Outsourcing Pharmaceutical Infrastructure Operations

Published on: 
Pharmaceutical Technology, Pharmaceutical Technology-10-02-2012, Volume 36, Issue 10

Today's pharmaceutical companies are striving to reduce costs and maximize efficiencies, and must make decisions on the best way to deploy their limited resources.

Today's pharmaceutical companies are striving to reduce costs and maximize efficiencies, while simultaneously working to advance the core business as quickly as possible, and must make decisions on the best way to deploy their limited resources. The job of an operations manager for a modern pharmaceutical facility includes operating and maintaining outlying building services and the utilities required to create and sustain on-site manufacturing capabilities, energy management, and essential non-manufacturing services, such as cleaning, building maintenance, catering, and other ancillary services. Outsourcing some or all of these services is a proven solution to optimize efficiency.

Mel Palmer

Outsourcing rather than out-tasking

In out-tasking, pharmaceutical technology and manufacturing companies utilize third-party vendors to carry out various maintenance tasks on specialized equipment, such as water-for-injection (i.e., stills) or compressors and boilers, while leaving the responsibility for the quality and scope of the work and the internal documentation in the hands of the client. In contrast, when the operations and maintenance program includes regular, preventive, and predictive work, as well as corrective tasks and technical support, then the client is operating under the outsourcing model. In other words, outsourcing involves contracting a whole function, rather than a specific task. Greater savings and efficiencies are found in outsourcing, rather than out-tasking.

David Lyons

Outsourcing energy services

Implementing highly reliable energy solutions at research and manufacturing facilities is a significant challenge for pharmaceutical companies. The traditional model has been to run a facility with the company owning, operating, and maintaining all equipment itself, thus assuming exposure to risk on issues such as equipment durability, fuel volatility, and maintaining the expertise required to keep the system working properly in-house. Pharmaceutical facilities, however, are increasingly embracing the outsourcing model.


The outsourcing service provider can be contracted to operate and maintain complex energy plants and ancillary equipment, such as:

  • On-site generation and cogeneration assets

  • Steam, hot-water, and chilled-water systems

  • Mechanical refrigeration facilities

  • HVAC systems

  • Electrical systems

  • Safety systems

  • Plumbing/sanitary systems

  • General building maintenance.

After the outsourced service provider has been selected, the client and service provider should agree on a well-defined scope and clear objectives, which should be captured in a service level agreement (SLA). Using a risk-based approach, the scope and responsibility of the service provider can be built up over time, which will ensure client satisfaction, specifically around regulatory compliance. However, it is important that the client does not relinquish all responsibility, as the ultimate regulatory responsibility lies with the product manufacturer.

Identifying a key subject matter expert to serve as a liaison between the service provider and client will ensure compliance to quality and regulatory systems. The expert should also design escalation and process flows for change controls and equipment deviation, which pose the most risk to the pharmaceutical manufacturer. For the service provider, customer satisfaction and adherence to quality systems in this highly regulated industry are essential.

The client and service provider can develop a performance scorecard that is linked financially to the service agreement contract. Key performance indicators (KPIs) can include areas such as safe systems of work, system availability, and performance against schedule. Each line item can be linked to a performance metric, and each metric can be weighted with agreed-upon scoring criteria that is reviewed and scored on a periodic basis (e.g., monthly, quarterly). Linking the score to contract payments, by withholding an agreed-upon percentage each quarter, drives performance from the service provider's point of view and ensures client satisfaction. As the relationship between the service provider and client evolves, or as business expands, it is common to review and adjust the KPIs.

Outsourcing maintenance allows the client to reduce costs without reducing core-business company headcount and, as the pharmaceutical company becomes the customer of the service provider, to more easily drive change and continuous improvement. Outsourcing also allows management to focus on developing and manufacturing the product rather than on the non-manufacturing activities involved in facilities engineering.

Leveraging combined heat and power

Another key advantage of outsourcing energy management is that full-service outside providers possess the expertise to evaluate, design, build, and then operate technologies such as combined heat and power (CHP) to optimize energy efficiency. CHP, sometimes referred to as cogeneration, is an efficient energy technology that simultaneously generates power (i.e., electricity) and thermal energy, which is used for heating, cooling, and production of high-pressure process steam, while typically consuming only 60% of the fuel required for separate processes (1). Figure 1 illustrates the higher energy efficiency of CHP compared to separate heat and power production. CHP technology is currently experiencing a resurgence in pharmaceutical facilities due to its many operational benefits. CHP can provide increased energy reliability, greater fuel flexibility, and market responsiveness. CHP can also mitigate lost products and research projects due to utility grid failures. CHP reduces greenhouse gas emissions; the waste heat generated during the power production process can be captured, recycled, and used for process applications without the need for boilers within each building.

Figure 1: Comparison of separate heat and power generation with cogeneration. (FIGURE IS COURTESY OF THE AUTHORS)

CHP is a proven solution for industrial manufacturing environments, in which reliable power is crucial. According to the US Environmental Protection Agency's (EPA) Combined Heat and Power Partnership, 88% of existing CHP plants are utilized for industrial purposes (2). The other 12% are used by commercial and institutional entities such as hospitals, municipal and state governments, colleges, and universities. With a full-service outsourcing provider, designing, building, and operating complex energy infrastructure may be achieved seamlessly.

Customers that implement CHP typically experience the following benefits:

  • Cost savings. Burning less fuel generates cost savings. CHP users avoid buying from the market at peak price periods. CHP can also be configured to use locally-sourced renewable fuels.

  • Reliability. Utility power outages will not interrupt CHP operations, so critical processes continue uninterrupted.

  • Environmental benefits. Greenhouse gas emissions and criteria air pollutants are reduced when less fuel is combusted.

  • Fuel diversity. CHP plants may be designed for input of multiple sources of fuel. This multi-fuel ability increases energy security and can also mitigate volatility in fuel commodity prices.


Outsourcing may seem like a simple concept, but the potential benefits are significant, especially when complex energy infrastructure must be operated and maintained at the highest levels of reliability. Pharmaceutical research and manufacturing processes are costly to operate, so outsourcing the facility's energy plant operations and management can be a solution to control costs, reduce fuel and energy consumption, and evaluate and implement energy solutions and technologies that can ensure the integrity of the underlying processes.

Mel Palmer is business development director for Veolia Energy North America, marketing@veoliaenergy.com, tel. 617.849.6656. David Lyons is client operations manager at Dalkia Ireland's Pharmaceutical & Healthcare division.


1. EPA, "Efficiency Benefits," www.epa.gov/chp/basic/efficiency.html, accessed June 20, 2012.

2. EPA, "Combined Heat and Power FAQ," www.epa.gov/chp/documents/faq.pdf, accessed June 22, 2012.