Module 1: Introduction to Facility Management

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At one level, ‘facilities management’ is a simple and an accurate label for the work done to ensure that a building or building complex works efficiently and effectively, that it meets the needs of the people active inside it. But because ‘facilities’ is such a vague term, it doesn’t deliver the kind of clear concrete image that helps people know what it’s referring to. We can picture office buildings and shopping centres, hospitals and sports complexes, airports and art centres. But the facilities? Not really. And ‘management’ does not add much clarification. It doesn’t suggest that ‘managing the built environment’ includes designing layouts, improving sustainability, negotiating leases, analysing business strategy, maintaining the plant, mitigating risk and a range of other interesting skilled work.

The amorphous nature of facilities management is well illustrated in the tale that is told – and is true - that when the 14 members of the strategic industry leaders group convened for the first time for the Commonwealth government’s Facilities management Action Agenda, they went around the table asking each to define ‘facilities management’. There almost as many different answers. Industry leader and Immediate Past Chairman of the Institute of Workplace and Facilities Management Association of UK,), Stephen Ballesty, regards the ultimate consensus on ‘Managing the Built Environment’ as the title of the FM Action Agenda’s 2005 strategic plan as a watershed in the industry’s self image and wider recognition of its role and contribution.

It remains the case, however, that facilities management – FM to its practitioners – can be frustratingly difficult to pin down. This is a pity as it is an intriguing and important field of work but one that is little known or appreciated.

Part of the difficulty is that the task of managing the built environment is exceedingly multifaceted. It involves technical services that keep the physical plant operating (e.g., lighting, air conditioning, maintenance, cleaning, etc). Security, risk management and business continuity are also FM responsibilities. So, too, accommodation layout and relocations. Further, it is not simply a matter of providing A, B and C services but integrating them so they might reinforce one another. At a higher level still, a facilities manager has strategic responsibilities: rationalising assets and defining policies to support business objectives. One must remember, too, how many different types of facilities there are.

A further problem with neatly pinning FM down comes about because facilities management is a relatively new field. Building services themselves are not new, of course. Nor are many of the other tasks involved in accommodating customers and staff or in making business decisions about building assets. However, recognising there is a coherent discipline overarching these tasks developed only in the 1980s with the outsourcing that was the hallmark of that decade.

The recognition that FM is a unique discipline (or conflation of disciplines) has also been driven by a new appreciation of how important a building is to an organisation’s success both in terms of workers’ productivity (and willingness to stay) and the public’s perception of the enterprise.

Facilities are second only to human resources as the largest ‘asset’ for an organisation, and the role of a facilities manager is to ensure that the physical infrastructure is strategically aligned to the organisation’s core business – incorporating financial, social and environmental objectives over the entire life cycle of property investment and ownership. The role is becoming critical as built infrastructure increases in complexity and value and has a more pervasive social [and environmental] impact as a user of natural resources.

What is FM?

Every organisation relies on a mix of functions and services to provide the support essential to its core business operations. Ensuring that this support is available in the right form, at the right quality and for the right cost is the task of facilities management. In essence, FM is about taking control, freeing organisations to do what they do best while the facilities managers take care of the rest.

Facility Management is a process of managing and maintaining the facilities in an organisation. Facilities can include an office complex, physical resources at the company or site and any other mechanical and electrical utilities that can cause health or safety hazard to employees.

Facilities management has gained importance over the last few years. This is because businesses have identified that well-managed buildings and utilities help companies function effectively and efficiently. Facilities management teams consist of professionals involved in the day-to-day analysis, maintenance and repair of company utilities. The facilities management team should also actively be involved in strategic planning activities that help in cutting costs and increasing employee productivity.

Facilities management teams need to ensure all the facilities in an organisation are compliant with industry health and safety regulations. They should also ensure the complex has:

• disability access,• fire prevention methods,• emergency exit plan in place,• effective waste disposal,• control of hazardous substances, and• maintenance of the company parking space.

Regular mechanical and electrical repairs along with property maintenance are also part of the services facilities team provides. In order to help the business achieve a competitive advantage and increase the overall worker productivity, companies must involve the facility manager in strategic decision-making.

In practice, FM has proved notoriously difficult to define over the years. However, clarity is being brought to this by the development of recognised standards, a process that has been underway for some time. The latest ISO standards offer this:

Facility management (facilities management, FM) is an organizational function which integrates people, place and process within the built environment with the purpose of improving the quality of life of people and the productivity of the core business.

At the beginning of the 21st Century, with its climate of continuous change in business and technology, and the consequent emphasis on effective utilisation of all corporate resources, facilities management (regardless of the precise definition!) has emerged as an important business discipline. With this has

come greater professionalism - and a wider range of choice in how specific functions and services are secured.

The strategic role of facilities management

According to a Deloitte report on the Strategic Role of Facilities Management, almost 75% of facilities professionals agreed that facilities management has a significant strategic impact. However, only around 20% of a facility manager’s time is spent in strategy and planning activities while a whopping 53% is spent on regular day-to-day operations.

To increase the time facility managers can spend on strategic planning, businesses need effective facility management software that will free up time spent on day-to-day operations. Effective facility management software allows professionals to perform assessments, as well as track and manage the company property and utilities. This saves facility managers time and enables them to be effectively involved in making decisions for business continuity and progress.

The end goal for any business is to cut cost, improve staff productivity and increase ROI. An effective facilities management process is vital to an organisation. This is because it covers almost all the business aspects, and its role in strategic planning helps a company achieve its business objectives.

Sourcing facilities services

One of the FM's primary responsibilities is providing and managing a range of services to his or her 'customers', that is, the employees within the organisation. These services span the range from security and M&E, through cleaning and catering, to plants and landscaping. Increasingly, such services are outsourced; in other words, purchased from and delivered by external suppliers – a practice that has grown and developed in parallel with the rise of FM.

From a starting point of single-purpose contracts (typically, maintenance, cleaning or security), each handled by a specialist supplier, the outsourcing concept has broadened over the years to encompass 'bundles' of services put in the hands of a multi-discipline contractor. More recently, contractors - especially the larger ones - have sought to bring diverse service lines together in 'integrated' packages, promising greater efficiencies and reduced management costs.

Alternative service supply solutions are offered by a number of FM providers who focus specifically on the management of services that are delivered by sub-contractors – but this once-common approach has become less so as many of these specialists have either diversified their skill base or been bought by ambitious contractors. 'Total facilities management' is another alternative, in which the provider takes on responsibility for the delivery and management of all required service lines. TFM solutions can be sourced from FM specialists or from diversified contractors, who will generally meet as much of the need as possible from their own resources. More comprehensive still is the solution offered by a handful of outsourcing providers who combine expertise in both FM and property.

It is impossible to generalise about the 'best' solution for the supply and management of business support services. That can only be defined in terms of a specific client organisation.

How big is the market?

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Just as it is difficult to define precisely what FM means, putting a firm value on the size of the UK market is a challenge. In past years, estimates have varied from over £10bn, through £16bn and £117bn to £173bn. Much of this variation has to do with the definitions being used. These days the most commonly quoted figures are in the region of £110bn to £120bn.

The only definite conclusion to be drawn from available research is that the facilities sector in the UK is a large and dynamic marketplace. The i-FM Top 50, our rankings of the leading facilities companies in the UK, accounts for a total turnover of about £13bn and a total employment roll of well over 325,000.

The relative newness of facilities management lends it a natural dynamism; its horizons seem continual to expand. It is now, for example, clear that FM will have a central role to play in building a sustainable future by ‘greening’ the built environment. The FM Action Agenda, a 3- year innovation and reform program supported by the Department of Industry, Resources & Tourism and a wide range of public and private sector industry stakeholders, captures well the spirit and energy of the industry. It not only addresses sustainability but such critical issues as the need for innovation; education and training; regulatory reform; and industry recognition. Perhaps what best demonstrates the commitment of facilities managers to the advancement of their field is the willingness of extremely busy people to devote significant time to achieving the objectives of the FM Action Agenda.

The purpose of this report is to describe facilities management in terms of the work it does, the range of skill it encompasses, and the current provision for education and training (or lack of it). In each of those areas, attention is drawn to intersections with a sustainability agenda.

Facilities management: a world of skilled work

The Facility Management Association of UK(IWFM UK) developed an accreditation system in 2000 that defines three levels of skill: (i) ‘practising FM’ where the role is focused on supervision of operations; (ii) ‘managing FM’ with responsibility for facility outcomes; and (iii) ‘leading FM’ which is a senior strategic role. The emphasis is on the professional managerial and supervisory aspects of ‘managing the built environment’ because the Association is, rightly, concerned that at the moment ‘facilities manager’ is not recognised as an ABS occupational category, it is not listed on government careers websites and doesn’t confer eligibility as a skilled migrant.

Most of today’s senior facility managers have arrived at their position through a series of accidental steps – “we mostly fall into it”, as one put it.

In this report the field of facilities management includes operators – that is not just their supervisors and managers, but people ‘on the tools’ (who would identify themselves as electricians, plumbers, security officers, etc) – whose skills are required if a facility is to run smoothly and sustainably. In fact, an initial vocational qualification is a promising step into a later career in facilities management itself. Norman Jackson who lectures in RMIT’s postgraduate Facilities Management course believes that five years in a

trade is not only an eminently suitable preparation for a Masters degree in FM but a preferable route into the profession, “such people have a real hands-on understanding of how things work and of how they fail and, thus, of how to manage the risks”. It is a pathway many have taken. A 2006 survey of the IWFM Britain’s membership found that while only 4% of respondents had only a trade qualification; 33% had a trade plus a degree and/or post-graduate degree.

To present a picture of the breadth (and depth) of skills required in servicing and managing the built environment, three general categories of work are described:

● building services: technical, operational skills that keep buildings functioning;

● space utilisation: layouts, fit-outs, relocations;

● professional advisory: translation, integration, alignment with business objectives.

The three are separated to bring some order to the material but the division into the technical, the ‘human’ and the strategic runs the risk of being dangerously misleading. Many tasks, such as risk management and procurement, are done by each group and have to be done well by each group. More importantly, the separation contradicts the whole FM philosophy that people and their building form a single ecology where each influences the functioning – indeed, the well being – of the other.

Importance of facility management

Over the last few years, more businesses have been starting to realize just how important effective facilities management can be for their profit margins. Facilities management teams are made up of professionals qualified in monitoring, maintaining, analyzing, repairing, and maintaining all facilities used to build and run a business including buildings such as warehouses and office blocks, staff, and human resources.

A facilities management team should also be active in devising and adjusting facilities management strategies to improve cost-cutting and increase employee productivity. A growing organization attracts a burgeoning list of resources to manage, including extra staff, HR, buildings, infrastructure, and equipment. The management team not only need to maintain the facilities, but they also need to ensure all areas are compliant with health and safety regulations. When a business is responsible for the health and wellbeing of so many employees the facilities management team needs to be ready to tackle any situation, so they can plan and respond immediately should changes or adjustments be needed, and handle on-site emergencies.

Why is facilities management so important?

It's a question we've often seen asked by managing directors who have been busy growing their business to a stage where they now have large buildings to manage, staff and HR to track and are looking for a complete platform to manage it across.

In the UK alone market research suggests that the facilities management sector is worth between £40bn and £95bn per annum. In recent years the awareness of facilities management has heightened due to the media coverage of PFI/PPP initiatives and financial divisions within organisations understanding the true benefit it has to the business.

What Benefits Does Facilities Management Offer?

• Enable cost-effective working processes within the business• Smarter working using intelligent IT systems and applications• Management of buildings, people, assets and much more• Integrate business information into one software platform• Increase the overall efficiency of an organisation• Maintain complete compliance

Listed below are just a few of the responsibilities a facilities management team focuses on to ensure smooth business operations:

• Risk assessment• Waste management and disposal• Access for disabled employees and members of the public• Ensure compliance with all health and safety regulations• Strategic planning • Controlling the distribution and use of hazardous substances•

When you realize that this is but a small sample of proper facilities management it becomes clear that a facility management program becomes an essential part of any business. With today’s technology, this usually involves the use of tailor-made software specific to the industry. Facilities management allows a business to keep its finger on the pulse and properly co-ordinate timely maintenance of assets to ensure longer usability and reduce the total cost of ownership.

A business lacking the ability to effectively manage its facilities risks falling out of regulatory compliance, and may also find itself facing expensive repair bills, rather than relatively minor maintenance costs. There is also the danger mismanaged equipment can pose to both employees and the public.

How is a Facility Correctly Managed?

Managing a facility correctly requires business owners to invest in a software application which is going to allow their facilities manager to work with large sets of information and log compliancy information, asset maintenance information and every process through the facility management lifecycle.

The benefit for business owners and key decision makers is that facilities management software allows you to access powerful reporting functions that give you greater insights into your facility and enables you to better analyse and make more informed decisions.

One of the key reasons facilities management is so important is that when a business is coordinating people, the health and safety responsibilities require you to be completely ready to tackle any situation. By managing your facility you can properly coordinate the maintenance of assets and prolong the lifespan of components within your building or facility. With recent developments in technology, facilities management has also entered the mobile platform with applications developed which enable facilities managers to work on the go. The benefit of FM software is available on a mobile platform is that it allows facilities managers to be agile and responsive, logging maintenance issues on the spot and accessing the same dataset that's on the main infrastructure.

Module 2: Workplace Facilities

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Facilities managers are stewards of the built environment. The day-to-day running of a building is fundamental to facilities professionals. From procuring the most competitive electricity contract to selecting the most appropriate air conditioning system, the facilities manager needs to be aware of the market, costs and benefits of all aspects of workplace facilities and equipment.

The increasing impetus on energy efficiency in business operations, health and safety issues and maximum productivity are now among the business objectives that facilities professionals must address. Ensuring that the appropriate services and facilities meet the needs of their users and are functioning efficiently and cost-effectively will bring benefits to all aspects of an organisation’s operations.

Buying gas, electricity and water

It is becoming an accepted view that facilities managers are kept in the dark over energy costs. Lack of transparency in the existing deregulated gas and electricity markets is costing UK businesses valuable time and money. The sheer number of companies selling gas and electricity in the UK is in itself a headache for facilities managers.

Some facilities managers also feel they are taking a gamble when choosing between an established, but potentially more expensive, supplier and one of the many new but equally viable competitors. The popular view is the deregulation of energy industries across Europe, and the consolidation of companies is intensifying the key issues, as foreign suppliers join the fray.

How to get the best deal

The solutions to the energy-buying conundrum for facilities managers comprise a much-simplified procurement process and more transparency in the market. Some facilities managers utilise the (free) services of reverse auction agencies. Any organisation seeking to obtain the best quote on energy enters a few details about its current set-up on an agency web site. All Ofgem-registered gas (or electricity) companies in the UK then ‘blind bid’ for the organisation’s business in a reverse auction to offer the most competitive price. Ofgem (the Office for Gas and Electricity Markets) is the official regulator. Only with a truly open market can those in charge of buying commercial and industrial energy be sure they are getting the best deal.

BETTA

The British Electricity Trading and Transmission Arrangements (BETTA) are meant to create ‘a fully-competitive, British-wide wholesale market for the trading of electricity generation’ and draw Scotland fully into the scheme. BETTA replaces NETA, the new electricity trading arrangements, which went life in March 2001. BETTA operates the high-voltage electricity transmission system throughout Britain.

Hitherto there was a separate Scottish system run by Scottish Power and Scottish & Southern Energy. National Grid looked after transmission in England and Wales, with the two systems joined by an interconnector. However, the Scottish companies were privatised as vertically integrated concerns covering the whole process, from generation through the transmission to supply. Ofgem reckons the changes give renewable generators in Scotland better access to the Anglo-French interconnector, making it easier to sell in continental Europe. Before NETA, the previous pool arrangement had been regarded as deeply flawed and seen as ‘effectively a means for generators to set a wholesale price which suppliers and large consumers had little choice but to accept’. In contrast, BETTA is a genuine market in which there is a real choice.

Large energy users

Suppliers are expected to focus heavily on the small and medium-sized enterprise (SME) market, where better margins and profits can be made compared with the high- volume business. What then can larger users do to improve their position?

When looking at contracts, be prepared to be innovative, look to load-manage, talk to suppliers about the usage profile, communicate regularly regarding any changes in consumption habits, watch the markets and supplier activity and know which suppliers are best suited to match a company’s needs, and set budgets in line with an educated view as to where prices might be heading.

Ofgem’s advice is to ‘shop around to get the best deal’. The role of this government watchdog is to make sure that markets are operating as competitively as possible. What Ofgem has no control over is the Climate Change Levy (CCL). This presents a conundrum. On one hand, electricity prices are lower than they would be, thanks to BETTA, while on the other hand, the CCL has the effect of raising prices.

Combined heat and power

Combined heat and power (CHP) is an efficient technology for generating electricity and heat together. A CHP plant is an installation where there is a simultaneous generation of usable heat and power (usually electricity) in a single process. The term CHP is synonymous with ‘co-generation’ and ‘total energy’, which are terms often used in

other European Community member states or in the USA. The basic elements of CHP plant consist of one or more prime movers usually driving electrical generators, where the heat generated in the process is utilised via suitable heat recovery equipment for a variety of purposes, including industrial processes, community heating and space heating.

Efficiency

CHP can provide a secure and efficient method of generating electricity and heat at the point of use. Typically, CHP achieves a 35 per cent reduction in primary energy usage compared with power stations and heat-only boilers. This is because it uses heat from electricity generation and does not suffer any transmission losses since the electricity is produced on site. So, when there is an optimum balance between heat and power loads, the host company should be able to make economic savings. Today, the existing CHP installed base achieves over 30 per cent reductions in carbon dioxide emissions compared with coal-fired power station equivalents, and over 10 per cent compared with gas-fired combined cycle

gas turbines. Further, the latest CHP installations produce over 50 per cent reductions compared with power generated by coal-fired complexes.

District and localised production of heat and electricity avoid massive amounts of efficiency loss from central power generation and lend themselves to considerable savings in energy. The fuel cell also has a key role to play in the overall process for ensuring that buildings reduce their harmful carbon dioxide emissions. Fuel cells convert the energy from a chemical reaction directly into electricity and heat and could provide the future CHP solution for buildings. Although most fuel cells are still under development, they seem certain to play a large part in providing CHP in the hydrogen economy, which promises to eliminate many of the problems the fossil fuel economy creates. It could reduce the depletion of natural resources and eliminate pollution (including greenhouse gases) caused by burning fossil fuels.

The CHP Club

The government is eager to achieve its target of 10 GW of CHP capacity by 2010 and has set up the CHP Club to help achieve this. This is particularly targeted at new and potential CHP users, and also aims to help existing users to extend their schemes. It intends to provide members with a one-stop shop: a combination of information, exchange of experience and advice facilities on CHP and related topics, all for free.

The Combined Heat and Power Quality Assurance (CHPQA) programme will enable good quality CHP to earn exemption from the CCL; potential members can visit and register with the CHP Club website. A consultation paper, CHPQA – A Quality Assurance Programme for Combined Heat and Power, has been

Totally integrated power

A lack of a uniform approach to energy monitoring, control and delivery have meant that occupants of industrial and commercial buildings have found it practically impossible to integrate energy supply to the same extent as other critical building services, such as HVAC and security. Heating, lighting, access control and fire and security systems all need to be controlled, along with a building’s energy requirements.

Totally integrated power, a concept developed by Siemens, offers integrated power distribution from medium-voltage switchgear all the way through to socket outlets on an office wall. The concept covers every aspect of power distribution and electricity management required in an industrial environment. It has been estimated that totally integrated power can bring power use savings of 25 per cent because it enables electricity users to reduce their total power costs, as well as increasing the efficiency of operation of plant equipment. Operators of public buildings, including museums, hospitals and airports, are said to benefit from totally integrated power just as much as industrial and office markets. The theory is that by expanding the capability of data control and management through an entire building, all aspects of energy delivery and consumption can be integrated.

Open systems in building control

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The organisation buildingSMART (formerly the International Alliance for Interoperability, IAI) has the mission ‘to provide a universal basis for process improvement and information sharing in the construction and facilities management industries, using industry foundation classes (IFC)’.

IFCs are a practical tool for information sharing, using object technology; they are information-rich, swiftly transmitted and not limited to any one software vendor or system. The IAI’s first chapter was set up in the USA in 1995 and the second in the UK in 1996. Other chapters now cover German-speaking, French-speaking and Nordic countries, Japan, Singapore, Korea and Australasia.

buildingSMART has chapters covering facilities management areas such as reactive and preventive maintenance, asset management, move management, change management, helpdesk, energy consumption profiles and performance data, but nothing currently in the area of the signal. This is the domain of open systems protocols and interoperability, principally involving the use of LonWorks, BACnet and EIB. With these systems, the situation is one where central systems increasingly feature distributed intelligence at all outstations.

The LonMark Interoperability Association is a key driving force in the establishment of interoperable guidelines for building, industrial, transportation and residential/ utility automation. LonMark membership is open to any manufacturer, end-user and system integrator committed to the development and use of open, interoperable products using multivendor

LonWorks control networks.

BACnet is a data communications protocol for building automation and control networks. The EIB bus – EIB stands for European integration bus but is always referred to as EIB – serves the same function as LonWorks and BACnet, offering the sensor-to-sensor and unit-to-unit links of LonWorks and the controller-to-controller-level protocol of BACnet.

As of yet, there is no 100 per cent open communication. The Building Research Establishment runs an EIB and BACnet training centre. The Energy Systems Trade Association’s Building Controls Group is one possible source of information. Watch out for Zigbee (IEEE802.15.4), a wireless standard aimed at building management systems (BMSs); the intention is to control and monitor buildings entirely from a personal computer (PC) through one converged (ultimately IP-based) building network. This is starting to happen.

Avoiding power failures

Organisations reliant on sensitive electronic and computer-based equipment are vulnerable to even momentary cuts in the electricity supply. Mains failure could bring most workplaces to a standstill. PCs, workstations, network servers, retail point-of-sale systems, medical equipment and telecom systems all depend on a high-quality uninterrupted power supply. A distortion of only a few milliseconds can destroy data, disconnect communication links and damage delicate instrumentation.

The best way to limit or prevent potential damage caused by power irregularities is with battery back-ups known as uninterruptible power supplies (UPSs) and standby generators. The cost of UPS systems ranges from under £100 to some £150,000, and generators start at £25,000 and can cost hundreds of thousands of pounds. When selecting a UPS, there are several important issues to consider:

● What are the potential consequences of power loss in both the short and long term?

● How much load requires protecting and which pieces of equipment are most critical?

● What is the length of time power needs to be sustained?

● What are the power requirements of critical equipment?

● What are the likelihood and possible duration of power losses or fluctuations?

The use and application of UPS systems need to be part of a company’s disaster recovery policy.

Water competition

The government is boosting the opportunities for competition in the water industry in England and Wales in order to bring customers more choice, keener prices and better services. As from 1 December 2005, companies have been able to compete in the water industry under the framework of Water Supply Licensing. Companies are being given clearer rights to enter the water market. Incumbent companies can remain vertically integrated statutory undertakers, retaining their key strategic water resource and environmental duties. The government is continuing to ensure that public health, the environment and the quality of drinking water are safeguarded. Ofwat (the Office of Water Services) continues to review regulatory changes, such as further transparency in incumbents’ costing information, to promote competition. Full information can be found on the Defra and Ofwat web sites.

Checking utility invoices

It pays to check all utility bills thoroughly, as costly mistakes in the supplier’s favour can and do occur. Anecdotal evidence suggests major users can expect average refunds of 2–4 per cent from rigorous attention to bill validation. Smaller users are not immune; although errors may affect them less regularly, their effect can be quite disproportionate.

Companies may already have some form of bill-checking procedures in place, supported by specialised software. But it is worthwhile reviewing how effective and efficient the systems are by questioning whether the checking process can validate the following items:

● Is it the correct supplier? Ensure, for example, that there is no double billing resulting from a

previous incumbent overlapping with a new contract.

● Are the prices correct, including transportation of use-of-system charges if separately itemised?

● Is there continuity, for example, no mismatch of ‘previous’ meter readings, no double-counted

or phantom bulk deliveries?

● Is the arithmetic correct?

● Is there proof of delivery; that is, independent verification of meter readings and bulk fuel

drops?

● Is there consistency with earlier billing patterns?

The complexity of some utility invoices can make it a daunting task to apply thorough vetting. Bills for contract electricity supplies and effluent charges, for example, can be quite complex. Worse still, much of the proprietary software sold for the purpose is not up to the job and becomes less relevant as non-tariff contract deals proliferate in the deregulated utility marketplace.

One practical approach is to model the invoice for each account with a spreadsheet. The current supplier’s details and contract price structure can be built in as constants. When the variable data from a new bill is entered into the appropriate boxes, the grand total should match that shown on the real bill. Changes of the supplier, changes of price and even changes of tariff structure can be accommodated by creating a modified version of the model bill.

Meter-reading errors

Experience shows that arithmetical errors are rare. Meter-reading discrepancies, however, do occur. Of course, an incorrect or estimated reading will usually be corrected on the subsequent read and any resulting overcharging will be balanced by a compensating undercharge, but there are important exceptions to this general rule. One is when the estimated reading occurs on the date of a change of supplier or end of the contract year when the price changes. Too much consumption may then be charged at a higher price and too little at the lower price. More significant is the situation where the meter is changed and the final reading on the outgoing meter is estimated or wrong.

Climate change levy

Energy consumption contributes significantly to the UK’s carbon dioxide emissions. Business accounts for nearly 70 per cent of these emissions, and industry and commerce alone are responsible for nearly 42 per cent. The UK government has set an ambitious target for a 20 per cent cut in the country’s carbon dioxide emissions by 2010, in line with the Kyoto Protocol. Initiatives have been launched by the government to assist companies in reducing their energy consumption. However, it is the CCL which has provided the impetus to getting- ting businesses to think about how they can cut their energy consumption and costs.

The levy is basically a tax on coal, gas and electricity affecting both private and public sectors. Its existence has increased the viability of renewable energy options and CHP, as these supplies will be exempt. British Gas estimates that the levy will add 10 per cent to electricity bills and 15 per cent to gas bills.

Objectives

The aim of the levy, which was introduced in April 2001, has been to encourage greater energy efficiency and use of greener power supplies. Reduced levy rates will be accorded to those who demonstrate that they have invested in energy efficiency. Any company pursuing an efficiency path will benefit from the levy; the government estimates that most businesses could save 10 per cent of their energy at little cost. Such a reduction would amount to more than just a 10 per cent reduction on the levy, it would also cut the overall fuel bill by a significant sum.

The levy is not aimed at the SME sector directly, but this group does have a key role to play. According to the Institute of Directors, if every small business in the UK were to cut its energy requirements by 20 per cent, the nation’s energy bill would be reduced by £1 billion, and 3 million tonnes of carbon dioxide

emissions would be eliminated. Whatever the size of the organisation, every company needs to have an energy management policy. The backing, understand- ing and support of everyone, from directors to staff, is mandatory.

Measuring energy efficiency

By far the most common yardstick for measuring, and managing, energy is by its cost. For a large number of users, interest does not extend beyond the one line on the expenditure budget for heat, light and power. However, if the cost is the only yardstick, interest in energy efficiency depends on whether unit costs of fuel are rising or falling. Until 2003/04, prices had been steadily falling, with a corresponding decline in interest in improving efficiency. The CCL was intended to help to correct this. Energy costs have since been rising, and are not expected to come down for the foreseeable future. Where energy is used in buildings, a step forward in the analysis is the cost per unit area.

