decreasing the size of their public sector workforces - for instance, in the United Kingdom the Office for Budget Responsibility forecasts one-in-seven public sector jobs will be lost by 2017, and it is not clear how public authorities will continue to meet the high expectations of their citizens as policymakers are already under pressure to find better and more tailored ways of delivering FM services with smaller budgets.
Some of your competitors have come under fire for underpaying staff working on public sector contracts (and for even breaching minimum wage regulations in the UK). Is this symptomatic of a wider malaise that perceives FM as a commodity service and leads to providers underbidding for contracts?
Although I would not seek to comment on the activities of our competitors, we are of the opinion that governments may need to rethink how facilities management services are provided.
The public sector has increased in size and significance but has been less focused on improving efficiencies and effectiveness - or value for money to use a better term.
By contrast, the private sector is constantly focusing on improving its levels of service delivery.
We know from experience when we bid on public sector service tasks that we can provide better cleaning in schools or better facility management of a hospital at lower cost, whilst also ensuring everything operates more effectively and efficiently.
Research undertaken for us by the Copenhagen Institute for Future Studies (CIFS) involving interviews with leaders, administrators and members of the public has also found outsourcing within the public sector to be much less developed than in the private sector, and identified even bigger challenges ahead that are linked to social and demographic changes. [Editor’s note: ISS Whitebook, 2020 Vision – Future of Public Sector Outsourcing is available for download on the ISS Group website: http://tinyurl.com/nq8zdn7].
Additionally, it has uncovered obstacles the industry as a whole must work together to remove.
What are these obstacles?
Primarily, there is a persistent myth that outsourcing means poorer quality and lay-offs which reflects a bias against private service providers and suggests better and cheaper may not always be welcome.
ISS and the rest of the service industry need to play an active role in promoting and facilitating outsourcing within the public sector, and we can do this by demonstrating how we provide services that are better, smarter and of higher quality by offering innovation, economies of scale and flexibility as welfare societies are badly in need of this.
Indeed, we would go further by suggesting service providers have an essential role to play in society by helping governments procure high quality services, and that facilities management companies will need to prove themselves as partners in value creation rather than merely as providers of outsourced services.
At ISS we have made it part of our business strategy to engage actively and openly with the media and unions, as well as local and national decision-makers in order to encourage discussion about the 'pros' and 'cons' of outsourcing in the public sector.
Service providers should not shy away from being open about how they operate but should instead engage in dialogue, and the industry should not be afraid of being challenged if outsourcing of public services results in people changing jobs, causes disruption, or even temporarily disappoints public expectations. After all, dialogue and transparency are essential for successful partnerships — and building and shaping lasting relations between service providers, the public sector and the citizens we both serve.
Contracts are typically awarded for short periods of between three and five years. Is the emotional investment you imply is necessary to convince governments and the public sector about the importance of added value worth it?
One of the central challenges in providing services to the public sector is overcoming the assumption that outsourcing contracts should be static, unidirectional and time-limited, and the public sector should therefore consider the more widespread use of “smart contracts” that take account of successes and failures (which are often the outcome of poorly negotiated and executed agreements).
The issue is directly linked to the input-output measurement practices that are the norm for contracts today, and we believe this practice seriously limits the scope of any provider to innovate and create better and cheaper services.
We also believe the FM industry in Europe should push for a re-evaluation of the European Union's public procurement rules which, in combination with other factors, function as a barrier to the introduction of innovative, value-adding solutions because they do not allow governments to buy services unless input is defined narrowly.
Many of these challenges cannot be addressed overnight as they do not have simple solutions, although we sincerely believe the industry can make a start by encouraging and contributing to constructive public debate in the societies it operates within.
At the end of the day outcomes (which we define as "value created for customers") matter much more than inputs such as the amount of time spent on delivering a service.
In January, an independent panel named you one of the "Top 5" CMOs in Denmark for the Berlingske Nyheds Magazine awards. What is the secret of your success?
Our success at ISS is based on teamwork.
Beyond that, you can rest assured I won't be sharing any of my darkest marketing secrets!
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