Construction Law - Managing Your Space
The latest AUDE - Estates Management Report 2019 highlights that repair and maintenance accounts for 32.6% of our universities' property costs. Energy is 18.7%, cleaning 18.7% and security 7.8%.
AUDE reports that nationally there has been a small downturn in the quality of our university estate due to a reduction in the maintenance spend and suggests that this could be storing up problems for the future. These statistics, combined with the prediction that our smaller teaching institutions are likely to experience a reduction in student numbers over the next two years, before a predicted rise again from 2021, means that utilising our university space has never been more challenging.
How Can Contracts Help Me?
If you ask a range of Estates Managers "what is your favourite contract?", I bet a fair number will answer "the ones that stay in the drawer!"
I accept that if you find yourself thumbing through a contract with the aim of finding someone to blame, you are already in a bad place. But, contracts can be helpful, they can provide guidance and they can represent an effective management tool.
Like many things in life, you are likely to get out of a contract, what you put in. If you spend time engaging with your stakeholders, understanding what they need, what they want (and perhaps even what they dream of!) you will recoup the benefit later.
How do you translate these needs, wants (and even dreams) into an effective management tool and not just seemingly endless paragraphs of Times New Roman 10 point?
There are numerous challenges facing anyone preparing a hard or soft facilities management (FM) contract and we need to break these down into bite-sized segments.
The Holy Grail
First, the holy grail of any contract is to create certainty and clarity. In practice, we can only be certain and clear in our contracts, if we are 100% sure of what we require. Back to our discussion with our stakeholders, we cannot guess or assume what is important to them, we must genuinely know.
Our second aim is to achieve successful service delivery at the right price. In simple terms, both the university and the service provider will want the same thing. The right price is achieved through the tendering process and a successful service is achieved through a service level agreement (SLA).
Thirdly, we need to allocate the risks inherent in delivery of the service between the parties in a way that makes the contract commercially viable for both. If we create an unbalanced contract that is overly onerous to the service provider it is unlikely to be sustainable. The contract may look like a victory, on paper, when it is signed but in the long run the university is unlikely to obtain a lasting advantage from a contract that only benefits one side.
Management Tool
Fourthly, a good FM contract ought to provide day to day guidance and be an effective management tool. It should enable the university to incentivise good behaviour and provide a remedy for breach or breaches in service delivery. These incentives and remedies need to be capable of being passed down to the supply chain to create a solid structure to support the university's objectives. This is a combination of the SLA and the Key Performance Indicators (KPIs) and I say more about these below.
Finally, the contract needs to find ways to encourage the parties to avoid disputes. This starts with matching the remedies to the breaches in a proportionate way. For example, if we entitle one party to terminate the contract for a relatively minor breach it gives the immediate impression of being tough. However, don’t be surprised if you find yourself either facing unnecessary disputes as to what amounts to a breach or the prospect of losing the benefit of the contract and so incur the cost of re-tendering much earlier than may have been necessary.
Best practice would recommend a sliding scale of remedies and responses that match the seriousness of the breach and the ease with which it could be remedied.
Service Level Agreement
Let's look at a contract as a management tool in more detail. What makes an effective SLA? The purpose of an SLA is to define the scope of the service and sets out the measurement criteria. It will enable the university to manage the service and ensures the supply chain observes the delivery objectives. To draft an effective SLA, experience suggests that you ought to ask your stakeholders to answer the following questions:
- What is essential to make the contract a success?
- What priority do we give these essentials?
- How best to turn the essentials into objectives and criteria?
- How do I provide remedies if the criteria are not met?
- How do I link the remedies to a service credit?
Key Performance Indicators
The equally important part of our contract as a management tool is the drafting of the KPIs. These define and measure the progress against the service level objectives. They can perform two functions: provide a snapshot of the performance under the contract, and also create a neat internal reporting mechanism for the university.
For the supply chain, the KPIs provide the goals that need to be achieved and which can be stepped down to the suppliers below. Getting these right is an art as well as a science. The art is the listening and interpreting the needs and wants of your stakeholders. The science is provided by people who have dedicated many hours to researching this topic such as the British Institute of Facilities Management (BIFM). BIFM helpfully publish a KPI Register which breaks down the respective KPIs into:
- service lines
- activities
- context
- metrics
Service lines and activities speak for themselves. We are used to seeing financial metrics such as income, expenditure, and stock levels. But when we consider the delivery of a service the context and the metrics themselves become all important. As a consequence we would expect to further granulate the metrics between time, cost and quality (both quantity and compliance).
The recommended questions to help you prepare effective KPI's are:
- How to measure the KPIs in the SLA?
- How to agree and define the relevant indicators?
- Are they realistically achievable?
- Are they definable and quantifiable?
- Have we attached each indictor to an appropriate timescale?
- Are they objectively measurable?
Performance against KPI's is usually reflected by use of service credits. However, thought needs to be given to how these remedies are linked to KPIs and in what circumstances the service credits are going to be an exhaustive remedy. If a response time is missed once, a single monetary deduction might be appropriate but if it is missed ten times or if no response is given at all, the university would expect a more robust remedy. A sliding scale would be relevant in these circumstances.
It will be interesting to see how accurate AUDE's predictions for property costs and student numbers prove to be but what is certain is that the pressure for us to manage and adapt our existing facilities to meet new challenges is only going one way.