Much information is available on cost standards for offices, schools, hospitals and other types of building, which enable users to compare their performance with best practice. Gas and electricity are sold by the kilowatt-hour (kWh), and this is the most commonly used unit for the analysis. Again, a range of information is available, notably through the Carbon Trust, which gives benchmark standards for energy use in various applications.

Energy-efficiency improvement programmes

Programmes of improvement must inevitably consider ways of actually increasing energy efficiency. Sometimes this is done by making major changes to the way requirements are met, for instance by installing a CHP unit or replacing a centralised steam boiler by smaller units close to the point of use. These are expensive capital projects which have to be carefully assessed and evaluated, with options such as whether to carry through the project in-house or use a contract energy management company.

Far more often, the improvement programme is achieved gradually. Such a programme might typically aim to improve energy efficiency by 2 per cent per year. This is likely to be measured in terms of a performance indicator, which may be in terms of kWh, kWh/m2, carbon dioxide emissions, and so forth. If it is measured in cost terms, an adjustment for any changes in fuel prices must be made for the results to have any meaning.

The importance of measuring where energy is used should also be emphasised. For instance, many organisations cannot separate their use of electricity for power and for lighting, or distinguish where steam and hot water are used after they leave the boilerhouse. Measurement enables energy use to be assessed against standards and its costs to be allocated to users. Adequate metering is essential for good energy management.

In practice, there can be all sorts of variations from year to year: the weather may have been different, there may be more people and more computers in the office, and some parts of the building may have been enlarged or refurbished. It is, however, possible to apply normalisation adjustments to certain factors, such as heating degree days, and this helps to allow more accurate comparisons. Another option may be to join an accreditation scheme which relies on more than one performance indicator, enabling a better judgement to be made about good management and progressive improvement.

The value of metering data

All organisations with a maximum electrical demand of more than 100 kW will already have metering systems that record consumption every half hour, every day of the week. This Code 5 metering is required under the rules covering the operation of the electricity supply market. The data gathered from these meters is primarily intended for use in billing and in balancing supply and demand requirements between generators and suppliers but has also proved useful in combating the extra liability associated with the CCL.

The metering information that is despatched for the purposes of the electricity pool is, however, edited. While this makes balancing supply and demand and billing procedures run more easily, this edited data is of little use for energy management, and it is important to get hold of the raw data. Your data collector should be able to provide this. The supplier’s permission should be sought (as, technically, the data belongs to them), but it is now standard practice to allow this. The figures for consumption will not provide a great deal of information in themselves. Their value lies in comparing them with, for example, trend data, degree day information and normalised performance indicators. So, the data stream needs to go through some form of analysis.

The results should highlight where energy consumption patterns are exceptional, for example, at night or weekends, or over shutdown periods. They will also indicate any drift from optimum performance and can provide an early warning of serious equipment faults which bring about noticeable drops or increases in consumption over short periods.

This information can be made available within a matter of days, rather than the weeks it normally takes the supplier to send a bill. For this reason, it is important to ensure that the contract you make with the data collector provides for the speedy release of this information to you.equipment faults which bring about noticeable drops or increases in consumption over short periods.

This information can be made available within a matter of days, rather than the weeks it normally takes the supplier to send a bill. For this reason, it is important to ensure that the contract you make with the data collector provides for the speedy release of this information to you.

Wastewater management

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Sewerage is an essential service, the exact costs of which are difficult to calculate. There are ways in which businesses can keep track of the amount they pay for wastewater. Water charges are tightly regulated and in a constant state of review, with the industry regulator Ofwat protecting customers’ interests by setting the overall price limits that govern charges. The 10 sewerage companies in England and Wales are given strict guidelines, but accurately pricing the amount of water the businesses send back into the sewerage system is problematic. Firms can sometimes pay more than they need to.

Sewerage charges

Water industry regulations allow water companies to levy a single charge for sewerage, although Ofwat recommends that costs are broken down into three constituent elements:

● foul drainage (including trade effluent)

● highway drainage (runoff from roads and pavements)

● surface drainage (runoff from properties).

The aim is to ensure that charges are related to the services provided. This makes it easier for customers to assess whether they are being correctly billed and to check they are getting the services for which they have paid.

Foul drainage

Foul drainage refers to the dirty water discharged from lavatories, sinks, washing machines, and so on. Charges are based on the volumes of water supplied to the property with adjustments made for non-return to the sewer. It is not possible to measure the exact amount of waste returned and it is the responsibility of each water company to decide how it calculates its own system for payment. However, this does not prevent customers from challenging charges. If a query is made, a representative from the water company visits the site and evaluates the situation according to the evidence supplied regarding the ways in which water is used there. The object is to agree on allowances.

Frozen food businesses, which use large amounts of water in production processes, hospitals (where liquids are often disposed of elsewhere) and pharmaceutical companies are examples of organisations which have a relatively low return to sewer and may be eligible for reductions. Even swimming pools can claim a discount for evaporation of water. No foul drainage charges should apply where a property is not connected to the sewerage system. The onus is generally on the consumer to come forward to claim rebates.

Highway drainage

The way in which water companies charge for highway and surface drainage tends to vary. Some operate a flat fee, others refer to the rateable value of the property or the surface area drained to a public sewer. According to Ofwat’s 1998/99 Report on Tariff Structure and Charges,4 Ofwat’s Director-General believes that as highway drainage benefits all those using roads, directly or indirectly, there is a case for recovering the costs of the service from highway authorities or from users of the highway. Currently, the law prevents this option and costs are recovered from sewerage customers. This situation is unlikely to change in the near future, so it is not currently possible for customers to claim a rebate for highway drainage.

Surface drainage

A charge based on runoff from properties forms a significant part of the total sewerage bill and businesses not using the service, or making only limited use of it, may be able to save money. Again, water companies differ in the way they calculate charges and not all of them differentiate between customers who are connected to the facility and those who are not. Ofwat’s Director-General wants

water companies to provide a clear explanation of the charges on bills and is encouraging them to reduce those charges if the property concerned does not benefit from surface drainage.

Trade effluent

Trade effluent refers to industrial waste, including that discharged at the end of or during manufacturing processes. This covers such things as waste from food factories, dairy product manufacturers, chemical plants and abattoirs. It is also classed as sewerage but billed separately. Customers pay according to the strength and volume of the trade effluent discharged, both of which have a bearing on the level of treatment needed for the waste. Public swimming pools, for example, may benefit from lower tariffs because of the lower strength of effluent discharged.

Large-user tariffs have been introduced by most of the water companies. These work primarily through the imposition of a high fixed charge and a lower volumetric rate for water supplied, or alternatively one where the standing charge remains the same, but there is a lower volumetric rate for all consumption over an agreed level. The aim is to provide attractive water charges for high users without presenting an incentive to wastewater.

Allowances

Water companies may make allowances for customers who can prove that rainwater, for example, is drained and taken away by means other than the public sewer. The water may go to a soakaway or watercourse using the customer’s own arrangements, or even a trade effluent meter. If significant volumes of water are not returned to the sewer, or if only a small volume of surface water is discharged, it may be worth diverting all the water so that none returns to the public sewer, which is one way to cut charges. Ofwat considers that some businesses may be underpaying for this particular service.

Metering

Some 20 per cent of non-household users, normally small businesses, remain unmetered, and in some areas, this figure rises to nearly 30 per cent. Since most sewerage charges are based on the volume of water supplied to a property, meters are the best way of ensuring that costs related to usage. The regulator is keen to encourage the use of meters and believes it is the sensible option were economically viable.

Remote reading

Remote reading of meters is gaining favour. Accessing each water meter to take a direct reading is not always easy, and manual readings have to be keyed into the energy management system by hand. To combat such problems, manufacturers have developed remote-reading systems, the main technologies of interest being electronic meter reading and radio reading. For electronic approaches, the meter requires an in-built encoder linked to a touchpad which passes data to a handheld interrogator. The data is subsequently downloaded to the energy management system. No access to premises is required to take readings. With radio, the meter reader does not have to touch the meter at all. Most remote reading systems can be retrofitted if required. Individual water companies will have advisers on the commercial and industrial metering issues. Accurate, timely information on consumption patterns can help managers to keep water costs under control. If there are cost savings to be made, the water meter could be the key.

European Community DIRECTIVES

Meeting European Community (EC) directives is a requirement for water quality and compliance adds to the cost of treating sewerage and effluent. So how can reduced tariffs be justified? Ofwat considers that reduced charges are based on customers making less use of the reception and conveyance part of the service, consistent with the way tariffs for large users have developed on the water side. The way sewerage companies calculate charges are far from straightforward and structures differ from company to company. General advice from sewerage companies is to contact them if you believe you are not making full use of their services or can prove you are being overcharged.

Preventing water pollution

Point-source pollution, from sewage and industrial effluents, for example, is easily regulated. However, pollution from diffuse sources such as surface water runoff from urban areas is not. Diffuse pollution, from silt and solids, in particular, is the most significant pollution being faced today. Surface water can be contaminated by oil, silt, leaves, dog or cat mess, carbon and a mixture of pollutants from the air, roads, industrial yards, car parks and other hard surfaces, such as drives and pavements. Discharges from surface water outfalls have been found with average concentrations of suspended solids over 200 mg/litre, almost the same as raw sewage. Discharges have also been found contaminated with sewage debris and high levels of dangerous bacteria.

Main causes of contamination

There are five main causes of contamination:

● contaminants deposited on drained surfaces, such as oil, rubber, chemicals, pesticides and mud

● wrong connections of foul water to surface water drains, by accident or ignorance

● public ignorance of where drains ultimately lead

● spills and deliberate disposal, particularly oil flushed into surface water drainage systems

● sudden flushing of contaminated water into drains, leading to flooding and subsequent

groundwater pollution.

Heavy rainfall accelerates runoff, producing a mixture of pollutants flushing rapidly into drains, then into rivers, causing contamination and flooding. Because the natural settling-out process is bypassed, the common result is widespread contamination of natural watercourses and the public water supply.

The Environment Agency is promoting sustainable drainage systems (SUDS) which are designed to overcome some of the disadvantages of conventional piped drainage systems in built-up areas by reducing flooding risks, improving water quality and providing a better environment for people and wildlife (www.environment-agency. gov.uk/SUDS).

Best management practices

The introduction of best management practices (BMPs) means that non-point-source pollution and flooding can be effectively and economically prevented and/or controlled. BMPs are ways of minimising diffuse pollution. Two techniques have been developed, procedural and structural, which aim to:

● slow the speed of runoff to allow settlement, filtering and infiltration

● reduce the quantity of runoff collected

● provide natural ways of treating collected surface water before it is either discharged to a

watercourse or infiltrated into the land.

Heating, ventilation and air conditioning

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Indoor air quality

It is estimated that the average person spends up to 90 per cent of their time inside a building. Maintaining air quality is vital to ensure health and well-being, as well as maximum productivity in the workplace. Yet, despite recent air quality initiatives relating to external air pollution and the reduction of emissions, there is currently no legislation and there are no EU directives related specifically to indoor air quality.

When defining air quality, it is important to consider everything from temperature and humidity to air flow and cleanliness, as well as the maintenance of any air conditioning or ventilation equipment used. The Heating, Ventilating and Air Conditioning Manufacturers Association (HVAC) has set up an initiative specifically on indoor air quality. It is evaluating research on the subject and is keen to create a greater understanding about the problems that may occur if air quality is poor.

Health problems (such as asthma, eye irritations and nausea) are known symptoms of poor air. There have even been cases of Legionnaire's disease spread by bacteria in HVAC systems. Poor air quality also impacts on productivity in the workplace.

The effect of equipment on air quality

Factors influencing indoor air quality include furniture, carpets, fixtures and fittings, process plant and equipment and general office apparatus such as computers, photocopiers and fax machines, as well as HVAC equipment.

Temperatures increase with the amount of electrical equipment used, small quantities of toxic ozone can be produced by printers and fax machines, for example, and emissions of volatile organic compounds (VOCs) are possible by-products of soft furnishings, carpets and some furniture. Assessing the equipment and furnishings in space and choosing equipment with minimum impact on indoor air quality is advisable and can mean that smaller and less expensive HVAC equipment is needed as a result.

Saving energy and improving quality

To save energy and improve indoor air quality, HVAC suggests:

● choosing electrical equipment with a sleep mode where possible to reduce power consumption

during inactive periods

● fitting ozone filters to equipment where appropriate

● fitting carpets and furnishings with low emissions of VOCs

● having dedicated extraction equipment to control fumes and emissions

● using solvent-free inks where possible

● checking how easily equipment can be cleaned and following manufacturers’ recommendations

on cleaning and maintenance.

Indoor air quality can be improved simply by removing or limiting as many pollutants as possible, providing a good quality environmental control system (which includes the removal of pollutants) and ensuring adequate ventilation (natural, where possible).

CIBSE recommends:

● eliminating contaminants at source

● substituting with sources that produce non-toxic or less malodorous contaminants

● reducing the emission rate of substances

● segregating occupants from potential sources of toxic or malodorous substances & improving

ventilation (by the local exhaust, displacement or dilution, for example) & providing personal protection.

Choosing equipment

Choosing the correct HVAC equipment is essential. It needs to be appropriate for the space in which it is installed and maintained properly thereafter, otherwise, it could have the effect of reducing air quality. Plant today is smaller and more efficient than it used to be and likewise, (new) buildings are becoming more energy efficient. The Federation of Environmental Trade Associations (FETA) emphasises the importance of maintaining equipment and stresses that using top-of-the-range equipment in the wrong place can be just as damaging as older equipment, especially if it is not maintained and cleaned regularly. FETA has the responsibility for testing air conditioning systems under Part L of Building Regulations.

Air conditioning which brings fresh air inside may be an excellent idea, but if the unit is sited in the wrong place it could actually be counter-productive, dragging more pollution indoors in the form of traffic fumes, especially if filters are not changed regularly. According to CIBSE, the grade of filtration needed varies according to several factors, including the level of external pollution and the exposure limits set to protect occupants, and the amount of protection required for the internal surfaces of the building, air handling plant and air distribution system.

A voluntary system run by Eurovent, the European testing body for HVAC equipment, certifies products. Eurovent tests the equipment’s performance and power rating, which ensures that manufacturers’ claims about the amount of energy the product uses are correct.

Air conditioning

The view of air conditioning as a luxury product is generally being abandoned. Indeed, in a range of locations encompassing offices, shops, restaurants, bars and cars, it has become essential to have an air-conditioned environment. There are situations, however, where natural ventilation is preferred on energy efficiency grounds.

The need for air conditioning

Trends towards open-plan offices have led to increased demands for air conditioning systems, as the space allocated per employee is more restrictive in an open-plan area than in a conventional office. Add to this the massive amounts of heat generated by the many electronic systems in today’s offices and the need for cooling becomes obvious. Opening windows is not always the answer, as in many cases the windows will be sealed units. Where the windows do open wide, the outside environment may be a busy, noisy and dirt-polluted thoroughfare.

A small office with two people and a typical range of office equipment can generate 3000 W of heat per hour, which is more than a two-bar electric fire. Poor air quality is known to reduce or inhibit productivity. The increasing drive towards air quality is expected to spur growth in the air conditioning market. Market research shows that the office segment accounts for 59 per cent of sales.

Waste management

Waste management is an ethical problem that no one can bury. Defined as the unwanted residue of an organisation’s activities, waste can include anything from toxic liquids and solids, pallets and packaging, expired light bulbs and printer cartridges, to the contents of the wastepaper basket.

Disposal

Three options exist for waste disposal:

● the strict reduction of waste generation, through adjustment, redesign of processes and

cooperation with suppliers

● the internal, and responsible, recycling of waste materials to provide new or different products

● getting rid of the waste to someone else and making it their problem.

The third option is the most commonly deployed for business; it is an attractive option, particularly as specialist companies move into the waste management field. In the past companies had to pay the local authority or a dedicated contractor to take away unwanted rubbish (to the nearest landfill site or incinerator). Now someone may collect waste for free and use the output as their raw material.

Responsibility for profitability

Of the many millions of tonnes of solid materials and many more tonnes of consumed water, only 25 per cent is converted into products physically consumed by customers. The balance is the national waste problem. The waste handling industry understands- ably booming, worth something like 0.5 per cent of gross domestic product (GDP) and growing, according to research by the Chartered Institution of Wastes Management.11 The public wants to see that companies are behaving responsibly. Awareness of the impact of waste is at an all-time high. The legislation is following public concern too. Company and product liability is extending into every aspect of the production process from inception to the final disposal. The issue embraces a growing emotional draw to environmentalism and the pragmatism of economics. Landfill sites have become a scarce resource and there is not enough space to bury rubbish as has been the practice in the past.

Companies have to implement a coherent waste management strategy, argues the Department for Environment, Food and Rural Affairs (Defra). The Environmental Protection Agency obliges directors to ensure that the waste generated by their businesses is stored, moved and disposed of by approved means (or they face fines of up to £20,000 or six months in prison per offence).

As of autumn 2007, the Waste Electronic and Electrical Equipment (WEEE) EU Directive requires businesses to recycle their old information technology and telecoms equipment, and other electronic and electrical waste.

A sustainable resource

The concept of waste as a sustainable resource has been around for a long time. The idea has been given a boost and recognition through the introduction of European and UK legislation. A recent guide produced by the Environment Council, A stakeholder’s guide to sustainable waste management, is most useful. The Environment Council firmly believes ‘environmental problems can be solved by involving, listening to and working with people’ and indeed applied that principle in developing the guide.

How do companies turn waste disposal into waste management? The first step is to understand the problem, and the starting point for this is a waste audit. This identifies the materials existing as waste within the company and provides data for subsequent comparison to monitor improvement. A further benefit could be the introduction to a specialist company with which to work in implementing improvements. Kick off with the relevant local authority and/or existing waste contractor.

Responsible environmental management is logically consistent with low costs. Savings can accrue through careful housekeeping, but longer-term savings follow investment in research technology or process design. Waste is set to be the next frontier of competitive advantage. By looking in their dustbins, companies can find new ways to improve internal business performance.

Catering

Why should a company have a restaurant? Many large organisations do not, arguing that nearby local restaurants, cafes, coffee shops, sandwich bars and fast-food outlets provide all the resources required. This philosophy can have an adverse effect: long off-site lunch breaks and stress caused by having to hurry back to the office are two potential pitfalls, and a lack of control over the staff’s diet is another; a healthy diet produces a healthy workforce, which means less absenteeism. Furthermore, a company with no restaurant is less likely to be able to attract staff because of the lack of quality food and subsidised prices and has nowhere to provide hospitality for customers.

Since January 2006, those involved in the food business, including caterers, have had to meet more exacting demands. The EEC Hygiene of Foodstuffs Regulation 852/ 2004 seeks to pursue a ‘high level of protection of human life and health’ while ‘including the aim of achieving free movement of food within the EC.’ Alongside this, the Food Hygiene (England) Regulations 2005 also came into force on 1 January 2006, dealing principally with enforcement and legal provisions as well as temperature control requirements. The 852/2004 Regulation applies to all food business activity from primary production through to sale to the end-user. The significant new measure for caterers is that they must now have written hazard analysis critical control point (HACCP) documentation in place. The Food Standards Agency has launched an ab- an abbreviated system for small businesses called ‘Safer Food, Better Business’. Major caterers have developed online manuals to enhance reporting procedures and access to the guidelines for their staff.

Drinking water

Staff have to be well watered and fed to be content. Research has found that most people said they worked more effectively in a smarter workplace. The two items workers considered most essential to a productive day were natural daylight (93 per cent) and chilled water (83 per cent).

Workers do not drink enough water. Indeed, most people say the amount of water they drink is directly related to where the water cooler is kept, and many of these people were frustrated at coolers being too far away. Lack of water leads to poor concentration, fatigue, irritability and headaches. It would thus appear that a key factor in keeping productivity to a maximum is ensuring that staff have access to a water cooler which is integrated into the design of the workplace. Not everyone wants to eat at work, but everyone needs water.

Company restaurant facilities

Sitting down to eat together at lunch or for a snack is one of the best ways to break down barriers, discuss problems, thrash out misunderstandings or share company gossip. To do this, staff typically adjourn to the restaurant, coffee bar or similar facility. Company size will dictate the type of restaurant or cafe facilities and levels of services offered. But the driver behind all these plans is to get staff into a mood where they not only want to come to work but enjoy it as well, with eating and drinking central to that enjoyment.

What do the staff want?

Where company catering and restaurants are concerned, facilities managers must try to understand their customers’ needs. Easy-to-organise staff surveys of what foods and drinks are preferred, what times of day staff would like them served, reaction to special menus and themed eating days, for example, can produce extra usage of the restaurant facility.

A focal point

Making the restaurant an attractive, comfortable and interesting place to eat and socialise, as well as promoting it as a centre for networking, meeting visitors or prospective clients and holding impromptu and scheduled meetings, will pay dividends for the company and, in so doing, for the facilities manager. To that end, the restaurant should be easily accessible from all parts of the building and as equally visible.

Fast food

While only operating a fast food-type operation is not recognised as common sense, it may be prudent to offer staff the opportunity to have access to a ‘fast’ service. The staff survey can help here. Making eating a worthy experience within the company will help to boost staff morale and retention.

Vending machines

Many facilities managers eschew vending machines because of the quality of the beverages produced and the image that has built up around them. However, there is still a market for these machines. It is unlikely that the ‘tea lady’, complete with trolley, buns of dubious freshness and a steaming urn, will ever make a full-scale reappearance. The future of the vending machine would seem assured. But canny facilities managers will approach the area sensitively and provide the staff with what they want. Assuming that the board can be convinced, this will help the staff to work better, aid staff retention and help to percolate money through to the bottom line.

Times

A restaurant should offer a full range of meals and general refreshments, at times when the staff want them. Moves towards more global trading have resulted in offices being open at what was hitherto deemed antisocial hours. The concept of facilities being offered at practically all hours is not as ridiculous as it used to sound. It is a fact that food still being served fresh at 2.30 pm will both encourage a wider spread of diners sitting down for a meal and increase the numbers of staff utilising the restaurant.

Menu

Some people will want to bring in their own food and drink. This should not be discouraged, and space should be made available. Others will increasingly want organic food or gluten-free products; again the level of demand can be gauged through a staff survey. It is a misnomer to label food ‘home-cooked’ when it is not. But this is an expression that has crept into the vernacular and now sits alongside such culinary delights as seasonal specials, cordon bleu cooking, chicken tikka masala, regional speciality days and low-fat cuisine.

Module 3: Sustainable Development and Facilities Management

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photo/save-planet-sustainable-ecology-concept-647855284?src=Ict2WUqw7Fuzrdg_V7cC4Q-1-3&studio=1

This opening chapter will introduce the concepts of facilities management (FM) and sustainable development both as individual subjects in their own right and what it means to deliver sustainable facilities management.

Both topics are significant pieces individually, with a range of books, publications and websites devoted to each subject. The sections covered in this chapter do not try to replace the information contained in these publications but merely represent the main points which will affect the aspects related to sustainable facilities management and are of relevance in later modules of the course.

The final section pulls together the two aspects and represents a series of 14 topic headings to define sustainability within the FM and property activities, which are used throughout this book. The use of these 14 categories will help to simplify the language used and help to identify where benefits can be provided and implemented.

The growing age of facilities management

Facilities management (FM) means many things to many people – at one end it leaves a core team to manage the business with a series of contractors to perform the non-core activities. At the other, it is the in-house provision of most activities with limited out-tasking such as cleaning.

The definitions of FM are still under debate, although recently the global community is coming to a consensus on the main aspects. The role of FM in business is undergoing a period of global growth with recognition of the benefits effective delivery can achieve. The industry is still maturing with a growing list of services defined as non-core and within the remit of FM to provide.

In the United States, FM started in the 1970s with the International Facility Management Association (IFMA) set up in 1980 with a number of organisations looking to train and manage staff involved at the interface between the workplace, staff and processes. The roll-out of the FM market globally has been slowly growing with the establishment of Euro FM in 1990 and the British Institute of Facilities Management (BIFM) in 1993.

There has been conjecture over the exact dates of when FM started, in part, due to the linkage with the term FM used by the IT and military sectors. More recently, the questions have concentrated on the scope and extent of what FM covers. It is recognised that FM includes a broad range of services, such as catering, cleaning, building management and maintenance, ground management and maintenance, security, postal, data management and IT, telecommunications, secretarial, health and safety, to organisations. It is also increasingly beginning to include human resources and finance functions as well.

Definitions of facilities management

FM can be provided by either an in-house team/department or by companies under contract.1 There is an increasing tendency for organisations to contract out (outsource/out-task) non-core business activities to provide the best service at the lowest cost.

Figure 1: FM service categories

The BIFM has defined five distinct areas of FM:

1. Large companies with in-house facilities teams that manage contracts with outsourced suppliers;

2. External management suppliers offer a range of outsourced services as a total one-stop shop;3. Smaller individual suppliers providing specific contracts for services such as cleaning or pest

control;4. Product suppliers; and5. Consultants.

Although FM has been defined by the delivery of non-core services, numerous broad provision types have been developed by which firms can contract out some or all of their activities. Figure 1 describes some of the key FM service categories. Facilities management provision may either be organised across service areas or via a packaged portfolio of service areas. These incorporate the following:

Single service provision: Focus on the delivery of one particular type of services, such as cleaning, security, catering and maintenance. Multiple or packaged service provision: Companies are now also providing an extensive range of services as a package. This means that a security firm may supply manned guards, burglar alarm systems, and/or electronic entry byes all as part of a single package, rather than, for example, manned guards alone. Once again, the focus is solely on delivery.

Management contracting: A mixture of delivery and management services are provided where client organisations will hire several management contractors, subsequently giving the client company overall management control. Meanwhile, management contractors will typically concentrate on the provision of a small number of service categories.

Integrated facilities management (IFM): At this juncture, client companies delegate total management of their facility requirements to service providers who manage and deliver an extensive range of services directly or by sub-contract(s). The increasing appeal of IFM companies to client organisations can be attributed to the fact that they focus their attention on the management of services, thus enabling the client organisation to avoid getting involved on a day-to-day basis.

Management agents: Here there is a focus on management alone where agents control provision by contracting the services of companies focusing on the delivery of facilities. Infrastructure management: Involves the maintenance and management of bridges, railways, roads, and utilities (gas, water, and electricity).

Building operations and maintenance: Encompasses buildings and content management, maintenance plus plant and systems management, including electrical, fabric, mechanical apparatus, specialist equipment and grounds. Business support services: Administration, finance, human resources management or procurement, and insurance are some of the categories of services in this area.

Support services: Encompasses a vast array of service streams such as bar management, catering, cleaning, courier services, furniture provision, interior environment, laundry, mail services, porterage, security, travel, library, and shops/retail, office and business support – essentially reprographics, printing, secretarial, reception and vending. Property management: Essentially involves asset management, design/ construction, disposals/acquisitions, space planning, project management, and relocation management.

Business challenges for FM

A significant driver for the FM market within private and public organisations is to reduce costs, promote efficiency and improve performance against an increasing complexity of organisational models and the application of new technologies. FM is acknowledged as contributing to the bottom line with increased recognition of the importance of quality and robust processes, be it risk management or cost reduction. There is a growing recognition that FM is for the support of the primary purpose of an enterprise.

