Service Delivery Notes

Key Issues in Service Delivery

Facility management is vital for an organization's core business; service disruptions can impact operations and business continuity.
Service delivery, whether insourced or outsourced, should meet end-user needs and provide best value.
Transitions between service arrangements (mobilization and demobilization) must be well-resourced and controlled to avoid disruptions.
All service providers require management, necessitating an informed client function to manage contracts and finances.
Transparent procedures and accepted accounting standards are essential.
Service provider payments (including incentives and penalties) should align with performance against service specifications and SLAs.
In-house teams should face the same assessment criteria as external providers, with changes controlled by agreement.
Contract costs should be monitored against tender prices and budgets.
Contracts should typically run for at least three years, with a review period appropriate to the contract's value and complexity.

Introduction to Service Delivery

End-users should not perceive differences between in-house and outsourced services; the primary goal is to demonstrate best value.
Service costs change over time, requiring regular reevaluation of service delivery arrangements.
Managing service delivery involves managing service contracts for both insourcing and outsourcing, emphasizing the informed client function.
Contracts and agreements should specify requirements and regulate service delivery aspects, including payment and actions for performance deviations.
Organizations should aim for the best outcomes regardless of the service delivery source, following standards like BS 8572.

The Internal Customer as End-User

End-users should be treated as customers; manage relationships with in-house teams and external providers professionally.
Apply performance management to both insourced and outsourced services, implementing continual improvement for productivity and quality.
Clearly define services and interfaces for both outsourced and insourced services to avoid gaps and manage resources effectively.
Customers (departments or units) must understand the nature and extent of service delivery to achieve best value and avoid conflicts of interest.
Identify stakeholders directly affected by service delivery, understanding their influence and avoiding divisive actions that conflict with business objectives.
In-house teams should leverage their experience to be responsive to customer needs, treating internal and external customers with a professional approach.

Insourcing

Insourcing should be managed to the highest standard with a policy and supporting procedures.
In-house teams must adapt to changing requirements to support the core business and achieve end-user satisfaction.
Investing in personnel through training and development is preferable to recruitment.
In-house teams should operate like external service providers and be judged similarly, focusing on consistency and avoiding complacency.
Efficiency and cost-effectiveness are crucial; teams should share common goals and objectives.
Customer charters and SLAs can articulate objectives and promote team spirit.
In-house teams should proactively seek areas for value addition and use ICT to improve communication and management information.
Compare performance against external providers to assess competitiveness and gain insights into best practices.
Clarity of roles and responsibilities is essential for performance measurement and achieving end-user satisfaction.

External Service Providers

Organizations should determine which services to outsource based on market capabilities.
Consider bundling services to achieve end-user satisfaction and best value, while understanding service providers' commercial perspectives.
Avoid excessive subcontracting due to added transaction costs.
Assess the financial standing of service providers before awarding contracts.

Mobilization

Mobilization is essential for correctly starting up a new service; control start-up, phasing, and ramping up delivery to avoid disrupting normal operations.
Maintain service levels during transition and mobilization.
Provide service providers with necessary information, including scope of service, contact details, emergency procedures, HSSE compliance, and supply chain requirements.
Define communication lines and establish a single point of contact for managing contracts.
A central helpdesk can coordinate communication between end-users and service providers, especially during significant changes.
Service providers should provide a mobilization plan with tasks, timing, and resource requirements, tracked via a schedule.
Weekly meetings should exchange information until mobilization is complete and confirmed by end-users.
Similar requirements should apply to the in-house team to ensure adequate preparation.
Check transition arrangements when replacing an incumbent service provider to ensure uninterrupted service delivery.
Include contingency plans to cover potential impacts of events and mitigate risks.

Supply-Side Considerations

Subcontracting should require prior written permission.
Service providers should report any issues affecting their ability to fulfill obligations due to resource shortages and their plans to address them.

Business Continuity and Transition

Business continuity management aims to safeguard stakeholder interests, value creation, and reputation during disruptions.
Changes in service delivery can threaten business continuity; identify and assess risks and opportunities.
Strengthen organizational resilience to counter disruptions from start-up or winding down of service delivery.
Departing service providers must not hinder incoming providers or leave the facility in an unsafe state.
Assess the potential impact of service delivery changes on the ability to maintain operations at an acceptable level.
Categorize essential processes and activities by priority for recovery, specifying maximum recovery periods.

Operational Processes and Procedures

Service providers should provide plans of their operations, including staffing details, and managerial personnel to achieve safe, efficient and cost-effective service delivery.
Changes to operational processes and procedures should be discussed at performance review meetings and approved after consideration.
Monitor all service contracts to identify deviations from agreed plans, processes, and procedures.
Service providers should raise concerns about matters impacting service delivery.
Avoid interfering in operational processes, focusing on an overseeing role; address concerns at performance review meetings.

