5 Key Steps to Effective Contractor Management

Contractor Management Challenges Today

Facilities management professionals and their teams today are required to manage highly distributed enterprises with locations (stores, restaurants, buildings, outlets, healthcare centers, etc.) all over the country or even all over the world.

For repair and maintenance (R&M) of these facilities, FM teams often need to source and manage service providers in each region and location across all the major contractor trades. Importantly, many FM teams often rely on third party service providers and vendors for the ultimate success of their programs.

However, as headcount and budget for FM teams are constantly being scrutinized and remain tight, FM teams everywhere are asked to do more with less. Therefore, it is imperative that FM teams manage their contractors in the most cost-effective and operationally efficient ways possible in order to complete their R&M work orders, making sourcing, hiring, and managing the best vendors for the job a never-ending challenge.

These challenges can impact the perception of FM organizations as expensive cost centers instead of being viewed as strategic centers of excellence.

Other challenges FM teams face on a regular basis include:

    • Limited visibility into work order progress by both FM and location staff using manual tracking methods (pen and paper).
    • No easy way to get real-time status updates on any given work order.
    • Inefficient communication between all parties.
    • Difficulties in tracking spending and managing costs for any given work order or service request.
    • No objective metrics/ measurement system in place to gauge vendor performance to retain great contractors and weed out lower-performing ones (too much reliance on anecdotal recall).

Contractor Management Lifecycle

The good news for facilities teams is that there are modern web and mobile-based work order (or facilities) management platforms with integrated analytics and service provider communication available in the market.

Referred to broadly as “service automation” platforms, these technologies can provide companies with a full, end-to-end lifecycle approach to their contractor management needs.

Contractor and service provider management using this lifecycle approach avoids the pitfalls of ad hoc sourcing, hiring and managing, which can increase costs and lead to inconsistent performance and poor quality of service.

The four elements and key benefits of this service automation-enabled lifecycle are:

    1. Find: Sourcing, credentialing and monitoring contractors based on expertise and qualifications that best meet the organization’s needs.
    2. Manage: Capturing all planned and on-demand service requests; real-time validating work performed in the field; streamlining proposals, and invoices across all trades, categories, and locations.
    3. Analyze: Using real-time and historical data to enhance FM operations by controlling spend, boosting the quality of service, and taking a strategic approach to budgeting and planning processes.
    4. Pay: Reducing invoice processing and remittance costs by eliminating pen-and-paper systems in favor of advanced techniques such as electronic data integration and automating invoicing & payment processes.

With this operational lifecycle in place, facilities teams can implement the following five steps toward maximizing their effectiveness in managing contractors.

Step 1: Optimize Your Vendor Network

Ad hoc contractor management without service automation in place may lead to a random selection of service providers for facilities work at all locations. This may lead to higher costs, unexpected results and non-repeatable processes. Many companies will attempt to overcome these challenges by using expensive “middlemen” such as brokers and other intermediaries. They look to them simply to help manage the hundreds to thousands of different contractors on which they rely.

Deploying service automation and analytics tools can provide FM teams access to critical data and insights for more easily determining the best-performing vendors to enable their companies to optimize their directory of service providers across the essential contractor trades.

Optimizing the number of service providers can reduce costs but also make service automation-enabled FM teams better business partners with corporate departments such as Procurement, Operations, and Finance because of the enhanced visibility and transparency into the process.

For example, many service automation-enabled companies today use the simple criteria of qualifying service providers based on their familiarity with modern work order management processes for dispatching, tracking, reporting, and even automating invoicing and payment.

Service providers who are not up-to-speed on service automation will need to be, or risk not making the cut for consideration of more R&M work.

Service Automation Success Story: National Distributor & Wholesaler

Challenge: With more than 1,400 locations nationwide, a large distributor and wholesaler of plumbing, HVAC and other equipment found itself managing more than 7,000 contractors across all its various trades. Vendor performance management and effective cost containment were nearly impossible because of the sheer number of contractors on which the company relied.

Result: By analyzing KPIs available through service automation, this company consolidated the number of service providers to an optimal number of 600 of the highest-performing contractors using objective criteria such as cost, responsiveness, and work order resolution time. This enabled the company to negotiate more favorable cost terms and implement data-driven vendor performance programs.

Step 2: Automate Your Work Order Dispatching

Legacy “pen-and-paper” dispatching of contractors for R&M work orders can lead to havoc in large-scale FM operations given the limited visibility into the status of open issues and nearly zero accountability of vendor performance.

Service automation tools can automate the dispatching and tracking process by empowering anyone authorized to access the platform to initiate, track and settle work orders from their desktops or their mobile devices. Preferred service providers (and backups) can be defined per location, trade, etc. so service requests are automatically routed properly and quickly.

Automating work order dispatching through centralized web and mobile service automation platforms can lead to significant advantages over legacy methods by increasing service provider response times to an issue and ultimately reducing critical work order time-to-resolution.

Service automation-enabled companies can also benefit from empowering non-FM employees with access to their platforms. This can dramatically reduce the burden on their FM teams by taking them out of the loop for routine work orders, while still giving them full visibility and control over the overall R&M process.

This enables companies to implement strategic FM programs such as tiering work order responses by priority or scheduling preventive maintenance work orders (PMs) on an automated, cost-controlled basis. PMs this way are not only assured of happening as needed but are automatically scheduled, further lessening the demand on the FM team for such routine tasks.

Service Automation Success Story: International Casual Dining Restaurant Chain

Challenge: A large casual dining company with approximately 100,000 employees and more than 1,500 restaurants struggled with a lack of visibility into the scope and spending of service providers responsible for completing work orders. The ad hoc nature of these work orders by location led to inconsistent and inefficient vendor performance, which led to higher costs in many cases.

