Facility management: taking care of business

Written by: Jason Hovet, David Friday
Photo by: Tomáš Kubeš

Facility Management (FM) has come a long way in the past five years. As FM providers have found the most work in office buildings and retail centers, the business is looking at new markets, which will take FM to industrial zones, government sites, and company boardrooms.

Zbyněk Passer

“FM IS IN A DIFFERENT SITUATION today and the know-how is growing,” observes Zbyněk Passer, marketing director of PasserInvest, one of the largest domestic developers. “Only three years ago, when holding meetings, most providers were only in the basic mode.” Now service levels in the industry are quite higher. Included in this is the human touch – meaning the employees who clean and maintain the property grounds. “The human qualities are growing,” Passers says. Paul-Eric Jarry, CEO of Optimal Facility Management, is reassured by this. Optimal operates around central Europe, and Jarry confirms “that the professionalism and commitment of workers here is excellent.” The company’s internal training programs, coupled with promotion opportunities, is having an effect on employees. “The practical result,” Jarry believes, “is a very low employee turnover rate.”
For all FM’s progress, its size here still doesn’t compare with EU neighbors, where FM started finding its feet at the beginning of the ’90s. “The most developed markets are in Great Britain and Scandinavia,” says Bohuslav Kyjánek, director at AB Facility. By comparison, he believes the Czech market is only about a fifth the size. “This means the potential here is very high,” he points out. That potential depends on clients, however, and not all are completely open to outsourcing FM, yet.

The outsourcing question
” For a developer, if they own a few buildings, it could make sense to have their own team,” opines Mervin Murray of Lordship, a leasing agent. “If there’s only one building, it is usually more advantageous to have someone do all FM instead of hiring and training people yourself.” However, the Lighthouse Vltava Waterfront Towers, which opened late last year, went in a different direction, opting to manage their own single building through a single manager. “We originally didn’t want to do it in-house,” says Jan Lovětínský, the towers’ marketing manager. In the end, he explains that they were able to get someone who was experienced enough to handle everything. Likewise, the many buildings at BB Centrum, run by developer PasserInvest, are operated by a combination of in-house and outsourcing. The latter accounts for the technical side, like energy. Their own team handles property upkeep. “We know our buildings best,” Passer notes.
On the market, this isn’t uncommon as many FM providers remain specialized. But as the clients’ needs increase, many firms are expanding their services to meet the need. Danube House, which opened early last year and is part of the expanding River City complex, chose Centra to manage the building. Besides the physical maintenance and administration duties, Centra can also provide transport, laundry, real estate services, and more. At Danube, however, Centra outsources security and technical FM, and concentrates on maintenance and administration. There’s a third area it works on, which is client relations. “This is an important part,” says Ondřej Fukal, Centra’s director in the FM division. “Every issue is unplanned and we act as a go-between [for the tenant and leasing agent].”
The idea behind FM is to allow clients to “concentrate on their core business” – a line often uttered by FM providers. “If you have a satisfied customer you don’t hear from them,” says Jana Vlková, commercial director at PBW Czech Republic. “The most common request is just to have an undisturbed operation; they don’t want to have to solve technical problems.” PBW – whose main priority is the commercial and administrative side of the business – is in a unique situation being a joint subsidiary of PBW Real Estate Fund, which owns Myslbek and IBC building, and parent company of Praha Facility Management (PFM), which handles technical maintenance at those buildings and others.
While FM in office buildings – or even a shopping center – can prove a challenge, it can be more difficult when a business needs to operate multiple sites. Take Carrefour. In 1998 it cooperated with Optimal when it was constructing a hypermarket in Ústí nad Labem. Today, Optimal manages all the technical equipment in Carrefour hypermarkets in the Czech and Slovak republics, and has helped cut energy consumption and costs by 15% and 20%, respectively. Optimal’s Jarry thinks more companies are seeing “that an FM supplier is a fantastic tool to improve performance.” For example, centralizing operations through one team is a big plus for processing and tracking data. “The main advantage for every multi-site client is that everything is generated by scale,” says the director of Optimal, which handles technical maintenance for (among others) more than 300 Česká spořitelna branches.

