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Is the writing on the wall for major Facilities Management Contracts in the UK Public sector?

Reading the coverage in the Main Stream Media in the wake of the collapse of Carillion, and the well documented challenges that a number of other major FM companies seem to be suffering, it might well seem that there is a tide of change running against the well established policy for major public sector bodies to outsource major elements of service and maintenance to large private companies.

We still wait to confirm the specific causes of the Carillion failure, but it seems likely that major outsourcing initiatives will follow the trend of major PFI contracts and find less and less support as large public sector organisations look again at how they ensure buildings and infrastructure are maintained, offices are cleaned and catering is provided into environments such as UK hospitals and prisons.

One option is a complete reversal of the outsourcing policy and a full embrace of hiring staff directly to deliver a vast range of services which are needed to support these very large and complex organisations. There has always been a ideological battle in places such as the NHS in relation to “privatisation” – some would regard outsourcing cleaning or catering services to be a very sensible approach, reducing the cost of what might be viewed as none frontline services. The counter argument being that making sure patients and staff are well fed, in a clean environment is a central to the workings of a hospital and to focus just on the financial efficiencies is both clinically naïve and financially myopic.

This raises major questions for the leaders of large public bodies, the civil service and politicians of all parties, but it also raises major strategic questions for those of us who have traditionally provided services into these major Outsourcing Companies. One significant impact is that companies supplying these large FM companies will be much more wary of not getting paid, and hence will look for some form of credit insurance, which may well be much more expensive moving forward. The number and scale of the losses to smaller supply companies was eye watering, and no doubt a significant number will find themselves under huge financial strain, and unfortunately some will succumb.

Aside from being far more careful about how we all engage with these large FM companies, the other question is how does any shift in approach to large, single party contracts change the way in which we deliver our services.

Within days of Carillions demise, a number of major public sector customers contacted our own business to see if we were willing and able to engage directly, or as part of a consortia of similar companies to provide the services that are currently under one single outsource contract. Whilst this may increase the management workload for the buyer of the services, the option to supply either independently or as a broader group provides significant improvement in control for the customer, and with the removal of the large FM player, the commercial risk for those of us providing specialist services is also reduced or even removed. This should allow for lower costs for the services, even if the costs of management for the end user customer may be slightly higher.

Whatever the outcome of the various reports and analysis of Outsourcing and Facilities Management within the Public Sector, the pace of change may be slower than some commentators have claimed. Some of these contracts cover long periods into the future, and replacing them with a number of smaller versions will take some time. If the decision is taking to take some (or all) of the services back in house, it will take even longer.

From the feedback I have received across a number of different Public, and Private organisations in this field, it seems that there is general acceptance that the status quo is no longer tenable. The failure of a major corporation like Carillion has sent shockwaves through all parts of UK business, politics and the general public.

A move to complete “insourcing” seems unlikely, many of the skills are no longer available in the public bodies and the costs of hiring the skills back in would be prohibitive. That said, I can see the larger contracts being split into a range of smaller specialist Outsourced Providers to reduce risk, and other services being considered for repatriation into internal staff where there is a strong argument that having them as part of the core of the organisation, even if that may be at a higher financial price.

Chris Bingham

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