Result: Providing all essential staff with the ability to open work orders through a service automation platform enabled the FM team to standardize its operations at all locations. This included providing users with access to the platform from their mobile devices, letting them open work orders directly and communicating with the FM team and service contractors using detailed text and multimedia notes.

Step 3: Implement Cost Controls

FM teams know that implementing cost controls without the necessary data is nearly impossible, which reinforces the adage that you “can’t manage what you can’t measure.” Service automation powered by analytics/business intelligence (BI) tools can provide organizations with access to real-time and historic data to track and monitor costs by a number of key performance indicators (KPIs) such as spend by specific vendors, across different regions and even on a location-to-location basis.

Having this data can help organizations and their FM teams establish industry best practices such as not to exceed (NTE) pricing controls for recurring or routine work orders, as well as for accepting new proposals from prospective vendors.

This includes the ability to detect spending anomalies or outliers that may highlight bigger issues such as pricing abuses or errors, or vendor performance problems in a specific store or region. Top performing FM teams can also customize their data down to granular levels including trade-specific analyses of cost and performance, enabling them to easily identify the best service provider by each trade.

With financial controls like these in place, FM teams can actively participate in their organizations’ budgeting and strategic planning processes, making them an invaluable part of the business.

Service Automation Success Story: Regional Fast Casual Restaurant Chain

Challenge: This 100 location US chain had been using a rudimentary work order tracking system that required high levels of manual intervention by the FM team. With the limited visibility this system provided, there was no easy way for this company to implement financial controls such as vendor pricing that adhered to acceptable industry rates or even their negotiated rates.

Result: With service automation analytics, the company was able to implement consistent financial controls including establishing NTE pricing for the first time. The result was lowering R&M costs more than 35% through better tracking and visibility

Step 4: Ensure Contractor Compliance

Ensuring that contractors comply to all regulatory and corporate requirements is a must-have step to mitigating risk and preventing liability costs, which can be substantial. For example, finding out after the fact (e.g. an on-site accident) about lapsed or underinsured service providers can prove extraordinarily costly.

However, because of the onerous, time-consuming aspects of manual compliance, many companies opt for having contractors self-report compliance requirements, even for critical items such as W-9 forms, insurance policies and licenses & bonds.

Service automation tools can provide FM organizations with the ability to manage compliance using a single, updatable (dynamic) dashboard that presents them with a comprehensive view of where each vendor stands in terms of its compliance.

In addition, with the ability to monitor and alert vendors directly from the platform, neither the company nor its vendors will ever be caught off guard in terms of compliance, helping it adhere to even the most stringent risk management goals and corporate controls.

Service Automation Success Story: National Clothing Retailer

Challenge: With more than 160 company-owned retail stores, this company largely relied on a “pen-and-paper” FM operation, making tracking the compliance of its hundreds of vendors a difficult, error-prone and time-consuming process.

Result: With service automation, the company significantly streamlined compliance across all locations. The FM team gained the ability to deliver timely alerts to its vendors in danger of being non-compliant due to upcoming insurance certificate expirations and other time-sensitive events.

Contractor Management without Service Automation

Challenge: At the grand opening of a major retailer’s store, an improperly installed mirror fell on a child causing severe injury. The retailer had not been conducting regular compliance checks on its vendors and learned too late that the service provider responsible did not have the proper level or amount of liability insurance to cover the damages. The retailer thus ended up having to pay all of the damages out-of-pocket.

Lesson Learned: Enforcing compliance is smart business and service automation makes it easy for FM teams to stay in front of potential problems.

Step 5: Initiate Regular, Data-Driven Performance Reviews

Consistent reviews of vendor performance on a regular basis is arguably the most important step in effective contractor management as well as for ensuring positive, productive company-to-vendor communications.

Without objective data measured against KPIs that both the FM team and its service providers can agree and rely on, performance evaluations can be largely a “guessing game,” subject to the whims and biases of the company or even the vendor. This can break down communications and harm the relationship overall.

Service automation-enabled organizations today rely on quantitative dashboards, scorecards, and analytics as the basis of data-driven and recurring performance management (e.g., quarterly reviews) as a way to enforce accountability and maintain transparency.

By using the same scorecards, smart vendors track their performance just like their customers do, ensuring everyone is focused on the same metrics with no surprises. For many service providers, a top grade scorecard is a “badge of honor” and an effective tool to generate additional business.

Service Automation Success Story: Retail Financial Company

Challenge: A financial company with 400 US & UK locations had zero metrics in place to even measure the volume of work orders its vendors were managing each year. Consequently, the company had no idea how those vendors were performing in key areas including cost and quality.

Result: Using service automation, this company instituted a formal vendor scorecard system built on a set number of criteria that were important to the FM team as well as the company’s store managers. The FM team took the additional and innovative step of soliciting direct feedback of contractor performance from the stores themselves through the platform as a scorecard line item that could be tracked over time.

Effective Contractor Management Leads to Effective Facilities Management

With locations all over the country and even the world to manage, commercial facilities management teams today are asked by their companies to do more with less. In addition, maintaining a corporate brand or organizational presence by ensuring superior customer experiences across physical environments has become mission critical. But legacy processes for managing contractors who are responsible for R&M of these locations can be expensive, time-consuming and ineffective.

Technologies such as service automation can help FM teams completely modernize how they source, hire and manage their service providers.

Further, service automation can make these FM teams an essential member of their company’s strategic operations through a more transparent, systematic and effective approach to contractor and vendor management.

Learn more about integrating innovative service automation and facilities management technology.