The perception of FM, however, is being widely considered as a commodity service for cost reduction as opposed to a strategic discipline capable of working with an organisation to provide real value. It concludes that outsourcing is the smart way to cut costs, increase productivity, and focus on revenue-generating core competencies. Integrated facilities management (IFM) services – are attracting large corporations and property owners seeking to cut operating costs, typically offering client savings of 15–20% on operation and occupancy costs. The high levels of expertise of facility service providers ensure demand from clients.

Companies are increasingly embracing IFM services as an effective way of minimising enterprise resources toward the operation and maintenance of critical building systems. Negotiating a good IFM services agreement, however, presents many challenges to both service providers as well as clients. For instance, one of the most important contractual issues involves reaching an agreement on the

disclaimers of consequential damage and limitations of liability. Strong, and mutually satisfactory resolution of such issues is necessary at the contract negotiation stage to avoid potential bitter experiences and unsatisfied customers.

Providing a bundled solution individually or through alliances is likely to be a major competitive factor. As companies pursue growth opportunities in international markets, the need for global real estate and IFM services such as corporate management and tenant representation is increasing, creating a demand for service providers that can provide such global services. The ‘single-sourcing’ trend is also stimulating demand for companies that can provide comprehensive services, best practices management, and consistent engineering standards.

International organisations are seeking global solutions in the delivery and standardisation of services, with early attempts from clients including HSBC, BP and Shell to reorganise and procure FM services on a global basis. Suppliers such as Johnson Controls and ISS have grown even more rapidly through mergers and acquisitions. Suppliers of multiple services are delivering services to organisations with global facility portfolios. Offshoring, as the term is also known, will bring further challenges for managing facilities, and the FM skillsets will be sought in regions that have not been considered for employment opportunities.

At the opposite end of the spectrum, FM also has to manage the foibles of those working and operating within the facilities. Aside from the general complaints of being too hot or too cold, there is a range of other complaints raised as part of the IFMA member 2003 Corporate Facility Monitor Survey on typical office complaints.

In the survey ‘It’s too cold’ and ‘It’s too hot’ ranked one and two respectively, followed by, in order: (3) poor janitorial service; (4) not enough conference rooms; (5) not enough storage/filing space in a workstation; (6) poor indoor air quality; (7) no privacy in workstation/office; (8) inadequate parking; (9) computer problems; and (10) noise level/too noisy.

Previous surveys conducted in 1991 and 1997 ranked the complaints of ‘too hot’ and ‘too cold’ first and second. All of the other complaints were ranked in different positions, but for the first time, the 2003 survey showed that the noise-level complaint had made the top ten. The most common complaint facility professionals reported hearing from upper management was related to the cost of facilities operations. Lack of space, the cleanliness and image of the facility, and the time required to complete construction and renovation projects were also cited.

Global maturity of facilities management

A review of the UK FM market found the market worth £106.3 billion with annual growth levels expected to be between 2% and 3% in real terms from 2006 to 2010. IFM will grow 30% over the next five years, and from 8% to 9% as a proportion of the market. Contracted out ancillary services will reach £75.5 billion (at 2005 prices) by 2010, an overall increase of 21% compared to 2005. In-house services will remain static at around £36.5 billion.

The FM market across Europe is currently in a strong growth phase with around 10%+ year on year, increases in revenues predicted to occur in the short to medium term, and current revenues in excess of $12 billion. Traditionally, organisations have employed in-house facility management teams to retain complete control of their operations, which is still prominent in continental Europe. This is compounded

by a lack of awareness and misconceptions about what FM is and a certain level of resistance from strong labour unions.

More businesses are seeking to increase flexibility, which is perceived as an opportunity, that can be realised by outsourcing non-core activities. As a result of outsourcing, benefits can include cost reductions of up to 20% of existing costs and reduced headcount, enabling the business to maintain a focus upon core activities. In keeping with the predominance of in-house facility management teams is the provision of single-service providers for individual services. The growth in this sector is seen as providing businesses with the benefits of outsourcing in controlled areas where known benefits are available.

Figure 2: Global FM vision and mission model to deliver financial and stakeholder value.

There are many approaches to outsourcing FM. The organisational structure employed to manage the resources is key to the successful day-to-day management and delivery of the services. Although it seems obvious, there is a huge variation in the types of structure employed not only based on the scope of services being managed but also driven by the maturity of the FM market.

The FM outsourcing market is quite diverse in terms of its maturity, which is translated into the way in which organisations organise their resources. The development and growth of service delivery organisations are very much based upon the market conditions that exist globally. In this sense, across much of continental Europe, there is a proliferation of maintenance based and cleaning based service- specific organisations. Progress is being made to standardise activities within Europe and globally. EuroFM is a liaison partner in the CEN standards: EN 15221 Facility management – terms and definitions and EN 15222 Facility management – guidance on how to prepare FM agreements. The Global FM programme has integrated IFMA, BIFM and FMA to pull together existing knowledge and information.

What is sustainable development?

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Whilst the phrase and term sustainable development has gained popular momentum over the last ten years, the components of it date back many decades. From Silent Spring written by Rachel Carson10 in the early 1960s describing a world affected by the chemicals and drive for increased productivity through to James Lovelock’s Gaia philosophy11 stating the role of ‘mother earth’, sustainable development has formed a spine through these books.

One of the first definitions of sustainable development was made in ‘Our Common Future’, the report of the Brundtland Commission, calling for development ‘that meets the needs of the present without compromising the ability of future generations to meet their own needs’.12 Whilst still used today, over 500 definitions of sustainability and sustainable development have been spawned by various governments, professional bodies, institutions and organisations. A more commonly known terminology encompasses the environmental, social and economic principals captured as the ‘triple bottom line’.

The UN Global Compact13 has three principles devoted to the environment, demonstrating how important the environment has become: Precautionary, Proximity and Polluter Pays Principals. As far as the environment is concerned, it is not just a question of understanding cause and effect, but also the relationships between the different species. It is also a recognition of the fact that some changes, once they occur, are irreversible.

Sustainable development has been increasingly quoted over recent years as more organisations jump on the ‘triple-bottom-line’ bandwagon. The term has a variety of meanings depending on the requirements of the organisations. This is large as a result of a lack of guidance provided to fully define and capture what sustainable development means for specific sectors and activities. Whilst the provision of social, environmental and economic partnership is well provided for, the combinations and elements of the partnership are less well understood. This has meant a relatively unstructured process for organisations moving towards implementing sustainable development activities and processes into their day-to-day operations.

What does sustainable development mean?

Sustainable development represents a process and a framework for redefining social progress and redirecting our economies to enable all people to meet their basic needs and improve their quality of life, while ensuring that the natural systems, resources and diversity upon which they depend are maintained and enhanced, both for their benefit and for that of future generations.

Figure 3 Typical issues and criteria comprising sustainable development.

Sustainability drives us to seek continuous improvements, in a way that integrates economic, environmental and social objectives into both our daily personal and business decisions and future planning activities (Figure 3). It also represents an approach for unlocking opportunities for improving sector competitiveness and enhancing reputation.

The UK Environment Agency published research in January 2004 that showed the link between social deprivation and environmental problems, and identified the need for a ‘joined-up approach’ to address environmental inequalities alongside social and economic problems. The research found that deprived communities suffer the worst air quality, and are more likely to live on tidal floodplains and near to polluting industrial sites. Although written for the UK market, the findings resonate with the global situation in both developed and developing countries.

Critical findings of the Environment Agency report included:

❏ In some parts of the country, deprived communities bear the greatest burden of poor air quality;

❏ Industrial sites are disproportionately located in deprived areas; and

❏ Tidal floodplain populations are strongly biased towards deprived communities.

At the opposite end of the spectrum, The Worldwatch Institute highlighting more than a quarter of the world’s population has now entered the ‘consumer class’. Higher levels of obesity and personal debt, chronic time shortages, and a degraded environment are all signs that excessive consumption is diminishing the quality of life of many people. Private consumption expenditure at the household level has increased fourfold since 1960. The 12% of the world’s people living in North America and western

Europe account for 60% of this consumption, while the one- third living in South Asia and sub-Saharan Africa accounts for only 3.2%.

Corporate responsibility

Companies are under increasing pressure from key stakeholders to be transparent about their values, principles and performance regarding sustainable development. One response to this pressure is the increase in ‘sustainability reporting’. It is quite clear, however, that reporting is only the tip of the iceberg. Companies will find it difficult to continue to produce relevant and reliable reports without having internal management and information systems that support this undertaking. The key challenge is to integrate sustainable development issues into mainstream business processes and systems to determine how well companies implement their policies into practice.

The role of organisations in the global economy is increasingly coming under the scrutiny of investors, analysts and pressure groups. Activities such as the riots seen at the G8 summits are no longer greeted by public scorn, but with questions about why governments and private organisations are not pulling their weight to support a sustainable global economy (Figure 4).

There are a number of underlying principles for organisations to deliver sustainability:

❏ Sustainability must be the organising principle incorporated as part of the central business plan and processes;

❏ Natural resources and systems have finite limits and all economic activity must be constrained within those limits;

❏ Economics must ensure basic needs are met and maintained equally across the globe;

❏ Cost of pollution must be internalised – captured as part of the life-cycle costing and decision-making process;

❏ There is no blueprint – off-the-shelf solutions will not be appropriate or applicable to align with the business strategy; and

Figure 4: Relationship between business risks and activities which CSR (Corporate Social Responsibility) and SD support.

❏ Lack of scientific certainty should not be used as an excuse to delay taking cost-effective measures to prevent damage.

Multi-nationals have been the subject of high-profile consumer boycotts in recent years. An increasing number of consumers switch or boycott brands for ethical reasons, with a significant number of consumers refusing to return to the product subsequently.46 Food, household appliances, cosmetics and tourism were among the most frequent choices of purchases for ethically minded consumers. This is coupled with an increased demand by consumers for multi-national companies to meet the highest corporate responsibility standards. Below are a few examples of companies and products that have been the subject of widespread boycotts.

Nestlé: For the past 20 years, the Swiss-based multi-national has been condemned for promoting powdered breast-milk substitutes in the third world, which critics claim contributes to the death of babies; a recent demand that Ethiopia repays its £3.75 million debts was retracted, and contaminated children’s food taken off shelves across Europe.

Gap: The anti-Gap movement was galvanised when a demonstrator set a pair of Gap trousers alight at the World Trade Organisation conference in Seattle in protest against working conditions at factories in Cambodia, Indonesia, Bangladesh and Mexico. Since then, Gap has incorporated stringent checks on factories and suppliers, disclosing progress through its annual reporting.

Esso: The oil giant and its Texas-based parent company ExxonMobil have long been targeted over their environmental policies and alleged funding of the US President George Bush’s election campaign.

Shell: The oil giant’s conversion resulted from two disastrous events in 1995. Almost simultaneously Shell stations in Germany were attacked over the com- pany’s plans to sink the Brent Spar oil rig in the

North Sea, and Shell was blamed for the execution of Nigerian author Ken Saro-Wiwa, who had protested against Shell’s environmental record in his country. To understand how it had so badly managed its public image, Shell commissioned a global survey of society’s expectations. Since 1997 in its annual report, Shell has recorded its polluting emissions, its energy efficiency, and a range of other statistics to quantify its environmental and social performance. Shell decided to introduce two phrases: firstly, ‘contribute to sustaining- able development’ and second ‘support for fundamental human rights’. However, taking this path has led to difficult questions about the potential clash between social and environmental concerns and short-term profitability. Shell took the decision never to drill on world heritage site land – a bold step since it was having more trouble than many rivals in finding new oil reserves.

The approach of corporate responsibility (CR) takes a similar approach to sustainable development, though it lays a greater emphasis on global activities and responds to those in the third world through the procurement or manufacturing of goods. CR is also broader in its context, taking into account elements of health and safety, ethical responsibility and investment in personnel.

Kofi Annan, Secretary General of the United Nations, proposed in 1999 for a global commitment by business to make international trade ‘work for all the world’s people’. The solution was to harness the increasing business trend towards ‘corporate responsibility’ and help companies develop a global, values-based system of management rooted in internationally accepted principles. This resulted in the launch of the UN’s Global Compact in July 2000 to which hundreds of companies have signed up representing virtually all industry sectors on every continent alongside a range of other standards: The UN Global Compact principles, the OECD guidelines for multi-national companies, the International Labour Organisation (ILO) standards and declarations, the Universal Declaration of Human Rights, the Global Reporting Initiative (GRI) sustainability reporting guidelines, the Global Sullivan Principles, the Social Accountability 8000 (SA 8000) international workplace standard.

Figure 5 describes sustainability based upon the size of the service area, from local to global, and the values of the organisation from the capital to social. Mapping onto this diagram, many global organisations are driven by shareholders to deliver increasing returns, expansion into new markets and reduce baseline costs, placing them squarely within the capital and globalisation sectors. Alternatively, many small and

medium-sized enterprises (SMEs) are more community based, but still are driven by a combination of maintaining community relations alongside generating profits. A common message covering all bodies is difficult due to the mixed drivers affecting them.

While critics of CR have said that it is not part of business core purpose, i.e. to do business and make a profit, many companies no longer agree. The market is changing, and CR is becoming a vital part of staying competitive, retaining talented staff, and satisfying customers’ expectations. Brand-name companies like Shell, Nike and Nestlé have discovered through high-profile scandals concerning the environment, human rights, health and labour conditions that they have to take society’s concerns seriously in order to preserve their licence to operate.

Figure 5: The role of various bodies in the modern marketplace.

Relationship between FM and sustainability

The incorporation of sustainable development in the day-to-day functions of facilities management is not new and has been met, to some degree, as part of the function itself. The FM industry employs some of the lowest paid staff and manages environmental hazards including those related to waste and utilities. Organisations are moving towards the next level of proactive engagement of sustainability linked to the provision and delivery of services.

There exists a large volume of information available and organisations involved in the delivery of sustainability within FM, from website information to trade articles pitched at varying levels. Appendix 1 provides a collation of some internet-based sources of information found to be useful.

Sustainable development and facilities management

Sustainable development is becoming increasingly important to organisations through the development and implementation of sustainable policies, which translates the strategy into action and demonstrable evidence of progress. Increasing numbers of companies throughout the building supply chain, including investors, property owners and service delivery companies, are developing and implement- ing policies. The unresolved challenge is to coordinate the policies and activities of the parties in this chain so that each can demonstrate that its policy is being observed and its objectives met.

There is a major role that the FM industry can play, by influencing colleagues and the management hierarchy within the clients’ organisation to understand the benefits and impacts of sustainable development. This will impact upon service delivery to ensure they incorporate sustainable criteria, such as energy reduction, waste minimisation, procurement controls and fair pay. Together, these have a

balancing effect on the budget with net savings achievable over the lifetime of a contract whilst providing improved service delivery. FM now has a strategic role to play within the business, utilising property performance metrics to support the decision-making process.

Since the 1990s, environmental management has gone from an activity restricted to the few ‘tree-huggers’ to major business, and it is a key requirement for professionals involved in the design, construction and management of any property. The environment has become a key news item, with stories reaching front page headline status highlighting the focus it is maintaining with the public. Employees and sub-contractors are increasingly asking questions within the workplace about environmental practices, and the commitment to waste minimisation and utility efficiency.

The facilities manager has had to take into account an array of legislative requirements to manage the building and additional pressures of meeting external certification or stakeholder requirements. The building is at the forefront of an organisation’s persona, portraying its values and beliefs.

This has meant the role of the facilities manager has grown markedly to encompass activities such as waste minimisation, recycling initiatives, energy management and utility reduction to meet their customers’ and clients’ expectations.

Global Alliance for Building Sustainably (GABS) charter

The GABS charter was developed in 2002 from a growing recognition by the United Nations of the impacts the built environment has on global issues including waste, resources and climate change. The inclusion of a range of functions involved in the scope of the built environment provided recognition of the complexity in the management of facilities and the co-operation of FM with the other functions to deliver the changes required.

The inaugural meeting of the GABS, held in Johannesburg, South Africa, on 29 and 30 August 2002, was one of the first partnerships to emerge from the world summit on sustainable development (WSSD). These partnerships are UN-endorsed action-oriented coalitions, focused on deliverables that would contribute to translating political commitments into action partnerships and initiatives to implement Agenda 21.

GABS, which was established by the Royal Institute of Chartered Surveyors Foundation with member organisations representing professionals, business, governmental and non-governmental sectors, was formed to accelerate the achievement of sustainable development in the land, property, construction and development sectors and to provide a platform for practitioners in those sectors to contribute to the WSSD. Representatives from more than 40 organisations signed the charter at the summit.

The GABS charter for action

1. The global alliance for building sustainability (GABS) is committed actively to promote the adoption of policies and practices to accelerate the achievement of the goal of sustainable development in the sectors of land, property, construction, facilities management, infrastructure and development.

2. We affirm the sustainable development vision of the WSSD and seek GABS’ inclusion in the subsequent process.

3. We are committed to closing the gap between policy and practice and taking practical and determined steps towards making sustainable development a reality for practitioners working in business, government, and/or communities.

4. We are committed to creating the opportunity throughout the above sectors in which practitioners are enabled to implement processes and practices that deliver sustainable development.

5. We undertake to accelerate the achievement of sustainable development throughout the above sectors by actively:

● building and strengthening partnerships between policymakers and practitioners;

● fostering co-operation and collaboration within and across professions and other

stakeholders;

● promoting awareness, participation and learning amongst the many stakes- holders

involved in these sectors;

● promoting, supporting and disseminating appropriate research, education and training;

● providing a network for collaboration for the member organisations of GABS;

● providing a platform for the exchange and dissemination of best and emerging practice;

● facilitating the development of tools and performance benchmarks.

6. Specifically, the GABS signatories commit to:

● promoting the GABS vision, aims and objectives within our individual organisations;

● distributing information appropriate to our members about partnerships, processes and

practices for sustainable development;

● reporting to GABS our progress towards the implementation of the principles of

sustainable development.7. In operational terms, we commit to:

● contributing to the production of a strategy and business plan for GABS;

● supporting the development of GABS.

Finally, we commit to the global alliance for building sustainability and recognise the benefit of partnerships for action, in turn contributing to sustainable development.

Signed for and on behalf of the attached listed organisations at the Indaba Hotel, Johannes- burg, South Africa, at the inaugural event for the global alliance for building sustainability, Friday 30 August 2002, within the world summit for sustainable development.

Requirements of facilities managers

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Facilities managers play a key role in the development and management of systems and data, primarily through the gathering, analysis and reporting of environmental and social information involving liaison with the rest of the business. The level of this information will be dependent on the importance of CR management within each individual organisation. Some less advanced companies are still collecting what might be described as primary data and auditing their processes against basic legislative requirements. Others who have established effective management and reporting procedures focus more on collecting data to monitor compliance with company policies and objectives.

Figure 6 The ‘ideal’ position for business functions to support sustainable development.

Within this role, the facilities manager is a key figure to aid and support an organisation in its development and management of a management system (Figure 6). In some companies, this role has enabled facilities managers to extend their sphere of influence. More and more businesses are moving towards an integrated approach to the management of environmental issues encompassing all areas within the business with the growing appreciation that the environment requires strategic management.

The major focus for facilities managers is to provide added value as part of the management of their property through pinpointing environmental costs and business opportunities. Much of this is through identifying projects such as utility and waste minimisation activities and arguing the case for capital investments which will permit a step change in environmental performance while markedly improving efficiency.

With the additional activities and workload, the facilities manager requires support in order to fulfil the day-to-day and operational management tasks. Most of the activities will rely on the evaluation of incoming utility and waste data, management of contractors and service providers, and the inclusion of environmental criteria within construction and refurbishment projects. The role will also include the management of a team to provide monthly reporting of day-to-day performance, e.g. utilities and waste and incident and non-conformance reporting where poor practices are identified.

The key skills to provide this level of information and detail are communication and management control. These will help to ensure that the team as a whole are aware of the reasons why they are collecting the information and reviewing it on a regular basis. The emphasis will always be on reducing existing costs and understanding changes in consumption, usage or disposals to effect a change at the core of the situation.

The rise in environmental prominence has also brought with it a dearth of publications, magazines and websites to help support and provide guidance to manage environmental issues within the workplace. This spreads across the entire spectrum of environmental management from manufacturing operational activities to multi-site property management. In addition, there are now a number of environmental training courses available to walk a manager through compliance, best practice and operational activities.

Properly thought through, sustainable development can be a major market differentiator. The facilities manager will have a major part to play in tailoring and providing service delivery and management processes specifically to reflect an organisation’s policy requirements, thus ensuring that these are fully integrated into all aspects of on-site operational activities.

Stakeholders and customers are also having an increasing influence on organisations by requesting them to move towards managing their effects on the environment and society in a more effective and public manner. As part of this, organisations now find that they need to have an environmental policy in place as a minimum, with a mechanism present to implement, measure and monitor the various elements of the policy.

The main environmental risks that a facilities manager needs to manage are described briefly below. This is by no means an exhaustive list, but will provide a description of the varied requirements and responsibilities to be complied with:

● Managing contractors and suppliers to ensure environmental legislation and site practices are

understood by contractors and suppliers. This will include training and communication at the initial stage, with measuring and monitoring of activities to provide management of the key aims;

● Service provision, e.g. cleaning, catering, mechanical and electrical – the inclusion of

environmental issues for each service provision including management of the plant, use of chemicals, building management system controls;

● Construction and refurbishment projects, including the choice of materials, disposal of waste,

design of the project to carry forward ideas through the various stages of design and build into day-to-day management;

● Major capital spend projects, such as chiller unit replacement which should incorporate

environmental criteria as part of a life-cycle analysis;

● Waste and utility management, particularly the control and reduction of consumption, purchase

of green energy, recycling as well as the day-to-day management and legal compliance checks;

● Procurement and supply chain management for the service providers and various provision of

consumables and specialist equipment to ensure suppliers meet an organisation’s environmental criteria; and

● Leasing and purchase of property to meet insurance and legislative requirements with due

diligence e.g. contaminated land.

The various environmental impacts affecting the services provided by a facilities department are described below in Table 1.3. This is not an exhaustive list but is meant to show the types of activities and the environmental impacts that will affect each service area.

Strategic challenges

Currently, there is a small percentage of buildings replaced each year. It is expected that by 2050, a vast majority of buildings standing will be those operating today. If we are to achieve the targets and expectations, the existing portfolio holds a significant role to play. There is a recognition that unless we significantly influence our existing portfolio we will fail to achieve these targets. However, the FM activity has only been recently recognised as an entity in its own right and still suffers from being the poor relative of the construction industry.

Yet FM has little or no involvement in the decisions which result in these impacts, largely the result of front-end capital decisions on the premises. Buildings are commonly handed over with insufficient information, poorly commissioned, or incomplete operation and maintenance manuals due to a variety of factors. FM needs to get more involved at the front end of projects – whether an acquisition, purchase or new build – in order to better manage the resulting environmental and social impacts.

There are a number of strategic areas to better understand the value of FM in the building life cycle and to include FM as part of the decision-making process.

Knowledge management

There is a known gap between the design intent of a facility and its actual operation throughout its life cycle. Part of this is due to changes made during the construction process, part due to poor management of the facility and part due to the lack of knowledge transferred to the FM team on how to effectively manage the facility under the varying conditions. There is a need to better manage the knowledge and change management process from design through to operation to enable properties to deliver their real value. Much of this will be focused upon FM being involved at these initial stages by providing input.

The return circle will enable FM to use their knowledge of the performance of buildings to deliver improved facilities from the design and construction phase, helping to improve the overall asset value and performance of the building stock.

Performance indicators

The definitions of sustainability affecting facilities management are varied and complex depending upon the activity performed, which may in part explain the poor uptake of sustainability by organisations. The development of performance measures will help to support the education process, provide a level of consistency in the marketplace and enable organisations to measure anticipated and actual results. The performance measures will include a level of benchmarking and correlate the performance of the building as intended in the design stage through to operation. Current tools exist which measure the sustainability performance prior to occupation, but these measures are not continued into operation.

Whole-life value

There is a barrier between the capital and revenue budgets which exists and undervalues the delivery of exceptional buildings from a sustainability perspective. By its very nature, the whole-life value will look to define and measure tangible and intangible costs and benefits for a project, within reasonable boundaries, to enable option appraisal and comparisons to be made. There is a need for greater consistency in how value is measured and formal guidance on the structure and process used.

There is a strong focus by organisations on cost reduction to support the share price, with facilities seen as a primary area of overspend and therefore a cost burden to be reduced. This leads to challenges in the delivery of a long-term programme for a facility in light of reducing capital and revenue spend. This is highlighted in the split between construction and operation costs, which are budgeted differently, commonly managed separately, and at odds with each other. Control, underspend and delivery within timeframes are critical measures for both which do not promote co-operation. However, life-cycle benefits are commonly missed through such a narrow view of the building programme.

There is a need to change the way wealth is measured and these budgets are delivered if the vision of sustainable buildings as the norm is to be realised. Rather than just a financial metric, the environmental and social impacts and benefits to a scheme need to be incorporated as a cost to providing a full financial profit and loss account.

Skills and competency

It is recognised that there is a lack of skills within the FM industry to actively manage facilities from a sustainability perspective. In part, this is due to wide experiences from which the facilities management community enters the profession and due to the wide range of skills required. In order to meet the vision, greater involvement of FM within the design and construction activities will require the skills to communicate ideas effectively and to understand the process in which these individuals are operating within.

Increasing liability

Organisations and increasingly those managing properties are holding greater responsibility for the actual and perceived liabilities of the activities performed. Partly governed through legislation and by public perception, liability covers the environmental, social and economic aspects of a business in the local communities where the facility is based and the market within which it operates.

FM has a great responsibility for compliance with many of the legislative requirements noted due to the management and control over issues such as waste disposal, discharge of effluent and monitoring and

measurement of plant equipment. Changes to legislation will mean that individuals are liable for environmental damage, similar to that for health and safety incidents. In this way not only have managing directors been sentenced to imprisonment, but those lower down the line have been found in breach of environmental legislation.

Module 4: Facilities Life Cycle

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This chapter will review the inclusion of sustainability criteria into capital projects, from the acquisition, design and construction or refurbishment of properties. During these activities, FM will have a role to support the initial brief definition, and how the various measures are implemented to reduce operating costs and deliver a more sustainable facility.

Different industries such as building and construction, railways, highways, water, aerospace, manufacturing, oil and gas have been applying varying asset management principles to their operations for years to increase profitability, manage activities better, achieve efficiency gains and safety performance targets. In the local government arena, the need to demonstrate value-for-money and best value in the procurement of services is a major driver to have asset management plans in place. Moreover, the increased implementation of Design-Build-Finance-Operate (DBFO) procurement methods forces long-term thinking, as consortia are required to operate assets typically for 25–30 years.

On the other hand, infrastructure owners are struggling with challenges such as escalating maintenance costs and lack of reliable knowledge of asset condition and performance at a given time. Different industries will have varying infrastructure management principles and processes in different contexts. Effective and efficient infrastructure asset management and whole-life costs are becoming increasingly important in any owner’s investment decisions. Asset owners are therefore recognising the benefits of managing assets along with whole-life principles. There is a need for a holistic approach that can bring significant value, and more effective infrastructure asset management in the long term under the following key areas:

❏ Framing the requirements – qualitative feasibility study to define needs and outcomes;

❏ Scoping the decision – often made in a project definition study looking at a cradle-to-cradle approach;

❏ Planning and design – analytical decisions made in the detailed design stage to review options;

❏ Implementation, delivery and operations; and

❏ End of usable life.

