Alternative Service Delivery
• There are a number of qualitative benefits that come from alternative service delivery for facilities management, including:
• Service level realignment (matching service levels to business requirements) to achieve consistent performance and service level standards which are based on a broader experience set (e.g. productivity for wide ranges of tasks)
• Contract standardization and rationalization (trades, sub-specialties, commodities and supplies)
• Larger buyer power for both materials (e.g. MRO and other consumables) and services
• Increased use of technology and other efficiency investments that may not be within current investment plans at the institutions
• Benchmarking across multiple similar facility types and increased
productivity per unit (from process improvements, work standardization and service level rationalization)
Alternative Service Delivery
• The current cost and service level baseline is not well documented and would take significant effort to define. Creating and gaining agreement on the service baseline is a critical success factor for service delivery model changes
• Understanding the key stakeholders (internally and externally) is
challenging, but required to effectively develop the appropriate governance model
• Contract management must be an active, ongoing activity for both the institution and the service provider
• Retention of unique or specialized skill sets – local staff are usually retained when they have site specific knowledge
• Existing labour agreements and organizational culture can make moving to these models impractical or highly complex
• The sector SME’s were strongly outspoken against any direction to change their current service delivery models due to the labour implications that would arise
Analysis summary
Analysis
Procurement
• Similar to the procurement analysis, savings ranges from best practices and Deloitte experience were applied to the provided spend volumes and extrapolated to the rest of the province using the ratio of operating grants (again setting UBC aside and re-adding their total).
• The data indicated the top five categories represented 98% of the reported spend; the analysis was performed on the these five categories.
Alternative service delivery:
• Two approaches were evaluated; the results of both were consistent.
• The first approach involved using the total facilities spend as reported by the institutions and extrapolated to the province based on operating spend, the potential savings range of 5-20% was then applied.
• The second approach calculated gross square meters (GSM) for AVED based the total post secondary student FTE spaces in the province and the known FTE spaces and GSM for the sample institutions
• Using the K-12 report findings as a check, a similar analysis was conducted to compare potential savings based on (GSM) • The GSM was calculated as a percentage of the K-12 GSM and then reduced by a factor for existing outsourcing in the sector
• Sensitivity analysis for both of these assumptions (K-12 to AVED ratio and proportion of outsourcing) indicated a change of ~37% and 30% (respectively) in both variables lead to a potential range of ~$5M to $59M
• Calculating productivity ratios is complex in this sector due to the varied and unique uses of space (e.g. large gymnasia through to highly specialized science and research labs) and requires varied ratios supported by detailed calculations, which were beyond the scope of this phase
• Ongoing costs were estimated using a Deloitte benchmark indicating that contract management costs are 1-7% of the annual cost of the contract. Using a midpoint contract value of ~$107M, the costs were projected to be between ~$1M and ~$8M
Assumptions and Limitations
The quantitative analysis is preliminary; additional, more detailed analysis is required to confirm and validate the opportunities in both areas • The data provided was used ‘as is’ and detailed review was not conducted
• Institutions had equal access and ability to extract and categorize the spend data
• A simplifying assumption has been used that all institutions’ facilities management needs are reasonably similar, while being different is size and scale; further analysis using the provincial facility space reports and developing a more detailed analysis is required to refine this opportunity
• The available data from the post-secondary institutions indicated existing third party delivery is in use by approximately half (50%) of the institutions, however this requires further validation
• Typical savings for alternative service delivery range from 5-20% • GSM ratio between AVED and K-12 was estimated at ~41%
• Proportion of current state outsourcing in the sector is assumed to be 50%
• The work of facilities management (including all components) is similar enough to that in K-12 that a high level comparison is valid • Data (data request and interviews) from the sample institutions is representative for the broader sector
Analysis summary Data Sources • B.C. government: http://www.aved.gov.bc.ca/mediaroom/facts.htm • B.C. government: http://www.bced.gov.bc.ca/reporting/docs/SoK_2011.pdf • Deloitte SME’s • Deloitte K-12 report
• Sample institutions data request submission
Conclusion
Procurement:
• Increased strategic sourcing provides an opportunity to save $3M to $12M in the facilities management function
Alternative service delivery:
• Based on the savings ranges and supporting sensitivity analysis, alternative service delivery for facilities could provide savings across the sector between $6M to $24M; however, more detailed data gathering and analysis by sub-function within facilities management is required to refine these high level estimates
• Implementing changes in this area will be very difficult, complex and require an extended effort across several years