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

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.