How To Make Outsourcing Work

When I speak at the annual NFMT Conference & Expo and it comes time to answer questions from session attendees, someone inevitably asks my opinion on outsourcing maintenance. As a typical consultant, my response has always been the same: “That depends.” Before I can answer the question, I need to ask several questions first.

What is the motive to outsource? What are the current in-house skill sets? Are you looking for cost reduction, labor savings, or skills availability? The ability to contract out maintenance activities effectively and efficiently has always been a struggle for maintenance and engineering managers.

The number one reason for outsourcing maintenance is cost savings, according to a recent survey of managers. Let’s be crystal clear here: Outsourcing maintenance does not save money. What managers are trying to achieve by contracting maintenance is a balance between costs and service that optimizes operations. If outsourcing maintenance is successful, managers will reduce their maintenance expenses or avoid costs by employing someone with more expertise and skills.

Two types of maintenance 

How can managers truly reap the return of the decision to outsource? The first step is to break down facility maintenance into two categories: commodity maintenance activities and skilled maintenance activities.

Commodity maintenance activities. As a homeowner, I have expectations related to the upkeep of my residence. I cut my own lawn, do the gardening, trim the bushes, clear leaves, and keep the place looking acceptable. When I use my leaf blower, I make sure all the leaves are off the lawn. When the driveway requires snow removal, I make sure all the snow is off the driveway. I change the oil in my truck and check the fluid levels.

None of these lawn care tasks requires a specific skill. If I need to, I can locate a service in the area to perform them. I can find a snow removal service, and I can take my truck to a service station to have them change the oil.

My point here is that managers can easily outsource certain facility tasks that don’t require a specific skill set or training in order to utilize in-house maintenance technicians more effectively.

Does it make sense to outsource these types of commodity services rather than use internal resources? I would consider cost a major factor when sending out requests for proposals (RFP) because the consequences of performance can be fairly easy to rectify.

When crafting the service level agreement, managers should include an evaluation process using best value proposition, which considers factors that include scope of work, qualifications, expertise, schedule, and a quantifying quality measure, such as references or visiting other facilities or operations with whom they currently contract.

Skills-based maintenance activities. When I refer to skilled maintenance, I’m looking at skilled labor and taking inventory of current multi-craft technical maintenance skills in mechanical systems, electrical distribution systems, hydraulics and pneumatics, welding, machining or fabrication, and carpentry.

The goal for managers who are considering outsourcing maintenance is to balance costs and service in a way that optimizes operations. When this process succeeds, managers can reduce maintenance expenses by employing a contractor with more expertise and skills than in-house resources can provide.

Technology issues

In recent years, equipment and technology for institutional and commercial facilities have seen tremendous innovations. Consider the improvements in building information modeling (BIM), Internet of things (IoT), HVAC systems, drones, condition monitoring, and remote monitoring. And don’t forget the advances in computerized maintenance management systems (CMMS)

Unfortunately, indications from organizations are that all this new technology goes largely underused in many cases. As a result, the performances of front-line maintenance and engineering technicians suffer because of their ability or knowledge to use the technology effectively. Given the fact that technicians are responsible for this new and complex technology, it’s no wonder that a lot of organizations are looking to outsource.

In this case, I would not look solely at costs. I also would consider several other qualifying criteria. In an article I wrote for Facility Maintenance Decisions in June 2020 — “Outsourcing: The Inside Story of Contracting Maintenance and Engineering Tasks,”  — I mentioned that managers should study external factors when considering outsourcing.

These factors include the scope of service required, the experience of the contractor, and key performance indicators (KPI). By understanding the skilled maintenance activities involved in the scope of work, managers can identify potential contractors and their relevant experience, and of course they can measure contractor performance against agreed upon indicators.

A contract service provider can offer skilled services that managers might not be able to provide using in-house technicians. Many contractors offer a full range of maintenance and engineering services and can wrap several possibilities together under one contract. These bundled services can make managing the process much simpler and more convenient, rather than forcing managers to oversee a full staff and deal with human resources responsibilities. Basing the decision to outsource skilled maintenance activities on the lowest cost will cost you.

KPI considerations 

One absolute for successful maintenance and engineering outsourcing is to establish a baseline of true maintenance costs. You will not be successful unless you understand your true costs. If you don’t have accurate and validated costs, then you will be comparing apples to cumquats.

Don’t forget KPIs, whether internal or outsourced. Measuring performance against KPIs is a key part of any outsourcing strategy. We’ve all heard the saying, “What gets measured, gets done.” When it comes to maintenance and engineering management, managers can use numerous KPIs to measure performance or service. They include the cost of maintenance by either internal or subcontractors to asset performance, asset reliability, quality, response time, service levels, complaints, etc. Whether it’s skilled or commodity outsourcing, it’s important to have the right measures in place to manage the service providers.

Finally, here is an actual story about an in-house grounds crew that demonstrates the complexity — and sometimes the absurdity — of outsourcing decisions. I arrived at a facility several years ago and noticed that about a dozen men were outside using gasoline trimmers to cut the lawn. I assumed they were using trimmers because the mowing equipment normally used was out of service or some such reason. But there they were, using trimmers to maintain the facility’s lawn. When I asked why they were doing this, the answer stunned me.

The previous year, a person using the riding mower tipped over and was injured. The response to the accident from the organization’s insurance company was that if they continued to use the riding mower, the insurance premiums would increase significantly. As a result, corporate made the crew start using trimmers.