Strategies in Outsourcing Facilities Management

The authors highlight costs, benefits, and implementation success factors across first, second, and third generations of facility management outsourcing contracts. This article is part of a special issue on outsourcing.
Jul 31, 2012

The pharmaceutical industry has faced significant competitive pressures over the past several decades that continue unabated. These pressures have led to interest in and adoption of new, more efficient and scalable operating models. Outsourcing is a major strategy that the industry has adopted across a broad range of value-chain activities. One key area where outsourcing is being increasingly adopted as an operating model is facilities management, a major indirect cost category that spans R&D, technical operations, and commercial facilities. Research shows that the level of market request for proposal (RFP) for facility management is experiencing on average 25% growth driven by Europe where RFP growth rates have jumped 50% (1). Despite the increased adoption of the model, there is still a need to better understand how the outsourced facilities management model can succeed, particularly in manufacturing and development facilities that have different constraints and requirements than commercial offices, where outsourcing is more commonly applied.

Services in facilities-management outsourcing


Table I: Categories of service typically included in facilities-management outsourcing contracts.
Facilities management is comprised of a broad range of activities ranging from utilities-plant maintenance, building maintenance, and engineering to mailroom operations. At research sites, the definition of facility management can also include laboratory-related services, such as glassware services, fume-hood maintenance, and some laboratory equipment calibration. Table I includes the broad categories of services that define how facilities management is being interpreted in the pharmaceutical industry and the services included in facilities-management outsourcing.

Some services listed in Table I were included even if they are performed in a cGMP setting. For example, cGMP cleaning is listed as generally included. However, cGMP production-equipment maintenance is almost never included in first-generation facility-management outsourcing initiatives. First-generation outsourcing refers to the initial outsourcing effort that typically involves transfer of people, processes, and some assets to a third-party supplier, and second- and third-generation outsourcing refer to re-bidding or re-negotiating the initial outsourcing contract. First-generation outsourcing is typically characterized by a focus on human resources terms and change management in adopting an outsourced model, and second- and third- generation initiatives typically focus on further leveragrticleing the strategy. There are only a handful of cases where cGMP production-equipment maintenance work was outsourced to facility management companies—these were experienced, third-generation outsourcing practitioners. There are exceptions to the general inclusion of the scope identifiedin Table I because of plant-specific considerations. For example, at a sterile facility, related heating, ventilation, air conditioning (HVAC) maintenance was not included because it is considered to be a key part of the product environment. The strongest determinant of what scope was included in a first-wave initiative was the sponsorship of the outsourcing project. Initiatives that were sponsored by a cross-functional executive steering group comprised of technical operations executives, chief financial officers (CFOs), sector leaders, and chief procurement officers (CPOs) tended to have the broadest mandate and consistent inclusion of services across sites. If, however, the sponsorship was primarily at a local level, scope was typically limited, and many plants and sites opted not to participate or participated in a limited way. The highest variance on scope inclusion was around technical services such as building and utility plant maintenance.