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More money for health, schools and care

There is a big difference between public and private sector regarding FM service procurement in the Nordics, apart from in Denmark, where several public bodies are now conducting tenders like the majority of the business community, adopting an integrated approach.

To Jacob Dohn, Coor Service Management's Head of Business Development in Denmark, it's a matter of simple arithmetic. Competition brings better quality and greater efficiency, and the same applies to support services like cleaning, property care, security/guarding, staff restaurants and energy issues.

"We also know that it's more effective to coordinate support services and run them on an integrated basis. Coordination means there's more money left over for public sector's core issues like health, schools and care," commented Jacob Dohn, Head of Business Development at Coor Service Management Denmark.

A growing population, longer life expectancy, higher quality standards and limited budgets mean public bodies, municipalities and county councils face a major challenge. By outsourcing support services, they can make big savings and quality improvements become achievable. Unutilized outsourcing potential of 75% in the public sector is highly significant in this context.

"Greater efficiency, improved quality and innovation are high on public sector agendas, which all favor outsourcing. But there are also opposing forces. Obviously, the legislation regulating public tenders is one, although in itself this doesn't obstruct decisions to outsource. In some contexts, the political dimension is very clear, and in such cases, rational considerations sometimes take a back seat," continues Jacob.

I fully understand that there’s some uncertainty surrounding outsourcing. However, it’s important to distinguish between public sector core operations and support functions.

Jacob Dohn, Head of Business Development, Coor Service Management in Denmark

In certain circles, suspicion of outsourcing is also widespread. Many people find it difficult to draw a line between core operation and support functions, and view it as their mission to run everything in-house.

"I fully understand that there's some uncertainty surrounding outsourcing. However, it's important to distinguish between public sector core operations and support functions. Every municipality, county council and central government authority has a duty to optimize its core operations, and they can do this better if they outsource responsibility for support functions to a service expert," adds Jacob.

The current purchasing patterns of a lot of public operations often involve purchasing single services from different external providers. But in recent years, several Danish authorities have decided to procure integrated solutions: the Danish Police Service and DR (Danmarks Radio) have conducted much broader-based tenders, covering a raft of support services, as well as Danish Defense, which tendered for a large, but somewhat more defined, services portfolio.

The common denominator for these tendering procedures is that feasible potential suppliers are involved early in the process with the aim of designing tenders that fit the market as well as possible. In this process, providers of integrated and single services are approached. This meant that competition was intense, simultaneous with the number of subsequent ambiguities and questions being minimized.

Outsourcing involves significant change for the parties involved, so everyone needs to be committed early in the process. Commitment is something Jacob Dohn often returns to.

"Our experience tells us that getting an early commitment is a decisive parameter for countering reluctance when you set to work. We've seen clear examples of those parties that prepare for early commitment also getting better support from the affected parties."

One reason for outsourcing failures is insufficient or inadequate partnership. Joint letters of intent should be signed back at the agreement phase, as well as clarifying collaboration partnership models that define decision and discussion forums with clear mandates from management down to operation level.

"There are more and less professional players in FM, just like any other sector. Unfortunately, there are lots of tendering processes that focus excessively on price. That's a shame, because pricing isn't the same as quality and taking responsibility. If the public sector is to succeed in tendering processes, they should focus more on factors like follow-ups, safety, environment and quality," concludes Jacob.

dohn

Jacob Dohn

Senior Vice President, Business and Operations Development

+45 2922 6568

Jacob.Dohn@coor.com