Life cycle facilities approach

The delivery of sustainability within a facility is best achieved through the entire life cycle to provide maximum returns. There is a widely acknowledged diminishing return and increasing cost through a facilities life cycle to retro-fit sustainability. Whilst this notion is accepted, it is surprising how late environmental and social aspects are discussed with respect to the operation of the facility. Within each

of the phases of a facility, there is the opportunity to encompass sustainability criteria to deliver an improved asset for both staffs operating within and book value.

An international study, led by the Royal Institution of Chartered Surveyors (RICS), found that green buildings can:

❏ earn higher rents and prices;

❏ attract tenants and buyers more quickly;

❏ cut tenant turnover;

❏ cost less to operate and maintain; and

❏ benefit occupiers.

This study shows that the interests of business and the environment can converge – achieving real environmental benefits can also be profitable. The study concludes that ‘more work needs to be done on the value of green buildings, but that the findings are encouraging: Evidence that sustainable practices can add value supports the claims and direction of the green building industry. This is an important step towards greater acceptance of green buildings in the marketplace’.

Sustainable Buildings

Buildings are a key component in the fabric of cities. And the building and construction sector is one of the most important areas of intervention and provides opportunities to limit the environmental impact as well as contribute to the achievement of sustainable development goals. This sector is estimated to provide 5 to 10% of employment at the national level and generate 5 to 15% of GDP. Moreover, it provides housing, mobility, water and sanitary infrastructures, and it represents the physical context for social interactions as well as economic development at the micro-level. Numerous studies have also shown a relationship between buildings and public health. At the same time, the built environment accounts for a large share of energy (estimated to be about 40% of global energy use), energy-related greenhouse gas emissions (estimated to be approximately 30%), waste generation and use of natural resources.

This situation has not passed unnoticed, and the sector is increasingly under pressure from authorities and the public to address environmental and social issues. Nevertheless, sustainable development in the building and construction sector remains hampered by limited coordination between different stakeholders throughout a building's life span. This is why it is necessary to create conditions and incentives that address and encourage all stakeholders to promote jointly sustainable building practices.

To address these issues, UNEP launched the Sustainable Buildings and Climate Initiative (SBCI) in 2006. It promotes and supports sustainable building practices on a global scale with a focus on energy efficiency and GHG emission reduction. SBCI brings together stakeholders involved in the building, planning and policy-making process on the local, national and international level by providing a platform for dialogue and collective action. Furthermore, the initiative develops tools and strategies to better evaluate and implement sustainable building practices. Pilot projects demonstrate the important role of buildings for mitigation and adaptation to climate change.

One of those pilot projects is UNEP's Sustainable Social Housing Initiative (SUSHI), which promotes sustainability in social housing programmes. In the pilot cities, Bangkok and São Paulo SUSHI assessed the status of social housing programmes, policies, market initiatives and voluntary actions and identified barriers for the implementation of sustainable building practices. The Sustainable Buildings Policies in Developing Countries (SPOD) is another project to pilot test tools and strategies. The project aims to assist governments at national and local levels to develop policy tools in support of mainstreaming sustainable construction and buildings approaches. A 'Quick Scan Tool' to assess policies in the building sector and scenarios to improve the current situation is being tested in two pilot cities, Nairobi (Kenya) and Ouagadougou (Burkina Faso).

Building life cycle

The building life cycle from a facilities manager’s perspective does not begin at building handover, but at the initial briefing stage where decisions on funding, operability and life cycles are determined. The value of incorporating the end- user perspective at this stage provides intimate knowledge of the organisation and culture. Liaising with the rest of the project team, this knowledge will help to challenge the pre-concepts often put forward at the initial stages of the design.

Initially, the sustainable construction potential (SCP) is high at the start of the project with the greatest level of flexibility and ease of changing decisions without significant cost implications. However, as the project progresses, the SCP decreases over time. The level of this decline will be variable and is dependent upon decisions made during the development of the design, and changes in the construction process.

Whole-life value

The life cycle of facilities has traditionally been separated into the initial construction investment and procurement capital outlay followed by the revenue stream comprising day-to-day operational management and small capital investment. The gap causes pressure on the ownership of sustainability practices with regard to who will pay for them and how they will be carried out. Traditionally higher upfront costs will provide no benefits for strict capital investment budgets in speculative developments.

In recent years, there has been a move towards a whole-life value approach in public and private sector investment decisions. Many of the drivers have been discussed earlier and these include cost, transparency, stakeholder and risk management factors. A recent UK National Audit Office report (2005) states that design, procurement and decision-making need to be based on the whole-life value covering more than just the costs associated with the acquisition and operation of an asset.

Whole-life value (WLV) encompasses economic, social and environmental aspects associated with the design, construction, operation, decommissioning, and, where appropriate, the re-use of the asset or its constituent materials at the end of its useful life. WLV takes into account the costs and benefits associated with the different stages of the whole life of the asset. The WLV of an asset, therefore, represents the optimum balance of stakeholders’ aspirations, needs and requirements, and the costs over the life of the asset.8 There will be trade-offs between the various short-term project constraints (such as time, costs and quality) and the conflicts in stakeholders’ longer-term interests and objectives.

WLV is of more importance than value for money (VFM) for one simple reason – WLV represents the long-term value for the money invested whereas VFM tends to represent the immediate spend. As such, sustainable FM considerations are better developed using the WLV methodology.

Design, build, finance, operate (DBFO)

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In DBFO procurement, the number of projects has increased steadily in different industry sectors in a model theoretically expected to deliver greater WLV than traditional procurement methods, due to expected efficiency gains and reduction in costs resulting from the sharing of knowledge and skills in design, construction and operation. There is an increased focus on service delivery over 25–30 years to a defined standard based on output specifications and not just delivery of the asset or project. Improvement in efficiency is expected by exploiting the private sector’s managerial practices, ability to innovate and to take risks. The private sector service provider is expected to provide innovative methods of delivering the service, thereby reducing whole-life costs. A clear understanding of risk in conjunction with the enhancement of long-term value is essential for achieving WLV.

A study by the Centre for Policy Studies for UK Private Finance Initiative projects identified that 88% had been delivered on time or early and with no cost overruns. This compared with 30% public sector projects delivered on time and 73% completed over budget. The implications are that better value is provided through private finance initiatives.

In the private sector, the drive is to get owners and clients to measure projects on value rather than cost alone. Aspects that are measured include:

● Procurement to be determined on the basis of quality, likely cost-in-use, out-turn price and

known past performance as well as price;

● Construction should be designed and cost as a total package, including costs in use and final

decommissioning;

● WLV to be appraised and the supply chain to commit itself to build on time, to budget and

quality, and provide genuine value for money throughout the life of the construction; and

● Advice (to clients) should cover a range of procurement and management options, including

environmental performance, operating and WLV.

Critically, the DBFO has raised the need for a strong personal relationship between the client and service provider, whether from regular meetings or through being colocated in the same space. Despite the growing body of evidence, some clients are unwilling to progress further than the initial thinking.

Projects commonly require a high level of professional fees to provide front-end risk evaluation and mitigation. Uncertainty and necessary innovation add to the costs in both the initial fees and throughout the project. Interest rates need to be factored in and are commonly higher than the public sector would set.

As with any prediction of the future, WLV analysis is a guess – an educated one most certainly – but a guess none the less. The analysis calculations depend on the prediction of future interest rates and future costs, so it is easy to see why there is little certainty in the outputs and why those outputs cannot be used for exact budget formulation. The most appropriate purpose of WLV is economic comparison. The variations in interest rates are minimised as the same variations will apply across all alternatives being considered. The choice of the discount rate (interest rate) used can have a dramatic effect on the outcome of the analysis. As an example, an annual energy bill of £100 000 over 30 years will have a present value of around £1.7 million if a 3.5% interest rate is taken, but only £600 000 at 1.5%.

Whole-life value incorporates factors that drive value associated with the commissioning and operation of an asset, including the values held by the different stakeholders. In a typical 30-year project, the value of operating the facility can be the same or greater than the initial capital outlay. The inclusion of sustainability criteria at the front end can deliver significant savings over the lifetime of the facility. There are three main criteria used in determining whole-life value to select the preferred solution. The final choice of schema me to be implemented will be a compromise between these three:

● The lowest whole-life cost;

● Technical evaluation; and

● Environmental and social evaluation.

It is important that the facility manager is involved in the data acquisition process early in the design phase and that the relevant schedules and costs be estimated as accurately as possible. There are a number of errors usually made by practitioners when carrying out a whole-life cost analysis which can be easily rectified:

● The omission of data;

● Lack of a systematic structure or analysis;

● Misinterpretation of data;

● Wrong or misused estimating techniques;

● A concentration of wrong or insignificant facts;

● Failure to assess uncertainty;

● Failure to check work;

● Estimating the wrong items; and

● Using incorrect or inconsistent escalation data.

Corporate strategy

In 2000, reflecting the growing understanding of sustainability in industry, Carillion began to look at the ways in which it could become a more sustainable company. These are the steps Carillion has taken:

Step 1: Sustainability policy

To provide a focus to a suite of related policies (environment, human resources, health and safety) Carillion developed a sustainability policy to bring together the vision, values and objectives of the bus in step

Step 2: Business impacts

This is portrayed by the ‘sun’ diagram, which allows Carillion to show the linkage between policy, government’s objectives and the key sustainability impacts (waste, design, community, etc.). This diagram can be used when considering- in the impacts of a specific project or contract and has become the Carillion definition of sustainability.ess under the guiding principle of ‘sustainable solutions for the way we live’.

Step 3: Strategy model

In 2001, a strategy model was developed to link business objectives to the sustainability objectives. The model was developed with senior team involvement, including the chief executive, as a tool to understand how key performance indicators (KPIs) could be used to improve sustainability performance whilst demonstrating how they deliver business benefit and contribute to the achievement of business objectives.

In 2004, the strategy model and objectives were reviewed to ensure they were based on tangible outcomes to be delivered by 2010. Critically, this demonstrated that it was as important to deliver the intangible issues as it is to deliver hard-nosed cash-backed business objectives. In fact, it was seen that community and environmental objectives both enabled, and legitimised, the success of Carillion’s business objectives in a process of continual improvement.

Step 4: Action plans, communication and training

A suite of action plans provides the necessary focus and management tool to ensure delivery. Throughout these steps, Carillion has realised that this can only be successfully implemented with consistent communication of the sustainability policy and aims. It is important that everyone understands their roles and responsibilities to enable the company to become a socially responsible organisation. This is a priority from induction and throughout career development.

Achievement of business benefit

When any new ‘initiative’ is introduced to a company, there is inevitably some scepticism from employees, who may well have seen numerous ideas come and go over a period of years. It was, therefore, important to show that the sustainable approach was not a passing fad, but a business imperative, which provided demonstrable benefits for the business, environment and society.

A business case was assembled that comprised project-based case records from which a number of clear benefits were identified. The case records demonstrated that being more sustainable enabled the company to:

1. Identify social and environmental impacts;2. Reduce cost, use fewer raw materials and create less waste, resulting in savings;3. Reduce risk and minimise the risk of prosecution;4. Improve relationships with customers;5. Improve relationships with the community;6. Create more effective supply chain management; and7. Achieve greater employee motivation.

Benefits were therefore realised for all stakeholders and the whole supply chain, including client, constructor, supplier and maintenance contractor through to the end-user and local communities. The company has now made sustainability a major part of its develop- ing business strategy. It has mapped sustainability onto the strategy model and has also used the model to help demonstrate the business case for its supply chain performance measurement process and its waste management strategy.

A reputation for addressing sustainability issues has resulted in increased competitiveness, enabling the company to bid for, and win, a number of multi-million-pound contracts where sustainability credentials were one of the deciding factors in awarding the contract. The life-cycle costing model used at a tender stage has helped to identify significant savings that could be achieved over 25 years by investing a modest upfront cost with paybacks in less than two years.

Master planning and real estate

The inclusion of sustainability considerations into the front-end stages of facilities and major projects can provide significant benefits in cost savings, innovative design and saleable/rentable premises. A step change is required to provide the necessary measures including ring-fenced capital expenditure, objectives for delivery into the project and into operation and the development of sustainability within the brief.

The role of FM at this stage should be significant. FM will become the body who will ensure the measures identified are bedded into the running of the facility, but more importantly, are required in the operation of the facility.

The inclusion of sustainability at the briefing stages of a project is performed in part, but rarely classified as such. Decisions on whether to remain in existing premises through refurbishment or increasing the number of workstations or move to a new facility are commonly considered coupled with the provision of car parking spaces for non-central facilities. However, aspects related to flood risk are not often covered. The benefits which can be achieved have been mentioned previously and include those summarised below:

● Reducing facility operating costs through improved energy and water efficiency within the

decision-making process;

● Setting capital cost provisions for sustainability measures based upon agreed and fixed payback

mechanisms;

● Choosing property locations which reduce liability related to climate change impacts affecting

asset value – storm damage, flooding, legal fines and clean-up;

● Incorporating the need to future proof and managing change to deliver facilities that are flexible

in the in-country marketplace;

● Improving the internal environmental conditions and work to increase productivity, optimised

internal conditions and retention of staff; and

● Involving the community to support the local economy, services and people.

Typically, there are four main triggers for a change in the facility, whether new or existing facilities are involved:

● Acquisitions and mergers – Before a company is acquired, a review of the portfolio should be

undertaken from a sustainability risk perspective as part of the due diligence process incorporating the financial processes. Primarily, the review will identify liabilities and contaminations which exist within the portfolios and measure these as a cost. The review of environmental liabilities is commonly performed as a follow-up once the acquisition has taken place rather than beforehand, often leading to additional unnecessary costs;

● Expansion in the number of staff – Considerations at this stage include whether a new building

is required, or if people can be managed in the existing buildings through reorganisation and different work densities;

● New locations/regional hub sites – Site locality is pre-defined in general but the optimum

location can be chosen based upon incorporating sustainability principals in the procurement process. If a new building is required to be built or if one could be rented. If a leased property, considerations at this stage include whether the sustainability criteria associated with the property should also be examined;

● Consolidation of properties – This could involve either a reduction in properties or consolidation

to a new site. Considerations at this stage should be based upon location, transport and reorganisation of the workplaces and these should all incorporate sustainability criteria.

Module 5: Operations of Facilities

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The operation of a facility carries with it by far the greatest impacts upon the environment, society and the economy of those working within and maintaining the facility itself. Given the time and effort spent in developing the design concept, installation of equipment and procurement of consumable items, it seems surprising that budget forecasting is often significantly different between the anticipated and actual performance of the facility in sustainability terms.

This chapter looks at the operational period in the facility life cycle and some means to be able to derive best practice from the building by reducing impacts and increasing benefits. The changing use of a building in keeping with changes in personnel and equipment means benchmarking and performance assessments should be a regular agenda item and part of the annual programme – not a one-off point in time exercise.

The chapter is split into three sections covering the three main aspects related to the sustainable operation of a facility. The first section looks at the technical aspects of the building, predominantly the energy efficiency and indoor environmental quality and how benefits and improvements can be gained. The second section reviews the non-technical aspects covering waste and resource efficiencies, green transport, pollution mitigation and biodiversity action plans. The final section covers occupant satisfaction to identify and provide facilities to meet demands and improve productivity. Elements of performance measurement and management are covered for each of the relevant sustainability categories.

Maintenance

The technical management of a facility involving the provision of heating and cooling, lighting and on-going maintenance has a significant impact upon the performance of the facility from an environmental and social perspective. The common focus is upon the energy consumption, however many other aspects relating to the use of hazardous materials, occupant satisfaction, life cycle procurement and local community involvement are also critical areas.

This section does not look to duplicate the many publications which exist on the technical operation and efficiency of the equipment, but to highlight the key points which should be drawn out into day-to-day practice, including their implications not only on energy but staff welfare, materials and life cycle costing.

Introduction

The technical operation of a facility is a complex mixture of reactive task management to meet customer demands, and the proactive maintenance regime to provide a clean and healthy working space. There

are a number of tools which can be used to review a facility’s current performance and identify areas for improvement. The categories described are based upon developing and communicating policy and achieving it through education, technical implementation and data analysis. The matrix is scored from one as the lowest to five as the highest. The matrix helps to identify where the main gaps exist and where attention should be paid.

Benchmarking can be used to optimise facility performance and enable a comparison either internally or externally with other companies in the same and other sectors producing ratings for the cost of maintenance in cost/m2 per annum and energy costs in cost/m2. The benchmarking process can identify areas to:

● Reduce costs;

● Improve efficiency;

● Improve service; and

● Save energy.

A one-size-fits-all approach to maintenance service provision is inappropriate for the front of the house, and particularly the retail sector, where the image is critical. Matching the maintenance programme to seasonal variations in visitor numbers and footfall will help maintain a professional image and meet demand. This means upgrading and refurbishing the space prior to peak seasonal periods to deliver a responsive front other f house and retail environment.

Mechanical and electrical

● Develop performance indicators covering areas such as planned maintenance quality, energy

efficiency, staff skills and competencies and overall customer satisfaction;

● Reset temperature set-point for air-conditioned IT/communications rooms to around 25◦C

rather than a lower temperature;

● Ensure installation of sufficient insulation to improve the thermal envelope of the building;

● Consider combined heat and power units as a boiler replacement option; and

● Survey the building as part of a simple energy audit.

Indoor air quality

Historically, the provision of good indoor air quality (IAQ) within facilities has been limited. Whilst the benefits associated with sustainable buildings, especially energy, waste and water conservation has been recognised, the equally signifi- cant financial and health benefits associated with good indoor air quality are often ignored.

Results of hundreds of studies and reports have demonstrated a significant and causal correlation between improving the indoor environment and gains in productivity and health.1 Buildings over the past few decades have been designed and built without a clear understanding of how the indoor

environment impacts worker productivity and health, and as a result often create an environment that inhibits productivity rather than enhances it.

Sick building syndrome in offices and workplaces was brought to public attention in the 1970s and 1980s. VOCs from carpets, fabrics and finishes; inadequate air circulation, poor lighting, mould build-up, daylighting and views of the outdoors, noise control and temperature variances – all were contributing to nausea, respiratory problems, skin rashes, lethargy, headaches, and numerous other health concerns. Concern over sick building syndrome led to an improvement in building design and maintenance, although ‘SBS’, as it came to be known, has hardly been conquered.

Owners of buildings have been held liable for poor indoor air quality, high- lighting the importance of managing the risks through the operation. With recent mould-related claims, insurance companies in the United States have begun to take defensive action with mould exclusion clauses and premium rate hikes. On the other hand, some insurance companies are willing to offer lower insurance premiums for buildings and facilities with positive environmental effects.

Energy professionals are in a strong position to affect thermal conditions and lighting, while they are often less knowledgeable about indoor pollutants. As a result, to achieve energy efficiency goals, ventilation rates are reduced to the detriment of the indoor air quality and the building occupants breathing that air, thus supporting the misconception that providing good indoor air quality and energy conservation are competing goals. Studies have also demonstrated how certain features of sustainable buildings have a positive impact on health and well-being and lead to lower absenteeism. A study of 11 000 workers in the Nether-lands found that absenteeism due to sick building syndrome is likely to be 34% lower when workers have control over their own thermal conditions. Complaints from building occupants lead to other financial impacts because building maintenance engineers spend unnecessary labour hours. It is estimated that simple efforts to increase comfort could result in a 12% decrease in labour costs attributed to responding to complaints.5 Less time dealing with complaints leads to more time to complete preventative maintenance, better equipment longevity, and lower operating costs overall.

The first step if complaints are arising is to review the basics:

● Ventilation system (CO2 levels used to measure effective ventilation);

● Air quality (VOC levels from materials, particularly after a refurbishment); and

● Thermal environment (temperature and humidity levels and variances).

From this initial review, if a specific problem is not identified directly, a building occupant survey should be performed to identify and provide a focus for further investigations. Common causes of poor air quality include the cleaning of ventilation systems, to remove the build-up of dirt and bacteria on a regular basis. Cleaning out of the system on a six monthly basis may help to reduce the level of complaints. The erection and removal of partitions in office spaces can also significantly change the flow of air and cause ‘dead-areas’ where no air circulates. Where the air intake is located is also important to ensure ‘dirty’ air is not taken up, particularly from vehicle exhaust emissions and cigarette smoke.

Energy efficiency programme

With rising global energy prices, the drivers for reducing energy consumption are becoming more efficient, are self-evident. There are four main activities involved:

● Education of staff;

● Provision of a monitoring and targeting system;

● Reduction of energy consumption through an audit programme; and

● Installation of renewable technologies.

These options should be pursued prior to consideration being given to the procurement of ‘green’ energy or carbon sequestration through the offsetting of carbon dioxide level by buying trees. The key areas to focus upon in a building include

the lighting, heating and cooling systems and controls which consume or manage the largest proportion of energy.

The section below does not go into detail on the specific efficiencies which can be derived from lighting, controls, heating and cooling systems, which are covered in more detail within a number of guides provided by the Chartered Institution of Building Services Engineers (CIBSE) and a number of other organisations. The section does provide the methodology to follow and provides information on the training and information required to make informed decisions on the equipment used and energy consumed.

The benefits which can be provided include:

● Peace of mind about energy use and cost;

● Reducing energy wastage through staff awareness;

● Identifying actions equating to a minimum of 10% reduction in annual energy bills;

● Pinpointing opportunities for reducing the amount of energy consumed;

● Assisting with better prioritisation of energy-related workload; and

● Enabling a constant flow of energy reduction measures to be planned.

The first step is to develop an energy policy to inform the company and any other stakeholders about the intention to reduce energy consumption. Targets and deadlines can be mentioned, but details of how these are to be achieved should not be included in energy policy.

Performing an energy audit

An audit should be performed over two phases – a preliminary audit to capture consumption patterns and trends highlighting key energy improvement proposals and identifying areas for further investigation. The recommendations will focus attention on actions for the next phase – a detailed site (comprehensive) and not to follow-up agreed on actions.

Preliminary audit

The survey reviews all significant energy use on the site and is the first step to cutting energy costs and reducing environmental and social impacts. A preliminary audit will deal primarily with energy consumption data (bills and/or meter readings) and does not involve a detailed, intrusive site survey covering building fabric, services, controls systems or performance although these aspects should be considered in any finding.

The main steps are:

1. collecting data;2. analysis;3. presentation; and4. indicating actions.

Costs savings

1. Establish the quantity and cost of each energy type. Quantity split by fuel type and cost given both as capital cost and carbon level. Source of data will be from meter readings where possible, rather than energy bills and should cover the past three years of operation;

2. Prepare 3. a time-based energy consumption graph to show patterns in energy use and identify any

anomalies or unusual readings which would warrant further investigation;4. Establish the normalised performance index (NPI) value for the building. This allows the relative

performance of similar use buildings to be compared and performance assessed against a benchmark value. The NPI is a corrected energy values which takes into account weather variation, building size and variations in operation and can provide useful guidance in setting actions and priorities for further investigation;

5. Where appropriate data is available, a plot of space heating against degree days can be generated. Assessment of scatter will indicate the level of system control and comparing the regression line with previous years can provide further data on energy trends;

6. A visual inspection should be made of the facility noting the age and relative condition of the main energy conversion plant e.g. boilers, chillers, air handling plant, etc.), insulation standards and observations regarding the building fabric;

7. Facility operating personnel will be interviewed to determine any past or ongoing problems, gauge the level of maintenance activity, the level of awareness and understanding of energy-related issues and to what level it is incorporated into existing techniques and procedures. Reports on boiler tests where available will be reviewed to determine performance and recommendations made for energy efficiency improvements as appropriate;

8. External benchmarks to compare the energy performance of different buildings against national averages can be made. The benefit of using this data is that it can compare a building’s performance against typical values and also best practice values. When more building types are surveyed and added to the M&T (Monitoring and Targeting) system, a league table can be produced and published (intranet or energy bulletin etc.) which can be used as a motivational tool in the awareness campaign; and

9. A report should be provided, identifying areas for action and potential cost-saving strategies with indicative cost, payback period and expected carbon saving.

Comprehensive audit

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Comprehensive surveys normally include measurement of principal energy flows and performance assessment of the major plant. The data gathered under the preliminary or concise audit do not allow areas of specific energy consumption and performance to be targeted and often require the installation of sub-meters in order to accurately discriminate between the various energy flows. It may also be necessary to undertake computer modelling of the building to determine how it should be performing.

1. The comprehensive energy audit and survey will be performed in line with CIBSE Guide F;2. Commentary may also be provided on the management culture of the organisation with

resultant recommendations on performance improvement measures;3. Recommendations will be costed with expected savings in energy use and payback period

advised. This may include a scheme proposal for works and anticipated implementation plan. Feasibility should confirm technical considerations, regulatory compliance issues, possible impact on existing operations and list any uncertainties. Reference should be made to future anticipated regulatory changes; and

4. An action plan for further investigation to verify that benefits have been achieved from the implementation of any recommendations will be presented.

Implementing the initiatives Following the audits, a series of energy efficiency initiatives will be identified. A suitable tracking document should be developed to capture the details and justification, with capital costs (if any), energy savings and paybacks forming part of the standard format (Figure 7). The aim of this document is to collate together the projects into a format to describe the overall benefits and installation costs, as well as identifying trends.

A typical process to implement and manage the initiatives includes:

1. Identify possible initiatives;2. Gather relevant energy consumption data;3. The present business case for implementation of initiative;4. Enter initiatives and related benefits on tracking plan;5. Implement initiative;6. Confirm energy savings after a suitable time period;7. Adjust the tracking plan where appropriate; and8. Use a tracking plan for company reporting.

Once no- and low-cost energy saving opportunities have been implemented, monitored and adjustments made to targets, the capital investment projects can be reviewed. Projects that are identified in energy surveys will have to be re-evaluated because any cost saving and payback calculations will have been based on historical data and these calculations will not reflect the lower

energy consumption. Capital investment projects can be funded from an internal budget allocation, external funding and grants, or from savings generated from the no- and low-cost initiatives.

Development and implementation of a monitoring and targeting strategy All companies should have a procedure for gathering and storing energy-related data. The type of system required for only one building will be different from systems that are used in multi-site scenarios. The development of an appropriate scope to provide an M&T system is given below.

Training programme

A training programme will create awareness amongst the staff about the energy policy and how this impacts on their jobs, as well as environmental and energy-related legislation. The purpose of training staff will be to ensure they are aware of the energy initiatives to be implemented and the reasons why. Taking the time to explain changes to the internal (and sometimes external) environment will increase acceptance of the changes. Buy-in from senior management will be essential to gain the support from staff. Many of the no- and low-cost measures that will be generated from site audits will require a culture change and a reason why they have been asked to alter their working practices.

Three training sessions are described covering all parts of the business since each group will view energy efficiency from different angles and so different drivers and language will be needed to maximise the participation.

● Senior managers – Describe the importance of energy efficiency in the workplace; financial

aspects related to efficiency savings; tips to reduce energy waste, and full support to the energy management programme and their appointed energy champions;

● Energy champions – Focus on information to encourage other staff to change their habits; and

● General staff – Cover the energy policy, role of energy champion and how their actions can have

a positive impact on the company. This session is important to gain support from all staff and can help to generate new ideas and initiatives. The session will also cover new starters through either part of induction training or a stand-alone session for new employees.

