ISO/TC 267

ISO/DIS 41012:2026(en)

Date:2025-12-09

Secretariat: (BSI)

Facility management — Guidance on strategic sourcing and the development of agreements

Facility management — Recommandations relatives au processus d'approvisionnement stratégique et d'élaboration des accords

© ISO 2026

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Contents

Foreword 3

Introduction 4

1 Scope 1

2 Normative references 1

3 Terms and definitions 1

4 Sourcing strategy and understanding the core business context 2

5 Strategic sourcing process in FM 7

6 Facility service provision 17

7 Main characteristics of FM agreements 21

8 Common considerations in agreements 23

9 Procurement phase 24

10 Implementation phase 25

11 Operational phase 26

12 Measure performance of service delivery 27

Annex A (informative) Example of requirements for a service 29

Annex B (informative) Example of business case content 31

Annex C (informative) Structure of an agreement — General clauses 33

Annex D (informative) Service level agreements — Benefits, preparation and structure of an agreement (SLA clauses) 48

Annex E (informative) Price and rate mechanisms 59

Annex F (informative) External Procurement for FM services 61

Bibliography 68

Foreword

ISO (the International Organization for Standardization) is a worldwide federation of national standards bodies (ISO member bodies). The work of preparing International Standards is normally carried out through ISO technical committees. Each member body interested in a subject for which a technical committee has been established has the right to be represented on that committee. International organizations, governmental and non-governmental, in liaison with ISO, also take part in the work. ISO collaborates closely with the International Electrotechnical Commission (IEC) on all matters of electrotechnical standardization.4

The procedures used to develop this document and those intended for its further maintenance are described in the ISO/IEC Directives, Part 1. In particular the different approval criteria needed for the different types of ISO documents should be noted. This document was drafted in accordance with the editorial rules of the ISO/IEC Directives, Part 2 (see www.iso.org/directives).

Attention is drawn to the possibility that some of the elements of this document may be the subject of patent rights. ISO shall not be held responsible for identifying any or all such patent rights. Details of any patent rights identified during the development of the document will be in the Introduction and/or on the ISO list of patent declarations received (see www.iso.org/patents).

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This document was prepared by Technical Committee ISO/TC 267, Facility management

Introduction

The International Standards on facility management (FM) developed by ISO/TC 267 describe the characteristics of facility management and are intended for use in both the private and public sectors.

NOTE The terms “facility management” and “facilities management” can be used interchangeably.

International cooperation in the preparation of these International Standards has identified common practices that can be applied across a wide variety of market sectors, organizational types, process activities and geographies, and their implementation will help to:

— improve quality, productivity and financial performance;

— enhance sustainability and reduce negative environmental impact;

— develop functional and motivating work environments;

— maintain regulatory compliance and provide safe workplaces;

— optimize life cycle performance and costs;

— improve resilience and relevance;

— project an organization’s identity and image more successfully.

FM and related goods and services support the achievement of core organizational activities and objectives. The purpose of this document is to enable organizations to identify and select the most appropriate resources for the design, sourcing and delivery of FM.

This document provides guidance on the overall strategic sourcing process and on how to prepare and implement adequate internal or external FM agreements. The Figure 1 below provides an overview of the logical sequence of this document.

Figure 1 — ISO 41012 logical sequence

This document also provides guidance on:

— types of agreements;

— development, structure and contents of agreements;

— clarification of definitions, where appropriate.

This document promotes a methodology from a strategic level to an operational level, with examples and check lists. The application of this sourcing approach is intended to contribute significantly to adding value and optimizing costs of operations for FM professionals and procurement, finance and senior management teams.

Annexes A and B give examples of requirements for typical services and a business case. Annexes C and D provide general and specific clauses and structured checklists for typical agreements. These annexes facilitate the selection of important clauses and preferences in the development of agreements, which allow for differences in origin, purpose and jurisdictions / national rules and regulations, and are based on a generic platform.

This document covers general demand organization requirements and the FM should apply this standard within their own context. Not all information in this document will be applicable to every FM process or agreement.

In this document, references to “agreement”, “service” or “service provider” are specific to FM and facility services agreement, facility service or facility service provider (internal or external). Any reference to a single service can also include multiple services.

Facility management — Guidance on strategic sourcing and the development of agreements

This document provides guidance on sourcing and development of agreements in facility management (FM). It highlights:

— different sourcing strategies and considerations to determine the best for the demanding organization;

— essential elements in FM sourcing processes;

— FM roles and responsibilities in sourcing processes;

— development processes and structures of typical agreement models.

This document is applicable to:

— strategic processes related to service and support functions for the core business;

— development of FM strategies;

— development of facility service provision agreements covering both public and private service demand and internal and external production/delivery options;

— development of FM information systems;

— FM education and research;

— organization development and business re-engineering processes in major types of working environments (e.g. industrial, commercial, administration, military, healthcare, accommodation).

The following documents are referred to in the text in such a way that some or all of their content constitutes requirements of this document. For dated references, only the edition cited applies. For undated references, the latest edition of the referenced document (including any amendments) applies.

ISO 41011, Facility management — Vocabulary

For the purposes of this document, the terms and definitions given in ISO 41011 and the following apply.

ISO and IEC maintain terminological databases for use in standardization at the following addresses:

— ISO Online browsing platform: available at https://www.iso.org/obp

— IEC Electropedia: available at https://www.electropedia.org/

3.1

Strategic Sourcing

The process undertaken by the DO to come to a strategic decision about the nature of FM service delivery.

3.2

Key Performance Area

Core activity domains that contribute significantly to achieving strategic objectives.

Aligning the structures and delivery of FM and support services provision with the demand organization’s business strategy is critical to successfully achieving core business objectives. It is important that the FM organization analyses the demand organization’s strategy. An effective sourcing process is important to achieve that objective.

Criteria that can have an impact on sourcing strategy include, but are not limited to:

— the competitive environment;

— value drivers (including cost/benefit analysis);

— the need for resource flexibility;

— business risk;

— reliability of supply chain / risk of over-reliance on single suppliers;

— operational characteristics;

— operational interdependencies;

— availability of in-house FM expertise;

— the availability and capability of various supply options;

— corporate policies;

— Regulatory/legal compliance requirements;

— organizational culture and management style;

— reporting requirements and management information systems;

— DO objectives on a strategic and operational level;

— innovation;

— corporate and real estate strategy;

— FM strategy;

As most organizations live in an environment of dynamic change, these sourcing processes should be reviewed regularly and at all times be closely linked to the organization’s overall business strategy.

It is vital that adequate FM competence is available within the demand organization (DO) to support the sourcing process through internal and/or external sources. These competences should include, but not be limited to:

— understand core business;

— analytic skills;

— management skills;

— communication skills;

— appropriate knowledge of FM;

— procurement skills;

— understand the regulatory/legal compliance requirements;

— environmental, social and cultural awareness;

To ensure an optimum outcome through each state of the process, it is important to engage the appropriately competent expertise to ensure exposure to the broadest potential opportunities are made available also in the procurement phase of the process.

Risk analysis is a process that is used to understand the nature, sources and causes of risk. A careful evaluation will ensure foreseeable risks are identified, quantified and, where possible eliminated. It is also used to study impacts and consequences. The level of detail and complexity applied to the review will depend upon the potential impact.

ISO 31000 defines risk as "the effect of uncertainty on objectives". Incorporating risk assessment and management into strategic sourcing and the development of agreements enables the demand organization and delivery organization(s) to incorporate and address potential threats and opportunities in a structured manner. In addition to identifying risks, it is important to assess probability, impact and consequence so that they can be incorporated into strategic planning, decision making and the overall strategic sourcing and agreement process.

The demand organization should consider potential risks during development of the sourcing strategy and modify as appropriate on the basis of improved knowledge during the procurement phase of the process, eventual supplier selection and negotiation and through ongoing governance. The level of detail and complexity applied to the risk assessment will depend upon risk complexity, probability, impact and potential consequence.

A key objective is to ensure that risk is allocated and apportioned to the organization best able to manage or mitigate each risk to a level acceptable to the demand organization.

