Julian Fris, Director of Neller Davies looks at how Total Facilities Management is changing to provide a model for the 21st century.
Not long ago, businesses being encouraged to bring all FM services under one provider via the Total Facilities Management (TFM) model was all the rage. How times change. With recent collapses leaning towards the TFM model, one wonders whether there is a future for it at all. Is this the end of TFM?
It may be a busted flush in its current form. But what is TFM? How does it differ from integrated FM, managing agent and many other variants? In essence, TFM is the delivery of a combination of premises-based services by one company to one or typically a number of sites that might be geographically spread.
New kid on the block…had to grow up quickly
TFM has been particularly popular in the last 10 years or so - especially with public sector contracts in defence, healthcare and judicial - and it largely grew out of the PFI contracts of the nineties and noughties. The aim was for companies to deal with building issues whilst the client focused on its core activities.
The rapid growth of TFM created local monopolies. The market was increasingly being controlled by around 10 companies, many government focused – in fact 6% of FM companies in 2017 held over 90% of contracts by value. The idea is that the bigger you are, the greater the perceived economies of scale and ability to absorb higher levels of risk, but it has had unintended consequences.
TFM companies were seemingly growing for size, not necessarily for profit. In many cases the supply chains investing significant chunks of their business into TFMs suffered from poor payment terms so as the principal could maintain its cashflow. Also, as we have learnt, investors were taking dividends based on future growth, which meant liquidity became even more tightly squeezed, eventually impacting service quality. Reverting to OJEU and procuring another was increasingly becoming a quick fix. Same hymn sheet, different choir, but ultimately the same song.
More widely, the UK is one of the leading proponents in TFM, but other parts of the world are catching up quickly, especially in Asia Pacific. The big UK companies may have been eyeing this but ran out of cash as other markets have jumped an industrial revolution and may not be wanting old school TFM but something a little more high-tech.
So, what of the future?
The performance-based structure, a feature of TFM, has grown up creating a disconnect between client and supplier; the combination of carrot and a lot of stick is not effective in the long term. There are no incentives for anyone, especially when no one really knows what the baselines really are. Many organisations do not really know what assets they own and what condition they are in.
The influence of cloud-based computing, no longer a pipedream but ever present as it becomes more secure and reliable, drives innovation like XaaS, ‘anything as a service’. This recognises the vast number of goods, services and technologies that service providers can now deliver to users as a service over a network like the internet - rather than provide locally or on-site within an enterprise. It’s TFM reset for the 2020s, where suddenly data is critical and clients and suppliers really start understanding what they are managing rather than just winging it.
We are also becoming increasingly exposed to the Internet of Things; the collection of applications which collect data, run systems and can be controlled over the cloud. Existing technologies like CCTV, access control and BMS are being coupled with on-demand apps like Microsoft Office 365, Amazon Web Services as well as artificial intelligence (AI) to create more intelligent buildings and service provision. Suddenly we are in a world of just-in-time response, feedback and solutions. Just consider how quickly you can get an Uber cab in any major city, a product from Amazon, or comment on your experience on TripAdvisor. This is driving everyone’s expectations and will significantly transform FM. We are already seeing some companies adopting this - like Bellrock, Cloud FM, CBRE - and ironically Carillion, but clearly the sand ran out in the egg timer.
Old-style TFM procured through a performance-based tender is becoming outmoded. Clients are embracing greater collaboration – they now know that they can get services on demand, only pay for what they use but need to work with experts and specialists through a Vested model. Globally the outsourced market is worth $1tr, in the UK it’s over £100bn – it is not a market to ignore by any stretch.
A change is as good as a rest
Using big data systems and moving to outcome-based solutions will drive different behaviours for large and small organisations alike. The UK Government, for example, is embracing tech and how it can streamline its estate. That might mean a vast amount of services go online, therefore needing less buildings and less FM. There is also a shift away from old fashioned buildings tenure. On the high street retailers are looking for more turnover-based store rentals – the feudal landlord approach dying in its wake.
More and more companies are going virtual; if they need property, they will more likely buy it on an-used basis from WeWork, Regus and others. FM still plays a role but it is not the all-encompassing premises management model of the past. Specialist environments like hospitals, care homes, schools, universities and stadia are perhaps more difficult to change, but not impossible, although need some level of expenditure. Figures of £6bn are required to remediate the NHS Estate - in some cases it will be cheaper to build new hospitals than modify the existing stock.
FM is maturing, innovating, dragging itself out of 20th century practices and its future looks great. I think the big companies were so focused on growth and global opportunities that they may have just forgotten the people and the systems along the way, and in the meantime the audience changed and was not prepared to accept caretaker-led solutions.
As FM becomes more strategic, we will see greater influence in the planning cycle along with the architects, constructors and project teams. Over the years much of the advice has come from industry experts who worked their way up, such as myself, but we have to recognise that this could be largely backward-facing. Lessons learnt are good and there’s nothing wrong with a bit of wise guidance, but equally advisors need to be more forward focused and grab opportunities from other sectors, perhaps taking more risks. Education and technology enables this, so TFM will grow but it will look and feel different. Some FMs have already understood this, but the clients lag behind because of lack of understanding or ability to invest in this bright new future.
So, we are clear that, while TFM goes through its transformation, the old look and feel will be no more, but is it dead? No, it’s just different.