Management Information and Reporting

Successful contract management depends on the quality of information provided by the service provider, enabling quick understanding of service delivery performance.
Information must be communicated to the right person, at the right time, in the right format.

Contract Management

Contract management and financial control are ongoing commitments requiring resources, whether services are insourced or outsourced.
The informed client function should develop working knowledge of service provider performance.
Contract management includes contract conditions and terms, payments, cost monitoring, performance monitoring, change control, contract administration, and review.

Contract Conditions and Terms

Contracts should address obligations, duties, and remedies for failure to fulfill the agreement.
Payment must depend on the service provider's performance.
Define how payments are adjusted when performance deviates from acceptable limits, including termination conditions.
Include clauses for arbitration or alternative dispute resolution.
For in-house teams, prepare a written agreement outlining terms and conditions, focusing on clarity over obligations and duties without being onerous.
Establish performance measures (KPIs) for in-house teams to demonstrate their ability to deliver against promises.

Payments and Cost Control

Organizations should be aware of cash flow implications for themselves and service providers.
Service providers should submit a cash-flow forecast for service delivery.
Regular payments to service providers are essential to prevent financial failure.
The payment form should be clear and simple, recalculating the gross value of services each month.
Monitor and control all contract costs systematically, incorporating monthly payments and the anticipated final cost.
The complexity and value of the service contract should determine the frequency and detail of reports.

Performance Appraisal and Reviews

Implement a formal system of performance appraisal for personnel managing service contracts, with similar arrangements for incentivizing service providers.
Align targets or goals between the organization's personnel and service providers without conflicts of interest.
For in-house teams, ensure alignment between senior managers and operational personnel, linking appraisals to business objectives.
Provide opportunities for training and personal development based on performance appraisals.
Consider offering incentives to service providers to ensure commitment to continual improvement.
Hold formal meetings to review performance, resolve difficulties, and consider changes to improve performance and realize targets.
Typical agenda items include end-user review, operational review, financial review, human resources review, statutory/regulatory compliance review, and action for the coming period.

Performance Measurement and Actions

Performance measurement is based on work done and work outstanding, providing an indication of performance trends.
Measure inputs (e.g., human resources, consumable materials) to alert the organization to instances of under-resourcing.
Actions arising during performance reviews should be determined by comparing tendered cost versus actual cost and changes proposed versus those approved.
Discuss contentious issues to avoid escalation and dispute.

Change Control

Control changes in the scope of services to properly manage the facility.
Avoid changes to the scope, service specification, or service levels unless the implications are fully understood and agreed beforehand.
Evaluate the effect on performance and cost before approving significant changes.
Value additional works at current market rates where cost/price data are unavailable.
Approve changes before they are implemented.
Undertake a risk assessment for significant changes to determine acceptability.
Sign off the change once it has been implemented and performed satisfactorily.

Contract Administration

Diligent contract administration is essential for continual improvement.
Key features include clearly defined roles and responsibilities, a designated contract manager, a helpdesk for managing the interface between end-users and service providers, and an open-book agreement.
Hold frequent meetings with service providers in the early days of the contract to discuss performance and address issues.
Establish whether the decision to outsource is still valid in terms of the facility management strategy, the prevailing market conditions, and the performance of the service provider.

Operational Review

The relationship between the service provider and the organization is crucial to ensuring that the service is provided as expected.
Prevent problems that could sour the relationship at the outset rather than resolve them later.

Checklist

Does the organization understand that, from the perspective of end-users, there should be no perceivable difference in service delivery between insourcing and outsourcing?
Where both insourcing and outsourcing apply, is the demarcation between services clear and are roles and responsibilities correctly assigned?
Have final checks been made on the financial standing of service providers, where appointed?
Have service providers, where appointed, provided details of their plans for start-up including key resources?
Has a mobilization plan been prepared for start-up or phasing in of services?
Have risks to business continuity been assessed and has due allowance been made for transition from one arrangement for service delivery to another?
Are service providers compliant with HSSE regulations?
Has the organization considered the cash-flow implications for itself and for service providers?
Are service providers aware that their payments will be adjusted in the event of under-performance?
Are arrangements in place to enable continuing assessment of the performance of service providers against service specifications and SLAs?
Are adequate controls in place to deal with changes to the service specification and SLAs?
Are appropriate cost monitoring and control arrangements in place?
Is the organization satisfied with its contract administration?
Do contracts run for not less than three years, with annual reviews and break clauses to enable poor performers to be removed?