Areas to consider during the risk assessment should be comprehensive enough to meet the needs of the demand organization and the service or activity being sourced. The assessment may include but not be limited to the following:

— Political Risk:

— Prevailing current and expected political climate to services being sourced

— Other political and regulatory risks that may impact ability to deliver

— Economic Risk:

— Economic climate

— Inflation and potential impact to agreement

— Market Risk:

— Supplier power and concentration

— Purchasing power

— Market practices

— General competencies of suppliers for service being procured within the market

— Technology Risk:

— Availability and maturity of technology to support delivery of service over life of agreement

— Ownership of technology by supplier or demand organizasion

— Legal Risk:

— Jurisdictional / Country legal risk

— Maturity of contracting arrangements

— Local familiarity with sourcing contract types, strategies and relationships

More specific risks for the demand organization to consider may include:

— Demand Organization Expertise

— Compliance risk

— Business Continuity

— Intellectual Property

— Reputational Risk

— Health & Safety

— Ethics

— Brand of Demand Organization and potential suppliers

— Operational

— Mutual dependency (share of demand organization spend and share of supplier revenue)

— Transition risk from change in delivery from internal to third party or between third parties

— Risks associated with the service or activity being sourced:

— Portfolio data and/or assets

— Quality of information on service to be sourced

— Local service provider competencies

— Safety or compliance implications for specific service

— Impact of service on other Demand Organization operations

NOTE For specific risk management information, see ISO 31000 and ISO 41014 Para. 4.4

The demand organization should consider the potential risk elements prior to implementing an agreement. All foreseeable risk elements should be considered to ensure the following (among other considerations):

— that the impact of needs are fully defined;

— translation of needs and constraints into requirement and specifications/service level, e.g.:

— data on the property portfolio and/or built environment;

— information on initial and long term cost implications;

— competences in the demand organization;

— competences by the service provider;

— resources;

— health, safety and environment;

— health & safety

— security;

— funding;

— IT system, hardware and communication technology/integration;

— due diligence;

— coordinated design, construction and transfer to usage;

— coordinated disaster recovery planning (natural and business related);

— business continuity planning and management;

— corporate governance;

Throughout a strategic sourcing process, several choices and decisions are made that can have impact on risks and opportunities in the project. A risk based approach to FM means that risk analysis needs to be repeated throughout the process of strategic sourcing as well as FM services at specific milestones, at a level appropriate for the relevant milestone.

In order to succeed and deliver required results, FM should be in close synchronization with the mission, vision, objectives and domains of the core business. It is the role of FM to provide strategic guidance to a core business in relation to FM aspects, interpreting needs and demands, translating them into explicit service and deliverables requirements. FM acts on the main three levels:

— strategic;

— tactical;

— operational.

NOTE “Strategic level”, “tactical level” and “operational level” are defined in ISO 41011.

At the strategic level, the aim is to achieve the strategic objectives of the organization in the long term by means of:

— establish the FM strategy and sourcing strategy in accordance with the organization’s strategy;

— policy-making, elaborating guidelines for space, built environments, processes and services;

— initiating risk analysis and mitigation and providing the direction to adapt to changes in the organization;

— establish performance management policy and outcomes;

— assessing the impact of facility on the primary activities, external environment and community;

— maintaining relations with authorities and other stakeholders;

— approving business plans and budgets;

— providing advisory services to demand organization;

— making procurement decisions, including establishing the re-procurement criteria

At the tactical level, the aim is to implement the strategic objectives in the organization in the medium term, e.g. through:

— administration;

— reporting (setting up and performing);

— recording (status and events);

— implementing and monitoring guidelines for strategies;

— developing business plans and budgets;

— translating strategic FM objectives into operational level requirements;

— establishing the service level agreements (SLAs);

— establishing the key performance indicators (KPIs);

— managing projects, processes and agreements;

— managing the FM teams;

— managing the services team;

— optimizing the use of resources;

— adapting to and reporting on changes and statuses;

— communicating with internal or external service providers on a tactical level.

At the operational level, the aim is to create the required environment to the end users on a day-to-day basis, e.g. through:

— delivering services in accordance with the SLA;

— monitoring and checking the service delivery processes;

— monitoring the service providers;

— receiving requests for service (e.g. via a help desk or service line);

— collecting data for performance evaluations, feedback and demands from end users;

— reporting to tactical level;

— communicating with internal or external service providers on an operational level.

The Strategic Sourcing process consists of a number of steps described in Clauses 5 to 10, as illustrated in Figure 2.

The decision making is often a result of each stage or step and those decisions inform subsequent stages or steps.

Figure 2 — Strategic Sourcing process overview

This step of the Strategic Sourcing process is shown in Figure 3.

Figure 3— Strategic sourcing process: Identify and analyse current and future needs and expectations

The first step in the identification of needs is to understand the current conditions and establish a baseline. It is imperative to have a good understanding of the current organizational structure and capabilities, current service delivery models, existing service contracts, and current performance measures. The following additional elements of existing core business information are important in most sourcing processes. As managing service supply may cover a very broad range of needs and demands of totally different natures, FM related sourcing should acquire as a minimum the following information from the demand organization:

— primary activities and core business, mission, vision, strategy and corporate values;

— key objectives of business/activities;

— geographical locations and areas of operation, building portfolio and space;

— strategic directions of the organization short/long term and its influence on, for example, building portfolio, technical infrastructure, work force and competence;

— organizational culture, structure, governance and principles of decision making (local, regional, global);

— current and possible future (intended) corporate image and trademark;

— range and nature of core products/services and distribution (local, regional, global);

— strategic considerations related to sustainable environmental issues and social responsibilities;

— security, resilience and other risk concerns with decisive influence on strategic choices;

— customers, demand organizations and other stakeholders with decisive influence on strategic choices;

— management of information for planning and controlling services;

— existing basis and arrangements for service provision and scope of services;

— the interface between the primary activities and support services;

— the “as is” situation: users’ expectations and satisfaction of present range and quality of services provision;

— applicable statutory and legislative requirements.

It is essential that the organizational needs are clearly articulated and the ultimate objectives are documented before commencement of any FM sourcing activity.

It is also important to understand the critical opportunities and risks and to identify the consequences current and future strategic decisions will have on the service and facility support demand of the core business of the DO.

The FM organization should have information on:

— the top management’s impressions of the present FM-organization’s performance, service levels and qualities;

— the strategic planning timeframe of the demand organization/business unit;

— changes in core strategies which, within their planning horizon, are expected to cause notable impact on:

— stakeholders’ expectations;

— geographic representation;

— building portfolio/tenancies;

— sites and locations;

— workspace/workplace;

— products and distribution;

— technical infrastructures and other infrastructure built enviroments;

— human resources and corporate culture and identity;

— security and operational risk issues;

— sustainability and environmental issues;

— social responsibilities;

— the most likely serious challenges and what impact they can have on needs and demand of service and support;

— business objectives, main drivers and constraints;

— core and non-core business;

— sustainability aspects;

— scope of services;

— innovation requirement;

— special service requirements and hazardous operations, where applicable;

— transitional arrangement;

— current service delivery model

Etc..

This step of the strategic sourcing process is shown in Figure 4.

Figure 4 — Strategic sourcing process: Translate needs into requirements

After an understanding of the needs of the core business is established, the scope of the facility service or services to be provided needs to be defined. The translation of a need to a requirement is to identify satisfaction criteria and corresponding service and/or goods. See Annex A for examples of how to translate needs into requirements.

The scope of facility services may include a single service (out-tasking) or a range of facility services.

All services supporting the primary activities should regularly be checked for relevance, adequate performance and cost efficiency.

New service requirements can involve needs for knowledge and skills that have not been required before, and it is important to include such resources early in the process. The following should be considered and actioned:

— check required and available data for assessment/estimation of service options to satisfy new requirements;

— estimate volumes, specify preliminary service levels, quality and performance requirements for new service provision and get verification/acceptance from top management;

— adjust volumes, service levels, quality and performance requirements on current service and support in accordance with information from the primary activities;

— express performance requirements in measurable terms with corresponding/suggested performance indicators, in order to compare agreed/decided performance requirements with measured results;

— consider interdependencies between FM activities which are important for creating or retaining synergies between them.

This step of the strategic sourcing process is shown in Figure 5.

Figure 5 — Strategic sourcing process: Determine the service levels

After the demand requirements have been developed, the next step is to establish the level of service or quality of performance to meet the requirements. The translation of requirements into specifications will define the appropriate scope of work and required resources. Until the level of service is determined, staffing levels or service provider provisions cannot be completely quantified.

The expected level of service needs to consider both qualitative and quantitative measures. Two key elements are fundamental in creating effective service levels:

a) the expectations should be practical and achievable;

b) the expectations should acknowledge that there is a relationship between the service level agreement and the resources needed to meet the level of service.

The service levels should relate to each requirement meeting a need of the DO’s core business. Performance measures should be identified and clearly stated for all requirements. These performance measures can be qualitative or quantitative, but should be sufficient to determine that needs and expectations are being met or, if not, adequate to address gaps and requirements to improve performance.

A format and structure for service level requirements is included in Annex D.

The appropriate mix of service level performance measures defines the management metrics or KPIs and can include some or all of the following:

— budget compliance/variance;

— response times (e.g. emergency, urgent and routine work);

— work completion rates;

— amount of proactive versus corrective (i.e. reactive) work;

— preventive maintenance compliance;

— safety inspection and testing compliance;

— staff/contractor utilization/productivity rates;

— level of cleanliness (internal and external);

— move and relocation management;

— project performance compliance;

— sustainability performance;

— system or equipment reliability;

— interruptions to operation;

— utilization of space or vacancy rates;

— energy conservation performance;

— life cycle performance of built environments (i.e. meet expectations for useful life);

— benchmarks;

— total costs of ownership

The determination of performance indicators or management metrics should be established independent of the method of service delivery discussed in 5.5.

