Total Service Costs: Navigating Economic Headwinds

In today’s challenging economic climate, marked by rising costs and unpredictable tariffs, facilities managers are constantly balancing operations, budget management, and the diverse needs of their business. While focusing on hourly labor rates has been a traditional approach when selecting service providers, it is now proving to be an insufficient—and often misleading—practice that can lead to higher total service costs and less satisfactory service. 

Facilities costs are accelerating far beyond general inflation, acting as a “silent budget killer” and demanding a smarter approach to financial oversight. The ServiceChannel Platform enables facilities managers to adopt a more transparent and objective data-driven approach to manage total service costs.

The Unseen Costs: Tariffs, Inflation, and Supply Chain Pressures

Facilities managers are now grappling with a complex web of rising costs:

• Material costs: New tariffs directly increase the price of essential building products. Raw material prices are projected to skyrocket by 7.5% this year due to these policies, with some goods facing tariffs as high as 145%.
• Labor expenses: Compensation costs for civilian workers increased by 3.6% in the last year, with unionized workers seeing even higher jumps. Labor shortages, particularly in transportation, further compound these costs, leading to delays and production bottlenecks.
• Supply chain vulnerabilities: Geopolitical tensions, extreme weather events, and cybersecurity threats are causing widespread supply chain disruptions, increasing freight costs, and delaying projects.
• The “Maintenance Premium”: Beyond general inflation, maintenance costs have increased 27% faster than the Consumer Price Index from 2021 to 2025. This “premium” is driven by factors like deferred maintenance, union labor inflation, and rising HVAC costs due to extreme weather, leading to significant unbudgeted expenses.

These combined pressures lead to project delays, reduced productivity, and a critical need for facilities managers to shift from simple “cost control” to comprehensive “risk management.”

Beyond the Hourly Rate: The Imperative of Total Cost Management

In this volatile environment, focusing solely on hourly rates for service providers is a dangerous illusion. A low hourly rate often hides inefficiencies, lack of first-time fix capabilities, and inflated material costs, ultimately leading to higher overall expenses.

Total Cost Management means evaluating the true cost of service by considering:

• Efficiency and speed: A provider who completes jobs faster, even with a higher hourly rate, can lead to lower total labor costs and minimize disruptions.
• Quality and reliability: High-quality work reduces costly callbacks and prevents recurring issues, saving money in the long run.
• Scope of services: A provider offering a wider range of services or preventative maintenance can reduce the need for multiple vendors and lower administrative costs.
• Technology and tools: Providers using technology for diagnostics and communication can complete jobs more effectively, reducing overall costs and improving efficiency.

This holistic view is crucial for building resilience and protecting your organization from the severe financial impacts of disruptions and escalating costs.

Implementing a Total Service Cost Management Strategy

ServiceChannel provides essential tools paired with data, so you can transform challenges into opportunities for savings and operational resilience across your provider network.

Here are some tools you can use today, included with your ServiceChannel subscription:

• Contractor Scorecard: Track provider performance across speed, quality, price, and engagement to ensure you partner with the most reliable, efficient providers who deliver first-time fixes and minimize downtime. Evaluate your provider performance trends and benchmark against the broader ServiceChannel network. 
• Provider Search with Price Score: Compare providers based on actual invoice amounts for similar work to move beyond hourly rates and identify true value, especially when material prices are volatile.
• Budget Insights: Gain real-time visibility into spending and forecasted costs to proactively manage your budget and prevent overspending amidst rapidly rising costs.
• Asset Validation for Total Cost of Ownership (TCO): Track asset history and costs to make informed decisions on maintenance, repair, and replacement, optimizing long-term spending in a high-cost environment.
• Analytics and Reporting: Access comprehensive data on spending trends and provider performance within Service Channel to identify cost drivers and make data-backed decisions for continuous improvement.

ServiceChannel helps facilities managers shift from reactive problem-solving to proactive Total Cost Management, leveraging data to optimize costs and build resilient operations.

Actionable Strategies for Facilities Managers

• Define comprehensive Key Performance Indicators (KPIs): Look beyond initial price to include metrics like first-time fix rates, asset uptime, and total cost of ownership, along with supply chain resilience and parts lead times.
• Focus on value, not just price: Prioritize long-term ROI, such as upgrading to efficient equipment that offers lifecycle cost savings.
• Implement robust performance monitoring: Regularly review provider performance using tools like ServiceChannel’s Contractor Scorecard to ensure accountability and continuous improvement.

Empowering Facilities Managers for a Resilient Future

In 2025, facilities managers are no longer just operational overseers. They are strategic business drivers, directly impacting the organization’s bottom line and competitive advantage by effectively mitigating risks and optimizing costs in a volatile market. The economic landscape demands a strategic shift. By embracing a Total Cost Management approach, facilities managers can move beyond superficial cost comparisons to reveal the true value and long-term financial impact of their service provider choices. 

The ServiceChannel Platform provides the necessary tools and data-driven capabilities to make this critical shift. The result: improved service quality, minimized disruptions, and real savings.

For additional strategies to build and maintain a rock-solid network of the most efficient and effective service providers in the market, be sure to check out the Framework for a Strong Provider Network.