Benchmarking as a Tool of Value Management
presentation by
Prof. Bernard Williams FRICS(IFPI Ltd)
to the Breakfast Briefing:
‘State-of-the-art Benchmarking and Cost Management
of Facilities in Large Estates’held at
The Royal Institution of Chartered Surveyors
14th June 2013
Contents
• Benchmarking definition• Facilities in context• Purpose of benchmarking• Methods of benchmarking• Cost benchmarking• Value management of facilities
What is Benchmarking?
‘Benchmarking is the process of comparing a product, service, process - indeed any activity or object - with other samples from a peer group, with a view to identifying ‘best buy’ or ‘best practice’ and targeting oneself
to emulate it’
(An Introduction to Benchmarking Facilities – Williams
1992)
Total revenue cost
Overall Facilities costs – 15%
e.g. Revenue costs p.a. = £50m (profit p.a. = £2.5m / facilities costs p.a. = £7.5m)
Pre-tax profit
5%
I.C.T. 5%
Business and staff support
costs 5%
Premises costs 5%
Facilities costs in overall context
The Outsourcing Conundrum
• Facilities Costs are the outsourced contractor’s sole source of profit
• Constant pressure to reduce costs – from all sides
• Facilities Costs are in reality of comparatively minor significance to users
• Users’ profits are put at risk by reduced costs of facilities
• Conflicting interests?????
FIG. 2.2.1.A: Three facets of cost control - inter-relationships
Costcontrol
Budgetarycontrol
Competitiveprocurement
Value engineering
Source: Facilities Economics ã BWA 1994
The 3 Facets of Cost Control
Value Engineering
• The process whereby products and services are provided to the required performance for the least cost.
• Value engineering requires the elimination of any
‘redundant performance’.
• Value Management identifies what performance is redundant – you need to prove it.
(Facilities Economics – Williams 1994)
Risks to Value Engineering
• Over-Stated Performance Requirements• Excessive Budget• Poor Management• Too Little Time• Intransigence • Poor Procurement• Poor Budgetary Control • Inaccurate Estimating
Facilities Value Management
‘The process whereby all investment in facilities, whether capital or revenue expenditure, is continually and formally evaluated for cost- effectiveness and cost-efficiency from concept to completion’
(‘Facilities Economics’ - Williams 2000)
Why Bother with Benchmarking Facilities?
• Demonstrating efficient purchasing• Justifying levels of quality/performance• Preparing to outsource – understanding
what you’ve got• Seeking to optimise value added in the
business case
Benchmarking -How?
• Informal group • Facilitated group • Compare to published data-set • Internal/external• Compare to ‘normalised’ data-set
‘Normalised’ Data-set
EstatesMaster Facilities Cost Prediction and Benchmarking Tool
• Intelligent decision-making tool• Benchmark whole estates accurately using
categories of buildings• Isolate individual buildings as required• Bespoke site-specific benchmarking
Conclusions
• Without a formal, properly substantiated, business case the provision of any facilities above zero-base performance levels is totally unacceptable in business terms
• By identifying and benchmarking options you can establish a business case based on true value for money.