At this point in the process, conclude and develop preferred service option(s) based on these requirements.

NOTE For more guidance on quality in FM, see EN 15221‑3.

This step of the strategic sourcing process is shown in Figure 6.

Figure 6 — Strategic sourcing process: Identify service delivery options

There are three typical approaches to delivering services utilizing in-house or externally contracted services. For each one, there may be a spectrum rather than an all or nothing split.

a) In house services - In this model, most services are performed by FM Organization staff . Some services may be contracted out based on strategic and sourcing decisions or all services provided and distributed by the in-house FM organization;

b) Separately contracted services - In this model, many services are contracted out to separate companies and individually managed by the FM Organization. Some services may still be performed in-house.

c) Bundled contracted services. - In this model, most if not all main services are bundled and contracted out to a single external service provider who manages the separate services . The FM Organization is responsible for managing the main contract. Some services may still be separately contracted out or either performed in-house. Even when all services are externally provided or out-tasked there should be an appropriate FM competence available within the demand organization.

There are a number of important issues that need to be closely analysed before finally deciding whether a service should be provided by in-house staff or procured from an external provider, including the following:

— Does the organization have the staff levels, capabilities, skills, knowledge, organizational and supervisory structure, and supporting facility and tools to meet internal service provision requirements?

— Does the market offer the total range of services with the quality specifications which are required by the primary activities, or only partly?

— Will the organization be operating in regions where there is no qualified market offers for the required services?

— Is the value of demand for the required service(s) sufficiently large to maintain an economical viable competence level and an in-house organized production capacity, compared with what the market offers for similar services?

— Are there special considerations to secure business continuity or specific security measures which can only be satisfied by keeping the appropriate service(s) produced by in-house resources?

— Are there principal strategic decisions or considerations of a political, cultural or social nature which override conclusions on one or more of the questions above?

This step of the strategic sourcing process is shown in Figure 7.

Figure 7 — Strategic sourcing process: Business case development and analysis

The next step in the strategic sourcing process includes the development of a business case which summarizes the scope, benefits, value, financial implications and risks of a proposed solution to a business need.

There are a number of important financial considerations to be closely analysed before finally deciding whether a service should be internally provided or alternatively purchased from an external provider, including the following:

— Is internal production cost (covering both direct and indirect cost/overhead) adequately analysed, understood and documented?

— Does business case and or financial analysis deliver a positive advantage or added value?

— Can the historic costs for an extended or amended service, be accurately extrapolated to provide a clear projection of future costs?

— Are there strategic decisions/policies that impact the acceptable level of cost?

— Are there other related investments that will affect the cost assessments?

The development of cost estimates for services requires a careful accounting of the scope, areas and inventory/registry of built environments. Determining the cost of providing services can be accomplished by using a number of methods depending on the requirements for new or existing services:

— historical data can be used for incremental analysis for the expansion of existing services;

— benchmarking with publicly available / published sources and cost indexes;

— zero-based budget analysis using detailed inventory of built environments and spaces coupled with engineered performance standards to accomplish the necessary services.

The need for reliable information on comparable price levels and assessment of other relevant market information can involve procurement specialists. If in-house management and staffing are estimated to require personnel recruitment, investments and other organizational changes, human resources and finance should be involved.

If new service requirements are identified, reliable figures of cost of services and delivery should be established. As the new service requirements may be produced and distributed in new market environments, a common measurement structure is an appropriate tool for calculating comparable figures across regions and jurisdictions .

To check cost of expanding existing service(s) agreements against similar current service cost (in-house or purchased on agreements), verifiable cost indexes or benchmark with similar organizations using the same services should be used.

At this point in the process, conclude preferred alternative(s) from a cost viewpoint.

At this stage of the sourcing process, each service level should be calculated separately to ensure the link between the estimated cost, service level and value. This methodology should be retained in subsequent stages.

The pricing strategy relates to the level of price and budget certainty desired by the Demand Organization. This needs to be decided as part of the sourcing process.

A risk and opportunity assessment should be undertaken by the FMO DO to support informing the decision-making process relating to the pricing mechanism.

Various methodologies of price and rate mechanisms that can be considered. These can be used in isolation or in combination as indicated by the Demand Organisation’s strategic review. See Annex D for the details.

Performance-based systems help demand organizations to better define and measure progress towards organizational objectives. Once the specific objectives have been identified, they should be linked to a systematic measurement system which clearly demonstrates the link between the cost, performance and specified service levels.

If a performance-based payment is selected, the parties should agree on how the system will operate and if incentives (bonus) and non / under-performance/- (penalty) will apply.

Where the two parties recognize that the demand organization’s primary activity performance can improve resulting from the positive performance of the service provider, the principles for establishing an incentive can be added to the agreement.

Where the service provider identifies opportunities for savings, the principles for establishing and sharing the savings at a specified ratio, may be added to the agreement.

When implementing a performance-based payment system, at a minimum it is crucial to consider the following:

— measurements should be “quantifiable”;

— measurements should be agreed upon by both the demand organization and service provider;

— complete alignment and understanding of the specific performance metrics within both organizations;

— communicate progress to goal within both organizations; which goal or goals?

— incentivize performance;

— create appropriate procurement and management process/organization to manage the phases in the preparation of agreements;

— ensure sufficient resources for financial oversight and additional administrative burden for performance-based payments.

The validation of rational approaches to determine estimated costs of service(s) delivery should include the development of a business case for each service(s) delivery option considered. It is important to identify and communicate the economic value proposition or return on investment for the service(s) delivered.

It is important that the business case presents a clear message on the value of the management of services and the budget. This will allow an understanding of what such investment means to an organization as a whole and an understanding of the processes and procedures involved.

An example of a business case appears in Annex B.

This step of the sourcing process is shown in Figure 8.

Figure 8 — Strategic sourcing process: Select preferred service delivery option -

At this stage all relevant information and all conclusions made in 5.2 to 5.8 should be applied in the process of securing an optimum solution.

The FM organization should ensure that all relevant information is available from the demand organization and ensure the option most closely align to the demand organization's requirements. A typical checklist is given below.

— Ensure necessary stakeholder consultations (top management, facility team leaders, human resources, trades unions, key service users, finance, legal, procurement, risk management, information technology (IT), property managers, landlords, insurers, health, safety and environment, etc.) are completed and impacts reviewed.

— Confirm budget/additional funding sources available to support the proposals.

— Prepare selection criteria. Understanding the criteria that each of the options satisfies and being able to evaluate them against an appropriate range of requirements will help the Demand Organization to focus on the one that is most likely to offer an optimum solution. Evaluation criteria might include the following:

— market / provider competence and capability to deliver scope;

— uniqueness of service;

— priority, flexibility and speed of response;

— risk assessment;

— safety and security;

— past experience;

— corporate social responsibility/sustainability policy;

— cost (direct and indirect);

— management and control requirements;

— statutory obligations and legal requirements;

— geographical location and limits;

— specific service delivery or project team expertise;

— specific approach to service delivery.

— Select a preferred solution.

— Get top management approval for preferred solution / sourcing strategy

— Check that the consequences of the new solution are fully understood by the stakeholders, communicated and accommodated within the organization and supply chain.

— Ensure interfaces and interdependencies between in-house organization and existing or new service provider(s) are defined and responsibilities acknowledged.

NOTE ISO 37500 includes some principles which might be applicable to FM.

The demand organization should determine the required facility operating model to meet their built environment investment strategy.

The implications of any investment strategy chosen should be discussed with any current service provider, including the ownership, right of use, operation, maintenance and ending of obligations that need to be agreed upon for the investment, in relation to the terms of the agreement.

Investment strategy should include a clear investment model. It should also include an adaptive built environment management strategy or a plan and a continuous follow up on maintenance.

At a strategic level it is important to consider the life cycle costs of each acceptable solution. This can also include the principle of sustainability by considering not only the financial costs but also the social and environmental impacts and their associated costs. These costs can then be carried forward to a life cycle analysis to provide an enhanced financial assessment.

NOTE For specific built environment management information, see ISO 55000, ISO 55001 and ISO 55002.

This step of the strategic sourcing process is shown in Figure 9.

Figure 9 — Strategic sourcing process: Facility service provision

The strategy on service provision is dependent on the outcome of the preferred strategic sourcing selection described in Clause 5.

If a primarily internal service provision model is selected the organization’s HR and hiring process would be required. However, there may be other specialized services still requiring procurement methods described in 6.3 and 6.4 below.

If a primarily external service provision model is selected:

— The sourcing / procurement methods described below in 6.3 and 6.4 can be applied to the services, either bundled or separately.

