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Controlling Cost & Quality of Facilities Across Large Estates. Benchmarking as a Tool of Value Management presentation by Prof. Bernard Williams FRICS (IFPI Ltd) to the Breakfast Briefing: ‘State-of-the-art Benchmarking and Cost Management of Facilities in Large Estates’ held at - PowerPoint PPT Presentation
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Controlling Cost & Quality of Facilities Across Large Estates
Benchmarking as a Tool of Value Management
presentation byProf. Bernard Williams FRICS
(IFPI Ltd)to the Breakfast Briefing:
‘State-of-the-art Benchmarking and Cost Management
of Facilities in Large Estates’held at
The Royal Institution of Chartered Surveyors
14th June 2013
Contents• Benchmarking definition• Facilities in context• Purpose of benchmarking• Methods of benchmarking• Cost benchmarking• Value management of facilities
What is Benchmarking?
‘Benchmarking is the process of comparing a product, service, process - indeed any activity or object - with other samples from a peer group, with a view to identifying ‘best buy’ or ‘best practice’ and targeting oneself
to emulate it’
(An Introduction to Benchmarking Facilities – Williams 1992)
Total revenue cost
Overall Facilities costs – 15%
e.g. Revenue costs p.a. = £50m (profit p.a. = £2.5m / facilities costs p.a. = £7.5m)
Pre-tax profit 5%
I.C.T. 5%
Business and staff support
costs 5%
Premises costs 5%
Facilities costs in overall context
The Outsourcing Conundrum
• Facilities Costs are the outsourced contractor’s sole source of profit
• Constant pressure to reduce costs – from all sides
• Facilities Costs are in reality of comparatively minor significance to users
• Users’ profits are put at risk by reduced costs of facilities
• Conflicting interests?????
FIG. 2.2.1.A: Three facets of cost control - inter-relationships
Costcontrol
Budgetarycontrol
Competitiveprocurement
Value engineering
Source: Facilities Economics ã BWA 1994
The 3 Facets of Cost Control
Value Engineering
• The process whereby products and services are provided to the required performance for the least cost.
• Value engineering requires the elimination of any
‘redundant performance’.
• Value Management identifies what performance is redundant – you need to prove it.
(Facilities Economics – Williams 1994)
Risks to Value Engineering• Over-Stated Performance Requirements• Excessive Budget• Poor Management• Too Little Time• Intransigence • Poor Procurement• Poor Budgetary Control • Inaccurate Estimating
Facilities Value Management
‘The process whereby all investment in facilities, whether capital or revenue expenditure, is continually and formally evaluated for cost- effectiveness and cost-efficiency from concept to completion’
(‘Facilities Economics’ - Williams 2000)
Value Management
Why Bother with Benchmarking Facilities?
• Demonstrating efficient purchasing• Justifying levels of quality/performance• Preparing to outsource – understanding
what you’ve got• Seeking to optimise value added in the
business case
Benchmarking -How?
• Informal group • Facilitated group • Compare to published data-set • Internal/external• Compare to ‘normalised’ data-set
‘Normalised’ Data-set
EstatesMaster Facilities Cost Prediction and Benchmarking Tool
• Intelligent decision-making tool• Benchmark whole estates accurately using
categories of buildings• Isolate individual buildings as required• Bespoke site-specific benchmarking
Conclusions
• Without a formal, properly substantiated, business case the provision of any facilities above zero-base performance levels is totally unacceptable in business terms
• By identifying and benchmarking options you can establish a business case based on true value for money.
Next….
• Jo Harris of BSRIA will next explain the pros and cons of the Benchmaking Group run by BSRIA and how BSRIA used the EstatesMaster normalised database in a high-level maintenance benchmarking study.