Feature
With the Carillion collapse serving as a lesson to us all, Nigel Forbes, Director at Litmus Partnership, discusses cautiousness amongst clients and providers alike, and a new, and rather revolutionary, approach to enabling successful partnerships in the future.
Cautiousness creeping in
“This year has arguably seen one of the biggest company collapses in the past five years, with Carillion, one of the largest construction and facilities management companies, going into compulsory liquidation in January. This affected many sectors – including healthcare. For example, Carillion was responsible for hard and soft FM services at James Cook University Hospital in Middlesbrough. “With around 43,000 employees, 19,000
of those in the UK , the demise of the company has served as a stark reminder to the facilities management (FM) industry around the importance of contract terms and the financial risks they are willing to take. “The Carillion collapse has led to some
service providers choosing to take a more cautious and circumspect approach. The Litmus Partnership specialises in catering and facilities management consultancy, and one of the sectors we focus on is healthcare. Over the years, we’ve navigated various partnerships between FM providers and NHS Trusts themselves. A research project I conducted earlier this year for a Trust shows the Carillion situation has undoubtedly introduced uncertainty. “This more cautious approach isn’t
necessarily new; concerns have been bubbling over the past 12 months but the
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Carillion news has certainly compounded this. Wariness was highlighted across various factors found within the research: • A number of FM providers declined tender opportunities due to client expectation on costs; the potential financial penalties and the expectations on cost savings just weren’t worth the risk. These weren’t new providers in their infancy, who you may expect to be more cautious – they were highly credible providers with significant experience;
• The Carillion downfall has caused some NHS Trusts to put tender exercises on hold, while they assess the impact;
• One of the leading FM service providers has decided to protect its existing profitable business rather than bid for new contracts in a volatile market.
“At the recent Hospital Caterers
Association 2018 Conference, Jonathan Ashworth, Labour’s Shadow Health Secretary, discussed how Labour would favour outsourcing to be taken back in-house; which for some NHS Trusts would be the right decision. Many do this now. “However for those Trusts where outsourcing is the more suitable model, let’s look at how the relationship between FM provider and client is currently set up – and, given the changing landscape, how it could
Nigel Forbes
potentially adapt to reflect these changing times?
Penalties are usually financial
“Currently, a typical contract is set-up to focus more on penalising the service provider. If KPI’s aren’t met the consequence is usually in the form of a financial penalty. This set-up gives the client an element of power – and reassurance that if a provider falls short, that they have some leverage. “Clearly, clients need a level of protection
to ensure the contractual agreement and service specifications are met. However, if we’re penalising ‘poor performance’, why aren’t we rewarding ‘excellent performance’? This approach – one which is mutually beneficial to both parties – isn’t currently common practice in the UK. It’s this more collaborative style of working which is gaining traction in the US, and is helping to develop high-performing strategic relationships.
A new approach
“I was introduced to the concept of the ‘Vested’ outsourcing approach by an American colleague, when I was working on a project with Jones Lang LaSalle. This was the first time I had heard of Vested, which is a rather progressive approach to business relationships. “If you’re to take the description found on
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