— In addition, there may be some in-house resources still required to either deliver specialty services or manage the external service provider. The organization’s HR and hiring process would apply to those resources and could be a repetitive process.

Translating the requirements into detailed specifications is the first step in this process. The detailed specifications can be prescriptive or performance-based. Examples of the translation of requirements into specifications appear in Annex A.

Internal services provision includes:

— required service delivery specifications;

— SLA.

External service provision includes:

— agreement (or contract);

— SLA;

— method statements (if required for input specification).

Some Demand Organizations may have a predetermined list of service level quality requirements and these should be required regardless whether internal or external delivery model is selected.

This step of the sourcing process is shown in Figure 10.

Figure 10 — Sourcing process: Internal service provision

If an organization decides to provide services internally, it is necessary to clearly define the responsibilities and authority of the manager responsible for enforcing the specification of the Demand Organisation and the manager responsible for performance of the services being delivered by the FM organisation. A management and communication system must be set up between the Demand Organisation and the FM organisation, similar to what will be required for an external provider. ISO 41002 provides guidance on the FM organisation development for the internal services provision

SLA development is equally important for internal and external service provision. The SLA defines common expectations for the services to be delivered to the DO. In the case of internal service provision, it specifies the requirements of the DO in the form of an SLA, which can also be implemented in another form of the organization's internal documentation (e.g. internal regulation, methodological instruction, etc.)

This SLA sets out effective communication, documents all requirements, specifies the scope of services, sets out roles and responsibilities, establishes procedure for conflict resolution and provides an objective basis for measuring the performance of either internal staff or external provider. The SLA should specify the form of financial implications for rewards and / or penalties for maintaining the required quality.

The SLAs for internal or external service provision should be similar. In general, fewer details may be required in the specifications section of an internal SLA and the formats of internal SLAs may vary. The SLA should preferably be a formal, negotiated agreement between two parties.

Internal provision often provides greater work assignment flexibility in the form of an ability to redirect own staff to provide additional services in addition to the requirements of the SLA, given their competence and capacity and authorized by competent DO management. Guidance on the content of the SLA is provided in Annex D

This step of the strategic sourcing process is shown in Figure 11.

Figure 11 — Strategic sourcing process: External service provision

The decision to use external service provision normally requires a formal agreement between the demand organization and the provider. Drafting the agreement is necessarily the result of cross-functional collaboration within the Demand Organisation and the provider.

The procurement function can be performed by a finance or purchasing organization with support from external consultants (e.g. Managing Contractor or a Managing Agent).

Guidance on the SLA content can be seen in Annex D.

The service expectations and conditions defined in the SLA are combined with the detailed work specifications and general contract clauses to create an agreement for contracting external services.

The contracting of external services requires a procurement strategy. When the demand organization has a procurement strategy, the FM organization should follow the established policies and procedures. Where the procurement strategy is not clearly defined, the FM organization should develop clear and consistent policies to procure the required services.

A procurement strategy defines the broad approach to contracting with service providers and recognizes that conditions prevailing in the market are subject to change. In the same way that needs in facility-related services are specific to an organization, the nature of the market is specific to a location or region. Over time, both are likely to change. In many respects, it is a matter of matching the current and likely future demand for services with their availability in the market.

An FM procurement strategy should include the following topics (which may overlap with the strategic sourcing process):

— market analysis;

— centralized versus de-centralized management of service agreements;

— geographical location of facility and limits;

— award of single service vs. multiple service agreements;

— service providers by specialization and size, and whether they are local, regional or national;

— authorization responsibilities;

— pre-requisite guidelines for public tendering;

— approach to addressing legislation (e.g. health, safety, security, sustainability and corporate social responsibility);

— legislative compliance (e.g. avoidance of corruption and anti-competitive practices);

— risk analysis;

— exclusivity for resourcing of service.

The degree to which exclusivity will be granted to the service provider for any particular service should be determined.

This step of the strategic sourcing process is shown in Figure 12.

Figure 12 — Strategic sourcing process: FM service procurement and FM agreement

The objective of an agreement is to define the relationship between the demand organization, the FMO and service provider responsible for delivering the service(s).

One of the most important factors in the development of an agreement is to create a common understanding of the service to be delivered and the quality of service, between the service provider and the demand organization. This is important whether the service is provided by in-house staff or an external service provider. In either event, the demand organization is generally seeking specific competencies such as responsiveness, quality work/services, timely resolution to issues, and meeting expectations on an agreed scope of service.

Time and resources should be dedicated to the preparation of the agreement in proportion to its size, importance, and complexity. Several different phases should be followed to prepare agreements and to ensure that the expectations of different stakeholders are taken into account. These stages are summarized in 9.1.

Both the demand organization and the service provider (in-house or external) should share a mutual vision and understand the desired outcome and objectives of the demand organization, i.e.

— the service provider/s should recognize the operational and strategic importance of its own operation to the demand organization;

— the demand organization should recognize that it has a direct interest in the performance of its service provider/s.

Consideration should be given to changes in core business requirements to ensure that mutuality and benefits are sustained throughout the term of the agreement.

It is important that, before the approval of the agreement, the demand organization and the service provider perform their own business case, risk and financial analysis.

The relative responsibility of each party for services listed in the agreement should be determined at the following levels:

a) strategic level;

b) tactical level;

c) operational level.

This determination will lead to the consideration of three main types of agreements:

— agreements which include a), b) and c) — this includes a degree of responsibility for establishing the overall FM strategy in line with primary activity strategy;

— agreements, which only include b) and c);

— agreements which only include c).

A careful analysis of the relationship between the three levels [a), b) and c)] will assist in the determination of all subsequent clauses in the agreement.

For external provisioning the agreement should be over a sufficiently long term to enable all parties to benefit. The term should be fixed taking into account criteria of the type of the agreement (strategic, tactical, operational), the scope and the market. For internal provision agreements, the term might be open-ended or linked to a budget or review cycle.

If the two parties can agree to extend the duration of the agreement, this should be defined and documented.

The agreement should explicitly contain reference to the notice period required for termination.

The extent and control of sub-contracting and the type of services that are allowed or not allowed to be sub-contracted should be defined in the agreement together with any specific conditions.

The service provider should remain accountable for the sub-contracted services.

The agreement can include the redistribution of activities between the demand organization and the service provider, as well as the transfer of built environment and personnel. It is important that:

— top management support the approach and understand the organizational or service impacts;

— individual business units or entities within the demand organization should be briefed on service levels, roles and responsibilities, constraints, request, approval and change mechanisms;

— management responsibilities of applicable personnel or entities within the demand organization who have the ability to require an amendment or addition to the agreed service provision, should be clearly defined together with the process for managing cost, service level and performance impacts.

For external agreements, where the service provider personnel are acting on behalf of the demand organization, the level of autonomy and operational scope (policy, standards, conformance and escalation path) should be clearly defined.

An SLA is a mechanism to create a common understanding (scope and quality) between the demand organization and the service provider. The SLA:

— enables effective communication to help manage expectations, clarify scope, roles and responsibilities, resolve conflicts or discrepancies;

— provides an objective basis for measuring performance.

There will be one or more SLA for each service category depending on the complexity of the service. This will allow an easy adoption to change requirements and link to budgeting and benchmarking.

For more information on SLA, see Annex D.

The agreement should include activities between the demand organization and the service provider regarding the termination of the agreement and the change-over period. Overlap 8.9

Annex C includes general clauses which should be included within an agreement. Table C.1 also differentiates between clauses that are specific to in-house or external agreements. Agreements can also include clauses that are specific to the agreement only, but meets the requirements of the parties.

Annex D includes SLA clauses which should be included within an agreement.

The degree of flexibility included in the agreement should be a product of the duration, extent of change anticipated, and the degree of cost certainty required by the demand organization.

The more flexible the agreement scope, the greater the need to carefully document change and cost management methodologies. Where it is anticipated that the scope of the change will impact all stakeholders, the method for handling the impact on budget/profitability, mobilization, redundancy and unrecoverable costs should be considered.

The agreement should explain the methodology and approach through which unexpected events and conflicts will be dealt with.

The agreement should contain a procedure for amendments (additions, omissions, variations).

While developing the performance criteria, considerations should be given to how these performance criteria will be used and managed within the performance management and quality assurance systems.

The agreement should preferably define the output requirements (e.g. key performance indicators, service levels) and constraints, not input requirements like detailed descriptions of tasks to be fulfilled. Where necessary, these can be listed in a Service Level Specification which can be incorporated as addendum.

Apart from very specific services for which the demand organization within the agreement should precisely specify a minimum level of resources, the service provider should be free to choose the resources by which the performance criteria are met. It is important to let the service provider find the most effective way to achieve the required service levels or outcomes. However, it is important for the demand organization to specify and/or approve a process and methodology to be used for measuring the output from each service as part of the agreement and specify the validation and testing criteria.

