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Facilities Management Outsourcing: It’s Different from Other Business Process Outsourcing (BPO) Transactions

With facilities management outsourcing on the rise, we are seeing an increase in inquiries from customers about how to contract for these services. One question inevitably raised is, “What are the issues unique to facilities management outsourcing?”—i.e., the issues that you would not see in other business process outsourcing (BPO) transactions. Although, for the most part, the contractual framework and issues are similar across BPO transactions, the very nature of facilities management services requires the customer to consider certain additional issues and to heighten the focus on existing issues.

Typically, the facilities management outsourcer is visible to personnel who work at a particular location, with all levels of customer personnel knowing that a third party is “in the house” and responsible for managing and caring for functions that affect personnel on a daily basis (e.g., maintaining the building exterior, building access, heat and air, the cafeteria, and the fitness center). This visibility and high level of daily contact is one of the key differentiators for facilities management outsourcing that drives a shift in one’s contracting approach. Identified below are five of the top unique issues to consider when negotiating facilities management outsourcing contracts.

  1. The Communications Plan: As part of the engagement process with a facilities management vendor, customers should establish a plan for managing communication with the service provider and their own personnel. For more on this topic, check out a recent white paper from Information Services Group. Effective communication between the customer and the vendor, as well as with the facility occupants, is essential in a facilities management relationship.

  2. Performance Measurement: Another key issue that a customer must consider in a facilities management outsourcing arrangement is managing the expectations of personnel who are involved in the outsourcing, as well as those who will use the services. The customer’s personnel will expect that, at a minimum, the services will be of the same quality as those that were provided prior to the outsourcing. Customers should document the service provider’s duties in significant detail and clearly define and capture meaningful service levels, such as completion of maintenance activities on time, issue response times, heat and air efficiency, and availability.

  3. Handling Issues and Complaints: In a typical outsourcing environment, there are processes for receiving, tracking, and responding to issues and complaints. For facilities management outsourcing, these processes are often enhanced to cover a broader number of service recipients. The outsourcing customer should consider documenting a clear, results-driven process with the facilities management service provider to quickly escalate and resolve performance issues. Most issues relating to facilities management services require quick response times and cannot wait until periodic performance review meetings to be resolved.

  4. Confidentiality: Because of the pervasive on-site presence of vendor personnel required to provide facilities management services, vendor personnel will have access to a customer’s confidential information. The customer should consider requiring the vendor (and its personnel) to commit to extensive obligations that outline how to handle such information. In addition, a customer that undertakes a facilities management outsourcing arrangement needs to prepare its own employees by training them on how to protect confidential information (such as clean desk rules).

  5. Insurance: Insurance issues in facilities management outsourcing transactions are unique, again, because of the access that vendor personnel will have to a customer’s facilities and assets. Customers should work closely with their insurance and risk-management representatives to consider the appropriate allocation of responsibility with respect to facility and property damage, the risk of loss and/or personal injury, and the appropriate types and amounts of insurance that the vendor (and its agents) should carry.

Copyright © 2019 by Morgan, Lewis & Bockius LLP. All Rights Reserved.


About this Author

Vito Petretti, Morgan Lewis, Technology Lawyer

Vito Petretti’s practice focus is technology and outsourcing matters. Clients regularly turn to him to draft and negotiate domestic and international outsourcing service agreements for a variety of business processes, such as information technology, finance and accounting, human resources, and procurement. Within the realm of information technology, Vito drafts and negotiates agreements for software licensing, hardware purchases and leases, data licensing and subscriptions, website hosting and development, and other technology-related agreements, including system...

James Sherwood, Morgan Lewis, Corporate lawyer

James R. Sherwood brings a background in auditing to his legal work on business matters such as mergers and acquisitions, joint ventures, spin-offs, and strategic alliances. He is part of a team that also handles matters involving finance and restructuring, tax, and securities, including public and private equity and debt offerings. Their clients range from Fortune 500 companies to investment banks to emerging market companies. Prior to attending law school, James was a senior audit assistant in the audit and enterprise risk services group at Deloitte & Touche.