Planned maintenance schedules

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Regular maintenance and inspection of equipment ensure they function effectively and operations are optimised, reducing the consumption of energy and the potential to break down. The use of a condition based maintenance variable against equipment types will maximise the use of the equipment.

Planned maintenance (PM) schedules can also be used for activities performed on a regular basis such as housekeeping tours and checks to record labour needed and confirmation of compliance. Typical equipment will include interceptors, bunds, spill kits and waste reviews.

A PM schedule should be developed for equipment, with timescales for maintenance and inspection attached individually for each PM.

● Identify all equipment on site which requires maintenance;

● Identify all equipment which requires statutory inspection and determines the associated

frequency of inspection; and

● Identify all equipment on site that requires calibration and the frequency at which this is

required.

New equipment should be identified and registered as they arrive to ensure the appropriate inspection is carried out. For each piece of equipment identified, the following information should be collected.

● Equipment details including serial number and location;

● Details of the maintenance work or calibration required;

● Frequency of maintenance or date next due;

● Details of the approved contractor for the maintenance work; and

● Frequency of inspection or date next due.

An assessment of the schedules takes place on a continual basis through on-going discussions to take into account the need to increase or decrease the level of inspections for each scheduled PM.

Operation

The operation of a facility has by far the greatest impact on the environment and society. Maintaining operations is not as simple as it sounds. It does not simply mean capturing data, measuring it and continuing to operate the facility based upon the data. If that were the case, much of the FM function could be an automated process. It means keeping the facility aligned with business operations, priorities, working times and staff numbers.

There are a number of good practice measures which can be incorporated into facilities management services. A series of examples based upon typical service lines are described below. The various measures may not be applicable to all organisations but should be used as a prompt and guide.

Catering and vending

● Install aerating kitchen taps where feasible;

● Source labour locally;

● Use permanent/reusable crockery and cutlery where possible to minimise waste. Where not

feasible, procure plastic or paper alternatives that can be recycled easily;

● Provide bulk portions of products such as sugar and milk (and provide milk jugs and sugar bowls)

in place of individual portions;

● Bulk buying from local suppliers helps reduce the amount of packaging generated and reduces

transport costs, which helps the local community;

● Investigate the opportunities to compost any waste food or look at central composting through

the local authority or community group;

● For tea and coffee making, whether vending machines or kettles, ensure they are energy

efficient and can be recycled at the end of their life;

● Purchase energy-efficient equipment in catering areas; and

● Cooking oil can be recycled, but again there is a minimum quantity for collection.

Cleaning

● Specify environmentally-friendly cleaning products, avoiding disinfectants containing

trichlorophenol, cresol, benzalkonium chloride and formaldehyde, and detergents containing phosphates;

● Bulk order cleaning products to save on packaging where feasible;

● Clean windows regularly to maintain the level of available daylight;

● Install basin plugs in all kitchen, cleaning and wash-hand basins to save water; and

● Provide centralised recycling facilities.

Transport

● Ensure the provision of teleconference facilities to minimise transport required for meetings;

● Get fleet and staff vehicles serviced regularly – more than 90% of badly polluting vehicles can be

re-tuned within 15 minutes;

● Make public transport details available to all staff;

● Look at the viability of shuttle buses with local businesses;

● Provide changing and shower facilities for cyclists;

● Provide lockers or other storage space for cyclists to keep clothes and cycling equipment; and

● Install cycle locking points to serve at least 10% of office occupants.

Stationery

● Think before you print – do you really need a paper copy?

● Print documents on both sides of the paper – making sure you proofread it on the screen first. If

draft copies are needed, print them on scrap paper;

● Always photocopy using the duplex option when available, and remember to return the setting

to one copy if you’ve done several; and

● Set up an office paper recycling scheme. The white paper is of high grade and so is in demand

from the paper industry. The market for this quality is much more stable than lower grades.

Computers and electrical equipment

● When purchasing electronic equipment, stipulate minimised packaging, e.g. on a pallet with

shrink wrap, and the sleep mode activated;

● Try to repair equipment before having it replaced – invest in a long-term maintenance contract

for any appliances;

● When buying replacement equipment such as printers, photocopiers and fax machines, choose

those with a duplex option, mailbox option and recycle the outdated items;

● Recycle computers/electronic equipment at the end of their life;

● Mobile phones and their batteries can be recycled;

● Set your computers to ‘power save’ when not at your desk; and

● Switch off computer screens and hardware at night and over weekends.

Miscellaneous

● Make sure your mailing lists are up-to-date to avoid sending out unnecessary details;

● Join your local business in the environment group; this provides a great way to exchange

practical ideas with others who are trying to improve their environmental performance;

● Only boil enough water in a kettle for yourself to use;

● If you have a choice, buy recycled products or goods from sustainable sources such as Traidcraft;

● Switch to re-useable and returnable packaging;

● Install percussion taps and flow regulators to reduce water consumption; and

● Switch off appliances instead of leaving them on standby, e.g. TV, computer screen, which uses

up to 20% normal use electricity and reduces the risk of a fire.

Waste management

Historically, waste management has been primarily the concern of manufacturing and industrial processes which in high volumes of potentially hazardous materials. This was a legislative and cost burden that had to be managed effectively to reduce the impact on an organisation. Within the office environment, waste management was under the control and commonly procured in line with the cleaning provision and therefore hidden from visibility. This section describes the impacts and reasoning of why waste management has now become a topic of conversation and concern and one whose visibility is required to provide effective management. The role of FM in managing waste including legislative requirements, recycling, awareness programmes and performance measurement is discussed.

Figure 8: Waste Hierarchy

The principles of effective waste management – avoid, reduce, re-use, recycle and recover – are well established but seldom implemented in their entirety as part of a well-planned business strategy (Figure 8). The increasing impact of environmental legislation – and, in particular, the introduction of the ‘producer pays’ principle – is now driving companies to focus on this aspect of their operations. The aim is to develop a coherent approach to this area of activities, which can produce many benefits in financial and environmental terms, as well as reducing the risk of non-compliance.

The safety of disposal methods and their implications on public health are also a serious consideration. Landfill sites can produce leachate that, unless properly managed, can contaminate the water supply. Also as a result of breaking down of materials within the site, methane and CO2 are produced. These are greenhouse gases and can add to global warming. Incinerators give off dioxins that are potentially hazardous to health. Added to this, there is a shortage of available landfill space in some areas of the country and having to meet strict European emission rulings led to many incinerators closing down in 1996. These factors increase the need to reduce the amount of rubbish that is thrown away.

Retailers have already felt the effects of consumer pressure on their business in the wake of public concern about environmental issues. As more local authorities increase and improve their arrangements for domestic waste reduction, recycling becomes a normal part of home life. In addition to these environmental concerns, there are very practical reasons why every organisation, large or small, should look at ways of reducing the amount of waste they produce.

The cost of waste

All businesses must, by law, have proper arrangements for the disposal of their waste. This normally involves paying a waste management company to provide containers for the rubbish and empty them on a regular basis. There is usually a charge for commercial waste collection and so by reducing the amount collected, companies can reduce the cost of waste disposal. In addition, looking at processes and operations within the organisation that are wasteful, where careful use of resources would result in fewer materials needed, will save money on top of the environmental and social implications including traffic, and the location of a waste plant in the local area.

A good way to start to identify areas where there could be greater efficiency is to conduct an audit which considers every aspect of the organisation and the implications for resources and waste on society and the environment. Many of the savings can be achieved with little or no investment from the companies involved. The following sections detail the key activities which an FM department will be involved in, to effectively manage and provide best practice in the reduction and reporting of waste over and above legal requirements.

Operational waste management and recycling

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Traditionally FM has extensive experience of managing all types of waste originating from an organisation’s operation from normal office waste to the more specialised varieties, e.g. clinical, building waste, oil or chemicals. The waste removal service should be performed by an approved supplier which has a registered waste carrier’s licence and is managed either on its own, particularly for most specialised wastes, or in conjunction with the cleaning or grounds maintenance service for general waste or garden waste.

In addition, FM must ensure that the waste service is fully legally compliant against the requirements of the duty of care legislation – cradle-to-grave – taking the waste from generation within the organisation through any transfer station or recycling depot to its final endpoint, be it recycling, landfill or incineration. A template for the capture of the waste details is captured in Table 4.3.

FM is also responsible for ensuring that efficient processes are in place for waste handling, movement and control; the role of FM should allow for the integration of waste management and recycling with other FM activities. This enables the adoption of a more proactive approach on behalf of clients – either in-house or contracted.

An example of this is by ensuring that appropriate waste removal arrangements are in place in advance of building or refurbishment activities, thereby avoiding unnecessary disruption and expenditure. Through this process, appropriate waste contractors are identified in advance of the move. Unwanted items are either disposed of to pre-labelled bins or labelled for waste to be removed directly by the waste contractor. This provides maximum potential for recycling and recovering the waste, reduces the potential for waste disposed of incorrectly, or left bagged outside.

Waste flow analysis The operational activities within a building are continually changing, particularly with increasing fluctuations in building occupancy, and changes in activities performed. All of these will lead to changes in the volumes of wastes arising and types of waste streams needing to be managed. The use of the waste flow analysis technique involves reviewing all aspects of a company’s waste management activities to ensure that these are conducted in a way which is both cost-effective and environmentally beneficial, as well having minimal impact in terms of building management.

Areas involved in this review may include:

● Identification of origins, types and volumes of waste. This should include both the general day-

to-day waste arisings and specific arisings which may result from ad hoc activities such as planned maintenance works and clearance of interceptors;

● Movement of waste prior to storage and disposal including routing for the cleaners, towards the

storage location, availability of space for bins to be located on the office or shop floor and sufficient signage; and

● Waste segregation and storage arrangements capable of taking the capacity of waste being

generated. If there is excess capacity, removal of this or a reduction in pick-ups per week to reduce costs and improve efficiencies.

A review should be made of the most appropriate waste minimisation activities that can generate a reduction in waste and also cost savings. A programme should be put in place to develop these plans with timescales and owners for each plan. It is important that any plans put together have the support of senior management to drive through the changes and ensure they are maintained.

Recycling and recovery can make a significant contribution to minimising waste such as through reconditioning to allow items to be re-used, recovery of raw materials, or through heat generation on disposal. The common office environment has the ability to recycle and recover over 70% of all wastes generated through segregation either on or off-site. However, some industries and offices struggle to achieve more than 10% recycling which impacts on costs and efficiency.

The recycling of waste can be achieved through on-site segregation, with a variety of bins and coloured bags used to distinguish the various streams. There are a number of bins available for plastic cups (Becka bins), aluminium cans, flat packed cardboard, glass bottle banks, and paper bins. Much of this is dependent on storage within a building until a sufficient load is collected to justify a pick-up. The major hurdle in this instance is ensuring waste is segregated effectively by staff with minimum cross-contamination, which is linked to the awareness and training provided.

An alternative is to utilise off-site segregation through a materials recycling facility (MRF) where uncompacted waste is taken and recyclable waste materials are removed. The benefits are that waste

does not have to be segregated on site, removing the need to store waste, although, without the visibility of segregation taking place, staff need to be reassured through a different form of awareness that the recycling levels are being achieved.

Education and training Initiatives to reduce and recycle waste are unlikely to be successful without the wholehearted co-operation and involvement of the workforce. Often a major culture change is necessary which is required through various training and communication programmes designed to raise levels of employee awareness and engagement. Any training and awareness programmes which are developed must be continued for a period of time to push through the changes, with enforcement required where necessary to stop cross-contamination of individual segregated waste streams.

An activity which has worked well is the competition achieved through various departments or floors particularly in an office environment or manufacturing cells in the industry. A reportable factor is chosen such as waste volumes or cross-contaminated bins which are checked on a regular basis and publicly reported to all staff through a league table. This has the double incentive of learning and transferring best practice across all locations, but also of pushing poor performers to improve their image.

Waste contract review Commonly waste disposal is handled through a variety of disparate contractors dealing with specific strands of waste often procured as a number of small value contracts. This will include confidential paper through security, general waste through the cleaning contractor, fluorescent tubes and special wastes through another party. This can be exacerbated where more than one site is managed, with a number of contractors providing services autonomously across the portfolio.

A waste contract review identifies the various waste management activities being undertaken and the associated contractual arrangements. This will include the various costs of invoiced and volumes generated. It ensures that measures to streamline processes, including increased recycling and recovery of wastes and reduced capacity if required, are incorporated into the service specification and that all waste management activities are consolidated into one contract, which can be offered to a single supplier. A variety of waste options is available in Table 4.4 which captures the advantages and disadvantages for each of the various options.

Packaging contracts in this way enables organisations to increase the amount of recycling and recovery they undertake at a reduced cost. Organisations can typically achieve savings in the region of 25% through contract consolidation while doubling levels of recycling and recovery. Having a single point of contact for all waste management issues also produces considerable savings in administration. For larger portfolios, greater direct and indirect savings can be realised through sharing best practice and efficiencies of scale. Monitoring and data capture FM is commonly responsible for the vast majority of waste streams resulting, and the capture of volumes and costs. For each of the various waste streams, it is important to capture the most accurate waste figures available.

Module 6: Operations and Maintenance

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Some facility managers look at existing space as merely something to be tolerated until the next alteration. Some even shun operations and maintenance, perhaps because they think those functions tie them too closely to the boiler room. One of our themes, in fact, is that facility managers need to be more business oriented. The fact is we deal with the built environment and facilities need to be operated and maintained. Space is in play at all times; it is being maintained, repaired, altered, or renovated constantly. Furniture is moved, exchanged, or replaced. New signage replaces old. Light fixtures are revamped.

Operations and maintenance is the high volume part of our business. A medium- sized, major headquarters can have 50,000 requests for service annually and four times that number of preventive maintenance items corrected. Not only is it high volume but each of those service requests has a customer depending upon us to respond effectively and we hope to do it efficiently.

This is a major effort that needs to be organized well and made to run like clockwork while avoiding bureaucracy and poor customer service. Operations and maintenance is a big business and important business. There is no greater challenge than to provide quality services at a minimal cost around the clock which seems to be the standard against which operators and maintainers are judged.

Two issues have dominated operations and maintenance throughout our professional lives. One is that maintenance and repair are consistently underfunded, often while organizations are expanding their capital expenditures. A university facility manager supposedly said, “Everyone is anxious to endow a new building, but no one ever endowed a maintenance and repair contract.” Studies that document the underfunding of maintenance and repair abound, particularly in the public sector, yet the situation continues to worsen. This is an area of crisis for the profession. There are glimmers of hope, but so far, no widespread realization that our facility infrastructure needs the level of funding for proper operations and maintenance.

Second, because we have not consistently used life-cycle costing or solicited the advice of operators and maintainers during the design and construction of facilities, we are faced with larger operations and maintenance challenges than need be. This is an area where there is widespread agreement on the desirability of using good sustainability principles to produce the most economical and functional design.

In recent years, as facility managers have downsized and outsourced, it appears to us that they have both outsourced and downsized the operations and maintenance function to a greater degree than the other functions of facility management. This downward spiral must be reversed.

Contracting and Types of contracts

• Contractor personnel provide better access to higher-quality skills.• With the decline of both quality and quantity in the technical labour pool, outsourcing reduces

the time that the facility manager must spend on personnel matters.• Large contractors can use their size to get price breaks on supplies and services.• Outsourcing allows the organization to concentrate on its core business.

• The number of organizational employees is reduced, a desirable feature for organizations who want to appear “lean and mean.”

• Particularly in the public sector, you save authorized personnel spaces.• With outsourcing, the company can provide services or a level of service that in-house

personnel cannot.• Outstanding contractors exist nearly everywhere. In fact, certain companies• have grown to meet the outsourcing trend in our industry.

Having said that, we should add that there are good reasons not to outsource some functions. For instance, no contractor should do strategic facility business planning. Also, many companies have facilities whose operations are so sensitive that the facility staff serving them needs to be company employees (although that type of facility does not occur as often as you might think). You must not, as our friend Martha Whitaker says, “outsource your soul.”

Most of the objections to outsourcing concern the loss of control or the fact that the workforce will be less loyal to management if contracted. Certainly, a judgment needs to be made by every organization when considering outsourcing, but our observation is that facility managers tend to be too conservative when outsourcing. Pressed to cut costs and personnel spaces, we should use our limited resources for top-flight in-house contract managers and planners who have technical supervisory experience while outsourcing the technical work and on-site supervision. Another absolutely essential staff member is an accountant who specializes in facility accounts. Preferably this individual works for you but, at a minimum, should be located with you. Thankfully, certain types of contracts and contractors have developed to provide the facility manager with exactly the workforce needed, provided he can properly define what is needed. In fact, some contract forms give the facility manager great flexibility in staffing provided that he and the contractor will partner to ensure mutual success.

In almost all of the services offered by the facility department contracting to a third party is a viable option. The trend has consistently been to go in this direction. Most organizations end up doing what they feel comfortable with or what they are forced into by upper management. Regardless of the motivation for outsourcing, the organization must decide three issues: (1) what level of control is desired, (2) what level of service is required, and (3) what response level is required. If these can be met by a contract, the organization is probably better off contracting out as long as specifications ensure the services. In most cases, three- to five-year service contracts are best. Contracting annually to exclusively low bidders tends, over several rebids, to ratchet quality down to an

the motivation for outsourcing, the organization must decide three issues: (1) what level of control is desired, (2) what level of service is required, and (3) what response level is required. If these can be met by a contract, the organization is probably better off contracting out as long as specifications ensure the services. In most cases, three- to five-year service contracts are best. Contracting annually to exclusively low bidders tends, over several rebids, to ratchet quality down to an unacceptable point. We have never been advocates of selling outsourcing for its large cost savings.

Cost savings from contracting out can be illusory. Make sure the contracts minimize the facility manager’s administrative time, allow for more flexibility in matching resources and workload, and produce the efficiencies and economies of scale on large contracts. If you are satisfied with the effectiveness of in-house service, try to capture those procedures in your outsourcing contract. Unless you have no alternative, be reluctant to adopt a sample contract that your outsourcing contractor may hand you as a “good model contract that is working well with my last client.”

According to the Outsourcing Institute, the following are the most important factors in contracting out:

• Understanding company goals and objectives• A strategic vision and plan• Selecting the right vendor• Ongoing management of relationships• A properly structured contract• Open communications with affected individuals and groups• Senior executive support and involvement• Careful attention to personal issues• Near-term financial justification• Use of outside experts

Each of those factors has it’s own applicability to a particular situation, but we would like to mention several key aspects. Traditional low-bid, adversarial contracting will not work. Perhaps formal partnering is not necessary, but when you are widely outsourced, your contractor is now your staff. We are convinced that a facility manager can get as much loyalty from a contract staff as from in-house staff. It all depends upon establishing a working relationship. It is our experience that each principal contractor should have a superintendent—or foreman-level individual on-site with the authority to speak for the contractor on 90 per cent of the contractual and staffing issues and 100 per cent of the operational issues that will arise. The facility manager and the contractor should, early in the contract, meet frequently to iron out the kinks. These meetings should soon need to be less and less frequent . . . or you have the wrong contractor. It is our experience that many contractors are not used to being treated as contributing partners to accomplish the mission and initially may need assurances from you that that is your intention.

If possible, facility managers should go slow in outsourcing, and use fact-based decision making. You are so much better off if you know your true costs of doing the services that you want to contract, to include distributed overheads. That sounds elemental, but too many outsourcing decisions have not been made when they should have or have failed to produce promised savings solely because the cost figures for current operations were fallacious.

Once the decision is made to outsource, the facility manager should work with the procurement staff to outsource one function at a time rather than the whole department at once. One of the most important things to do, and one of the most difficult, is, to be honest with staff and to keep them informed as to the outsourcing analysis proceeds. No facility manager should ever get in the position of promising staff continued employment, but he should be sensitive to their concerns.

In the last publicly published Annual Outsourcing Index, the Outsourcing Institute found that price was the top criteria for selecting a contractor followed by commitment to quality, flexibility in contract terms, the contractor’s reputation and/or references, and its scope of resources.2 This survey was taken during a slow economic period similar to what we are experiencing today. Interestingly, medium-sized organizations were less concerned about cost than very large ones or small ones; their principal concern was quality.

Just as you wouldn’t send your child to a school without first checking its credentials and talking with the teachers, don’t pick a service provider out of the phone book. Do some research, talk to their management, and get a list of previous customers (who match your contracting needs as closely as

possible) from the potential contractors. And check out their employees, who may be working for you soon.

Soon after companies started to consider outsourcing, the military actually developed a contract form which fit the model for small construction and alterations jobs, operations, and maintenance. It was called IDIQ, indefinite demand, indefinite quantity, contracting and seemed ideal for facility management. Facility managers, and finally their procurement counterparts, realized that the traditional forms of contracting often did not work when contracting for continuing or for unique services the demand for which ebbed and flowed. In other words, the facility manager knew he was going to want service X, or sometimes supply item Y, during the next three years but did not know exactly when or in what quantity. Other FMs, wanted a form of contract for services or supplies that they could call for in an emergency or crisis. IDIQ contracts are for a fixed period (the base) usually with optional extensions if service is performed well. The contract defines what services are desired during the base period and specifies how services can be obtained through the issuance of task order and who is an authorized to issue such a task order. Payment is at a fixed rate with, perhaps, an escalator clause for inflation.

The exact origin of IDIQ contracting is uncertain but it was first widely used within the U.S. Department of Defense and finally through the entire U.S. federal government before it became popular in the private sector.3 Interestingly, its growth parallels the growth of facility management probably as facility managers realized the inherent advantages of the IDIQ contracts. This accelerated as FM services were increasingly contracted out because of the ease of use of the IDIQ for those services where the type of service was well known but quantity over the next year, for example, was not. Interestingly, several companies influenced often by retiring military officers who joined their ranks, developed business units specifically focused on IDIQ contracting. After a number of years, entrepreneurs started to fine tune IDIQ contracting and developed the job order contract, JOC. Again, most of the development of JOC occurred in the public sector but soon private industry began to use JOC and JOC contractors appeared. A JOC contract follows certain procedures leading to an agreement focusing on achieving good work performance and reasonable costs. It consists of the following elements:

• Standard specifications established in the master contract with a summary of work, also including any specific or client-driven conditions.

• Construction item costs specified in a Unit Price Book.• Facility manager issues a Request for Qualifications (RFQ), evaluating firms using best-value,

performance-based criteria, or an Invitation to Bid awarded to the lowest responsive and responsible bidder. (More about this later).

• A minimum amount of work is guaranteed for the contractor. This is usually• a small amount for consideration—a requirement in most states for contracts. (This might, for

instance, be £25,000 in a total JOC contract of £5,000,000 which is a real incentive to the contractor to perform well because if the FM is unhappy with your work, he may issue another JOC contract for the same services and give the first contractor just the minimum).

• Issuance of contractor’s work orders based on the owner’s requirements.• Cost for work orders based on standard specifications, unit costs, and the contractor’s

coefficient. (This coefficient is critical for the contractor because it must cover overhead, profit, and unexpected costs, yet be low enough to make him competitive)

• Open communications between the facilities team and JOC contracting team, including a kick-off partnering session between everyone utilizing the contract.

It is our experience that, in a satisfactory JOC or IDIQ contract, the contractor stands to gain a substantial amount of work not covered in the master contract because 1) he is on the ground and 2) he has a proven record of performance.

The major advantages of job order contacting are:

• Fast and timely delivery of projects and services and occasional supplies.• The low overhead cost of service procurement and delivery.• Development of a partner relationship based on work performance.• Reduced legal fees.• ELIMINATION OF CHANGE ORDERS!!!!!• Standard pricing and specification are familiar to both parties resulting in efficient and effective

estimating, design, and fixed price service contracting.Methods of Contracting Services-If the facility manager decides to contract for services, there are multiple ways to do it. One is to contract for a specific project based on a given set of specifications. This is the way that we contract for major construction and alterations. The alternative is to sign for services or supplies for a given period based on a listing of unit costs for those services as discussed in IDIQ and JOC above. Particularly the first time you contract this way, select two to five contractors as qualified (don’t offer them a contract) so that, if your choice does not work out, you can easily contract with an alternate source. Remember, all you agreed to with your original selectee was a minimal dollar amount that you can expend over the base period of the contract. We have experienced high volume periods when we actually needed two different contractors performing the same type of work.

Our preference is to gather services into broad groups like custodial, or electrical services, or building maintenance for contracting. Our experience is that, though there are efficiencies of scale, asking one contractor to provide all services lowers performance. We require the contractor to provide an on-site superintendent (foreman for smaller contracts) and all first line supervision but the facility management staff assumes responsibility for work assignments, quality control, and therefore, cost control but this is our preference, not necessarily inherent in either IDIQ or JOC.

One note of caution for those who employ contractors. The Internal Revenue Service investigates cases in which companies convert staff into contract positions or hire new staff as private contractors to avoid paying the employer portion of the social security tax. Sometimes in a unionized shop, such situations will be reported by the union. Be careful to observe the “duck rule” “If it looks like a duck and quacks like a duck, then it’s probably a duck.” Contract employees normally

(1) work for a contractor’s supervisor, and

(2) are subject to be moved to other job sites.

If the only reason to convert a staff position is to avoid taxation and the person continues to function as an employee, the company could be liable. We have, however, hired contractor management and additional supervisory personnel for short periods when we had a peak workload. It is worthwhile to discuss the need for the facility manager to define both his requirements and the quality of the contractor needed to meet those requirements. Often when there is unhappiness with the procurement process or with a contractor’s performance, the root problem is in inadequate specification or selection criteria.

The evaluation criteria and their comparative weights must reflect what is truly important to the facility manager (references, bonding capability, financial stability, the stability of the workforce, ability to perform a specialized task), particularly if prequalification is used. Then the facility manager must set the cutoff score low enough so he will retain competition yet high enough to eliminate those with whom he can- not live. This sensitive process, of which the facility manager is only one participant, explains why procurement is an art, not a science. Time spent on properly defining a requirement, and on properly stating and weighting selection criteria, will not only lead to a much smoother bidder evaluation process but will probably secure a better contractor.

Some purchasing departments and facility managers burden themselves with one-year term service contracts. Our experience is that a three-year term contract with two one-year options and pricing tied to a local pricing index is almost ideal because it provides continuity of service, yet ensures the continuation of competitive pricing. Too many facility managers abrogate their responsibilities and rights in service contracting. Like all other functions, service contracting needs to be managed, and the facility manager must understand that clearly and exercise his responsibilities.

Placement of the Procurement Officer-Most facility management organizations does not have a procurement officer and/or purchasing agent assigned. These individuals are so important to the facility managers, increasingly so as we outsource. If the assignment is impossible, consider co-location of the procurement personnel. If co-location is not possible, then the facility manager must spend time training the procurement staff in our unique contracting needs.

Contractor and Consultant Evaluation-Service contractors and consultants should be competitively evaluated as part of the procurement process. When negotiation or directed procurement (sole sourcing) is not allowed, use a two-step procedure when the dollar cost of the procurement (say £250,000) justifies it. The first step is an evaluation of technical ability, references, insurability, and financial capability of your contractor or consultant. The second step is to evaluate four to six short-listed candidates using the results of an interview, previously submitted material, and costing information.

