EMBEDDING SUSTAINABILITY IN

THE PROCUREMENT OF FM

SERVICES

INTERIM REPORT

The Sustainable FM Index

Partner Research Project

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AUTHORS

DISCLAIMER

Erica Hall, Researcher

The SFMI

David Johnston, Lead Developer

The SFMI

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2016 PARTNERS

This interim report outlines the current processes of how facilities services are procured and aims to assist in developing a

greater understanding to the opportunities and tools needed to realise sustainable procurement practices in the FM sector.

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ABOUT THE SFMI

The Sustainable Facilities Management Index (SFMI) is the only UK facilities management

(FM) industry benchmark of sustainability, utilising 23 Environmental, Social and

Governance (ESG) criteria that include risk management, contracts and management

systems. The Index provides a robust and transparent assessment of FM providers within

the UK market.

Now in its fourth year, the Index continues to drive sustainability performance

improvements within the sector by showcasing achievement and highlighting best practice.

It also seeks to stimulate a positive change within the sector, through performance and

perception. Several of the major companies assessed in the Index have chosen to become

Partners - spearheading further research and collaboration on target areas.

Following on from the success of the 2015 Sustainable FM Index Working Group project on

Social Value, this year’s SFMI Partners are steering a committee focused on the activity of

how FM services are procured.

FIND OUT MORE: Sustainable FM Index

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INTRODUCTION

This client-focused research project seeks to better understand the process of

how sustainability requirements within facilities services are procured, with an

aim of influencing future procurement strategies towards the most sustainable

approach. To do this, we aim to engage client and service teams involved in the

procurement of FM services. The project will use findings from surveys,

supported by interviews, to assess client and service partner understanding and

experiences of sustainability (under ESG initiatives) in the procurement of FM

services. This interim report is based on findings from an initial survey,

interviews, and desktop research. It outlines the current processes of how

facilities services are procured and aims to assist in developing a greater

understanding to the opportunities and tools needed to realise sustainable

procurement practices.

The FM sector is heavily reliant upon outsourced suppliers to help deliver the

service and meet organisational specifications and requirements. Supplier

services can range from low cost items through to major contracts for total FM

activities.

A recent AMA Research report entitled ‘Facilities Management Outsourcing

Market Report – UK 2014-2018 Analysis’ suggests that outsourcing will continue

to rise over the next 5 years to make savings in the wake of the recession. The

report highlighted the value of outsourced ‘core FM services’ (£81Bn) and in-

house FM services (£38Bn) in 2010 from analysis by KPMG and MBD.1 These

services include both hard and soft services such as building maintenance,

cleaning, catering, M&E, and environmental management.2

1 AMA Research Facilities Management Outsourcing Market Report - UK 2014-2018 Analysis 2 WRAP FAM100-001: Review of current procurement practice in the

Facilities Management sector

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Organisations are recognising the importance of managing supply chains

however, the skills to achieve a more responsible approach is still in its ‘infancy’.

Optimising the value clients receive from this outsourcing is key, currently there

are two avenues for their partnership: holistic service provision partnership that

include flexible approaches to job functions or a piecemeal/rigid approach that

segregates job functions leading to limitations to sustainability.

There is currently a push for changing the function of procurement from

minimising upfront cost to maximising value.3 The goals of sustainable

procurement strategies range from: minimising negative impacts of goods

and services across life cycles and supply chains, ensuring fair contract prices

and terms, providing opportunity to SMEs, and minimising demand for

resources. However, a common issue is appearing from many sides of this

relationship where the contracted and anticipated service deliverables are not

being met. From a client side, this may be measured through not meeting

the service specification; from a FM supplier, it may be from not being able

to provide the best service to the client.

3 Oracle Sustainability Solutions Embedding Sustainability in the Sourcing and Procurement Process 2015

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SUSTAINABLE PROCUREMENT OF FM SERVICES

What is Sustainable Procurement?

Sustainable procurement is a process in which organisations purchase, use and dispose of needed

products, services and works in a way that takes into account the value for money on a whole life

basis for the organisation, the benefits to the society and economy while ensuring minimal

negative impacts on the environment.

However, the role of sustainability in the procurement process has varying views across, and

within, organisations and is driven by different company ethos which impact on the way facilities

management services are procured.

