Future proofing FM contracts

Ageing NHS estates as well as the increasing costs of food and materials have seen the costs of operating facilities management services and maintaining the estate generally increase across the board, resulting in costlier operational FM contracts. This presents the NHS procurement departments with a number of issues to address; do you risk maintaining the ‘status quo’ and keeping contracts in house? Contract out some or all of the services? Is a framework or purchasing consortium the answer? How do you achieve value for money, stakeholder engagement, good patient care, transparency, innovation, provide a good overall standard of service and future proof an FM contract?

Back to Basics?
Is the answer in this current climate to get back to basics and ensure a good overall standard of service and good patient care? And which is the most effective procurement option to deliver this? The NHS is a unique organisation and as such it requires bespoke contracts that meet its exacting needs, which vary from Trust to Trust, even if the clinical services provided are similar.

Frameworks present a good value option, especially in these austere times, because all the pre-qualification requirements have been completed, which saves the procuring NHS organisation the expense and time of frequent tendering. Ultimately the aim of a framework is to save time and money, but it does restrict the organisation to a certain number of contractors, some of whom may not qualify when the framework is renewed and can reduce the best value gained from competitive tendering.

One key benefit is continuity of service. As an organisation you can partner with a contractor who works well with your organisation, giving you and the contractor the option to continue the partnership and to contract with them. The contractor then has to be both flexible and proactive to ensure that the service or services being provided continue to provide a good service and achieve value for money in order to retain the contract and remain competitive.

Buying Power
Trust mergers and the formulation of consortiums give NHS organisations greater strategic buying power. Whilst on merger this might mean that you have a number of contracts, PFI aside, the strategy going forwards should be to reduce the number of contracts and retender the FM services as one organisation. Retendering means that the needs of the organisation as a whole can be considered and included in the contract achieving greater economies of scale leading to bigger savings in the long term. The disadvantage is that realising savings in the shorter term is more difficult to achieve, because they are not immediately obvious or necessarily achievable.

A more obvious and sometimes ignored route to procurement in these current times is to maintain the ‘status quo’. There are some contracts, which are either in house or outsourced, that provide a good service and are considered to be value for money. If you as an organisation are satisfied with the service and cannot achieve a better quality or more economic service by outsourcing it or retendering it then it is of benefit to the organisation to continue operating the service yourselves or to extend the contract with the current provider, if you are able to do so.

If as an organisation you decide to tender a package of FM services and subsequent to tendering it is proved that it is not of benefit to contract that particular service, following agreement with the Finance department and/or procurement department it is better in some cases to maintain the contract as it is, budgets allowing.

Total Facilities Management
If like many NHS organisations, you are in a position where some of the services are outsourced and others are being provided in house a good option is a total facilities management contract (TFM). This option has to be considered carefully because of the length of time it takes to procure a TFM contract, If the right TFM contract is procured it will lead to investment in the services, innovation, less management time, future proofing, incentivised performance, good standard of service and savings in the medium and long term. When budgets are tight and investment is required in equipment, then investment as a result of outsourcing is beneficial. Tendering for a TFM contract in this economic climate, may be considered a bold and costly move, but not if the long term savings outweigh the current costs of maintaining the services as they are. 

Although PFI is not popular and has been under review, it can provide options for NHS organisations. There are some large Trusts that have PFIs in the midst of their estate. If the Soft FM services have been included within the PFI, this then means that the Trust can include the rest of the estate or part of the estate in the Soft FM contract. These services will either be benchmarked or market tested at between 5 or 7 year intervals ensuring that the provision of those services continues to be provided at market value. The disadvantage is that should there be a requirement to alter the provision of Soft FM services, then depending on the value of the alteration you have to go through the Variation process and this can take time.

Procuring a contract in this economic climate is in reality more difficult for the procuring NHS organisation than the successful contractor. For the NHS the pressures to achieve best value are currently greater, but that does not change the criteria under which an NHS organisation would procure or the organisations needs and requirements. The service requirements maybe altered to meet the budget, but overall they will still be the same.

Therefore how much of procurement in the NHS is in reality actually affected by the current economic climate?

About the Author

Nicola Paice is a consultant at Appleyards Groupe Artelia

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