How are these evaluations to be scored? Many public agencies, unfortunately, are tied to selecting the contractor or consultant submitting the lowest bid (and that is fine for well-defined, non-controversial requirements). Except for those simply defined tasks, it is preferable to use the “most qualified” method and allocate 30–45 per cent of the total score to price. In this way, the number of points allocated to the pricing of each contractor is calculated as follows:

Score of contractor = Max score (points) – max score × (.5)(TS – LC)/LC

where: TS = Price on contractor being evaluated

LC = Price of the lowest contractor

Partnering-

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A facility manager who tries to manage a fully contracted department through a low-bid contract that emphasizes the adversarial relationship with the contractor is doomed to fail. In a largely contracted-out organization, the facility manager needs to consider contractor personnel, at least from an operational point of view as “his,” members of the FM team. He has no real alternative but to do so. The facility manager must work with the contractor’s on-site management or supervision to provide customers with seamless, customer-oriented service. Anything in the contract or his relationship with the contractor that gets in the way of serving customers has to be changed. Mutual focus on customers is the essence of partnering. This is not mere rhetoric. We have managed a completely outsourced situation and we practised what we preach here . . . and it works to the advantage of customers.

That philosophy deemphasizes the importance of the form of the contract and emphasizes results. Initially, this may be difficult. First, if the organization has a centralized procurement function, the contact there may be reluctant to deviate from the strict wording of the contract to allow mutual give and take which inevitably must occur. Second, no contract is perfect for the first time. The facility manager needs to understand that and act accordingly, working with the contractor to create a win-win situation. Regularly scheduled operational reviews with the contractor are very helpful. In some cases, the facility manager must be willing to give, expecting the contractor to do so in the future. If that doesn’t occur, this may be the wrong contractor.

For every major contract, you should have the contractor provide a manager, supervisor, or established foreman on site (your choice since you pay). That individual must have the ability to speak for the contractor on all operational matters. After about six months, the contractor’s front office becomes not much more than a pay and personnel office for our contracts. You should meet with the contractor’s front office personnel only when you have a problem, or quarterly, to ensure they understand where you are going as a department and how it affects their contract.

The facility manager must be confident in his ability to administer contracts so that he can manage the fine line between cooperation with the contractor and keeping that contractor at arm's length. When faced with conflicts (and they will come up), he can resolve it by determining what is best for his customers. Partnering can so easily become a conflict of interest, inch by inch. We constantly stress cooperation with our contractors but the facility manager must be ever alert to conflicts of interest be they a lunch, baseball tickets, or a weekend at a posh resort.

This concept works as well for supplies as it does for services. One very large facility management organization turned all of its supply activities over to the local supply house. After a few initial problems, they were amazed to find that they got their materials faster, with less paperwork, and at a lower price because of the con- tractor’s expertise and muscle in the local marketplace. Others, of course, have their contractors supply their own materials and, in special situations, supplies which the facilities staff need.

Some organizations like to have formal partnering agreements with their contractors. Often these agreements address open and effective communications, how problems and disagreements will be

resolved, use of the team approach, trust in both the experience and commitment of all team members and the goal to which all are committed.

Successful partnering is dependent on a team approach to common goals, with both partners able to talk frankly and as equals. We have always been the most successful by motivating the contractor toward exceptional behaviour and performance. To most contractors, the greatest incentive is a contract extension with a suitable price adjustment. For a contractor who is performing exceptionally, that is a major plus. For us, department stability is a major payoff.

On the other side of the ledger, not all contractors are capable of being good partners. In our experience, one very fine performing company had to be dropped because its president would not let go and let his on-site supervisor meet our customers’ needs. There are as many challenges for the contractor in partnering as for the facility manager.

Outsourcing and partnering are inextricably tied to one another. The modern facility manager needs to be a contract manager extraordinaire. In all but the exceptional case, his success will depend on how well he orchestrates a primarily outsourced workforce to meet organizational goals. It is a different management model, but one that can work exceptionally well as long as the transition to it is slow, thoughtful, and uses facts, not opinion.

Automation-

An issue which is hard to address in specifications is the degree to which the facility management team will use automation and whose automation will be used. Large, full-service contractors tend to want to use their own automation system when they move into a new organization, the system which they are used to but then they have none of your building data in their system. Also, once building data is in the contractor’s automated system, they have a powerful bargaining chip which gives them a leg up at the next re-bid. If the owner’s system is outdated or overtaxed, the decision becomes somewhat easier but we recommend using the owner’s system until the decision is made whether to change out the system and then who is to purchase the system. This scenario needs to be thought out carefully and provided for in the pre-bid analysis.

Module 7: Project Management

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Introduction

Realization of these objectives requires systematic planning and careful implementation. To this effect, application of knowledge, skill, tools and techniques in the project environment, refers to project management. Project management in recent years has proliferated, reaching new heights of sophistication. It has emerged as a distinct area of management practices to meet the challenges of the new economic environment, globalization process, rapid technological advancement, and quality concerns of the stakeholders.

Project Definition

The project, in general, refers to a new endeavour with a specific objective and varies so widely that it is very difficult to precisely define it. Some of the commonly quoted definitions are as follows. Project is a temporary endeavour undertaken to create a unique product or service or result.

Project is a unique process, consist of a set of coordinated and controlled activities with start and finishes dates, undertaken to achieve an objective conforming to specific requirements, including the constraints of time cost and resource.

Examples of the project include Developing a watershed, Creating irrigation facility, Developing a new variety of a crop, Developing new breed of an animal, Developing agro-processing centre, Construction of farm building, the sting of a concentrated feed plant etc. It may be noted that each of these projects differs in composition, type, scope, size and time.

Project Characteristics

Despite the above diversities, projects share the following common characteristics.

● Unique in nature.

● Have definite objectives (goals) to achieve.

● Requires set of resources.

● Have a specific time frame for completion with a definite start and finish.

● Involves risk and uncertainty.

● Requires cross-functional teams and interdisciplinary approach.

Project Performance Dimensions

Three major dimensions that define the project performance are scope, time, and resource. These parameters are interrelated and interactive. The relationship generally represented as an equilateral triangle. The relationship is shown in figure 9.

Figure 9. Project performance dimensions

It is evident that any change in any one of the dimensions would affect the other. For example, if the scope is enlarged, the project would require more time for completion and the cost would also go up. If time is reduced the scope and cost would also be required to be reduced. Similarly, any change in the cost would be reflected in scope and time. Successful completion of the project would require the accomplishment of specified goals within scheduled time and budget. In recent years a fourth dimension, stakeholder satisfaction, is added to the project. However, the other school of management argues that this dimension is an inherent part of the scope of the project that defines the specifications to which the project is required to be implemented. Thus the performance of a project is measured by the degree to which these three parameters (scope, time and cost) are achieved.

Mathematically

Performance = f(Scope, Cost, Time)

In management literature, this equilateral triangle is also referred to as the “Quality triangle” of the project.

Project Life Cycle

Every project, from conception to completion, passes through various phases of a life cycle synonym to the life cycle of living beings. There is no universal consensus on the number of phases in a project cycle. An understanding of the life cycle is important to the successful completion of the project as it facilitates to understand the logical sequence of events in the continuum of progress from start to finish. A typical project consists of four phases- Conceptualization, Planning, Execution and Termination. Each phase is

marked by one or more deliverables such as Concept note, Feasibility report, Implementation Plan, HRD plan, Resource allocation plan, Evaluation report etc.

Conceptualization Phase

Conception phase, starting with the seed of an idea, it covers identification of the product/ service, Pre-feasibility, Feasibility studies and Appraisal and Approval. The project idea is conceptualized with initial considerations of all possible alternatives for achieving the project objectives. As the idea becomes established a proposal is developed setting out the rationale, method, estimated costs, benefits and other details for appraisal of the stakeholders. After reaching a broad consensus on the proposal the feasibility dimensions are analyzed in detail.

Planning Phase

In this phase, the project structure is planned based on project appraisal and approvals. Detailed plans for activity, finance, and resources are developed and integrated into the quality parameters. In the process major tasks need to be performed in this phase are

• Identification of activities and their sequencing• The time frame for execution• Estimation and budgeting• Staffing

A Detailed Project Report (DPR) specifying various aspects of the project is finalized to facilitate execution in this phase.

Execution Phase

This phase of the project witnesses the concentrated activity where the plans are put into operation. Each activity is monitored, controlled and coordinated to achieve project objectives. Important activities in this phase are

• Communicating with stakeholders• Reviewing progress• Monitoring cost and time• Controlling quality• Managing changes

Termination Phase

This phase marks the completion of the project wherein the agreed deliverables are installed and the project is put into operation with arrangements for follow-up and evaluation.

Life Cycle path

The life cycle of a project from start to completion follows either an “S” shaped path or a “J “ shaped path (Figure 10 and 11). In “S” shape path the progress is slow at the starting and terminal phase and is fast in the implementation phase. For example, the implementation of the watershed project. At the beginning detailed sectoral planning and coordination among various implementing agencies etc. makes

progress slow and similarly towards termination, creating an institutional arrangement for transfer and maintenance of assets to the stakeholders progress slowly.

Figure 10. Project life path –“S” shape

In “J” type cycle path the progress, in the beginning, is slow and as the time moves on the progress of the project improves at a fast rate. Example, in developing an energy plantation. In this the land preparation progresses slowly and as soon as the land and seedling are transplantation is undertaken. This is shown in figure 11.

Figure 11. Project life cycle path - “J” Shape

Project Classification

There is no standard classification of the projects. However considering project goals, these can be classified into two broad groups, industrial and developmental. Each of these groups can be further classified considering nature of work (repetitive, non-repetitive), completion time (long term, short term etc), cost (large, small, etc.), level of risk (high, low, no-risk), mode of operation ( build, build-operate-transfer etc).

Industrial projects also referred to as commercial projects, which are undertaken to provide goods or services for meeting the growing needs of the customers and providing attractive returns to the investors/stakeholders. Following the background, these projects are further grouped into two categories i.e., demand-based and resource/supply base. The demand-based projects are designed to satisfy the customers’ felt as well the latent needs such as complex fertilizers, agro-processing infrastructure etc. The resource/ supply based projects are those which take advantage of the available resources like land, water, agricultural produce, raw material, minerals and even human resource. Projects triggered by successful R&D are also considered as supply based. Examples of resource-based projects include food product units, metallurgical industries, oil refineries etc. Examples of projects based on human resource (skilled) availability include projects in the IT sector, Clinical Research projects in bio services and others.

Development projects are undertaken to facilitate the promotion and acceleration of overall economic development. These projects act as catalysts for economic development providing a cascading effect. Development projects cover sectors like irrigation, agriculture, infrastructure health and education.

Project management

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Project management is a distinct area of management that helps in handling projects. It has three key features to distinguish it from other forms of management and they include a project manager, the project team and the project management system. The project management system comprises organization structure, information processing and decision- making and the procedures that facilitate the integration of horizontal and vertical elements of the project organization. The project management system focuses on integrated planning and control.

Benefits of Project Management Approach

The rationale for following project management approach is as follows.

• Project management approach will help in handling complex, costly and risky assignments by providing an interdisciplinary approach in handling the assignments. Example: R&D organizations.

• Project management approaches help in handling assignments in a specified time frame with definite start and completion points. Example handling customer orders by Industries involved in the production of capital goods.

• Project management approaches provide task orientation to personnel in an Organization in handling assignments. Example: Organizations in IT sector handling software development assignments for clients.

Project Identification and Formulation

Introduction

A project in the economic sense directly or indirectly adds to the economy of the Nation. However, introspection of the project performance clearly indicates that the situation is far from satisfactory. Most of the major and critical projects in the public sector that too in crucial sectors like irrigation, agriculture, and infrastructure are plagued by tremendous time and cost overruns. Even in the private sector, the performance is not all that satisfactory as is evident from the growing sickness in industry and the rapid increase in non-performing assets (NPAS) of Banks and Financial Institutions. The reasons for time and cost overruns are several and they can be broadly classified under-technical, financial, procedural and managerial. Most of these problems mainly stem from inadequate project formulation and haphazard implementation.

Project Identification

Project identification is an important step in project formulation. These are conceived with the objective of meeting the market demand, exploiting natural resources or creating wealth. The project ideas for developmental projects come mainly from the national planning process, whereas industrial projects usually stem from the identification of commercial prospects and profit potential.

As projects are a means of achieving certain objectives, there may be several alternative projects that will meet these objectives. It is important to indicate all the other alternatives considered with justification in favour of the specific project proposed for consideration.

Sectoral studies, opportunity studies, support studies, project identification essentially focuses on screening the number of project ideas that come up based on information and data available and based on expert opinions and to come up with a limited number of project options which are promising.

Project Formulation

Project Formulation Concept

“Project Formulation” is the processes of presenting a project idea in a form in which it can be subjected to comparative appraisals for the purpose of determining in definitive terms the priority that should be attached to a project under severe resource constraints. Project Formulation involves the following steps (Figure 13).

Figure 13: Project formulation-schematic view

Opportunity Studies

An opportunity study identifies investment opportunities and is normally undertaken at the macro level by agencies involved in economic planning and development. In general opportunity studies, there are three types of study – Area Study, sectoral and Sub-sectoral Studies and Resource Based Studies. Opportunity Studies and Support studies provide a sound basis for project identification.

Pre-feasibility Studies / Opportunity Studies

A pre-feasibility study should be viewed as an intermediate stage between a project opportunity study and a detailed feasibility study, the difference being primarily the extent of details of the information obtained. It is the process of gathering facts and opinions pertaining to the project. This information is then vetted for the purpose of tentatively determining whether the project idea is worth pursuing furthering. The pre-feasibility study lays stress on assessing market potential, the magnitude of investment, technical feasibility, financial analysis, risk analysis etc. The breadth and depth of pre-feasibility depend upon the time available and the confidence of the decision maker. Pre-feasibility studies help in preparing a project profile for presentation to various stakeholders including funding

agencies to solicit their support to the project. It also throws light on aspects of the project that are critical in nature and necessitate further investigation through functional support studies.

Support studies are carried out before commissioning pre-feasibility or a feasibility study of projects requiring large-scale investments. These studies also form an integral part of the feasibility studies. They cover one or more critical aspects of the project in detail. The contents of the Support Study vary depending on the nature of the study and the project contemplated. Since it relates to a vital aspect of the project the conclusions should be clear enough to give a direction to the subsequent stage of project preparation.

Feasibility Study

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Feasibility Study forms the backbone of Project Formulation and presents a balanced picture incorporating all aspects of possible concern. The study investigates practicalities, ways of achieving objectives, strategy options, methodology, and predict likely outcome, risk and the consequences of each course of action. It becomes the foundation on which project definition and rationale will be based so that the quality is reflected in subsequent project activity. A well-conducted study provides a sound base for decisions, clarifications of objectives, logical planning, minimal risk, and a successful cost-effective project. Assessing the feasibility of a proposal requires an understanding of the STEEP factors. These are under Social, Technological, Ecological, Economic, and Political.

A feasibility study is not an end in itself but only a means to arrive at an investment decision. The preparation of a feasibility study report is often made difficult by the number of alternatives (regarding the choice of technology, plant capacity, location, financing etc.) and assumptions on which the decisions are made. The project feasibility studies focus on

- Economic and Market Analysis- Technical Analysis- Market Analysis- Financial Analysis- Economic Benefits- Project Risk and Uncertainty- Management Aspects

Economic and Market Analysis

In recent years, market analysis has undergone a paradigm shift. The demand forecast and projection of the demand-supply gap for products/services can no longer be based on extrapolation of past trends using statistical tools and techniques. One has to look at multiple parameters that influence the market. Demand projections are to be made keeping in view all possible developments. Review of the projects executed over the years suggests that many projects have failed not because of technological and

financial problems but mainly because of the fact that the projects ignored customer requirements and market forces.

In market analysis, a number of factors need to be considered covering – product specifications, pricing, channels of distribution, trade practices, the threat of substitutes, domestic and international competition, opportunities for exports etc. It should aim at providing analysis of future market scenario so that the decision on project investment can be taken in an objective manner keeping in view the market risk and uncertainty.

Technical Analysis

Technical analysis is based on the description of the product and specifications and also the requirements of quality standards. The analysis encompasses available alternative technologies, selection of the most appropriate technology in terms of the optimum combination of project components, implications of the acquisition of technology, and contractual aspects of licensing. Special attention is given to technical dimensions such as in project selection. The technology chosen should also keep in view the requirements of raw materials and other inputs in terms of quality and should ensure that the cost of production would be competitive. In brief, the technical analysis included the following aspects.

Technology

● Availability

● Alternatives

● Latest / state-of-art

● Other implications

Plant capacity

● Market demand

● Technological parameters

Inputs

● Raw materials

● Components

● Power

● Water

● Fuel

● Others

Environmental Impact Studies:

All most all projects have some impact on the environment. The current concern about environmental quality requires environmental clearance for all projects. Therefore environ impact analysis needs to be undertaken before the commencement of feasibility study.

Objectives of Environmental Impact Studies:

• To identify and describe the environmental resources/values (ER/Vs) or the environmental attributes (EA) which will be affected by the project (in a quantified manner as far as possible).

• To describe, measure and assess the environmental effects that the proposed project will have on the ER/Vs.

• To describe the alternatives to the proposed project which could accomplish the same results but with a different set of environmental effects

The environmental impact studies would facilitate providing necessary remedial measures in terms of the equipment and facilities to be provided in the project to comply with the environmental regulation specifications.

Financial Analysis

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The Financial Analysis examines the viability of the project from financial or commercial considerations and indicates the return on the investments. Some of the commonly used techniques for financial analysis are as follows.

• Pay-back period.• Return on Investment (ROI)• Net Present Value (NPV)• Profitability Index(PI)/Benefit Cost Ratio• Internal Rate of Return (IRR)• Pay-back Period

This is the simplest of all methods and calculates the time required to recover the initial project investment out of the subsequent cash flow. It is computed by dividing the investment amount by the sum of the annual returns (income – expenditure) until it is equal to the capital cost.

Example1. (Uniform annual return)

A farmer has invested about Rs. 20000/- in constructing a fish pond and gets an annual net return of Rs.5000/- (the difference between annual income and expenditure). The payback period for the project is 4 years (20000/ 5000).

Example 2.(Varying annual return)

In a project Rs.1,00,000/- an initial investment of establishing a horticultural orchard. The annual cash flow is as under.

The drawback in this method is that it ignores any return received after the payback period and assumes an equal value for the income and expenditure irrespective of the time.

It is also possible that projects with a high return on investments beyond the pay-back period may not get the deserved importance i.e., two projects having a same pay-back period – one giving no return and the other providing large return after a pay-back period will be treated equally, which is logically not correct.

• Return on Investment (ROI);

The ROI is the annual return as a percentage of the initial investment and is computed by dividing the annual return with investment. It is calculation is simple when the return is uniform. For example, the ROI of the fish ponds is (5000/ 10000) X 100 = 50%. When the return is not uniform the average of annual returns over a period is used. For horticultural orchard average return is (1,30,000/3) = 43333. ROI = (43333/100000) X 100 = 43.3 %.

Computation of ROI also suffers from similar limitation as of pay-back period. It does not differentiate between two projects one yielding immediate return (lift irrigation project) and another project where the return is received after some gestation period say about 2-3 years (developing a new variety of crop).

Both the pay-back period and ROI are simple ones and more suited for quick analysis of the projects and sometimes provide inadequate measures of project viability. It is desirable to use these methods in conjunction with other discounted cash flow methods such as Net Present Value (NPV), Internal Rate of Return (IRR) and Benefit-Cost ratio.

• Discounted Cash Flow Analysis:

The principle of discounting is the reverse of compounding and takes the value of money over time. To understand his let us take an example of compounding first. Assuming the return of 10

%, Rs 100 would grow to Rs110/- in the first year and Rs 121 in the second year. In a reverse statement, at a discount rate of 10%, the return of Rs.110 in the next year is equivalent to Rs100 at present. In other words, the present worth of next years return at a discount rate 10 % is only Rs.90.91 i.e., (100/110) Similarly Rs121 in the second year worth Rs 100/- at present or the present value of a return after two years is Rs. 82.64 (100/121). These values Rs.90.91 and rs.82.64 are known as the present

value of the future annual return of Rs.100 in a first and second year respectively. Mathematically, the formula for computing a present value (PV) of cash flow “Cn” in “nth” year at a discount rate of “d” is as follows;

PV= Cn / (1+d)n

The computed discount factor tables are also available for ready reference. In the financial analysis, the present value is computed for both investment and returns. The results are presented in three different measures ie. NPV, B-C Ratio, and IRR.

• Net Present Value (NPV)

Net Present Value is considered as one of the important measures for deciding the financial viability of a project. The sum of discounted values of the stream of investments in different years of project implementation gives the present value of the cost (say C). Similarly, the sum of discounted returns yields the present value of benefits (say B). The net present value (NPV) of the project is the difference between these two values (B, C). Higher the value of NPV is always desirable for a project.

Benefit-Cost Ratio (B-C Ratio) or Profitability Index (PI);

The B-C Ratio also referred to as Profitability Index (PI), reflect the profitability of a project and computed as the ratio of the totall present value of the returns to the total present value of the investments (B/C). Higher the ratio better is the return.

• Internal Rate of Return (IRR):

Internal Rate of Return (IRR) indicates the limit or the rate of discount at which the project total present value of the return (B) equals to total present value of investments ( C ) i.e. B-C = Zero. In other words, it is the discount rate at which the NPV of the project is zero. The IRR is computed by iteration i.e. Computing NPV at different discount rate till the value is nearly zero. It is desirable to have projects with higher IRR.

Risk and Uncertainty

Risk and Uncertainty are associated with every project. Risk is related to the occurrence of adverse consequences and is quantifiable. It is analysed through the probability of occurrences. Whereas uncertainty refers to inherently unpredictable dimensions and is assessed through sensitivity analysis. It is, therefore, necessary to analyse these dimensions during formulation and appraisal phase of the programme. Factors attributing to risk and uncertainties of a project are grouped under the following;

• Technical –relates to project scope, change in technology, quality and quantity of inputs, activity times, estimation errors etc.

• Economical- pertains to market, cost, competitive environment, change in policy, exchange rate etc.

• Socio-political- includes dimensions such as labour, stakeholders etc.• Environmental – factors could be level of pollution, environmental degradation etc.

Economic Benefits:

Apart from the financial benefits (in terms of Return on Investment) the economic benefits of the project are also analyzed in the feasibility study. The economic benefits include employment generation, economic development of the area where the project is located, foreign exchange savings in case of import substitutes or earning of foreign exchange in case of export-oriented projects and others.

Management Aspects:

Management aspects are becoming very important in project feasibility studies. The management aspects cover the background of promoters, management philosophy, the organization set up and staffing for project implementation phase as well as operational phase, the aspects of decentralization and delegation, systems and procedures, the method of execution and finally the accountability.

Time Frame for Project Implementation:

The feasibility study also presents a broad time frame for project implementation. The time frame influences preoperative expenses and cost escalations which will impact the profitability and viability of the project.

Feasibility Report:

Based on the feasibility studies the Techno-economic feasibility report or the project report is prepared to facilitate project evaluation and appraisal and investment decisions.

Project Appraisal

The project appraisal is the process of critical examination and analysis of the proposal in totality. The appraisal goes beyond the analysis presented in the feasibility report. At this stage, if the required compilation of additional information and further analysis of project dimensions are undertaken. At the end of the process, an appraisal note is prepared for facilitating decision on the project implementation.

The appraisal process generally concentrates on the following aspects.

• Market Appraisal: Focusing on demand projections, adequacy of marketing infrastructure and competence of the key marketing personnel.

• Technical Appraisal: Covering product mix, Capacity, Process of manufacture engineering know-how and technical collaboration, Raw materials and consumables, Location and site, Building, Plant and equipment, Manpower requirements and Break-even point.

• Environmental Appraisal: Impact on land use and micro-environment, the commitment of natural resources, and Government policy.

• Financial Appraisal: Capital, rate of return, specifications, contingencies, cost projection, capacity utilization, and financing pattern.

• Economic Appraisal: Considered as a supportive appraisal it reviews the economic rate of return, the effective rate of protection and domestic resource cost.

• Managerial Appraisal: Focuses on promoters, organization structure, managerial personnel, and HR management.

• Social Cost Benefit Analysis (SCBA): Social Cost Benefit Analysis is a methodology for evaluating projects from the social point of view and focuses on social cost and benefits of a

project. There often tend to differ from the costs incurred in monetary terms and benefits earned in monetary terms by the project SCBA may be based on the UNIDO method or the Little-Miracles (L-M) approach. Under the UNIDO method, the net benefits of the project are considered in terms of economic (efficiency) prices also referred to as shadow prices. As per the L-M approach the outputs and inputs of a project are classified into (1) traded goods and services (2) Non traded goods and services; and (3) Labor. All over the world including India currently, the focus is on Economic Rate of Return (ERR) based on SCBA assume importance in project formulation and investment decisions.

Detailed Project Report (DPR)

Once the projects are appraised and the investment decisions are made a Detailed Project Report (DPR) is prepared. It provides all the relevant details including design drawings, specifications, detailed cost estimates etc. and this would act as a blueprint for project implementation.

Module 8: Human Resource Management

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22&studio=1

Human resource management (HRM) emerged as a concept in the 1980s. Rebranding personnel management quickly became popular, but many organisations had little awareness of the theory behind the concept.

This report aims to provide a short and accessible overview of both the evolution of human resource management (HRM) and current research in the area.

The report explains the origins of HRM, examines issues in relation to HR functions, HR roles and HR strategies and addresses the ongoing debate around how HR impacts on organisation performance.

The report concludes by emphasising that good HR practices are not enough in themselves to improve employee commitment or build productivity in the organisation. Organisation culture, which is strongly influenced by the approach to leadership and management in the organisation, is equally important. To be relevant HR needs to appreciate the varied and many roles it is required to fill and reflect on and develop its own capacity in respect of these.

What is Human Resource?

Every organization, large or small, uses a variety of capital to make the business work. Capital includes cash, valuables, or goods used to generate income for a business. For example, a retail store uses registers and inventory, while a consulting firm may have proprietary software or buildings. No matter the industry, all companies have one thing in common: they must have people to make their capital work for them. This will be our focus throughout the text: generation of revenue through the use of people’s skills and abilities.

There are many definitions of human resource management of varying degrees of complexity. Two of the more meaningful are:

Human resource management is a strategic, integrated and coherent approach to the employment, development and well-being of the people working in organisations (Armstrong, 2016:7)

Human resource management is the process through which management builds the workforce and tries to create the human performances that the organisation needs. (Boxall and Purcell, 2016:7)

These definitions point to some of the key characteristics of HRM as identified by Armstrong (2008):

• The diversity of HRM: It is difficult to identify the universal characteristics of HRM. Many models exist and practices vary across organisations, often corresponding to the conceptual version of HRM in only a few respects.

• The strategic nature of HRM: Perhaps the most significant feature of HRM is the importance attached to strategic integration. This requires that HR planning be consistent with organisation planning more generally.

• The commitment-orientated nature of HRM: The notions of mutuality and high commitment underpin HRM. If all involved in an organisation perceive themselves to be engaged in a mutual endeavour they are likely to be more committed and consequently to perform at a higher level.