The next level
Currently, FM in office and retail is the most developed segment of the market. The area with the greatest potential, though, operates on another level. “The industrial field is certainly the next high growth FM market,” says Jarry, “but isn’t as mature yet.” Industrial FM brings new worries. Centra’s Fukal contrasts the two fields by explaining that if water is leaking on a desk at an office, the desk can just be moved and work goes on. However, if water is dripping on a machine in a factory, the machine needs to be shut down and moved, the leak fixed, the machine moved back…which costs a company valuable production time. Kyjánek, from AB Facility, looks at it similarly. “In industrial zones, a mistake in providing services can mean a drop in production,” he warns.
His company knows well the difficulties in industry. AB Facility provides complex FM to a 42-hectare site in northern Bohemia that houses Mondi Packaging Paper (formerly Frantschach Pulp and Paper), along with 15 other companies. Complex FM is just like it sounds: the company handles more than 80 services from fire and emergency – a major concern at industrial sites – to personal, administrative, economic, and technical services. “Every industrial area, including in this one, has high standards for security and environmental protection,” Kyjánek says. “Our execution has to be 100%.”
Kyjánek further notes that differences in production can be another complication. “FM for industry is totally different than for offices because of the different customer preferences,” says Radka Motlochová, the marketing manager of Okin Facility. Okin won a “project of the year” award, given by the Czech chapter of the International Facility Management Association (IFMA), last year for its work in the factories of Adast, a manufacturer of printing machines. As the main partner, Okin not only provides FM services, but also deals with other external FM suppliers and is implementing a new reporting system, all helping to cut operating costs by 20%. Motlochová, too, sees the opportunities in industrial FM. “Outsourcing of support services in industrial areas is only at the beginning,” she predicts.
Industrial FM isn’t the only growth area for the future. “In terms of volume, we believe the market will expand in areas such as industry and government services,” Optimal’s Jarry predicts. While the government isn’t traditionally a big user of outsourcing, opportunities are appearing (see sidebar, p. 40). According to Ondřej Štrup, the corporate facility manager at Skanska and founding president of the Czech branch of IFMA, more people are now recognizing FM’s value. “It’s starting to be in fashion,” he says. Raising FM’s profile here has been IFMA’s job, and it’s carried it out by communication and education – even some universities now offer courses. EU entry has also helped, and EU norms are currently being worked out in Brussels. “This will be useful as a benchmark,” Štrup remarks, “so clients know what they are getting.” This is welcome news, especially when clients are becoming more demanding, as Jarry explains: “Quality wise, the quest for performance has just started. We reckon that the increasing concern with costs will lead FM operators to sophisticate their offer and adapt it to every client’s specific profile.” Therefore, more emphasis will be put on balances between capital and operating expenditures. “This is a big challenge,” Jarry admits, adding that not all providers will be up to it.

Money from nothing Bohuslav Kyjánek While many companies concentrate on updating technology in their production equipment, not as many worry about their energy technology. THAT COULD CHANGE however, as Energy Performance Contracting (EPC) starts to gain steam. “EPC is still relatively new in the Czech Republic and is used far less than in other countries like Germany or Austria,” says Bohuslav Kyjánek, director of AB Facility, which has the country’s largest energy performance contract with Motol Teaching Hospital. In EPC, both parties share the energy savings, and savings are also used to finance the modernization of energy equipment. Currently this type of contract works best with public enterprises, like hospitals and schools, which have tight budgets. What helps is that there generally is no initial investment, which, according to Miroslav Marada, of MVV Energie, eliminates some of the financial risk. Up to now, MVV has concluded 26 contracts, all long-term, six of which are with industrial concerns – although these make a 47% share by value – with the rest in healthcare and schools. In total, Marada says, the contracts are worth CZK 300 million but have generated savings of CZK 750 million. Siemens also offers EPC and has 15 contracts today, mainly with schools and health centers, notes division director Dušan Bakoš. Public enterprises, he estimates, make up 80% of the market. The biggest public contract currently is Motol Teaching Hospital, which AB Facility and ECM Facility cooperate on. From a CZK 100 million investment, the companies expect to save Motol CZK 160 million over eight years. This is an advantage private companies are also starting to see. “The proportion of private customers is growing,” Bakoš says, adding that contracts for private clients are shorter, usually around five years. This is being helped by firms – especially in industry and manufacturing – wanting to make operations more effective. “It is obvious that need for investment into energy saving measures and technologies is growing,” Marada says and concludes, “this should increase interest for EPC.” Jason Hovet

Start to finish – and beyond Ondřej Strup After years of lobbying, Prague was finally selected in 2003 to host the International Facility Management Association’s (IFMA) annual conference. For Ondřej Štrup, the Czech branch’s founding president, it just proves the country’s potential in FM. “[The conference] showed we are interesting for FM providers,” he says. The REAL TASK now is how to make FM interesting to companies. The future could mean moving FM from a strictly operational role – as it’s seen now – to more of a strategic role. “Right now you’re just a fireman putting out fires and doing only what is needed,” Štrup comments. His hope is to get decision-makers to start looking at the company real estate differently and to involve facility managers in planning, such as for relocations or expansion. “You must have a strategy for your space,” Štrup believes. That strategy can even begin at a building’s conception. “Currently an architect is doing the work of a facility manager,” he says, explaining that including a facility manager early on can save a few headaches later. One solution may be prime contracting, which is a new idea here and still relatively young in western Europe. Štrup believes this is a way to move facility management into the construction process. Defined as “a systematic approach to the procurement and maintenance of buildings,” prime contracting is simply creating a team that deals with subcontractors and has overall responsibility for projects. The idea is to replace contract-driven, short-term projects with a multi-project team in order to create better relationships with contractors. This then should help lower construction costs and better forecast maintenance and energy costs. Prime contracting is still in a testing phase in much of Europe, with no projects yet started in the Czech Republic. One example is the British Ministry of Defence, which awarded five regional contracts for FM on its sites around the United Kingdom starting in1998. In Scotland alone, the team integrated more than 40 contractors on 21 core and 300-plus small sites, which boosted cost efficiency by 30%. How soon a project like this will be here is not known. But most FM providers know that public sector projects, such as FM at Czech army bases, would be a lucrative contract. Says Centra’s Ondřej Fukal, “There’s a huge amount of potential there.”