If you're a Head of Real Estate, your FM costs have probably been rising for a while. Wages, energy and inflation have all pushed up the cost of delivery. At the same time, you're being asked to reduce operating costs and show better value.
When that happens, the first call usually goes to the FM supplier.
Can they take a lower margin? Can services be delivered less often? Can the scope come down? Can subcontractor costs be squeezed?
Sometimes these measures are necessary. On their own, they rarely last. At first they appear to work. Then costs creep back up, service quality suffers and deferred maintenance becomes a bigger problem further down the line.
The other common response is to retender and appoint a new supplier. Either route can absorb months of time and money without ever touching the reasons the cost base became unsustainable.
I've seen this play out repeatedly over more than 20 years advising boards and senior executives on FM strategy, operating models and major commercial decisions. In this piece I set out the five questions I'd ask before changing supplier, and why the order matters.
The Problem Isn't Always the Supplier
We focus too quickly on who is delivering the service, rather than asking whether we've designed the right model in the first place.
Changing supplier without fixing the underlying model is like moving pieces around a chessboard without a strategy.
The supplier, the contract and the commercials may all change. But if the organisation is still asking for the wrong services, through an inefficient operating model, with the wrong incentives and weak governance, why would you expect a different outcome?
A new supplier can't make up for a poorly designed model indefinitely.
This isn't an argument against outsourcing. Nor is it an argument for insourcing. It's an argument for getting the model right before deciding who delivers it.
Five Questions to Ask Before Changing Supplier
When FM costs are rising, I work through five questions in this order. Each one depends on the answer to the one before.
1. What does the organisation actually need from FM right now?
This is the question most often skipped.
FM requirements change as organisations change. Portfolios evolve, ways of working shift and occupancy patterns move. Yet service specifications and contracts often still reflect requirements set several years ago.
So before looking for savings, work out what you need from FM today. Which services are genuinely business critical? Where does resilience matter? Where is a higher service level justified? And where are you paying for service or capacity you no longer need?
Cost optimisation starts with understanding demand.
2. Are the operating model, service design and technology capable of delivering it efficiently?
Once you know what you need, the next question is how to deliver it. That covers the shape of the FM organisation, the balance between in-house and outsourced delivery, service design, technology, processes, data and how services join up across the estate.
There is no single right answer. Some organisations will benefit from outsourcing more. Others will do better bringing particular capabilities in-house. Many will end up with a hybrid.
What matters is the sequence. The sourcing decision should follow the operating model design. It shouldn't drive it.
3. Is the commercial model creating the right incentives and behaviours?
A contract can be commercially competitive and still deliver poor value.
How services are priced, measured and incentivised shapes behaviour. Does your commercial model reward the supplier for finding efficiencies, or for activity and volume? Does it encourage planned maintenance, or does the supplier earn more when things break? Do the performance measures reflect the outcomes you care about? Is there enough flexibility for both parties to adapt as requirements change?
A lower unit price doesn't guarantee lower total cost or better value.
4. Do governance, performance management and contract controls actually drive the outcomes we're paying for?
Even a well designed contract will underperform if nobody manages it properly.
I've worked with organisations that had sophisticated contracts, detailed KPIs and extensive governance structures, and still weren't getting the value they expected. The governance existed. It just didn't work.
So ask the practical questions. Are responsibilities clear? Do the performance measures mean anything? Are issues picked up early? Is anyone managing the contract commercially? Are the right people having the right conversations?
Good contract management does more than police the supplier. It helps both sides improve the service and the value it delivers.
5. And only then: do we have the right supplier?
Sometimes the answer will be yes. Sometimes it won't.
There are real reasons to change. The supplier may be genuinely unable to deliver what you need. The relationship may have broken down. The market may offer something materially better.
But a retender carries significant cost and disruption of its own: procurement, mobilisation, transition, knowledge transfer and a great deal of management time. If the underlying problems haven't been fixed, you risk handing them to a new supplier.
Why the Order Matters
Too often, organisations jump straight to question five. They spend months on procurement, followed by mobilisation and transition, only to discover they've transferred the same problems to a new supplier.
Answer the first four and the fifth often answers itself. The right route becomes clear. That might mean keeping your current supplier and restructuring the relationship. It might mean renegotiating the commercial model, insourcing some services, or redesigning the operating model. Or, in the end, it might mean changing supplier.
Sometimes changing supplier is absolutely the right answer. But it shouldn't be the default. I'll look at when it is in my next piece.
The supplier decision should follow from the strategy. It can't replace it.
Moving the pieces around may change the position on the board. It doesn't change the game.
If you're facing rising FM costs right now, which of these five questions is hardest to answer honestly?
Don't outsource a problem. Don't reprocure a problem either. Fix the model first.
If this raises a question about your own arrangements and you would value an independent, no-obligation conversation, book 30 minutes or get in touch.