By Kingsley Adegboye

Against the backdrop of the current economic realities of the country which has compelled most business owners to adopt belt-tightening approach, the Managing Director of Alpha Mead Facilities & Management Services Ltd (AMFacilities), a Lagos-based facilities management firm, Mr. Femi Akintunde has advised businesses to embrace a long term approach to facilities management contracts.

According to Akintunde, organizations that adopt this approach will be able to manage their maintenance cost and hedge against the eminent price fluctuations without being hard hit by the prevailing market conditions.

Akintunde who was analysing some of the key national economic indices and how they will affect the real estate and facilities management industry in 2016, advised organizations seeking to pursue cost-cutting programmes by reducing maintenance budget to think of long term approach, because, according to him, “the excitement of cheap service goes long before the pain of poor quality”.

Pointing out that the current market conditions have compelled most businesses, including facilities management firms to embark on stringent cost frameworks, he said “This is not the time to begin to structure short term contracts because you want to cut cost. Cutting cost by engaging in short term contracts is not sustainable. “It is only a matter of time before the pains of poor quality catches up.

“Rather, this is the time to sit with your FM service provider and have a partnership approach to business. Having a long term view of your maintenance cost is one of the ways to hedge against the market this year. Organizations with short term views will not only spend more this year due to imminent price fluctuations, they will also spend the next three to four years incurring additional cost, due to the high rate of deferred maintenance they are accumulating now”.

Explaining that structuring long term contracts has lots of advantages for the businesses and FM providers, he noted that this gives the FM providers comfort to invest in building capacity, explore economy of scales, and seek alternative ways of adding value to the business.

“Yes, this is the time where organizations must seek ways of responding to our current economic realities. But it is also a time organizations must focus on their core business, rather than focusing on structuring short term FM contracts or pursing cost reduction without recourse to quality or efficiency of service.

“Imagine a situation where an organization is expending executive time every month to review facilities management cost, when its competitors are in the boardroom thinking of how to get the largest part of the small pie in the market. 2016 is not a year when any business can afford to be distracted. My advice is, focus on your core business to drive revenue. Let your FM provider handle how to reduce your operating cost.

“Business owners need to understand that long term contracts are not cast in stone. The fact that it is long term does not mean it cannot be reviewed if either of the parties is not meeting the stated obligations. Long term contracts only give comfort to the contracting parties. For example, when an organization gives you long term contract, as a facilities manager, it gives you comfort to invest in building capacity that will serve the organization for long, and you will really strive to understand the business. But if you have a two or three year contract, or even one; like some companies do, it is likely for you to do touch and go because the time is too short, and you don’t know if you are going to be there tomorrow”, he noted.

Akintunde therefore urged FM professionals to earn the trust of the market by delivering real value,insisting that facilities management professionals must seek ways of building capacity that can show real value to the customers. He said this is not the time to compete with price, stressing that FM organizations looking to compete with price will hurt themselves this year, because what the market requires is not low price.

“Low price cannot deliver to the level of sophistication the market demands today. What the market requires is efficient and quality FM services that can help them perform optimally and improve the life cycle of their assets. If you manage a generator at low price for example, you will not be able to service it at the right time and that will affect the asset life-cycle cost.

“But if you can show the customer how your FM process will help him get the required 10,000 hours out of his generator, he will appreciate you better than when you price low; and a generator that is supposed to deliver 10,000 hours ends up packing up at 4,000 hours. The customer has already lost 6,000 hours on the generator and has to also bear the huge cost of replacement. No customer will appreciate you for that. They will forget that you priced low and blame you for inefficiency” Akintunde explained.