• People and their talents regarded as ‘human capital’: One of the original academic underpinnings of HRM is the notion that people and their collective skills, abilities and experiences should be regarded as a valuable asset and source of competitive advantage rather than a cost.

• Unitarist rather than pluralist, individualist rather than collective in its approach to employee relations: The theory of HRM contends that employees share the same interests as employers and also emphasises the importance of the relationship between the organisation and the individual employee rather than any group or representative body.

• HRM as a management-driven activity: Notwithstanding the increase in the number of HR managers and the size of HR departments, HRM is described by Armstrong (2008:16) as ‘a central, senior management-driven, strategic activity that is developed, owned and delivered by management as a whole to promote the interests of their organisation’. In the early days of HRM, Purcell (1993) described it as the rediscovery of management prerogative and Guest (1991) said that ‘HRM is too important to be left to personnel managers’. More recently there has been considerable emphasis on the role of line managers in delivering on the objectives of HRM.

• An emphasis on the needs of the organisation and business goals and values: The concept of HRM has been largely based on a management and business orientated philosophy. While the interests of the members of the organisation are recognised they are subordinated to those of the organisation. However, in this area, the theory of HRM is evolving. While clearly HR needs to support the achievement of organisation objectives, there is a growing body of opinion that there needs to be more to HRM than that. In particular, HR needs to have regard for the interests of all stakeholders and the values and standards that society expects to be upheld in the workplace.

When the term HRM first became popular there was a criticism of it as it referred to people as resources, as if they were any other factor of production to be leveraged into economic value. However, Boxall and Purcell (2016:4) regard this as a misunderstanding of the term. They suggest that it is not people that are referred to as ‘human resources’, rather their knowledge, skills and energies which they use in their daily roles: ‘People are not human resources. On the contrary, people are independent agents who possess human resources, which are the talents they can deploy and develop at work and which they take with them when they leave the organisation’ (authors’ emphases). However, the authors add that referring to people as human resources are ‘a mistake made in a variety of textbooks and dictionaries’.

HRM has also been widely criticised for reasons beyond its terminology. The main reservations are summed up by Armstrong and Taylor (2015:8) as ‘HRM promises more than it delivers and its morality is suspect’. In respect of the first point, HRM has been variously (and contradictorily) described as overly prescriptive, uncertain and imprecise, and simplistic. In respect of the second point, it has been claimed that HR overemphasises business needs and that it is manipulative in seeking to shape human behaviour at work.

However, much of the criticism has subsided. According to Armstrong (2016:5), this is because ‘HRM is no longer governed by the original philosophy – if it ever was’. According to Storey (2007:6), HRM ‘in its generic, broad and popular sense simply refers to the system of people management’ that pertains in an organisation. Elsewhere Armstrong comments (2016:10), ‘HRM is here to stay, even if it is applied diversely or only used as a label to describe traditional personnel management practices…HRM has largely become something that organisations do rather than an aspiration or a philosophy, and the term is generally in use as a way of describing the process of managing people’.

What is HRM?

Human resource management (HRM) is the process of employing people, training them, compensating them, developing policies relating to them, and developing strategies to retain them. As a field, HRM has undergone many changes over the last twenty years, giving it an even more important role in today’s organizations. In the past, HRM meant processing payroll, sending birthday gifts to employees, arranging company outings, and making sure forms were filled out correctly—in other words, more of an administrative role rather than a strategic role crucial to the success of the organization. Jack Welch, the former CEO of General Electric and management guru, sums up the new role of HRM: “Get out of the parties and birthdays and enrollment forms. Remember, HR is important in good times, HR is defined in hard times.”

It’s necessary to point out here, at the very beginning of this text, that every manager has some role relating to human resource management. Just because we do not have the title of HR manager doesn’t mean we won’t perform all or at least some of the HRM tasks. For example, most managers deal with compensation, motivation, and retention of employees—making these aspects not only part of HRM but also part of management. As a result, this book is equally important to someone who wants to be an HR manager and to someone who will manage a business.

The role of HRM

Keep in mind that many functions of HRM are also tasks other department managers perform, which is what makes this information important, despite the career path taken. Most experts agree on seven main roles that HRM plays in organizations. These are described in the following sections.

You need people to perform tasks and get work done in the organization. Even with the most sophisticated machines, humans are still needed. Because of this, one of the major tasks in HRM is staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary package. Within the staffing function, there are four main steps:

Staffing

● Development of a staffing plan. This plan allows HRM to see how many people they should hire

based on revenue expectations.

● Development of policies to encourage multiculturalism at work. Multiculturalism in the

workplace is becoming more and more important, as we have many more people from a variety of backgrounds in the workforce.

● Recruitment. This involves finding people to fill open positions.

● Selection. In this stage, people will be interviewed and selected, and a proper compensation

package will be negotiated. This step is followed by training, retention, and motivation.

Development of Workplace Policies

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Every organization has policies to ensure fairness and continuity within the organization. One of the jobs of HRM is to develop the verbiage surrounding these policies. In the development of policies, HRM, management, and executives are involved in the process. For example, the HRM professional will likely recognize the need for a policy or a change of policy, seek opinions on the policy, write the policy, and then communicate that policy to employees. It is key to note here that HR departments do not and cannot work alone. Everything they do needs to involve all other departments in the organization. Some examples of workplace policies might be the following:

● Discipline process policy

● Vacation time policy

● Dress code

● Ethics policy

● Internet usage policy

Compensation and Benefits Administration

HRM professionals need to determine that compensation is fair, meets industry standards, and is high enough to entice people to work for the organization. Compensation includes anything the employee receives for his or her work. In addition, HRM professionals need to make sure the pay is comparable to what other people performing similar jobs are being paid. This involves setting up pay systems that take into consideration the number of years with the organization, years of experience, education, and similar aspects. Examples of employee compensation include the following:

● Health Benefits

● Pay 401(k) (retirement plans)

● Stock purchase plans

● Vacation time

● Sick leave

● Bonuses

● Tuition reimbursement

Retention

Human resource people must be aware of all the laws that affect the workplace. An HRM professional might work with some of the HRM Retention involves keeping and motivating employees to stay with the organization. Compensation is a major factor in employee retention, but there are other factors as well. Ninety per cent of employees leave a company for the following reasons:

● The job they are performing

● Challenges with their manager

● Poor fit with organizational culture

● Poor workplace environment

Despite this, 90 per cent of managers thinks employees leave as a result of pay. As a result, managers often try to change their compensation packages to keep people from leaving, when compensation isn’t the reason they are leaving at all.

Training and development

Once we have spent the time to hire new employees, we want to make sure they not only are trained to do the job but also continue to grow and develop new skills in their job. This results in higher productivity for the organization. Training is also a key component in employee motivation. Employees who feel they are developing their skills tend to be happier in their jobs, which results in increased employee retention. Examples of training programs might include the following:

● Job skills training, such as how to run a particular computer program

● Training on communication

● Team-building activities

● Policy and legal training, such as sexual harassment training and ethics training

Dealing with laws affecting employment

Human resource people must be aware of all the laws that affect the workplace. An HRM professional might work with some of these laws:

• Discrimination laws

● Health-care requirements

● Compensation requirements such as the minimum wage

● Worker safety laws

● Labour laws

The legal environment of HRM is always changing, so HRM must always be aware of changes taking place and then communicate those changes to the entire management organization.

Strategic HRM

Since the 1990s textbooks and commentators have increasingly referred to strategic HRM (sometimes SHRM) rather than simply HRM. This is a cause of much confusion, particularly as one of the key characteristics of HRM is that it is strategic, that is that HR policies and practices are informed by the overall objectives of the organisation. The terms are widely used interchangeably and to large extent differences between the two are conceptual and of academic concern.

SHRM has been described by Boxall (1996) as the interface between HRM and strategic management. In other words, it describes how the future development of the organisation and the achievement of its objectives can be supported by its HR policies and practices. Having a skilled, capable and motivated workforce is perceived as fundamental to competitive advantage and SHRM is oriented towards recruiting, supporting and developing high- quality employees.

Integration and alignment are fundamental characteristics of SHRM. In organisations practising SHRM, people strategies are informed by business strategy (described in the HR literature as ‘vertical fit’). In addition, HR policies should be integrated or consistent with each other (‘horizontal fit’ or sometimes described as ‘bundling’ HR practices). For example, if your organisation structure is based on team-based working, as is frequently the case in the public sector or voluntary organisations, individual pay for performance would not represent good horizontal fit.

The further objective of SHRM is to provide a sense of direction. Consistent with its origins in strategic management, planning is central to SHRM. Management identifies a range of employee-related priorities and objectives which will contribute towards the achievement of the objectives of the organisation. An action plan is also required, that is, the means by which it is proposed the objectives will be met.

Armstrong suggests that SHRM can best be understood as ‘a mindset, underpinned by certain concepts rather than a set of techniques’, while the CIPD (2016) comment that ‘strategic human resource management is a complex process that is constantly evolving and the source of the ongoing discussion by academics and commentators’. However, among organisations who have adopted SHRM it is possible to identify a number of key characteristics (adapted from Reilly, 2012):

• There is an organisationally shared philosophy underpinning people management (sometimes described as a ‘big idea’, for example, ‘alleviating world poverty’ for a third world agency or ‘serving the customer’ for a retail organisation)

• There is a focus on business critical issues and outcomes

• People and their skills, knowledge and experience are seen a competitive resource• There is a planned approach to resources (not just numbers but also skills and potential)• Consideration is given to long-term and not just short-term value in the organisation;• The full range of people management activities are brought together in an integrated manner• The approach anticipates and supports change through scanning the internal and external

environment• There is an awareness of the importance of social and intellectual capital in the organisation and

an emphasis on activities such as knowledge sharing, networking and relationship building.

Functions of Human Resource Management

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Operative Functions

● Recruitment: This is the most challenging task for any HR manager. A lot of attention and

resources are required to draw, employ and hold the prospective employees. A lot of elements go into this function of recruitment, like developing a job description, publishing the job posting, sourcing the prospective candidates, interviewing, salary negotiations and making the job offer.

● Training and Development: On the job training is the responsibility of the HR department.

Fresher training may also be provided by some companies for both new hires and existing employees. This Fresher training is mainly done to make the employees up to date in their respective areas as required by the company. This function makes the employees understand the process and makes it easy for them to get on their jobs with much ease. During the process of training and development, the results are monitored and measured to find out if the employees require any new skills in addition to what he/she has.

● Professional Development: This is a very important function of Human Resource Management.

This function helps the employees with the opportunity for growth, education, and management training. The organization undertakes to sponsor their employees for various seminars, trade shows, and corporal responsibilities. This, in turn, makes the employees feel that they have been taken care of by their superiors and also the organization.

● Compensation and Benefits: A company can attain its goals and objectives if it can acclimatize to

new ways of providing benefits to the employees. Some of the benefits given by companies are listed below for our understanding:

1. Working hour flexibility2. Extended vacation3. Dental/Medical Insurance4. Maternal/Paternal Leave5. Education Reimbursement for children

● Performance Appraisal: The employees of any organization will be evaluated by the HR

department as per the performance. This function of Human Resource Management is to help the organization in finding out if the employee they have hired is moving towards the goals and objectives of the organization. On the other hand, it also helps the company to evaluate whether the employees needs improvement in other areas. It also helps the HR team in drawing certain development plans for those employees who have not met the minimal requirements of the job.

● Ensuring Legal Compliance: To protect the organization this function plays a crucial role. The HR

department of every organization should be aware of all the laws and policies that relate to employment, working conditions, working hours, overtime, minimum wage, tax allowances etc. Compliance with such laws is very much required for the existence of an organization.

Managerial Functions

● Planning: This function is very vital to set the goals and objectives of an organization. The

policies and procedures are laid down to achieve these goals. When it comes to planning the first thing is to foresee vacancies, set the job requirements and decide the recruitment sources. For every job group, a demand and supply forecast is to be made, this requires an HR manager to be aware of both the job market and strategic goals of the company. Shortage versus the excess of employees for that given job category is determined for a given period. In the end, a plan is ascertained to eliminate this shortage of employees.

● Organizing: The next major managerial function is to develop and design the structure of the

organization. It fundamentally includes the following:

Employees are grouped into positions or activities they will be performing.

Allocate different functions to different persons.

Delegate authority as per the tasks and responsibilities that are assigned.

● Directing: This function is preordained to inspire and direct the employees to achieve the goals.

This can be attained by having in place proper planning of career of employees, various motivational methods and having friendly relations with the manpower. This is a great challenge to any HR manager of an organization; he/she should have the capability of finding employee needs and ways to satisfy them. Motivation will be a continuous process here as new needs may come forward as the old ones get fulfilled.

● Controlling: This is concerned with the apprehension of activities as per plans, which was

formulated on the basis of goals of the company. The controlling function ends the cycle and again prompts for planning. Here the HR Manager makes an examination of outcome achieved with the standards that were set in the planning stage to see if there are any deviations from the set standards. Hence any deviation can be corrected on the next cycle.

Advisory Functions

• Top Management Advice: HR Manager is a specialist in Human Resource Management functions. She/he can advise the top management in formulating policies and procedures. He/she can also recommend the top management for the appraisal of manpower which they feel apt. This function also involves advice regarding maintaining high-quality human relations and far above the ground employee morale.

• Departmental Head advice: Under this function, he/she advises the heads of various departments on policies related to job design, job description, recruitment, selection, appraisals.

Diversity and Multiculturism

On a Tuesday afternoon, as you are getting ready to go to lunch, you receive an e-mail from your human resources (HR) manager about the need to hire a new project manager, and there is a £500 bonus for referring a friend who successfully joins the company. Immediately, you e-mail your friend, Daniel, because you know he would be great for the job. Daniel is eventually hired for the position, and a few months later a new e-mail goes out asking for friend recommendations for a new position. You and Daniel both recommend someone, and eventually, that person gets hired. Over the next year, hiring notices are not advertised externally as the organization has had good luck with this hiring practice. Seems like a great way to recruit new people, doesn’t it? It can be, but it also can be a detriment to the diversity and multiculturalism of the workplace. How you might wonder?

While not true across the board, people have a tendency to spend time with people who are like themselves, in the race, income level, and other aspects of diversity such as sexual orientation. Even from a young age, people tend to choose friends who are of the same race. As a result, when you recommend Daniel for a position, it is highly likely that Daniel is similar, from a diversity perspective to you. Then, when Daniel recommends someone for a job, it is highly likely that he, too, is recommending someone with similar characteristics as you both. This obviously creates a lack of multicultural diversity in the workplace, which can mean lost profits for companies.

Multiculturalism can offer many benefits to businesses by increasing diversity in the workplace and improving working relationships. In this blog, we will be discussing the concept of multiculturalism and the relation of multiculturalism to the UK. We will also explore the ways in which language services can support the positive impact of multiculturalism.

What Do We Mean by ‘Multiculturalism’?

Multiculturalism refers to the concept in which different cultural or racial groups in society have equal rights and opportunities and none is marginalised or regarded as insignificant. The policy of multiculturalism is giving equal attention and representation to the cultural needs and contributions of all groups in society and by placing a special emphasis on minority groups who are historically underrepresented.

An example of the multiculturalist practice is bilingual education, which values the importance of language to a specific cultural group. In a multiculturalist society, people recognise the benefits of the co-existence of cultures, where traditions and languages come together to create a community of diversity and acceptance.

Multiculturalism and the UK

Multiculturalism is understood as the co-existence of diverse cultural and racial groups with an attitude of tolerance, togetherness and acceptance. The United Kingdom is an example of a multicultural society with a diverse population comprising of people with different identities, traditions and values.

Geographically, the United Kingdom is composed of England, Wales, Scotland and Northern Ireland, each region with specific cultural traditions and values. However, the UK’s long history of immigration means that the UK is one of the most diverse countries in the world. The UK as a multicultural society is not a new concept; it goes back to the 1000’s to the cohabitation between the Celts, Anglo-Saxons and Vikings. Diversity is part of the UK’s DNA and Britishness has come to represent the integration of many cultural groups into society. In fact, the Evening Standard found that 270 nationalities with 300 languages lived in London alone.

In recent times, political changes like Brexit has seen a resurgence of discussion surrounding multiculturalism, immigration and the place of minority groups in British society. Now more than ever, corporations and public institutions need to place extra emphasis on the value of diversity and the importance of multiculturalism in the workplace.

The Benefits of Multiculturalism in the Workplace

Multiculturalism promotes the integration of different cultures and the sharing of one’s ideas and perspectives. The sharing of ideas can lead to new innovations for businesses and more prosperous working relationships. Open-mindedness and communication are core benefits of multiculturalism that can benefit the workplace. It encourages open dialogue which creates understanding, collaboration and teamwork among staff. Above all, multiculturalism demonstrates tolerance, respect and acceptance which improves company culture and reduces conflict within the workplace.

A diverse workforce gives a company a competitive advantage, especially when trading internationally. Employees with different cultural backgrounds make it easier to communicate globally and increase a company’s understanding of different cultures and environments.

How Can Language Translation Support Multiculturalism?

Speaking to a potential client, business partner or colleague in their native language shows that you value cultural difference and are willing to go the extra mile. Language translation and interpretation creates open communication which helps to form a long-lasting and beneficial working relationship. Localisation is a way that you can tailor a message to a specific person or group with a different cultural background. Customising a message using regional dialogue and phrases not only makes communication clearer but also shows that you value a person’s cultural background.

Multiculturalism is in alliance with policies regarding equal opportunities in the workplace. Translating documents into multiple languages demonstrates a company’s commitment to equal opportunity and diversity within the workplace. It also shows that a company does not privilege a dominant culture and instead values minority groups. It is also common practice for certain documentation such as legal documents and medical documents to be translated into languages commonly found in the local community. Certain regions of the UK are committed to bilingualism and multiculturalism. For example,

as part of The Welsh language Act 1993, the Wales Office states that in the conduct of public business in Wales, the English and Welsh languages will be treated on the basis of equality. Many companies conform to this mandate to support multiculturalism and diversity in local and regional communities.

Multiculturalism offers opportunities for businesses to expand their global reach and improve their corporate responsibility. Language translation, localisation and interpretation can help businesses to develop more fruitful working relationships with clients from diverse cultural backgrounds and create a healthy working environment.

Recruitment and Selection process

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Recruitment is a process of finding and attracting the potential resources for filling up the vacant positions in an organization. It sources candidates with the abilities and attitude, which are required for achieving the objectives of an organization.

The recruitment process is a process of identifying the jobs vacancy, analyzing the job requirements, reviewing applications, screening, shortlisting and selecting the right candidate.

To increase the efficiency of hiring, it is recommended that the HR team of an organization follows the five best practices. These five practices ensure successful recruitment without any interruptions. In addition, these practices also ensure consistency and compliance in the recruitment process.

The recruitment process is the first step in creating a powerful resource base. The process undergoes a systematic procedure starting from sourcing the resources to arranging and conducting interviews and finally selecting the right candidates.

Recruitment Planning

Recruitment planning is the first step of the recruitment process, where the vacant positions are analyzed and described. It includes job specifications and its nature, experience, qualifications and skills required for the job, etc.

A structured recruitment plan is mandatory to attract potential candidates from a pool of candidates. The potential candidates should be qualified, experienced with a capability to take the responsibilities required to achieve the objectives of the organization.

Identifying Vacancy

The first and foremost process of recruitment plan is identifying the vacancy. This process begins with receiving the requisition for recruitments from different department of the organization to the HR Department, which contains −

● Number of posts to be filled

● Number of positions

● Duties and responsibilities to be performed

● Qualification and experience required

When a vacancy is identified, it the responsibility of the sourcing manager to ascertain whether the position is required or not, permanent or temporary, full-time or part-time, etc. These parameters should be evaluated before commencing recruitment. Proper identifying, planning and evaluating leads to the hiring of the right resource for the team and the organization.

Job Analysis

Job analysis is a process of identifying, analyzing, and determining the duties, responsibilities, skills, abilities, and work environment of a specific job. These factors help in identifying what a job demands and what an employee must possess in performing a job productively.

Job analysis helps in understanding what tasks are important and how to perform them. Its purpose is to establish and document the job relatedness of employment procedures such as selection, training, compensation, and performance appraisal.

● The following steps are important in analyzing a job −

● Recording and collecting job information

● Accuracy in checking the job information

● Generating a job description based on the information

● Determining the skills, knowledge and skills, which are required for the job

● The immediate products of job analysis are job descriptions and job specifications.

Job Description

The job description is an important document, which is descriptive in nature and contains the final statement of the job analysis. This description is very important for a successful recruitment process.

The job description provides information about the scope of job roles, responsibilities and the positioning of the job in the organization. And this data gives the employer and the organization a clear idea of what an employee must do to meet the requirement of his job responsibilities.

The job description is generated for fulfilling the following processes −

● Classification and ranking of jobs

● Placing and orientation of new resources

● Promotions and transfers

● Describing the career path

● Future development of work standards

A job description provides information on the following elements −

● Job Title / Job Identification / Organization Position

● Job Location

● Summary of Job

● Job Duties

● Machines, Materials and Equipment

● Process of Supervision

● Working Conditions

● Health Hazards

● Job Specification

Job specification focuses on the specifications of the candidate, whom the HR team is going to hire. The first step in job specification is preparing the list of all jobs in the organization and its locations. The second step is to generate information for each job.

This information about each job in an organization is as follows −

● Physical specifications

● Mental specifications

● Physical features

● Emotional specifications

● Behavioural specifications

A job specification document provides information on the following elements −

● Qualification

● Experiences

● Training and development

● Skills requirements

● Work responsibilities

● Emotional characteristics

● Planning of career

● Job Evaluation

Job evaluation is a comparative process of analyzing, assessing, and determining the relative value/worth of a job in relation to the other jobs in an organization.

The main objective of job evaluation is to analyze and determine which job commands how much pay. There are several methods such as job grading, job classifications, job ranking, etc., which are involved in job evaluation. Job evaluation forms the basis for salary and wage negotiations.

Recruitment Strategy

Recruitment strategy is the second step of the recruitment process, where a strategy is prepared for hiring the resources. After completing the preparation of job descriptions and job specifications, the next step is to decide which strategy to adopt for recruiting the potential candidates for the organization.

While preparing a recruitment strategy, the HR team considers the following points −

● Make or by employees

● Types of recruitment

● Geographical area

● Recruitment sources

The development of a recruitment strategy is a long process, but having the right strategy is mandatory to attract the right candidates. The steps involved in developing a recruitment strategy include −

● Setting up a board team

● Analyzing HR strategy

● Collection of available data

● Analyzing the collected data

● Setting the recruitment strategy

● Searching the Right Candidates

Searching is the process of recruitment where the resources are sourced depending upon the requirement of the job. After the recruitment strategy is done, the searching of candidates will be initialized. This process consists of two steps −

● Source activation − Once the line manager verifies and permits the existence of the vacancy, the

search for candidates starts.

● Selling − Here, the organization selects the media through which the communication of

vacancies reaches the prospective candidates.

Searching involves attracting job seekers to the vacancies. The sources are broadly divided into two categories: Internal Sources and External Sources.

Internal Sources

Internal sources of recruitment refer to hiring employees within the organization through −

● Promotions

● Transfers

● Former Employees

● Internal Advertisements (Job Posting)

● Employee Referrals

● Previous Applicants

● External Sources

External sources of recruitment refer to hiring employees outside the organization through −

● Direct Recruitment

● Employment Exchanges

● Employment Agencies

● Advertisements

● Professional Associations

● Campus Recruitment

● Word of Mouth

● Screening / Shortlisting

Screening starts after completion of the process of sourcing the candidates. Screening is the process of filtering the applications of the candidates for the further selection process.

Screening is an integral part of the recruitment process that helps in removing unqualified or irrelevant candidates, which were received through sourcing. The screening process of recruitment consists of three steps −

Reviewing of Resumes and Cover Letters

Reviewing is the first step of screening candidates. In this process, the resumes of the candidates are reviewed and checked for the candidates’ education, work experience, and overall background matching the requirement of the job

While reviewing the resumes, an HR executive must keep the following points in mind, to ensure better screening of the potential candidates −

● Reason for change of job

● Longevity with each organization

● Long gaps in employment

● Job-hopping

● Lack of career progression

● Conducting Telephonic or Video Interview

Conducting telephonic or video interviews is the second step of screening candidates. In this process, after the resumes are screened, the candidates are contacted through phone or video by the hiring manager. This screening process has two outcomes −

It helps in verifying the candidates, whether they are active and available.

It also helps in giving a quick insight into the candidate’s attitude, ability to answer interview questions, and communication skills.

Identifying the top candidates

Identifying the top candidates is the final step of screening the resumes/candidates. In this process, the cream/top layer of resumes are shortlisted, which makes it easy for the hiring manager to take a decision. This process has the following three outcomes −

● Shortlisting 5 to 10 resumes for review by the hiring managers

● Providing insights and recommendations to the hiring manager

● Helps the hiring managers to take a decision in hiring the right candidate

● Evaluation and Control

Evaluation and control is the last stage in the process of recruitment. In this process, the effectiveness and the validity of the process and methods are assessed. Recruitment is a costly process, hence it is important that the performance of the recruitment process is thoroughly evaluated.

The costs incurred in the recruitment process are to be evaluated and controlled effectively. These include the following −

● Salaries to the Recruiters

● Advertisements cost and other costs incurred in recruitment methods, i.e., agency fees.

● Administrative expenses and Recruitment overheads

● Overtime and Outstanding costs, while the vacancies remain unfilled

● The cost incurred in recruiting suitable candidates for the final selection process

● Time spent by the Management and the Professionals in preparing a job description, job

specifications, and conducting interviews.

Finally, the question that is to be asked is, whether the recruitment methods used are valid or not? And whether the recruitment process itself is effective or not? Statistical information on the costs incurred for the process of recruitment should be effective.

Module 9: Real Estate

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image-photo/real-estate-concept-businessman-signs-contract-111149084?src=8HveSeQf2ovZP7iL5tO_CQ-2-33&studio=1

All facility managers are in the real estate business. Unfortunately, not all manage real estate: in fact, few do as confirmed by the latest study of the international profession, The Facility Industry Study, by the combined professional associations. This fact is one of the greatest weaknesses in the practice of the profession today and, unfortunately, does not seem to be improving.

Real estate managers historically have come from the business management or legal tracks; facility managers still come from primarily a technical background. It is not, however, that facility managers cannot manage real estate. It is that upper management does not look to them to do so and has shown little tendency to move organizational real estate under the facility manager except in smaller organizations. Image is the problem here and one that the profession should work hard to overcome because failure to do so can be disastrous.

In this section, we assume, unless noted, that the facility manager is managing real estate. We look at standard options for a growing organization: buying or leasing and site considerations. Also, we look at the considerations of becoming a lessor. Since some facility managers are also property managers by title, we also discuss that function.

The decision to purchase or lease real estate goes to the very heart of a company— its culture, investment strategy, and desire for control. It is important for decision makers to identify the opportunity costs for each option, in present value terms, but the final decision may just as likely be made for subjective reasons. Nevertheless, in this chapter we discuss the factors that go into this decision as they relate to facility management, including the consequent responsibility of site selection, should that be within the manager’s realm.

One of the better articles we have read on the strategic role of real estate in an organization points out that real estate alone is big business, that it has not always been managed well, that there is nearly always a real estate component to business plans, and that real estate is the arena where the facility manager is most likely 1) to get CEO-level exposure and 2) elevate the importance of the FM department in the eyes of management. We have personally seen this happen in our own practice. Facility managers tend to feel that we do not get enough high-level executive interest in or support for facility management. Well . . . a major real estate transaction can give that to us so we must handle it well.

