Contracting facility maintenance helps clients convert capex to opex, while increasing organizational agility.
Service Level Agreements (#SLAs) are a must-negotiate when considering Integrated or Total Facility Management services as multiple industries move toward outcome-based payments.
The Pay for Performance Spillover Effect
Industries including #BigPharma are moving toward outcome-based transactions(.)
For as long as facility management has been a service, related contracts have provided for the continual, outsourced maintenance of facilities too large, and firms too focused on core competencies to manage such details. Today, as industries including #BigPharma are moving toward outcome-based transactions (payment if, and only if, a patient improves as a result of pharmacological intervention), a spillover effect is washing over unexpected areas of connected business functions.
From CAPEX to OPEX
Formerly, a depreciable capital expenditure (#CAPEX) was necessary to ensure improvement of fixed assets, including plants, property, and equipment. Now, improvements to building efficiency, for example, can be defined via #SLA with a contracted provider of #IFM or #TFM. Such an agreement allows for a split of future cost savings for the firm realized by #PPE improvements implemented by the contracted firm, and shifts long-term tax shields related to depreciation to short-term via service expenditure. Examples of such improvements include:
HVAC improvements resulting in lower energy costs
Facility maintenance resulting in lower insurance claims
Parts replacements which result in more efficient enterprise performance
A New Way to Bill
The perception of receiving a wholesale bargain on parts while paying your provider for excellent service is one which has taken hold for the long-run.
The industry standard for repair and maintenance has remained the same for decades, across a variety of applications: a lower hourly fee is charged for labor, and an exorbitant premium is charged for parts. If you ever were in need of a plumber, or mechanic to repair your personal property, you likely experienced this model in action.
Today, a shift is occurring across the services supply chain, as technological advancement undergirds the increased fragmentation of fee-for-service providers: wholesale rates are charged for replacements and improvements, and a premium for service. While the end cost may remain the same, the accounting for expense and investment can be significant. Further, the perception of receiving a wholesale bargain on parts while paying your provider for excellent service is one which has taken hold for the long-run.