Electrical contractors regard outsourcing with some measure of uncertainty. The concept can be both controversial and polarizing. However, outsourcing in contracting should be considered as something positive instead of negative.
Outsourcing is an area from which contractors can benefit, if they understand it. It has gotten a bad name in the media, but the outsourcing that is negatively reported mainly deals with the IT industry such as computer programming, customer service functions and software development (think Dell Computers and call centers based in India. In cases such as Dell's, the practice is sometimes referred to as “offshoring.”) Services that are outsourced to countries outside of the United States are a sore subject among many and open for a whole host of debates.
But, in our industry, the outsourcing concerns services-building services. Though it is not as controversial as the other type, it does have its own fair share of opponents. Mainly, those who are against the practice work for a company in the role of on-site technician, maintenance worker and the like. Outsourcing moves many of these functions, and hence the personnel positions themselves, to outside firms, making such full-time positions unnecessary.
Outsourcing is best used in facilities operation and management. According to numerous reports, outsourcing allows for lower facilities costs and less downtime. If this sounds somewhat familiar, it should. This is the same argument used in the world of preventative and proactive maintenance. In fact, system and whole-building maintenance is something quite common in both outsourcing and out-tasking; it is an area in which contractors have a long-standing history. One can almost think of maintenance as a precursor to the entire outsourcing craze. And to think, contractors have been doing this for quite a few years, all the while not knowing that they were onto something big.
Businesses continue to seek outsourcing arrangements because it helps them properly maintain and operate their facilities, which allows them to concentrate more on their core areas of business. When examined in this context, the practice makes business sense.
The market overall
In attempting to understand outsourcing, we must learn what actually is behind this movement.
Facility management is perhaps the best place to start logically. Facility management (FM) is the umbrella term that covers all of the individual components. The FM market is large; estimates place the total market at around $188 billion in 2002. But what the do the numbers actually mean for contractors?
From that figure, 23.1 percent ($ 43.4 billion) is out-tasked, while another 6.6 percent ($12.4 billion) is total FM outsourcing of which electrical makes up a large portion. Reports also state roughly 61,000 electrical contractors are involved in outsourcing, in one way or another.
IFMA, the International Facility Management Association, began tracking outsourcing in 1993. Some of the findings help contractors better understand not only the concept, but also how outsourcing and out-tasking fit into the industry. The last study was conducted in 1999, though IFMA notes the information remains relevant.
Outsourcing vs. out-tasking
The terms “outsourcing” and “out-tasking cause confusion. Though similar, they make up completely different market aspects.
Nigel Poland, managing director, CB Richard Ellis, Global Corporate Services, said, “There is a lot of confusion about outsourcing currently, and there needs to be a differentiation between outsourcing and out-tasking. Out-tasking is when a company subcontracts a specific task such as janitorial services or electrical maintenance to a service provider. Outsourcing is, in my view, when an organization delegates the management of a function or group of tasks to a service provider such as providing facilities management services, which include the management of janitorial, landscaping, operations and maintenance, and other support functions within an organization's portfolio.”
For companies such as CB Richard Ellis, outsourcing and out-tasking play a large part in their businesses, since they take on a comprehensive, whole-building role. Contractors can find opportunities in both outsourcing and out-tasking since the enormous FM market uses such services on a routine and ongoing basis.
Getting in the game
To get into the outsourcing game, approach both large and small facility management companies. Poland said, “As an outsource provider, CB Richard Ellis manages other companies to provide many of the tasks that we are responsible for, including providing specialized electrical maintenance and installations. In addition, we work with companies across the world in providing project management services that typically include a significant electrical component. Much of this work is contracted at a local level within specific accounts and we also maintain national relationships with qualified providers.”
The local-level component seems to be the key, especially for contractors. Christine Duffy, manager, marketing programs, Linc Facility Services LLC, said her firm is “happy to entertain bids” from interested contractors. Duffy confirmed that facility management companies generally will never perform services beyond their scope of expertise, and this usually includes all things electrical. Projects and services, such as electrical system installation, comprehensive system repair and annual inspections, are all items that are out-tasked to companies like electrical contractors, mainly because they understand the industry.
Whenever specialized services or licenses are required for the work, as in electrical services, FM companies will seek out qualified candidates within that market. Contractors can find themselves in demand, especially if the FM firm in question does not have many other options. Companies such as CB Richard Ellis and Linc Facility Services routinely bring in contractors to perform work.
Most facility management companies employ a database that lists all available contractors. A phone call to a local FM office expressing interest could get one included in the database. Sometimes the process is more involved, similar to becoming a vendor.
Though many FM firms have on-site personnel devoted to the facility, and many perform routine maintenance functions, there are still opportunities for contractor involvement. One of the most notable sentiments, in relation to working with facility management companies, is that contractors need to view the partnership as just that. Trust becomes a factor and it becomes apparent that contractors dealing in such scenarios are more than just simple vendors.
Because FM firms are essentially in charge of an entire facility-or even an entire company-and the required operations, it is something that is both critical and important. Thus it makes sense why the FM in charge would need to be both confident and comfortable with their chosen out-taskers. Contractors, especially those that specialize in various systems, including low-voltage in addition to electrical, can find themselves playing a fairly significant role in FM contracts.
To be continued
Those within the electrical contracting industry agree that outsourcing appears threatening, but that sentiment is beginning to change. Mainly, it is market acceptance that is allowing this attitude shift toward outsourcing as the practice gets more popular.
By understanding what the market is and how a contractor can fit in best, everyone involved can begin to feel more comfortable operating in this scenario. Perhaps the best way to make the situation work to the contractor's advantage may be to understand this is just another source of revenue.
Many companies are opting for FM arrangements so they can turn to a sole source provider for all of their facilities needs. Comprehensive FM agreements cover basically everything within the confines of a building. This includes janitorial services, grounds maintenance, landscaping, billing, etc. This is in addition to those areas that contractors are involved in, such as installation and repair for electrical, security, fire alarm, life safety and communication systems.
Many businesses begin the process by out-tasking a few items at first, with the ultimate goal of outsourcing the entire facility at some point. Because of this, contractors may have been involved in the facility's upkeep and operations at one point, only to have the contract taken away and incorporated into a total FM arrangement with an FM firm. This is why contractors need to get to know the FM firms in their operating areas.
Outsourcing can assist contractors by providing a steady stream of opportunities. The first step is to understand the opportunity itself. A contractor's dedication, knowledge and past performance will help lead the way. EC
STONG-MICHAS, a freelance writer, lives in central Pennsylvania. She can be reached at JenLeahS@msn.com.