EXAMPLE It is generally possible to specify output requirements, however, there might be some services where the output is not easy to define. An example is security, where an output description of “no security breaches” is possible, but not practical or realistic. As a substitute, an input based indicator might be a better solution. (See Table D1)

Parties to the agreement should ensure that the responsibilities for designing, updating and reporting and retaining of management information are fully understood and articulated in the agreement. Procedures should be prescribed for the production of reports and performance indicators to any or all stakeholders. Parties to the agreement should consider an independent audit of such reports and performance indicators.

The extent of reporting, validation, testing, financial reconciliation and auditing should be outlined in the agreement. Any requirement for a service provider to support audits and qualitative testing should also be documented. Any requirement for formatting documentation or integrating IT systems data should also be identified.

Specific consideration should be given to the ownership and access to historical and current data, and the ability to transfer, modify and utilize the data through appropriate information exchange and/or interface with a building information system.

The agreement should define the methodology by which continuous improvement, best practice and innovation are initiated or developed and mutual benefit is agreed and apportioned, in a coherent manner with the price and rate mechanisms defined.

The agreement should identify all stakeholders affected by it and they should have access to the final agreement and any subsequent modifications.

In multinational agreements, the demand organization and service provider shall define the applicable legal framework and means of compliance for the agreement and its parts.

The agreement should take account of relevant DO corporate governance and policies.

Explicit attention should be paid to termination of the agreement in terms of notice period, communication, remuneration, personnel, actions required in connection with transfer of staff to an alternative provider, transfer of ownership of either party to the agreement, the ownership and exchange of data (see C.5.2), built environments and other matters.

If the sourcing strategy has determined that service will be provided in-house, an agreement process will be followed that conforms to the DOs governance processes.

However, if it is determined that external providers will be used, this phase will require a structured procurement process for development of bid documentation and evaluation of provider proposals.

The Demand Organisation should give considerations to the following aspects when considering the procurement phase:

— whether the Demand Organisation is a public sector or private sector;

— any constraints and/or regulations that the Demand Organisation needs to follow in relation to the procurement phase;

— who would manage the procurement phase (i.e. internal department or function and/or various departments or external support.);

— the allocation of time to engage and brief the function/department/external provider assigned to conduct the procurement phase;

— time and resources are required for the formation of a team (assigned to conduct the procurement) and the cross-function engagement and collaboration;

The information exchanged between the parties must be accurate and reliable.

The procurement phase consists of various stages which should be considered. These include the preparation phase, the bid process. evaluation of bids, agreement and appointment of a service provider. Detail concerning the procurement phase appear in Annex F

This phase includes the planning, preparation and actions needed to mobilise the agreement to a state of readiness for service delivery. This will include the Demand Organisation and the service provider (external or internal FMO) coming to an agreement on all procedures, responsibilities and accountabilities for resources, systems, data, information, authorizations and processes prior to taking full responsibility for the services to be delivered according to the agreement.

Any degree of parallel operation should be clearly defined including access to the existing data, as agreed upon, supplier information, measurements and attendance at meetings. Consideration should be given to the accessibility to existing and proprietary information system, the data and the ability to transfer, modify and utilize this through appropriate information exchange and/or interface, see C.4.11 and C.5.2. Parties should ensure that adequate contingency plans are in place to cover all predictable issues that can emerge on the day the service becomes operational.

During the mobilization phase, the service provider should establish or verify (see section 10.2) the condition of key built environments and their ability to meet the desired performance. This is essential where a performance-based approach is adopted, as the service provider will need to ensure that all installed systems and services covered by the agreement meet the desired output at commencement. The service provider should verify or establish the relevant specifications for the facility/ies as well as the users to be served. Any discrepancies will need to be documented as well as the processes and timeframes for their resolution.

The verification of the accuracy of all records and documents when transferred from a current agreement to a new agreement or provider is essential and should include the most accurate and available as-built information, condition assessments and maintenance records, etc. Any discrepancies will need to be documented and the updated documentation should form part of the agreement going forwards as a dynamic or continuously updated document.

Following the completion of all or sufficient mobilization activities services should be allowed to commence. By prior agreement there may be a transition phase where the service stabilizes and procedures are fine tuned. Some mobilisation activities may be suitable to be scheduled to continue into this period.

The environmental, operational, financial and disposal impacts throughout all phases of the agreement should be considered. See Annex D6.3

If not substantiated through due diligence, during the agreement preparation phase of implementation, both parties should confirm the validity of the data and/or information which were given to the other party to build the agreement. There should also be adequate testing of information exchange mechanisms necessary to ensure the required outcomes. Any validation associated with prequalification of service providers should be completed.

NOTE Validation might be aided by use of benchmarking or ratios (e.g. “cost per unit floor area”).

A period should be allowed for validation of data, services and systems by the service provider where validation did not occur prior to the implementation date of the agreement.

A predetermined mechanism should be defined and agreed to manage discrepancies where the outcome of the validation phase does not match the agreed criteria or where the validation is not undertaken.

The following stages apply:

The agreement should define a period for the implementation and stabilization of service delivery. Consideration should be given to apportionment of risk in terms of service delivery. On the basis of transfer documentation issued by the Demand Organization, the service provider takes full operational control and becomes accountable for the services as specified by the agreement. During this period consideration could be given to monitoring performance but, not applying (full) negative (or positive) performance measures.

During this stage the services are delivered as agreed and, the methodology for optimization agreed upon, is applied. Service performance is to be continuously evaluated in accordance with Section 12.

The Demand Organization and service provider should implement the activities for conclusion of the agreement. A defined period of time and the methodology for executing any termination, should be given in the agreement. The period for finalizing any outstanding actions should be documented.

The demobilisation phase should include agreement by the parties regarding all resources, systems, data, authorizations, procedures, documentation and services which must be discontinued at the termination of the agreement. See Annex C.5.2.

Any data, information and documentation stipulated by the agreement should be compiled, collated and handed over to the demand organization in the agreed format.

Lessons learnt from demobilisations should be incorporated in future agreements.

This step of the strategic sourcing process is shown in Figure 13. To be amended

Figure 13 — Strategic Sourcing process: Measure service provision performance

In measuring, monitoring and anticipating the performance of delivery, the Demand Organisation should consider the use of technology and digital environments to drive outcome-based service delivery performance and in collecting relevant data for each key performance indicator throughout the duration of the agreement.

NOTE For guidance on available technologies in FM, see ISO TR 41016.

Performance measurement can be done by using statistical and mathematical sampling methods.

Measuring effectiveness needs to address both of the following:

a) definition and description of service levels (see 5.3 and 5.4);

b) review the selection of performance measures for the service delivery.

Performance measures of services can be taken at the strategic, tactical and operational levels of the organizations or taken at one level only.

The Demand Organization should describe performance measures in the SLAs which include corresponding Key Performance Areas (KPA) and KPIs and related metrics. The key performance indicator (KPI) refers to the agreed specific measurable level of performance between the Demand Organization (DO) and the Facilities Management Organization (FMO) for all the built environment services per team or employee in order to meet each specific predefined objective

The Demand Organizations should validate the measures by benchmarking the results with one or more industry partners.

NOTE For guidance on performance benchmarking in FM, see EN 15221‑7.

Outcomes and outputs indicative of effectiveness service delivery can include the following:

— service level requirements and performance measures (see 5.3 and 5.4) are enabled and provide effective delivery as per the SLA and KPI’s

— valuable information is enabled for all relevant stakeholders;

— identified gaps between agreed and performed services are analysed, adjusted, and primarily corrected in accordance with the terms of the agreement.

This may include, but not be limited to:

— Formal notification of performance gaps

— Improvement requests

— Permanent or temporary changes to the established governance procedures

— Financial incentives/ penalties

— Formal improvement plans produced by the internal or external provider

Changes to the agreement to relieve some of the responsibilities of the service provider and allow them to focus on other areas of the contract where they can perform better. Termination of the agreement based on a decision that the service provider has defaulted.

1. 
   (informative)
   
   Example of requirements for a service

Table A.1 gives examples of how needs on different levels can be translated into requirements and specifications for services such as:

— strategic planning;

— project management;

— security project;

— vehicle fleet operations.

Table A.1 — Examples of translations of needs into requirements for different types of services<Tbl_--></Tbl_-->

1. 
   (informative)
   
   Example of business case content
   1. General

The economic and added value should be linked to the desired level of service(s) expected by the demand organization. The business case content should include the following statements:

— how the services being delivered will meet regulatory and statutory requirements;

— clear alignment of services with the requirements and needs of the demand organization;

— how the services will enable alignment with the demand organization's strategic intent;

— services performance criteria and impact on the related core business KPIs;

— how the services will enable alignment with the organization’s strategic intent;

— Service performance criteria and impact on the related core business KPIs;

— How the services will add to the competitive edge of the organization;

— risk analysis;

— specific return on investment of services, where appropriate, e.g. how the operation of the facility will improve efficiency and effectiveness.