A sustainability survey recently conducted by BIFM highlights the changes in the facilities

management sector around the understanding and ultimately the definition of sustainability. The

2016 report suggests a fundamental change from predominantly environmentally focused to

involve wider social impacts such as wellbeing and productivity.4

‘Sustainable procurement of facilities management services achieves optimum results

in economic, social and environmental impacts to ensure that the agreed services,

support and improve the effectiveness and efficiency of the organisation’s primary

activities in a responsible manner.’5

4 BIFM Sustainability Survey 2016 – Where we are 10 years on. 5 Adapted from BIFM definition of FM and definition of sustainable procurement

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Why do it?

Companies may understand and may be able to manage their environmental

and social impacts (such as pay, energy and waste management), but the

indirect impacts (modern slavery, wellbeing etc.) associated with the

procurement of goods and services are much more difficult to manage.

Sustainable procurement practice as defined above can help save money,

reduce risks, improve supply chain resilience, and improve business

competitiveness and reputation. This requires considering the whole life cycle

impacts at the specification and procurement phases.

Not One Size Fits All

Each organisation will be guided by a unique set of priorities

embedded in their organisation values, sustainability policy and

procurement policy. These priorities are the driving force of

sustainability in the procurement process. Page 8 identifies

commonly noted drivers for sustainability.

Value vs Risk (envirnomental, economic, social,

legislative)

Initial Expenditure

Preventative Maintenance Implications

Operating Cost & Performance

Disposal - End of Life Issues

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Fundamental Drivers6 Range of Sustainability Drivers

Organisational Ethics

Cost Savings

Environmental Impact Reduction

Managing Risks

o Improved Supply Chains

o Increased Supply Chain Resilience

o Supply Chain Security

o Health and Labour Rights

Meeting Multiple CSR goals

Legislative Pressures

Board commitment

Improve Competitiveness

Build Business Reputation

Investor Confidence

Innovation

Stakeholder Expectations

o Worker and/or Client Expectations

Supplier Commitment

Leadership Moral reasons: “the right thing to do”

6 Oracle Sustainability Solutions Embedding Sustainability in the Sourcing and Procurement Process 2015

Sustainable Procurement

Cost Savings

Risk Management

Compliance

Value Creation

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The Challenge

Sustainability continues to be perceived as an additional cost that works

against organisations and procurement priorities to generate savings. This is

a common misconception - that sustainability and value for money (cost

savings) are not attainable together. Hence, organisations often consider

sustainability as a tick box exercise.

The additional challenge to this perception is the understanding and

communication of the benefits/needs of sustainability from the FM service

provider to the procurement team/client, (visa-versa) and within the

organisation.

“The myth that sustainability cost more. Bad Procurement Cost

More”

AS Director & ISO 20400 UK lead Shaun McCarthy7

7 Action Sustainability Director and ISO 20400 UK lead Shaun McCarthy OBE presenting at a recent conference in

Australia giving a strategic overview of sustainable procurement and the Supply Chain – Video Source Action Sustainability

Organisation Ethos

Procurement Strategy

Sustainability Strategy

Sustainable Procurement of

FM Services

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INITIAL FINDINGS

Survey and Interviews

An initial survey and interview series were conducted to collect data on

the current practices of embedding sustainability in the procurement of

facilities management services. Some questions asked respondents to

provide their view on the current contracting/procurement process on

sustainability, their role in ensuring sustainability is included, and their

view on life cycle facilities management solutions.

Life cycle considerations is considered by 50% of the respondents as a

necessity, but 27% find it a challenge to be included. Moreover, almost

half of the respondent’s state that their organisation is committed to

sustainability and either always provide it within their contracts, or

ask/suggest that it is included. However, only 39% think their

procurement process is market leading or good with respect to including

sustainability in the procurement process.

The survey also signposts reasons why sustainability is not included;

these are summarised in the adjacent ‘main barriers’ text box. Further

research summary findings are illustrated on page 11.

Main Barriers:

o Financial constraints

o Conflicts with in-house targets

o Perception as being more expensive

o Company focus is not on sustainability in

procurement per se

o Lack of expertise (in-house) on sustainability

topics

Technical input is limited to engagement and targeted

individuals for task activities.

“Sometimes challenging to break away from the

"Sustainability = Environmental Management"

misperception. Can be initially challenging to align

when our perceptions of sustainability differ.”

