1. Controlling Cost & Quality of Facilities Across Large Estates

2. 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

3. Contents Benchmarking definition Facilities in context Purpose of benchmarking Methods of benchmarking Cost benchmarking Value management of facilities

4. 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 )

5. 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

6. 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?????

7. Source: Facilities Economics  BWA 1994 The 3 Facets of Cost Control

8. 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)

9. Risks to Value Engineering Over-Stated Performance Requirements Excessive Budget Poor Management Too Little Time Intransigence Poor Procurement Poor Budgetary Control Inaccurate Estimating

10. 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)

11. Value Management

12. 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

13. Benchmarking -How? Informal group Facilitated group Compare to published data-set Internal/external Compare to ‘normalised’ data-set

14. ‘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

15. 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.

16. 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.

17. Value-managed Facilities Policy A collection of the accepted business cases made in support of each facility. It should demonstrate the added-value the business can expect from the investment it has agreed to make.

18. Conclusions Cost of facilities is of minor significance to businesses. Identifying appropriate performance levels is key to value management Cost-efficient procurement has a place in value management Cost-efficient procurement is not value management Benchmarking can help identify current and desirable levels of performance. Benchmarking can help to make a business case for proposed levels of performance.

19. Challenges to financial benchmarking Allocation of expenditure – where and what for? Every building is different! Good comparable data Exact match of buildings and performance Exact match of resource drivers Scope assessment Measurement

20. Administration Alterations Cleaning Energy - other Energy - HVAC Maintenance - HVAC Maintenance - Other Property costs Operating costs (<1.5%) p.a. Turnover Assets & equipment People costs Source: Facilities Economics (BEB Ltd) Premises Costs in Context