Procurement & cost reduction

The brief

Reduce what clients were paying to run and maintain their buildings, without stripping out the service that the buildings and their occupiers actually needed.

The challenge

Property costs drift. Contracts roll over on inflation-linked increases, specifications outlive the buildings they were written for, and suppliers who were competitive five years ago no longer are. Nobody notices, because each individual invoice looks reasonable and querying it takes work that nobody has time for.

The crude response is to cut. Reduce the cleaning frequency, defer the maintenance, take the cheapest tender. That reduces the invoice and increases the eventual bill, because deferred maintenance is a loan at a poor rate of interest.

Our approach

• Reviewed what was actually being paid for, contract by contract and line by line, rather than accepting the total as given.
• Tested each specification against what the building genuinely required, removing work that no longer served a purpose.
• Retendered and renegotiated where the market had moved and existing suppliers were no longer competitive.
• Distinguished between cost that could be removed and cost that was protecting the asset, and left the second category alone.
• Set out the numbers so the client, or their leaseholders, could see exactly where each saving came from.

The outcome

• Reported average service-charge reductions of 30 to 40 per cent for clients during the 2008 downturn, achieved through retendering and renegotiation.
• Savings that held, because the specification was corrected rather than the maintenance deferred.
• Costs presented transparently enough to explain to leaseholders and boards.

Where this applies

• Service charges that have crept up year on year without anyone testing them.
• Maintenance contracts rolling over automatically on annual increases.
• Refurbishment specifications priced well above what the objective for the property requires.
• Quotes for major works, such as excavation or replacement, that have not been preceded by a proper investigation.

See The Avenue, Ealing, where investigating first replaced an excavation →