Survey Respondent Comment

(Outsourced Hard FM Provider)

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How sustainability is maintained in contracts:

o Regular reviews

o Sub-contractor engagement – checking you are

doing what you are supposed to

o Training schedules & records

However, 26% of the respondents indicate that there

are no assurances for sustainability and report mixed

reviews on its importance.

The other question was to determine how end-

beneficiaries (operational management/site

managers, etc.) have input in the procurement

process to bridge the gap between what is

contracted during the procurement process, what is

expected by these beneficiaries and the value that

FM can provide in a sustainable and cost effective

manner.

Main Engagement Methods:

o Relevant stakeholders are identified and

engaged prior to contract design

o Consultations

o During mobilisation further contractual

obligations are agreed

“On the other hand, some clients have no

wider interest than complying with

legislation, and therefore there is very small

scope to go over and beyond in offering add-

on value or long-term savings (where initial

investment is a little bit higher).”

Survey Respondent Comment

(Sustainability Professional for an Outsourced Hard

FM Provider)

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Partners Experience

During the SFMI benchmarking process, SFMI auditors visit sites and liaise directly with senior

managers and operational teams. The audit records highlight key methods to include

sustainability:

Optimising mobilisation period to develop delivery model

Contract Delivery Models:

Gain Share Mechanism

Efficiency gains with a view to invoke behavioural change

Being selective on bids where there is no alignment with values

Being flexible to deliver as a partner and engage clients on ways to improve.

The findings from this initial research implies that the engagement is split between the pre and

post contract phase which has a significant impact on costs of contracts in the short and long

term. This ultimately impacts how sustainability is perceived.

The way that procurement criteria are set also drives the level of sustainability. Clients often lack

experience in providing clear explanation of what sustainability means to their organisation and it

can be neglected in contracts or discounted by FM providers who cannot correctly interpret these

requirements. Therefore, parameters are either too broadly outlined or detailed so much so that

FM providers find them difficult to commit to. When sustainability is included it is often task-based

rather than an engrained contractual aspect. This limits the ability to prove the important

relationship between sustainability as a life cycle approach to cost savings and contractual value

on environmental, social and economic objectives.

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CURRENT GOOD PRACTICE

While the development of sustainable procurement of facilities

management remains in its early stages, there have been

some successful frameworks developed to assist progress.

The adjacent diagram outlines the core processes that stand

out as key to successful sustainable procurement

frameworks8.

8 The MBS Approach: A Summary of the Managing Buildings

Sustainably Approach and IEMA Webinar: The Inside Track on ISO 20400 –

Sustainable 2016 ISO SP presentation by Shaun McCarthy.

Current Best Practice Approaches:

BS 8903

ISO 20400

Develop joint sustainability plans

Standardised approach across business

Clear explanation of what sustainability means for

the client and the contractual requirements

Framed questions through a clear explanation and

setting out the requirements

Plan Objectives

Brief

Pre-qualification

questions

Specification of Service

Selection Criteria

Contract

Reports

EvaluationStakeholder

identification and engagement

Enabling People

Governing Procurement

Setting Priorities

Measuring & Improving

Performance

Greivance Mechanism

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WHAT NEXT?

It is evident that there are several drivers changing the face of sustainability in the FM

sector and the related procurement process. These include legislation, corporate image,

organisational ethos, life cycle cost reduction, risk management and pressure from

clients and investors. More evident is the ineffective way in which sustainability is

communicated to and between parties involved in the procurement process.

The needs are to:

focus on the client - understand what they need and clearly articulate it in the contract;

drive the procurement of FM services in the direction of life cycle benefits and clearly

promote the benefits of sustainability measures and practice;

engage the disengaged organisations which have little to no focus or understanding of

sustainability to invoke positive change and push the sustainability agenda;

and for:

FM tender responses to demonstrate best value by delivering solutions that are not

simply compliance ‘tick box’ based;

FM service providers to build a strong reputation of best practice with embedded

sustainability agendas.

Over the next 3 months, further interviews will be conducted, the survey will be

reopened, and there will be a roundtable event hosted by ICRS to unpack the challenges

and opportunities of embedding sustainability in the procurement of FM services. The

findings of the SFMI benchmarking process will also be considered, as there are now

three clear groups of assessed organisation that provide very different services.