March 2017 – Outsource providers have benchmarking needs and can benefit from benchmarking in several ways. Here are the most common reasons cited:
- Contracts may stipulate benchmarking of key performance indicators (KPIs) to assure the owner that the services provided are competitive and consistent with industry costs and levels of services.
- Outsourcers will benchmark internally, between different portfolio clients, to track costs and understand how their various contacts are performing.
- Using benchmarking info to identify the best performing sites and the best practices that led to superior performance.
- Outsourcers need access to benchmarking data in developing proposals for new work. Many benchmarking companies receive requests from contractors to help with proposal pricing.
- Benchmarking comparisons can be used by the client’s procurement group to avoid the need to re-bid work. When a client is receiving good services at a market price, it doesn’t make sense to rebid the project just to prove the price is competitive.
Outsource providers have the same issues getting started with benchmarking as corporate real estate groups and facilities managers. The constant demands of daily issues and problems often keep the benchmarking initiative from beginning. Without good benchmarking comparisons, outsourcers may not realize their cost profile is high or low.
Regardless of what benchmarking program or tool you use, the task often looks formidable. Data may be held by different organizations and, when working for a client, some information regarding space or headcounts may not be readily available. Finally, many benchmarking forms are not user friendly so people don’t usually volunteers to “benchmark” unless they can see the benefits.
These issues easily can be overcome and the benefits to benchmarking certainly outweigh the negatives. Here is a suggested approach to help get started. We have used examples from FM BENCHMARKING to illustrate how easy the process should be. This approach will allow you obtain the key output reports in the minimum amount of time.
First, focus on what is important! For outsourcers, the critical benchmarks are the services included in your scope of work. Energy management, maintenance and janitorial services are often provided under service contracts so the KPIs for those services need to be benchmarked. We will cover KPIs for energy utilization in this article. Subsequent articles will cover maintenance and janitorial KPIs for service providers.
Energy intensity is compared on a gross area basis. Since for most buildings the electricity usage is a major component, we usually look at electric energy intensity: KWH (kilowatt Hours) per Gross Area.
Comparing your energy intensity may give you the wrong perspective on your performance unless the comparisons are made with a relevant peer group.
For a quick comparison we can utilize benchmarking to create a chart showing the KWH/area of a good peer group. Figure 1, for example, is a chart showing the KWH/area for office facilities.
This allows you to see at a glance how well your facilities are utilizing electricity compared to other office buildings. There are 318 buildings in this peer group with a median KWH utilization of 24.25 KWH/GSF and a first quartile performance of 16.7 KWH/GSF (the value of the buildings right between the end of the 1st and start of the 2nd performance quartile).
By looking at and comparing similar types of facilities, you will be able to make intelligent “data driven” decisions. The outsourcer, for this example, has totaled its annual KWH consumption and divided by the Gross Square Feet to determine the annual usage of 18.94 KWH/GSF, which is in the second quartile. This is an opportunity for the outsourcer to propose some additional energy conservation projects to the owner. This has the potential to earn additional fees for the outsourcer and reduce costs for the owner… A WIN-WIN for everyone.
Using a benchmarking tool such as this gives the outsourcer an idea of the performance of a good peer group but it doesn’t directly show their building’s performance or provide a table of the implemented best practices by quartile. For that we need to apply additional benchmarking capabilities.
Such a benchmarking tool shows at a glance, as an example, how well your facility is utilizing its electrical consumption. In Figure 2, there are 171 buildings satisfying the selected filter criteria (so we can compare our building to other similar ones) with a median electrical utilization of 23.64 kwh per GSF. Our building’s performance (shown in yellow) is 18.94 kwh per GSF and the performance needed to reach the first quartile 15.97 kwh per GSF.
To reach first quartile you could start by:
- Encouraging the occupants to turn off more lights
- Reducing the operating hours to those needed to support the business
- Raising the temperature set points in the summer and lowering the set points in the winter
However, none of these steps will provide a better work environment for the occupants, you will receive more complaints, and there is no added fee for any of this.
A much better approach would be to evaluate what best practices other organizations in this peer group have implemented to reach the 1st Quartile performance level. Figure 3 shows some of the best practices you have implemented in your sample building, and which have been implemented by the peer group in your quartile as well as in the next better quartile. Figure 3 shows just a small sampling of the utilities best practices available in this benchmarking tool, but enough to give an understanding of this important concept.
Using the results from this table, the outsourcer can make proven recommendations for energy efficiency projects that would help achieve first quartile performance. Again, this is win-win for both the outsourcer and the owner. The owner will achieve cost savings from the energy efficiency improvements, the outsourcer will earn additional fee by implementing projects, and there will be improved occupant satisfaction that will benefit everyone.