• 1. Examples of a business case

Elements which can be included in a business case analysis (checklist) include the following:

— project aim;

— executive summary;

— project name;

— needs, demands and requirements;

— service/provision description;

— service objectives and service strategic alignment with demand organization’s mission, vision and objectives;

— market and competitive analysis;

— options analysis and selection of preferred solution;

— financial analysis, investment needs and funding, return on investment, life cycle cost assessment;

— project plan, timing, schedule, critical path and milestones;

— organizational impact (internally and externally), key stakeholders dependencies;

— required resources (e.g. project leadership team, project governance team, team resources and funding);

— commitments from related parties, project controls, reporting processes, deliverables schedules, financial budget and schedules;

— services performance criteria and impact on the related core business KPIs.

1. 
   (informative)
   
   Structure of an agreement — General clauses

In order to facilitate a stable agreement and also allow for dynamic adjustment of individual services to the needs of the demand organization’s primary activities, the following structure is recommended:

— general clauses, which are intended to be valid and applicable for the totality of the agreement, and which contain business aspects;

— SLA clauses for each individual service, focussing on a specific service, quantity, quality and process aspects (see Annex D).

The applicability of clauses will vary between different services taking into account the demands, circumstances and locations. Clauses that are generally applicable can be grouped together in a document referred to as general clauses.

The individual clauses of the various SLA clauses (minimum one for each type of service) should be linked by the corresponding numbering of the general clauses, so that both documents together comprise the conditions governing the rights and obligations of the parties.

The agreement can include the general and specific clauses listed below.

a) General clauses (see Table C.1):

— C.1: General description

— C.2: Primary activities requirements

— C.3: General conditions

— C.4: General provisions

— C.5: Termination conditions

— C.6: General obligations of the demand organization

— C.7: General obligations of the service provider

— C.8: Transfer of personnel

— C.9: Timing and main dates

— C.10: Agreement price, payment and accounting

— C.11: Changes of the agreement

— C.12: Default by a party

— C.13: Auditing

— C.14: Risks and responsibilities

— C.15: Insurances

— C.16: Force majeure

— C.17: Dispute and dispute resolution (settlement) process and methods

— C.18: Built environments replacement and project activity

b) SLA specific clauses (see Table D.2):

— D.1: General description

— D.2: Common organization processes

— D.3: General conditions

— D.4: Structure and communication

— D.5: Definition and clarification

— D.6: Obligations and requirements

— D.7: Price, payment and accounting

— D.8: Appendices

Tables C.1 and D.2 set out what should be considered in terms of detail within the agreement. Headings and sub-headings are presented along with the intent of such a clause within the agreement. For each heading and sub-heading proposed content suggestions are provided.

Table C.1 identifies those general clauses which can be incorporated in an agreement. Some clauses may not be applicable to all agreements.

Table C.1 — Example of a structure of an agreement — General clauses<Tbl_--></Tbl_-->

1. 
   (informative)
   
   Service level agreements — Benefits, preparation and structure of an agreement (SLA clauses)
   1. General

SLAs are critical in enabling the FM organization to align the appropriate services with the business requirements, strategy and objectives of the demand organization.

An SLA benefits both the FM organization and the demand organization. The benefits of establishing SLAs include:

— developing cooperation and partnerships between the parties;

— building trust within the organization;

— establishing accountability by clearly identifying roles and responsibilities;

— enable both parties to demonstrate compliance with statutory and regulatory requirements;

— clearly identifying customer expectations;

— improving understanding of customer needs;

— educating customers of work requirements to meet expectations;

— establishing a mechanism to assess and improve customer satisfaction;

— providing a context for measuring performance;

— gaining agreement to service level expectations;

— establishing a baseline for continuous improvement;

— improving consistency in service delivery and evaluating value;

— reducing the time to adequately resolve conflicts;

— enhancing control over costs relative to services delivered;

— improving moral and long-term relationships;

— improving effectiveness and efficiency of FM operations.

The FM organization and the demand organization can appoint a designated representative(s) to develop SLAs.

Consideration can be given to engaging a facilitator to help develop and negotiate the SLA. The appropriately qualified facilitator can be an external consultant or an in-house employee skilled in SLA establishment.

Annex D provides examples of the structure and principle elements to be considered when creating an SLA. These are essentially the same for either in-house or outsourced agreements. Thus, it should be a formal, negotiated agreement between the FM organization and the demand organization.

FM SLAs should also provide:

— information regarding response times to various work priorities;

— target times for deficiency or service interruption resolution;

— processes and guidelines for problem escalation;

— mechanisms for managing expectations and communication;

— criteria for periodic reporting of performance.

• 1. Key attributes of SLAs

The key attributes of successful SLAs are that they:

— define the scope of the services to be provided;

— define the boundary conditions and important parameters;

— establish the level of service and/or quality of the output (see Table D.1);

— establish the way in which the services are provided (see Table D.1);

— provide performance measurement criteria and targets;

— define acceptable delivery times and possibly cost of delivery;

— establish conflict or gap resolution processes;

— describe how to deal with non-compliance with agreed procedures and results.

Irrespective of the delivery model, in-house or outsourced, it is important that FM SLAs be approached in a structured and careful manner. The following steps provide guidance for developing an SLA.

Typically, SLAs can be crafted in one of the following ways:

— as an input specification (prescriptive) where the method, frequency and quality are fully described;

— as an output specification (performance-based) where the desired outcome is specified and the operation and method are defined by the service supplier in the form of a method statement.

Examples are given in Table D.1

Table D.1 — Example of an input based and output based description of tasks for a maintenance service<Tbl_--></Tbl_-->

It is also possible to define a minimum level. A typical example would be cleaning in reception areas. The demand organization may wish to specify the level of normal daily cleaning, but also incorporate an output driven component to cover inclement weather or high utilization for particular events, etc. In these circumstances, the FM organization and the service provider will need to consider how funding or labour utilization will be impacted to meet the changing requirement.

• 1. Process for preparing an SLA
     1. Step 1: Scope of services

Define the scope of the service(s) to be provided. Examples of services that can be covered by an SLA include housekeeping services, grounds maintenance, building system maintenance, operations, security, food service, move management, project management, fleet management, pest control and waste management. However, the list and content can be structured using the format in Annex C.

• • 1. Step 2: Conditions

Define the interfaces, conditions and important parameters. Important parameters to address in an SLA can include organizational structure and hierarchy, SLA owners/managers, facility hours of operation, security and safety policies/procedures, job hazard analysis, emergency procedures, work request processes, request acknowledgement procedures, delivery time, response times by work/service priority, status notification, problem resolution, escalation procedures, planned downtime of facility or systems, criticality of facility systems and use of organization technology systems.

• • 1. Step 3: Service quality and service level

Identify and define the level of service and/or quality of output. The establishment of the level of service expected should consider both qualitative and quantitative standards of quality. The expectations should be practical and achievable. They should also acknowledge that relationship between level of service and quantity of resources needed to meet the level of service. The establishment of specific levels of service creates the basis for steps 5 and 6.

• • 1. Step 4: Method

Establish the method by which the services are provided including resources, allocations and methodologies.

This should include consideration of purchasing and management of tools, equipment, materials and supplies. If applicable, work times and shifts should be established and agreed upon relative to the levels of service expected.

• • 1. Step 5: Performance metrics and measurement

Define performance measurement criteria and targets (e.g. quality, quantity, compliance, cost and timeliness).

Performance measures should be incorporated both for external service providers and internal SLAs. These measures should include the right mix of metrics to clearly establish KPIs required to adequately evaluate performance. Targets for each KPI should also be established and an appropriate periodic reporting schedule should be determined to manage performance and correct deficiencies in a timely manner.

KPIs referring to the corresponding service levels/quality requirement should be included in the SLAs. The following are examples of KPI categories:

— KPI on financial performance:

— budget performance;

— cost control;

— economic value added;

— activity based costing;

— cost of quality (cost of rework/repair/correcting problems).

— KPI on process and operational performance:

— relevant regulatory requirements as a KPI;

— cycle time/processing time for key processes;

— productivity indexes;

— accuracy of process variables;

— rework time/costs.

— KPI on facility service:

— competence;

— communication;

— temporal (e.g. punctuality, reliability, availability);

— tolerance/precision.

— KPI on customer/user/tenant satisfaction /experience:

— customer satisfaction index;

— complaints;

— index lost customers/tenants.

— KPI on employee wellbeing, satisfaction, experience:

— absenteeism;

— stress related illness;

— turnover/churn;

— requests for transfer.

— KPI on supplier performance:

— understanding (knowing the client/customer);

— responsiveness;

— flexibility;

— quality control;

— reliability;

— communication;

— competence;

— security;

— over all product quality.

