Category Archives: Outsourcing

“The Duality of Competition” Soliciting the Best Service Provider Participation in Your FM Sourcing Initiative

Introduction

I’m sorry, but we’ve decided not to bid for this opportunity.”

Even multinational enterprises looking to outsource services valued in the hundreds of millions of dollars are hearing these words more often.  While the sourcing teams from Global 1000 companies are often shocked to have their opportunities declines, this is not really surprising given the evolution of the facility management industry.  As deals get larger and more complex, more business risks are transferred from the occupier to the Service Provider.  In addition, account margins have become notoriously thin and contracts are managed with more sophisticated cost controls and reporting requirements.

With business development costs rising Service Providers are increasingly more selective about which opportunities to pursue and are particularly careful to avoid expensive pursuits with low probability of favorable results.

The Decision to Move Forward

Most Service Providers make a decision to pursue an opportunity based on their assessment of three critical questions:  (1) what’s the opportunity worth?  (2) what’s the likelihood of success? And (3) what’s the cost of pursuit?  Of course the answers to these questions are likely not well known at the outset, so a number of more quantifiable factors will be considered including:

  • Whether a pre-existing relationship exists with the Client organization
  • Potential for direct interaction with the key Client stakeholders throughout the sourcing process
  • The role of advisors in the sourcing process
  • Likely or perceived pursuit costs
  • Potential near- and long-term value of the business (including expected margins and the likelihood of growing the account over time)
  • Alignment with capabilities and core competencies
  • The competitive environment and in particular, the presence of incumbent competitors
  • The perception of the “sincerity” of the outsourcing initiative (Will the sourcing event actually occur)
  • Whether the outsourcing is first or second generation event
  • Other opportunities available in the market place

Outsourcing clients must understand that Service Providers treat each “pursuit” as an investment with a potential return.  While the direct costs of a pursuit can be significant – over a million dollars for some multi-national opportunities – it is important to understand that these pursuits also represent the allocation of a limited resource of talented personnel.  Service Providers need to make the savviest possible pursuit investments.

Generating Participation

Knowing how Service Providers evaluate opportunities provides can inform Client organizations on how to position and create the most attractive possible sourcing events.   Clear, open communication to the market place is essential.  The better Service Providers are able to understand the nature of the opportunity, the competitive process, and the underlying Client business drivers for outsourcing, the better they are able to qualify the opportunity and evaluate their participation.  Client organizations that provide multiple opportunities for interaction, personalized as opposed to group communications and personally (as well as personably!) engage with the Service Provider teams achieve better and more engaged participation than Clients that operate their procurement through a secretive or blind, “arm’s length” process.

Additionally, the role of consultants needs to be carefully considered.  Hiring an advisory firm can send a clear message to the market the Client or Occupier is very serious about the opportunity and ultimately help accelerate the process.  However, if the advisor’s role significantly constrains direct interaction with the Client team, Service Providers may see the lack of interaction as a reason to not pursue the work.

Excessive competition also discourages participation.  When a provider is one of ten or twenty candidates it’s difficult to justify a significant business development effort even if the potential opportunity is large.  Having the wrong competitors can signal that the client has not prepared well.  Initial market research must efficiently allow Client organizations to identify a selective short list of potential candidates.  For an IFM sourcing opportunity, a field of three to five Service Providers is generally ideal.  Effective prequalification should focus on verifying a Service Provider’s market presence, experience and capabilities to delivery services as opposed to early solution development.

Lessons Learned

Finally if your organization follows this advice and still finds a desired Service Provider declines your opportunity, remember this isn’t necessarily a bad thing.  It may simply be that they have determined that this fit is not appropriate for their business.  Better to move on and focus on building relationships with organizations that, from a well informed perspective, see your opportunity as being highly desirable.

Organizations that have run the most successful FM sourcing processes had a thorough understanding of both the marketplace as well as the drivers of Service Provider participation.  They quickly identified the right potential partners in the market place, openly communicated their initiative and structured a sourcing process that, in essence, competes for the best participation from these Providers.  This “Duality of Competition” ultimately drives the intensity, focus and openness required from both parties to find and develop the best possible FM sourcing relationship.

