The seven signs of a dysfunctional service relationship.

Outsourcing facilities services has proven to be an effective strategy for owners wishing to reduce costs, streamline the managerial burden and increase the quality of these services. However, over time, business requirements and customer expectations change, while new service delivery technologies, new providers and changing environmental forces may necessitate the reexamination of existing partnerships.

While there are risks involved in changing service providers, in many instances it is worth the effort. Below are seven "Recompete Indicators." As a rule of thumb, when three or more are present, it's time to consider recompeting.

Incumbent performance has declined. Sometimes there is an obvious problem such as a reduction in work quality, increasing work order backlogs and reduced customer response times. In other cases, reasonable special requests are not being honored or performed in a correct and timely fashion.

Incumbent is no longer cost competitive. While a contract may have been best value when originally bid, several years of inflation-based price increases and insulation from competitive pressure can result in costs being well above current market conditions. If there is uncertainty about cost competitiveness, a benchmarking exercise can be an effective method of determining if costs are in keeping with current best practices.

Pace of innovation has dropped off. Once a new account is won, there is often a "buzz" in the service provider's organization and significant effort is devoted to transitioning the account, training and deploying people and implementing technology. Over time, these levels of time and attention drop off. Even if day-to-day performance is acceptable, if the service provider is not proactively bringing new technology, cost reduction initiatives, best practices and other innovations to the owner, it may be time for a fresh look at a new provider.

Scope of work is no longer appropriate. When a service contract is bid, significant effort is expended to carefully define the scope of services, as well as service level expectations. Over time, these requirements change as new facilities are acquired, new business functions are supported and existing facilities are reconfigured.

There is unreasonable fear of "damaging the relationship." Establishing open communication and rapport between customer and provider personnel is a key success factor in a new contract. However, over time these relationships may become so comfortable that the customer becomes reluctant to challenge the provider to deliver the best value available in the market for fear this will impinge on the "relationship."

Service provider doesn't have the skills to keep pace with new business initiatives. In today's market, there is an expectation that service providers will support a variety of new programs that require experience and technology expertise in order to successfully implement at a reasonable cost. If the service provider is struggling to keep up or always seems to be looking for guidance, it may be time to find a partner who has the proven capabilities in the critical areas now being sought.

A major change in sourcing strategy is being implemented. Revised expectations may drive a need to recompete even if the incumbent service provider is well liked. This gives the incumbent's senior management team an opportunity to fundamentally reassess their service delivery model to ensure it is best suited for a revised strategic direction.

Is it always necessary to change service providers? The answer is "no." In some cases, more modest interventions can achieve strong results, One alternative is to have a "summit meeting" with the service provider's senior leadership team. A high level meeting between senior leaders in both organizations can be used to reinvigorate the relationship and spark higher levels of performance. A second approach is to challenge the service provider with specific goals and targets, a strategy that can create focus in the service provider organization.

Carefully monitoring the performance of current service providers to determine if the "recompete indicators" are evident can result in a new outlook on outsourcing. If there are limited issues emerging, try one of the interventions mentioned above.

If three or more indicators are making their presence known, it's probably time to recompete existing service contracts.

MICHAEL REDDING 

DIRECTOR

UMS FACILITIES CONSULTING