• • 1. Step 6: Gap and conflict resolution

Establish conflict or gap resolution processes. Despite best efforts, there can be variances (gaps) between the quality of services delivered and customer expectations. The agreement should contain procedures to resolve potential discrepancies. The gap resolution processes should address by whom, how and when the issues will be resolved. Paramount to the process is effective communication, agreement of the performance standards, any unforeseen circumstances, timeliness in addressing issues and documentation of problems and their resolution to the acceptance of the demand organization. The process should also consider root cause analysis of the issues and mechanisms to avoid future recurrence of the issues.

• • 1. Step 7: Emergency situations

Emergency situations can arise throughout the term of the agreement. It is important to ensure the SLA has provision for the service provider to execute remedial services in the case of emergencies or unforeseen circumstances (e.g. flood, fire, theft, earthquake). This provision will allow the service provider to by-pass normal approval processes to resolve the situation within defined parameters.

• 1. Success factors

The success factors for SLAs are that they should:

— be a bi-lateral agreement, not unilateral decision;

— be simple and clear, not too complex;

— have realistic expectations;

— have tools to enable measurement of performance and success;

— be understood and accepted by stakeholders;

— be reviewed periodically.

• 1. Structure of an agreement – SLA clauses

Table D.2 shows an example of SLA clauses. All clauses may not be applicable to all agreements.

Table D.2 — Example of a structure of an agreement – Specific clauses (SLA)<Tbl_--></Tbl_-->

1. 
   (informative)
   
   Price and rate mechanisms

Various methodologies of price and rate mechanisms that can be considered. These can be used in isolation or in combination as indicated by the Demand Organisation’s strategic review.

• 1. Fixed price

The FM organization provides a fixed price against clear and detailed requirements provided by the Demand Organization. Fixed Price strategies provide a higher degree of price and budget certainty compared to other models.

Assumptions and risks could be priced by the FM Organisation and the Demand Organisation should clarify, understand and negotiate these, ensuring the associated cost e are clear, reasonable and acceptable. The FM Organisation has to price allowing for risk as in many cases if there are extra costs for the FM Organisation, there will be no extra payment by the demand organization.

The Fixed Price contract should include clauses that ensure price fairness to account for elements such as changes to government mandated wage or tax, as well as unforeseen price changes.

With fixed price strategies, most of the risk is taken by the FM Organization. However, the FM Organization can benefit financially with improved efficiency of service delivery.

Where there are elements of a fixed price that have a variable element, unit priced costing can deliver the certainties that fixed pricing offer. A variable element can be considered for service areas where there is likely to be variation based on unforeseen demand.

• 1. Target Price

This pricing strategy uses many of the elements of the Fixed Price strategy. The variation occurs when there is an over or under spend, i.e. the costs are greater or less than anticipated. In this case the variation is shared at an agreed ratio between the parties.

There may be limitations or caps placed on the amount of shared costs. This will be set up at the contract stage and may be fixed for the duration of the contract or have agreed points for renegotiation.

Demand Organizations that are looking to select this strategy should ensure that their affordability budget offers a sufficient buffer above the target price, to allow for potential, shared over -spend.

The contract terms for Target Price requires that the FM Organization follow an Open-Book policy regarding their costs.

Target price strategies allow for a sharing of risk between the parties. There are options for this risk to be limited towards the Demand Organization, by using capped limits.

• 1. Pass through costs

This strategy offers a flexibility of needs to the Demand Organisation. Where the demand organization is not able to clearly specify their requirements and/or demand or where certainty of price is not a requirement, this strategy offers a solution.

The FM Organisation will deliver the requested services at a cost. This cost is then passed on to the Demand Organisation. It is usual to have a management fee or service fee on top of the costs that allow the FM Organization to account for overheads and profits.

To allow for more certainty, Demand Organizations may provide an indication of required services and estimated volumes. The strategy can include unit prices that will apply to the Demand Organization’s standard requirements. Ad hoc services can be requested on top of these unit priced rates and these will be priced either at market rate or as negotiated by DO and provider on a case by case basis.

The contract terms for this strategy requires that the FM Organization follow an Open-Book policy regarding their costs.

With this strategy, most of the risk is taken by the Demand Organization.

• 1. Unit Rate

This strategy is used where the Demand Organization’s demand is variable, but price certainty per activity is preferable. Unit rates can be developed for different activities, services or needs. The FM Organisation provides a price list for activities based on the Demand Organizations requirements. The Demand Organisation will request the services as needed from this framework.

The unit rate is likely to include a management fee or service fee on top of the costs that allow the FM Organization to account for overheads and profits.

Demand Organizations may provide an indication of required services and estimated volumes. The strategy can include unit prices that will apply to the Demand Organization’s standard requirements. Ad hoc services can be requested on top of these unit priced rates and these will be priced either at market rate or as negotiated on a case by case basis.

The risk for cost per unit or labour rates is borne by the FM Organization. The risk for number of activities or labour requirements are borne by the Demand Organization

Whilst all of the above can be used in isolation, sometimes the best fitting strategy will be a blend of two or more options.

It is normal for costs to be set at the start of a contract. It is also usual for these costs to either be negotiated at agreed times throughout the contract or fixed to an index of price changes. In addition to these price changes any amendments to the scope requirements could result in changes to the agreed prices.

For all the above pricing mechanisms an open -book clause can be used. In this case the details of all relevant financial transactions are available to the demand organization.

Financial accountability should be agreed in accordance with the type of price mechanism chosen, stating precisely what financial documentation or information is available for the demand organization.

1. 
   (informative)
   
   External Procurement for FM services
   1. General

Creation of the necessary documentation should be the responsibility of the FM organization or appropriate functionary within the demand organization. If the demand organisation has no internal FM function or the FM team is not sufficiently experienced or is unable to dedicate the time that procurement can take, they may choose to appoint an external agency.

The DO may wish to engage with the supplier community in advance to gain insight into commercial structures, service options, industry innovations and trends, contract terms and conditions from a supplier perspective, etc. These can be incorporated within the procurement documentation which matches the demand organization objectives.

Alternately, during the procurement phase, the DO may ask for comments on a draft agreement and consider alternatives or efficiency ideas from the bidders. These can be incorporated into the agreement where they align with the objectives of the demand organization.

In addition, after a preferred bidder is selected, the demand organisation and the preferred bidder could (to the extent that the procurement regulations permits) the demand organisation could receive further feedback on the agreement that may be incorporated into a final agreement.

To ensure that there is a mutual understanding between organisations, and cultures and process can be aligned, consider strategies during the development of the agreement that allow collaborative growth. This may include early market engagement, negotiations phases, and briefings as well as ongoing collaborative dialogue

• 1. Preparation Phase

During the preparation phase, the DO collects all relevant information needed to conduct a procurement exercise and develops the documentation needed for the procurement so that bidders have all the information they need to submit a fair bid.

It is crucial that this phase is given sufficient time in the programme as this will stand as the foundation upon which the agreement will be built. The information gathered should be verified to be as accurate as possible to ensure the bidders are given accurate information for the bid and especially costing.

• • 1. Facility Information

This includes any facility and built environment related information needed by a bidder in support of submitting a bid, for example:

— Number, location, type and size of buildings

— Current FM spend

— Current and historical minor works or small projects program (if within scope)

— Areas of cleanable space, including where possible breakdowns of hard surfaces, carpeting, washrooms, lobby, etc.

— Area of landscaping/grounds maintenance for different types of surfaces and needs whether mowing, mulching, snow removal or other winter services, etc.

— Inventories along with equipment information for maintenance services

• • 1. Service Information

This includes any service related information needed by a bidder in support of submitting a bid. For example:

— Hours of operations or services, including any limitations of when service can be conducted (i.e. preventive maintenance can only be conducted after DO business hours.)

— Specific service delivery requirements beyond typical industry standard service delivery which may be driven by the DO requirements and limitations.

— Any limitations such as requirement of security clearance or escort requirements to access specific areas.

— Actual service specifications with task and frequency and/or outcome-based service requirements.

— Any, sector specific, laws or regulations which apply.

— Number of end-users to be serviced

• • 1. Develop Provider Agreement

The Agreement is typically the primary document or set of documents addressing specific aspects of the contractual arrangement with the bidder.

It typically includes a main agreement with all legal terms and conditions and related appendix or attachments with the other required documents to make a complete Agreement.

• • 1. Develop the Legal terms and conditions

This part of the agreement includes all required legal terms and conditions required by a particular jurisdiction, including liability, payment terms, termination terms, etc.

It would be developed in conjunction with other departments such as the legal department, finance and procurement or a template may be provided for adaptation to the specific services and facility management requirements.

In view of the complex nature of such an agreement, path for dispute resolution should be articulated.

• • 1. Set Service Specifications

Management related

This includes any administrative and management related requirements such as:

— Communication protocols

— Scheduled meetings

— Quality assurance and performance management

— Reporting

— Change process

Service related

This includes service specific requirements such as:

— Tasks and frequency

— Task performance requirements (i.e. details, service level, etc.)