Purchase or Lease?

Although there are two major applications of the lease versus purchase process— the acquisition of major properties and sites, or major equipment—this chapter deals with the lease or purchase of the real estate. The lease versus purchase analysis is a capital budgeting analysis that compares the pertinent costs of each method on an equal basis. Most facility managers need help in making these decisions.

Joseph Horowitz, director of administration for CBS, Inc., discussed user requirements and provides a decision checklist for real estate decisions.

Help can come in many forms but most facility managers need help if we do not have real estate expertise and legal support within our organizations. Even though organizational legal support is sometimes available, unless they are familiar with local real estate/zoning law, we recommend some level of consultant assistance. It tends to be expensive but can open doors and avoid pitfalls for any facility manager handling a major real estate or development project for the first time. While the following pages provide you with tools to make real estate decisions, this is not an arena for first-time players to venture without assistance. A more detailed description and explanation of the varied forms and considerations for real estate decisions, whether you use a consultant or not, is the book Managing Corporate Real Estate; Forms and Procedures by Ed Rondeau, Robert Kevin Brown, and Paul Lapides.

In addition, building assessment is a technique that helps managers match an organization’s needs to a proper building. For the financial aspects of this decision, there are accepted accounting principles regulated by the Financial Accounting Standards Board. But to begin, let’s look at the factors to be considered in the lease versus purchase question.

The Buy-Lease Analysis

In theory, the analysis is quite simple. The net present value (NPV) of the cash-out- flow associated with the lease option is compared to that for the buy option. The lesser value is the preferred option.

Most companies have a financial analyst or accounting firm capable of computing cash outlays and NPVs for each option. You’ll need the following information:

• The company’s cost of capital• All lease terms having a financial impact, especially the lease payment• The purchase price of the real estate or equipment plus any other financial terms related to the

purchase• The company’s incremental cost of borrowing

Risk is a major criterion in a number of lease versus purchase decisions. Ideally, there should be no significant difference between the risk of owning and leasing the same property. However, management’s perception of the company’s strengths and weaknesses, the economic climate, sustainability rating, if any, and governmental constraints may drive the decision.

Based on cash flow, each project should be evaluated independently. Items such as investment tax credits, other accrual items, return on assets, the effect on working capital ratios, and effect on debt-equity ratios must be considered when analyzing a buy situation.

The asset will definitely become part of the business, but it must be determined how that will happen. Should the business pay rent, or should the business purchase the asset? There are benefits to both situations. Therefore, a financial analysis will be a present value comparison of cash flows resulting from purchasing an asset on the one hand or leasing the same asset on the other hand. The objective is to select the particular action that minimizes the present value of cash outflows.

A buy/lease analysis requires finding the cash outflows associated with the lease option, determining the cash outflows associated with the purchase option, and computing and then comparing the net present values of the cash flows.

Whether purchase or leasing is preferred varies also according to the investment capability and philosophy of the company. For instance, certain government agencies are regularly either owners or lessors. Manufacturing companies are more likely than service companies to choose ownership, due to the heavy capital investments for equipment and infrastructure.

Advantages of Purchasing

Although it is seldom stated, most arguments for buying are emotional, political ones. Companies like the control inherent in purchasing, particularly real estate. For organizations that want to convey a high standard or a unique look, the purchase option greatly enhances that. In fact, the desire for control is so strong—particularly in large, well-established companies or smaller companies greatly concerned about their image—that “doing the numbers” is often a waste of time.

Other advantages of purchasing are that property appreciates in value over its life; in fact, some view purchase as a good hedge against inflation. Also, life-cycle costs are normally less, the property has a disposal value at the end of its use, the property can be a source of later financing, and annual depreciation can be written off. Finally, expansion and alterations at an existing site can usually be accomplished more rapidly.

Advantages of Leasing

Leasing certainly has its advocates. For a young company, leasing its space may be the only real option. If a company cannot resource at least a minimal facility department, leasing may be the only solution. Even some major companies have policies that expansion, at least initially, is accomplished through leasing. Almost all companies lease some property for unexpected new requirements, to meet temporary needs, or for initial expansion. In the current business environment, companies use a balance of owned and leased space to provide them with business flexibility.

Sale-Leaseback

A method that combines the features of real estate ownership and leasing is sale-leaseback. If applied correctly, this maximizes the value of the company’s real estate assets by reducing occupancy costs while permitting the company to maintain long- term control.

In a sale-leaseback, the corporation sells one or more of its properties to a limited partnership and simultaneously leases back the real estate for long-term use. The typical transaction has three participants: the seller or lessee, the purchaser or lessor, and the lenders. Sale-leasebacks offer many benefits, including 4

• Raising funds for 100 per cent of the property’s value• Long-term, fixed-rate capital• Long-term control• Off-balance-sheet treatment• Earnings improvements• Cash flow

The Negotiating Process

When negotiating a lease, an entirely different set of considerations must be made. The extent to which the lessee may be favourably accommodated is strongly affected by both financial considerations and other factors. For example:

• Size of the organization. Large organizations always ask for and receive more favourable lease terms than smaller organizations. If your size or the nature of your organization makes you a prestigious tenant, strengthen your position during the lease negotiation.

• Stage of building construction. During the early stages of building construction, a lessee can get the most favourable lease considerations.

• Part of building occupied. Generally, the highest floors with the best views afford the fewest leasing concessions. Accepting lower-status space offers the greatest opportunity for other concessions.

• Availability of space in the area. In overbuilt cities (vacancy rates of 10 per cent or more) leasing organizations are much more likely to be accommodating. In cities where the vacancy rate exceeds 15 per cent, it is not uncommon to ask for and receive up to one-third of the term of the lease in free rent, in addition to special furnishings and other concessions. It is reasonably common for a lease to be written at “net zero” or just for the lessor’s operating expenses under these conditions.

• Term length. Most leases for commercial spaces are for five or seven years. The facility manager in search of space should remember that lease terms may be written to accommodate the lessee, and different lengths may be better for the organization. A lease with a term of five years will leave the organization that is growing rapidly with a burden of inflexibility years before the lease expires. It might be better to negotiate an original lease of three years with options to absorb additional space at a fixed rate at the end of the three years. Options to expand into suitable space (which may afford, for example, a better view, more status, or greater accessibility to interfacing departments) are also possible.

• Operating expenses. Operating expenses and parking are issues of some importance and may also be negotiated according to the relative strength of the market, position of the lessor, and priorities of the lessee.

The advantage of a lease decision over purchase may depend greatly on specific negotiable items in the agreement. For instance, cash benefits may accrue to the lessee if terms require little or no down payment and balloon payments after one or more years. The organization is then able to apply 100 per cent of its income to operating expenses and keep its cash flow liquid.

It is important to negotiate the proper kind of lease (e.g., operating, financial, maintenance, leveraged) and be certain that the IRS recognizes the agreement as a true lease, not a rental-purchase agreement. (The rental-purchase agreement is treated- ed as ownership by the IRS.) It may be an advantage to ensure that the lease does not affect the debt-equity ratio of the organization since the IRS requires that most bank loans have debt accounted against equity.

It may be advisable to negotiate a varying cash flow. For instance, balloon payments can be scheduled to coincide with cash-rich periods within the fiscal year and avoid periods of cash drought.

In negotiating, understand the position of the lessor. Often the lessor is willing to offer lower rates if he retains investment tax credits and rights to depreciation tax credits. A fluctuating taxable income may affect the lessor’s willingness to grant advantageous fixed-rate terms, or he may be willing to offer variable-rate terms that are satisfactory.

Site Selection and Acquisition

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Facility managers in companies that acquire and dispose of facilities routinely have a real estate division and financial, legal, architectural, and engineering experts well equipped to handle the acquisition and disposal of real estate. For most facility managers, however, site selection and acquisition can be the initial step on a major capital project that could be the highlight of their career. For that reason, it should be done with care, discretion, and prudent use of expertise to obtain the best deal for the best dollar on the schedule expected.

For the majority of facility managers, site selection and acquisition is so infrequent that it takes on a life of its own. There are always political aspects to site selection, for example. A common saying in the corporate world is that the headquarters relocation will always reduce the CEO’s commute. It is not possible to eliminate politics totally, but you can take several steps to make site selection as objective as possible.

1. Establish a confidentiality policy and restrict access to those having a need to know, including administrative personnel.

2. Ensure that in-house personnel are objective and have a broad-based knowledge of the company’s requirements. Often a consultant is needed for focus and to do the legwork and analysis.

3. The criteria for selection must be credible and truly the most important factors. They must be developed within the corporation and used to judge all sites. This is a substantial effort, and a consultant can be used here well.

4. The acquisition team should identify those individuals and groups who will be winners or losers in the various options or who will try to influence the decision. An internal relations campaign should be launched both to strengthen the voice of supporters and to minimize the detractors. Make sure everyone supports what the team decides because it is best for the company.

Given the importance of site selection, internal politics are inevitable. Fortunately, in large firms, site selection is almost routine, thus less politically charged.

Site Selection Team

The first task in selecting a site is to put together a team or committee to determine who the decision maker is and to set the criteria for selection. But if the decision is political, or if the chief executive officer (CEO) or chairman has predetermined the location, admit it up front and do not waste time on a

search. That sounds simple, but when the matter isn’t viewed realistically, there’s often much wasted time and energy.

In either case, prepare detailed cost comparisons for all sites or locations. Be sure that no single individual or department analyzes all the information so that you obtain an adequate range of options and negate personal bias. It may be the final responsibility of one individual or department to propose the site or property; however, the team should offer its combined expertise.

Whether the team is all in-house personnel or includes an outside consultant depends on your personal and their familiarity with the local market. A consultant is often used because most companies acquire sites so seldom that the staff cannot provide adequate advice, and large companies that operate internationally are not versed in local market conditions.

The consultant to use is a matter of personal preference. There are relocation advisers in all major U.S. cities to provide a technical and free alternative to brokers.

While we do not have any data, it appears that some organizations, for a variety of reasons, want to be in a sustainable building. We know of no situation where LEED has been the major reason for relocation or new construction, but better energy management has been a strong supporting factor for a specific location or design factor for renovation or new construction.6 But your relationship with the consultant is more important than the type of consultant hired, particularly since brokers’ fees can be negotiated. Also, it is not unusual for a company to augment the site selection team with an architect, a builder, legal counsel, and a financial analyst.

Acquisition

The line between site selection and acquisition is a fuzzy one. The acquisition process starts when the requirements and criteria for the site have been developed. Acquisition without a real estate professional, particularly one familiar with the local area and its political jurisdiction, is not recommended. If a real estate professional is not on staff, then hire a consultant because acquisition can be a snake pit without one. The seller will always know the property better than you. Consequently, try to learn as much about the site as possible. Don’t overlook critical sources of information. The time spent finding this information translates into a firmer position during acquisition and can help avoid embarrassment. If time and finances permit, use a team composed of yourself; an operations person; structural, mechanical, and electrical engineers; a communications specialist; and security, fire, and life safety expert to prepare a property assessment. This assessment will focus on hard costs for the final acquisition decision and highlight factors that might block the acquisition.

One of the best practical discussions of real estate strategies is the HOK consulting report, Exit Strategies. An exit strategy is a methodology for explicitly addressing factors that affect real estate risk and for accommodating the many changes that confront facility managers every day. Here are some of the considerations for exit strategies:7

• You have fewer options when downsizing. Downsizing companies should concentrate on leasing versus buying.

• A rapidly growing company should refrain from owning real estate until it has the cash that can be diverted to building ownership. Once cash is committed to bricks and mortar, it becomes nonliquid.

• High-volatility companies need to spend the most time in planning their real estate strategy and any individual real estate action.

• Alternative work strategies may assist or alleviate the impacts of exit strategies. Some of these alternative work strategies have implementation costs.

• The facility manager can provide the most value by giving good advice on controllable risk. A market-based partner may help in reaching good decisions.

The company counsel and a real estate professional can guide you around the potential pitfalls in negotiating the sale and closure. With their guidance approach the acquisition with three rules in mind:

1. Create the time envelope for the acquisition process and control it.2. Negotiate with the principal owner.3. Maximize leverage with the initial offer.

The process of selecting a new site or property is only one phase of the strategic process of managing assets of the organization. You can attempt to influence top management to include relevant facility data in the formal decision making by offering specific information that significantly skews the financial projects, derived from your site-selection process.

The site and property selection process, when combined with the strategic planning process, offers greater visibility and credibility to the facility manager within the organization than most other functions do. Therefore, upper management will tend to judge the facility manager disproportionately on the quality of the site selection process.

Property Management

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Property management is managing a facility to maximize profit. There is no negative connotation to the word profit. In fact, several large property management companies could give management lessons to facility managers. With a certain type and class of property, customer-oriented property management makes good business sense. Nevertheless, the bottom line is maximizing profit from those properties. Since many corporate facility managers also serve as property managers, it is worthwhile to discuss good property management. While there are many similarities, the facility manager should keep in mind the basic difference between himself and the property manager. The approach to a common problem may, in fact, be quite different.

With increasing outsourcing and the reduction of staff, there is an inclination manager should keep in mind the basic difference between himself and the property manager. The approach to a common problem may, in fact, be quite different.

With increasing outsourcing and the reduction of staff, there is an inclination for an in-house organization to adopt a “Property Management Model” for facility management, the heart of which is having an experienced engineer supervisor assigned to each building to handle all O&M problems.

If planned carefully and implemented properly, this may work. But if planners ignored O&M functions which building engineers control and normally are provided centrally by a property management company, the consequence is that facility management organization is reduced to marginal performance.

Organization and Documentation

Normally the on-premises property management staff is smaller than for a corporate facility manager. Service and response are spelt out in the lease. Services over and above those are provided only if specially funded and in good time. This is because building services are primarily contracted out, with instantaneous reaction only for emergencies or life-threatening situations. Exhibit 8-1 represents a typical property management organization of midtown, mid-rise office building.

The property manager is an exceptionally important individual to the tenants. Increasingly, it is the custom not to have a resident manager and, in some cases, not even an engineer or handyman on the premises. The property is serviced on an as-needed basis by on-call or roving personnel, with one manager managing four or five properties.

Certainly, there is a break-even point for the size property that justifies a residential property manager. However, the following benefits to the tenants accrue when a property manager is a resident:

1. Rules and regulations are enforced, and violations are discovered before they become serious.2. Contractual services are performed to a higher standard.3. Small problems are solved before they become crises.4. There is less physical abuse of the facility.5. Tenants have a visible presence for complaints, suggestions, and praise.

All of these result in a better-run building and a happier tenant. That should be reflected in higher renewals and the ability to charge top dollar for well-run space. We cannot recommend the rental of properties that do not have a resident manager, particularly in metropolitan office settings.

The same arguments for a managerial-level person on-site apply to a resident engineer or handyman. There is a no greater insurance policy. A flood because no one knew where to find the shut-off valve or the closest handyman was thirty minutes away when the main broke, will more than offset several years salary saved for an on-site handyman. However, it is important that this technical person has a sense of

proprietorship in the building and be customer oriented. A lead engineer, skilled in the building’s systems and in customer service, can serve the building and the tenants well.

Since profit maximization is the Maison d’être for leasing a building, it is important that leases be systematically controlled. A proper lease management system has four characteristics:

1. It is a real property database.2. It is an action-reporting system.3. It is a management-reporting mechanism.4. It is a tool for real estate planning.

Module 10: Outsourcing of Services or In-house Staff

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Outsourcing can be defined as “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources."

Outsourcing is a strategy by which an organization contracts out major functions to specialized and efficient service providers who ultimately become valued business partners. In some cases, outsourcing involves the transfer of employees from the company to the outsourcing company.

Outsourcing at a Glance

There have been many calls to bring jobs back to the United States. It was a big component of Donald Trump's election campaign, as well as his presidency. But according to some statistics, outsourcing is still front and centre for many corporations.

Why Do Companies Outsource?

There are many reasons why a company may choose to outsource certain business functions. Some of the most common reasons include:

• Reducing and controlling operating costs (the largest driver)• Improving company focus• Gaining access to world-class capabilities• Freeing internal resources for other purposes• Streamlining or increasing efficiency for time-consuming functions • Maximizing use of external resources• Sharing risks with a partner company

Cost reduction

Especially for startups and small and medium enterprises operating on a tight budget, outsourcing significantly reduces costs—both in labour and overhead. Outsourcing companies help clients find the talent they need with significantly lower labour costs compared to hiring locally. Aside from that, reliable outsourcing companies also provide their workers with high-spec equipment, office space and support, and they also handle HR and other general administrative tasks, making your outsourcing venture a cost-effective one.

Access to more talent

Outsourcing is a smart option, especially for businesses and firms in western countries like the UK, the US, and Australia, where talent shortage is especially felt. There’s a bigger pool of equally-talented workforce in other countries, so companies have more options. Aside from this, outsourcing also gives

companies access to talent from different countries and different regions, especially if their business requires it.

Flexibility

One great advantage of working with outsourced workers is the flexibility that it offers. Outsourcing contracts are based on the project duration and the team size that’s required for it. Clients can conveniently (and quickly) scale with the help of reliable outsourcing companies, and they only hire the expertise they want right when they need them.

Speedy hiring process

Compared to hiring full-time workers, hiring with outsourced companies is significantly faster. In just a span of 1 to 2 weeks, clients can already find an outsourced worker or outsourced team who’s ready to work with them and jump into the project right away. This saves companies a lot of time, especially those who are looking to develop a product following strict deadlines.

Fresh perspectives

Especially for setups wherein the outsourced workers are treated as collaborators rather than merely order-takers, outsourcing allows companies to work with a fresh perspective from different parts of the world. This gives companies a huge competitive advantage, as they have collaborators who have different backgrounds, consequently bringing in new ideas.

Outsourcing isn’t something to be scared of, and I hope I helped you feel that. All you have to do is be knowledgeable about the whole process—read up on outsourcing and search for outsourcing service providers according to your needs. Once you find a reliable and trustworthy outsourcing company that really delivers results, I don’t see any reason not to outsource.

But these reasons aren't enough to implement a successful outsourcing program. Companies must ensure they consider every component and can meet the requirements for successful outsourcing.

Downfalls of Outsourcing

While there are viable reasons why outsourcing can be effective, many companies often have to weigh the disadvantages, which can be difficult to manage. Here are some of the biggest cons associated with outsourcing:

• Existing staff may feel disposable or threatened• Redundancies in staff• Issues with product/service quality (standards may differ geographically)• Problems with communication (language, time zones)• Loss of control over policies and procedures• Threats to data security

Advantages and disadvantages of outsourcing

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Outsourcing is a common practice of contracting out business functions and processes to third-party providers. The benefits of outsourcing can be substantial - from cost savings and efficiency gains to greater competitive advantage.

On the other hand, loss of control over the outsourced function is often a potential business risk. You should consider carefully the pros and cons of outsourcing before deciding to contract out any activities or business operations.

Advantages of outsourcing

There are many reasons why a business may choose to outsource a particular task, job or a process. For example, some of the recognised benefits of outsourcing include:

• improved focus on core business activities - outsourcing can free up your business to focus on its strengths, allowing your staff to concentrate on their main tasks and on the future strategy

• increased efficiency - choosing an outsourcing company that specialises in the process or service you want them to carry out for you can help you achieve a more productive, efficient service, often of greater quality

• controlled costs - cost-savings achieved by outsourcing can help you release capital for investment in other areas of your business

• increased reach - outsourcing can give you access to capabilities and facilities otherwise not accessible or affordable

• greater competitive advantage - outsourcing can help you leverage knowledge and skills along with your complete supply chain

• Outsourcing can also help to make your business more flexible and agile, able to adapt to changing market conditions and challenges while providing cost savings and service level improvements.

Disadvantages of outsourcing

Outsourcing involves handing over direct control over a business function or process to a third party. As such, it comes with certain risks. For example, when outsourcing, you may experience problems with:

• service delivery - which may fall behind time or below expectation• confidentiality and security - which may be at risk• lack of flexibility - contract could prove too rigid to accommodate change• management difficulties - changes at the outsourcing company could lead to friction• instability - the outsourcing company could go out of business

Offshore outsourcing, although potentially more cost-effective, may present additional challenges such as hidden costs of provider selection or handover, severance and costs related to layoffs of local

employees who will not be relocated internationally, etc. Even simply managing the offshore relationship can prove challenging due to time zones, different languages or cultural preferences.

Specification

A specification often refers to a set of documented requirements to be satisfied by a material, design, product, or service. A specification is often a type of technical standard. There are different types of technical or engineering specifications (specs), and the term is used differently in different technical contexts. The meaning of the term "specification" varies depending on how it is used:

Product Specification:

This describes a manufacturer's product and its performance without consideration for a particular building. A manufacturer publishes this information as part of its sales literature.

Project Specification:

This describes an architect's design and performance requirements for a particular building. It might contain requirements for how a product should be used for a building. Contractors and sub-contractors submit bids and supply products to meet a project specification.

Master Specification:

This is a template an architect can use to help him or she creates a Project Specification. It may contain requirements for several products to help the architect select the one or ones best suited for a particular project. Some architects have their own library of master specification sections. Other architects subscribe to commercially published libraries of specifications such as "MasterSpec" by Arcom. A manufacturer will try to encourage an architect or publisher to include its product in a master specification but has little or no control over the document.

Guide Specification:

This is a type of master specification that is published by a building product manufacturer to help an architect write a project specification that is based on the manufacturer's products. There are publishers that, for a fee, will write a guide specification for a manufacturer and publish the specification on the publisher's website. Being included in the publisher's database is a form of advertising. Each publisher has its own "style" of specifying, and having your spec written in the house style will be useful to specifiers that frequent the publisher's site. These benefits must be weighed against the costs and drawbacks. I frequently find it better for a manufacturer to write its own specification section (with the help of a consultant, if necessary) and publish the guide specification on the manufacturer's own website.

Working with contractors

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Generally speaking, a contractor is any person who agrees to fulfil the demands of a contract. When you hire a lawn care company to mow your grass and a plumber to fix a leaky pipe, you are dealing with contractors. The contractor then legally binds his or her name to the action spelt out in the contract – and so do you.

When it comes to home remodelling, a “general contractor” is the person who is in charge of the construction site. Contractors use their contracts, agreed upon by both the homeowner and the contractor, as the blueprint for all aspects of the job.

The vast majority of contractors are honest people who simply want the opportunity to do the things you want to be done, and they want you to be happy with the work. A contractor’s whole livelihood is based on your satisfaction, but every contractor has had a combination of good and bad experiences with customers. As a result of those experiences, contractors rely on the written contract to resolve any dispute over what was agreed.

Types of contractors

In a big remodelling job involving several trades, there are two main types of contractors: General contractor and subcontractors.

A general contractor is a type of manager who is in charge of overseeing the entirety of a project. For a home remodelling job, the GC will meet with the homeowner to go over the initial project details, estimate the cost of the project, draft a contract, hire workers and handle the daily operation of the job. A general contractor usually doesn’t perform any of the labour, but instead, hire skilled tradesmen as subcontractors.

A subcontractor is a worker who is hired by a general contractor to perform the obligations of another’s contract. Also referred to as speciality contractors or “subs,” subcontractors are typically hired to perform a specialized type of labour. They are the plumbers, roofers, carpet installers and electricians who are essential to any large remodelling project. As the name implies, subcontractors work under contract with and get paid by general contractors.

There are also specialized, trade-specific contractors who manage groups of workers under the same trade. For example, an electrical contractor could be a business owner or firm that employs a team of electricians. This type of contractor is usually needed for large projects or highly-specialized work.

General contractors

Homeowners are used to hiring repairmen for specific jobs – replacing a toilet, putting down carpeting, etc. But when it’s a big job, like remodelling a kitchen, things can quickly become complicated. Several specialists will need to be hired, and scheduled to perform their work in the proper order. Plumbers, flooring installers, countertop specialists – all of these workers need to manage and coordinate with each other.

This is usually when a general contractor near you is needed. A general contractor will assess the project from the initial meeting with the homeowner and devise a plan to guide the job all the way to completion. Seasoned contractors should have a strong understanding of every aspect of home remodeling and be able to answer questions on everything from the types of building materials needed,

the skill level and number of workers required, timelines for completion and the necessary building permits to ensure the project is finished in a safe manner and up to code.

General contractors get paid by taking a percentage of the overall cost of the completed project. Some will charge a flat fee, but in most cases, a general contractor will charge between 10 and 20 per cent of the total cost of the job. This includes the cost of all materials, permits and subcontractors.

Ultimately, the role of a general contractor is to oversee the day-to-day operations of a project while acting as the communication liaison for all parties involved. As homeowners who have been through major projects can attest, this can go very smoothly or it can go badly. The most important thing the homeowner needs to do is hire the right contractor, and then make sure that the contractor fully understands the homeowner’s intentions – down to the last detail.

The homeowner's responsibility

Hiring an experienced, professional contractor to help with your home improvement projects is already a step in the right direction. However, if you haven't worked with contractors before, you may not be aware of the dynamics involved in a contractor-customer relationship.

If you're new to the process, or just want to work on improving your relationship with your existing contractor, consider the following tips:

1. Be clear about what you want, and don’t be afraid to speak up. Contractors say homeowners with realistic and well-defined goals are usually the most satisfied. Make your expectations clear during the discussion stage, and then when the contract is written take the time to read it, and discuss the details again. If you have a question or you’re unhappy with any aspect of the project, bring it to the contractor’s attention as soon as possible. It's your home, your project and your money. One of the worst things you can do to contractors is let them get started on a job and then say you meant something else.

2. Be available for the estimate. Although it depends on the scope of your home improvement project and the contractor's preferences, contractors may provide you with an estimate anywhere from one day to several weeks after you submit your project. This is because it will involve researching the cost of materials, calculating the time needed to complete the project, the number of workers needed and so on. As a customer, the best thing you can do is make an effort to be available when the contractor contacts you, and don’t be late. Driving to the site, discussing the job and preparing the written estimate all to cost the contractor time and money. A "free estimate" isn't really free for contractors -- it's an investment cost that they absorb.

3. Inform rejected contractors of your decision. Since you have likely contacted several contractors to find the best price for your home improvement project, it's important that you let the rejected contractors know that you won't be using their services. While an estimate may be free to the consumer, it can cost a contractor time, effort and money to meet with you about your project and provide an estimate. Sure, they'll get the message if you ignore their calls for a month, but it's always more professional, polite and considerate to call the contractors personally so they can focus their time and efforts on other projects.

4. Make payments on time. As a customer, you are responsible for making payments to contractors according to the guidelines set forth in your contract. In the same way, you would be frustrated by late payment from your workplace, contractors will grow impatient when payments are consistently delayed. The best thing you can do to maintain a positive relationship with contractor sis keep track of when your payments are due and make an extra effort to submit them in a prompt manner. This shows the contractor that you appreciate his or her work and encourages them to continue the job in a timely manner as well.

5. Have some trust in your contractor. Once you have verified the contractor's certifications and experience level, checked customer references and established a contract, you should trust in his or her ability to effectively finish the job. If your contractors have proved to be capable of providing quality work, try to avoid hovering around the worksite. Not only will it slow progress on the job, but it can also lead the contractor to believe you have no faith in his or her work.