FM CONTRACTS
example, lighting projects typically involve relatively low levels of investment, and can yield quick and large paybacks. The move from traditional lamps to LED fittings means not only a very quick reduction in energy consumption, but the maintenance requirements of LEDs are also minimal, with eight-yearly replacement cycles significantly reducing annual re-lamping costs.
Dr Rachel Dick says: “A collaborative contract cannot in any way be considered ‘hands-off’ once it is procured – it requires consistent joint management by the Trust and the supplier if the two parties are to effectively engage in the pursuit of cost rationalisation and third-party income stream generation.”
through a contract requirement to value test the soft FM services against the market at given anniversary dates; often five-yearly intervals. However, the principles of benchmarking
require comparators to be selected on a like-for-like basis. This includes details such as indexation metrics, thereby excluding newer contracts which use CPI rather than RPIX. As earlier generations of PFI contracts with RPIX as the contractual indexation metric expire, and associated FM contracts reach the end of their service life, we see that the available peer group is becoming smaller year-on-year. Consequently, instead of continuous improvement and value for money, the reduced competition leads to overly inflated service costs and lowered motivation to improve service levels. So, how can the NHS and the supplier collaborate to bring about a contract that is commercially viable and sustainable for both parties?
With pain, should come gain If agreeing to share the pain of inflation, then contracts should also look to capture gain sharing around commercial revenue- generating opportunities. In catering services, for example, driving sales in the retail catering spaces might be considered as the easy, proverbial ‘low-hanging fruit’. There are also the (arguably more challenging to achieve) additional revenue generation opportunities which can be achieved through letting of catering spaces to host functions outside of core hours. The commercialisation of laundry
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and linen services and central sterile services can also open other avenues of revenue, but this requires a targeted and focused approach to acquiring external customers. This is one reason why having an external service-provider in many respects offers an open door to realising new potential income streams over and above the delivery of services ‘in house’, where the Trust would then have to leverage such opportunities by themselves.
The potential for shared savings Greater still is the potential for shared savings through making energy consumption reductions. There are three key energy uses in a building: heating, cooling, and lighting. The performance of a building in terms of how effectively and efficiently it can be heated or cooled is influenced by the mechanical and electrical elements and the building fabric. The key to improving the building’s energy consumption therefore relies on upgrades to the mechanical and electrical efficiency, and improvements to the thermal transmission of the fabric (i.e. the U-values). Understandably, these improvements
require capital interventions, and can be quite outside of the control of the supply chain providing the services. What the hard FM provider can do is bring its wider industry expertise and experience of these types of projects to the Trust’s attention. It can also work with the Trust to help it understand the complexity and scale of works required and payback periods. For
New contracts that are about to be tendered for must focus on incorporating fair and viable mechanisms to control the impact of rising inflation, both now and in the future
44 Health Estate Journal September 2022
Soft FM service-providers Soft FM service-providers also play a very significant part, and can often have a more direct impact upon energy consumption than first considered. The catering service, for example, (the largest area of energy consumption after heating, cooling, and lighting the building) is an area that represents an opportunity for energy reduction through the methods of storing and preparing food (i.e., more fresh and less frozen, with less reliance on gas ovens and cookers). Retail catering spaces could also be sub-metered, and annual reductions in energy costs could be proportionally split to keep both sides engaged in continuous energy reduction practices. However, this kind of pain/gain sharing
relationship requires careful detailing and negotiation to ensure a clear ‘win-win’ for all parties. A collaborative contract cannot in any way be considered ‘hands-off’ once it is procured – it requires consistent joint management by the Trust and the supplier if the two parties are to effectively engage in the pursuit of cost rationalisation and third-party income stream generation. So, where to begin?
Carefully crafted procurement The dialogue starts at tender stage, with the development of a set of specification documents which include a supporting performance calculator to quantify service performance, providing a tool for objective measurement of the contract delivery which protects service quality performance in the face of rising costs. There is an ever-expanding list of technologies, products, and materials that permits service-providers to deliver services more effectively and efficiently. Tender documents need to be able to draw these innovations out of each bidder’s response in a way that permits like-for-like comparison. Importantly, EFM and procurement
professionals must be supported in evaluating responses from the market in a way that permits transparent and evidence-based decisions to be made against clear and auditable criteria. The tender process and the contract must be aligned. The business requirements captured in the contract must be fully examined and investigated through the tender documents and the responses from the market.
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