• • 1. Set performance measures

This includes performance measurements that form the basis of the supplier performance. They are typically a specific set of measurements specific to service delivery with a small number of Key Performance Areas (KPAs) and a larger set of Key Performance Indicators (KPIs). These enable both tracking and management of performance and guidance on the outcomes expected, which are based on the Quality Assurance and Performance Management processes outlined in the Management related portion of the specifications.

• 1. Develop procurement documentation
     1. Information about the bid process

Typically referred to as bidding information pack, the overarching document that provides the information about the bidding process in a structured format (usually organized in sections) should include information such as:

— Overall schedule/timeline

— Bidder meetings and/or site visits

— Deadlines for questions

— Last date for issuing addendums

— What mechanisms are available to bidders for disputing an award

— Whether a debrief will be held with unsuccessful bidders

— Time of final submission

— Timing of evaluation phase

— Timing of select bidder interviews (if used)

— Timing of anticipated award

— Form of contract draft for services

— Rules to be followed (by both the Demand Organisation and the bidders) during the bid process such as:

— Bidders may communicate only with the identified contact.

— Any verbal answers (such as during a bidder meeting or site visit) are not to be relied upon and a formal written question must be submitted for an official answer.

— What parts of the submission are mandatory and whether those mandatory items could disqualify a bidder.

— That there is no obligation to select and award the contract.

— The process for evaluation.

— Bid submission requirements

— General requirements (referring to what applies to the bid submission except for the specific technical and financial submissions) such as:

— A submission label or information on who to address their submission and the address or email address for submission.

— The structure and format of the submission including font size, margins, soft copy type (i.e. excel, pdf, etc.)

— The maximum number of pages for the technical submission and whether any other attachments are permitted (i.e. resumes or CVs of staff)

— Any mandatory submission requirements (i.e. bid letter, proof of insurance or affiliations, corporate financials, etc.)

— The scope of services being requested (outline and indication as where the details are included)

— Right to cancel the bid process

— Cost of preparing proposals

— Confidentiality of proposals

• • 1. Questions / Technical submission

This section includes questions for which the bidders need to respond and submit answers. Those may include the following:

— Corporate profile.

— Qualifications of the company and staff to provide the services.

— Examples of other clients for whom similar services are provided.

— References for their services

— Detailed methodology given the approach, strategy and workplan for executing the works, within the specified timeframe

— Their process for delivering the service

— Their quality assurance and performance management approach for the services

— Examples or samples of reporting and/or communications

— Description of software systems or tools used to deliver services.

— Explanation of equipment and tools that will be used to deliver the services

— Their plan for mobilization and contract startup

— Their plan for eventual demobilization and handover or decommissioning.

— Approach to Health and Safety (such as statement, methodology for risk assessment etc)

— List of major sub-contractors (if used/applicable)

— Information about the equipment/products proposed (e.g. manufactured, technical specs, model etc)

— Warranties

— description of any safety violations and / Litigations

• • 1. Financial Submission

This section outlines how the financial submission is to be provided.

Typically, the financial submission is included separate from the technical submission so they can be evaluated separately and the evaluators are not influenced by the financial submission when reviewing the technical submission.

As part of the procurement documentation, a template for the bidder to fill in may be provided so that all financial submissions are following the same structure and provide the information in a structured manner. The financial elements and level of detail will depend on the services and the contract type. More detail enables a better analysis of pricing and in particular, may identify pricing that is inconsistent with successful provision of the services or a misunderstanding of the requirements.

• • 1. Evaluation criteria

The evaluation criteria is important so the bidders know how they are evaluated and that a fair, transparent evaluation process will be followed.

This may involve separate evaluation of the technical submission and financial submission.

Assigning a weighting to the technical and financial elements of the bid submission involves deciding what the proportion if between the technical and financial submission.

For instance, you may assign 30 % to the financial submission and 70 % to the technical submission. If you use a point system, you could have 300 points for financial and 700 points for technical.

• • 1. Technical Evaluation

The technical evaluation is intended to evaluate the capabilities of the bidders to successfully provide the services as well as determine whether they meet your minimum requirements.

You may choose to set a minimum level that must be achieved in order to consider their bid. For example, if they don’t achieve a 75 % on the technical evaluation (i.e. no less than 450 points out of a total of 600 points). In this case, you would discard a bidder if they achieved only 400 points.

Evaluation also includes minimum requirements such as insurance, licenses, qualifications of the organization and staff proposed.

In addition, the evaluation is conducted based on questions you provide in the procurement documentation. This may cover areas such as:

— Organization history, size, capability to support the services

— Experience delivering services similar to yours for organizations similar to the Demand Organization

— References

— Design of the organization delivering services including org chart, staffing levels, resumes, etc.

— Approach to delivering services

— Approach to quality assurance

— Approach to communications with the FM and Demand Organization

— Technology, reporting, etc.

— Approach to transition including a recommended schedule

— Additional factors that may be considered during the technical evaluation:

— Indication of financial viability (e.g. banker’s letter, financial statement, etc.)

— Proposed Cash Drawdown Schedule

— Cost Breakdown

— Performance Security, if applicable

• • 1. Financial Evaluation

Financial evaluation typically compares all bidders against the lowest acceptable price or against an in-house estimate as derived by the FM Organisation.

The lowest acceptable bid may not be the lowest bid since when evaluating bids, it is best to not accept a low bid unless there is evidence that the bidder can perform the work for the price bid. Often criteria to discard a bid that is more than a set percentage lower than the average bids is used. If so, this should be outlined to the bidders in this section.

A typical approach is to assign 100 % of available points to the financial evaluation for the lowest acceptable bid and then divide the next price into the lowest price to determine the % of points to award.

As an example with three bids:

Bidder 1 = 150,000

Bidder 2 = 160,000

Bidder 3 = 200,000

In this case, Bidder 1 would be assigned 400 points (using the previous example)

Bidder 2 would be calculated this way:

150,000/160,000 = 0,937 5 * 400 maximum points = 375 points.

Do the same for all other bids.

• 1. Identify bidding approach

The bidding approach you use will be based on a number of factors including any laws or rules your country or organization require you to follow, the value of the procurement opportunity, the availability of bidders, sensitivity of the work, specialization of the work, etc.

You should consider the method that gives you the best likely outcome.

• • 1. Open public procurement

Publish the procurement opportunity in a public forum. This is typically an online bidding platform however there may be other options available to you.

You may also want to specifically contact potential bidders to let them know that the procurement opportunity has been published.

Publish a summarized version of the opportunity without pricing submissions or detailed response requirements.

Include key items and questions to establish that the potential bidder is qualified and capable of providing the services.

Evaluate the submissions and select the top 3 or more bidders.

Send the full Request for Proposal to the selected bidders.

• • 1. By Invitation

Identify a select number of qualified, competent and capable service providers.

Contact them to determine their interest.

Send your procurement opportunity to interested bidders you have selected.

• 1. Issue Pre-Qualification if applicable

Evaluate Responses

Select Bidders

• 1. Issue Procurement (Open Period) to bidders

Request bidders to make an offer for the requested service and provide feedback on the agreement terms.

Conduct stakeholder meeting and/or site visits

Respond to clarifications requests and ensure the responses are made available to all bidders

Consider allowances for commercially sensitive questions and requests to keep responses private

Include amendments to agreement and tender documentation as required (following internal review and subsequent changes following clarifications questions and answers) and issue amended documentations to the bidders

Receive Bids

• 1. Evaluate Bids

Evaluate and select the service provider’s proposals and acceptance of agreement terms.

Recommend and get approval for successful Bidder

• 1. Negotiate if necessary

Depending on the policies of the demand organization, negotiate discrepancies with a previously notified number of bidders prior to selection of the provider. The output from this phase will usually result in the selection of a preferred service provider.

• 1. Award

Notifying participants of the bidding process outcome is a requirement. This should be done in a way that both successful and unsuccessful bidders are notified at the same time. In most cases it is good practice to provide detailed and specific feedback on the submissions and their evaluation.

In some instances this notification may trigger a legal or best practice period of inaction. This period allows all bidders to consider their situation and to raise any challenges or disagreements.

This phase consists of detailed preparation of the agreement documentation and completion of any due diligence activity. Both parties should agree to a methodology for resolving issues of non-compliance with the conditions of the agreement.

• 1. Issue and execute Agreement

Signing of the agreement in accordance with legal and organizational requirements.

Bibliography

[1] ISO 31000, Risk management — Guidelines

[2] ISO 37500, Guidance on outsourcing

[3] ISO 55000, Asset management — Vocabulary, overview and principles

[4] ISO 55001, Asset management — Asset management system — Requirements

[5] ISO 55002, Asset management — Management systems — Guidelines for the application of ISO 55001

[6] EN 152213, Facility Management — Part 3: Guidance on quality in Facility Management

[7] EN 152217, Facility Management — Part 7: Guidelines for Performance Benchmarking