Writing Winning Proposals: Five Tips for FM Service Providers

Business development represents a significant investment for FM Service Providers.  Pursuits for global accounts can reportedly cost over a million dollars and even a smaller account can be punishingly expensive to pursue.  The most tangible output of this business development activity is the proposal, so how can Service Providers ensure these proposals are a effective as possible?

(1)    Winning proposals are about the Client, not the Service Provider.

“They just seem to understand us”, when we hear those words we know our clients have made their decision.  It’s the trump card that can often triumph over weighted decision matrices and other formalized evaluation criteria.  Clients want to partner with Service Providers who “get it”.

Unfortunately, most Service Providers spend the bulk of their proposals buried in “Self”.  There are long descriptions of past successes, the story of the company’s founding fathers and long lists of other, presumably very satisfied, clients.  While these may be impressive, the potential client is left with the task of connecting the content to their own needs.

The place to start is the cover letter.  Many proposal cover letters will spend  three to five paragraphs focused on the service provider, their commitment to the client, their long history with other clients, and other inward-facing “points of distinction”.  A client isn’t even referenced until the closing sentence, which is usually a please for favorable consideration.

Winning cover letters convey an understanding of the client’s business condition and specifically connect the Service Provider’s solution to the client’s needs and requirements.

For example, instead of writing:

Our company has been in business for fifty years and is a recognized leader in the field…

Write with a focus on the client:

Business pressures require that Occupier Incorporated reduce support costs by at least 10% over the next three years.  To achieve these objectives while retaining expected services levels requires a solution that…

Quick test:  Count how many times you reference your own organization versus the client organization in your proposal cover letter.  A cover letter that resonates typically has a 1:1 ratio of client references to self-references .  When that ratio becomes 1:2 or 1:3 (which is not uncommon) you’ve lost sight of the client.

(2)    Winning proposals show how solutions will directly impact client.

Most proposals give “magazine article” responses.  Lots of information about the general approach and typical benefits, very little information about how the approach will be applied to the client organization or expected measurable benefits.

Winning proposals include a short discussion about the general approach and then emphasize client specific detail about how it will be applied and expected results.  For example:

Based on an initial review of the asset base, the RCM principles will be applied first to the high voltage electrical and HVAC systems.  It is expected that this will reduce the total volume of preventive and maintenance work by 10% by the end of year one.”

(3)    Winning proposals clearly explain cost savings

The lowest priced proposal often does not win a competitive bid, typically because they are perceived as being “risky”.  While the client wants cost savings, they don’t really understand how the proposed savings will be achieved and are nervous about the potential business impacts.

Winning proposals very clearly outline and summarize expected savings and the potential business impact, if any, on the client’s organization, for example:

This proposal reduces total cost of operations by 15%.  These savings are achieved as follows:

  • 3% from more efficient management of sub-contacted vendors and leverage of global purchasing agreements
  • 2% from enhanced technician training to eliminate high cost call-outs
  • 3% from rationalization of service levels across the portfolio
  • 4% from increased productivity through better work management
  • 3% from reduced workload through better asset management

When the client has clarity about cost reductions, they are more confident about the effectiveness of the solution and more willing to embrace bold proposals.  Of course this is most easily achieved when the first two tips have been followed

(4)    Winning proposals have a consistent message.

Many of the proposals we have reviewed over the years are internally inconsistent.  On one page the technology strategy may have five key dimensions, on the next, it may have four.  The same may apply to descriptions of key business processes, organizational charts and other key aspects of the solution.  In some cases the entire look and feel of the proposal changes as the client moves from section to section.

In speaking with business development teams we have come to understand that this occurs because several people may be involved in assembling a proposal and it may leverage varied source material.   Unfortunately, the message to the client is that of a fragmented, poorly considered, approach.

A proposal that is consistent in its message, lexicon, use of graphics and overall look and feel gives the client confidence that they are receiving a well-considered, unified approach to service delivery.

(5)    Winning proposal are shorter

FM proposals frequently run hundreds of pages, with substantial “expository” and “value added information” which is burdensome for the client to read and ultimately obscures the central message.  Ruthlessly edit the proposal.  Reduce that the original word count by 30 – 40%.  The most powerful thoughts and ideas will come shining through and the entire proposal will be more compelling.

Conclusion

Interestingly having the “best solution” is usually not the most important consideration in the final selection.  When the Client feels that they are receiving a well-considered approach from a capable Service Provider that truly understands their business they will partner to find the right solution.