Facilities Management Middle East
The Elusive World of FM Tenders and Contracts
PANELLISTS AT FM CONFERENCE CALL ON THE COMMUNITY TO RESOLVE FM CONTRACTUAL BIASES
The first panel discussion at the Facilities Management Middle East Conference 2021 was titled “The Elusive World of FM Tenders and Contracts”, which had Jennifer Peltenburg, Facilities Management Consultant, Tarek Nizameddin, senior executive director – commercial at Ejadah, and Mohamad Abou Laban, chief executive officer, Deyaar Facilities Management, as panellists.
Prabhakar Kesavan, regional general manager, Voltas – International Business Operations Group, who was the moderator of the event, started off by asking about the existing ambiguity in FM contracts, to which Abou Laban responded: “FM contracts are complex in nature. The RFP (request for proposal) is not written in a good way. Sometimes somebody copies it from a construction contract template. You need a proper FM consultant to actually draft a proper contract that has the relevant SLAs and KPIs.”
Abou Laban believed that clients need to be educated regarding this.
Nizameddin agreed that in principle there needs to be proper FM templates and that the FM community needs to come together. He said: “We understand that we are friends and we are competitive, but at the end of the day, we are from the same community. We can create a template, but how are we going to convince the clients to use this template? This is the challenge. Our role as FM service providers is to keep discussing and educating our clients on this subject.”
Kesavan acknowledged that it’s a challenge and he turned to Peltenburg on possible solutions. She said: “It’s one thing to actually win the business, it’s another to control that business, which means in my experience, if you don’t have a strong project manager or a facilities manager, you will ultimately lose. You need to have a facilities manager who doesn’t just understand maintenance or self-services, but also the full gamut in terms of commercials and contract management. We need to really start focusing on the facilities manager.”
Kesavan agreed and said: “I think improvement starts at home and we need to get our house in order, and
ensure we manage the contract and project correctly.” He asked further as to how one can go and educate the clients and try and get the contract templates modified to be more fair and equitable.
Abou Laban responded by saying that he has himself guided clients in drafting contracts and RFPs. “It helps a lot when you build a rapport with the customer. Personally I’ve always succeeded to put MCTs (minimum contract terms) agreed with the customer, because you need to cap the liability.”
Kesavan asked Nizameddin as to how he prices the risks into a contract. Nizameddin replied: “Each tender will have its own risk assessments. We try to understand if we can handle this risk or not; also some tenders are important for us to enter a new market or a new segment. All these elements are evaluated, and we have a risk evaluation metrics and the decision is taken based on this.”
With the aim of winning contracts, service providers will often undercut each other in the market. Kesavan asked if there was something that could be done collaboratively as an industry to reach common ground where certain basic terms are insisted by the FM industry collectively, so as to educate the client.
Peltenburg said: “I think there should be a collaborative effort in terms of having a minimum number of mobilisation days. Part of the negotiation [with clients] is often about mobilisation costs. Clients need to understand that it costs us a lot of money to recruit people, and purchase materials and vehicles. We all should look in terms of collaboration by saying that, for instance, any client should be paying 50% upfront.”
Relating to mobilisation, Kesavan pointed out that when FM companies are taking over from an existing service provider, one of the requirements is to attend to snagging works, and how would the best way to deal with that be, he asked.
Abou Laban said: “It depends on the size of the company. If you have a sizable company, you will have a separate mobilisation team that ensures carrying on the activities from project to project. If you have a smaller team, you need to have an SOP which is clear and you need to have also some people that have done the exercise more than once. The key thing is to have the right people doing the condition audit or doing the snagging by collaborating with the client, the incumbent or the previous service provider.”
Nizameddin added that the challenge today is a disconnection between the client operation and the client procurement teams. He elaborated: “The operations team write the technical side of the RFPs and give it to procurement and the client don’t get the technical team involved in the technical evaluation. They give them the minimum information just to qualify, disqualify or provide comments, but in many cases operations are not even involved in the discussion and negotiation. It is done by procurement, who are usually from construction background that follow the construction guidelines.”
It is important to look at FM as an investment as a protection for the assets, said Abou Laban. “You are in a building and you want the price to appreciate. A client might say that they have the DLP and so a facilities management company is not required. We have to explain to them that preventive maintenance is essential so that the warranties are not voided. So there’s an education process which needs to go on. We need to educate them and try to get his buy-in as early as possible. We should also find the right people to help in putting the right information in the RFPs. A good business development manager will go to the customers early on and try to influence as much as possible. The tender is for his benefit and the benefit of the other competitors as because it is FM-related. In the end, it’s a beneficial for the facility itself.”
Peltenburg concludes by saying that the general perception for FM is that “it’s money wasted”. And that needs to change, she said.
She said that the attitude in this region is “why bother to maintain when the building is looked at only for only 10-15 years”. She says: “If you go to Europe, it’s about maintaining the culture and the buildings. But I think things are turning around and UAE is no longer just a place in the Middle East, It’s becoming what a city should be and that needs to be preserved.”
YOU NEED TO HAVE A FACILITIES MANAGER WHO DOESN’T JUST UNDERSTAND MAINTENANCE OR SELFSERVICES, BUT ALSO THE FULL GAMUT IN TERMS OF COMMERCIALS AND CONTRACT MANAGEMENT. JENNIFER PELTENBURG, FACILITIES MANAGEMENT CONSULTANT