Looking After the Assets

Five D

The business developed with the trend of outsourcing facilities management, which led – in cases where appropriate – to the combination of lease negotiation or lease administration. In the late 1990s, the federal government began outsourcing integrated real estate facility management contracts (the basis of the market in Australia) to a large number of private corporations—initially very large ones, and more recently smaller companies too—because of perceived advantages in efficiency in having a single solution to both matters.

Steve, who had amassed several years’ experience in the field in Europe, has been with Five D since its foundation in 2003 (he took full ownership in 2010) and says that 2012, “has been the busiest year I have seen, certainly as far as enquiries are concerned. It is difficult to be sure of the reasons for this upswing,” he adds, “but there are two main sources of the increase in activity. Most companies inherently either do or don’t outsource. If not, there is often a trigger—a change of CEO or CFO, for example—that may prompt a decision to examine the options, and there has been a noticeable amount of activity in this sector.”

Most of the sector’s activity, he believes, has been driven by sheer economic circumstances and the imperative to examine every possible way of cutting costs. “Companies are forced to see how they could cut their costs or headcount. There is a lot of pressure on them to look at alternatives,” and Five D has seen many enquiries this year on this basis. This, explains Steve, is real cost-cutting, not just trying to cram everything off balance sheet as an accounting short cut. “The latter,” he says, “is a short-lived attitude because, in the end, the dollars will tell the story regardless.”

As these solutions move more toward technology-based service delivery, however, the cost of obtaining the technology increases for individual companies who wish to do it themselves. It’s at this point that a company such as Five D becomes hugely cost-effective because it has invested in the technology (highly sophisticated bespoke software systems) on behalf of its many clients.

“As an example, and part of our success, we have a very high-end, global best-practice SAP system that is specifically configured for integrated property-FM solutions. It costs many millions of dollars and would be prohibitive for the property division of a company or even government—not cost-effective for the administration of a few hundred properties. By outsourcing to us, our clients can get access to the latest and best systems.” It is this trend that is likely to drive the market over the next two to three years. Steve says that Australia is particularly ripe for this technology because even a large company may typically only have a fraction of the number of properties compared to a counterpart in Europe or the US.

The technology has also worked in Five D’s favour because it acts as a barrier to competitors who may want to get into the market, putting them off with the high cost of entry. “Apart from staffing,” says Steve, “the highest cost in our business by far is IT. It is ongoing—we are always seeking ways of doing things better or presenting information in a more user-friendly manner—and it has to be a part of the way we do business. A hybrid model is also developing among companies that have their own in-house teams for property-FM but want to plug into Five D’s technology to make them more efficient and act as a kind of property support service.”

There is plenty of scope, he believes, for companies to understand better what is involved and what the benefits are of an integrated property and facilities management solution – even if many of the new contacts Five D gets have already gone through a consultation exercise before approaching the company. The government market (essentially federal and state authorities) currently accounts for around half of Five D’s business, and private sector business is likely to increase over time. “We provide services to nearly every town and township around the country and, with the full support of our clients, we want to engage with local communities.”

To that end, Five D aims to engage with local contractors wherever possible, rather than hiring big-city companies to provide, say, electrical services in a remote rural locality. “They still have to comply with all of our local requirements, which are very stringent,” Steve explains. It was a natural extension of this practice to join Supply Nation (formerly, AIMSC – Australian Indigenous Minorities Supplier Council), which is sponsored by the government and exists to create opportunities for businesses to engage with other businesses that are majority-owned by Indigenous persons. There is no price disadvantage – they still have to be competitive in normal trading terms – but according to Steve, Five D “make[s] efforts to get in touch with such organisations. We have a target each year of the amount of business we want to pass their way. It’s an excellent idea because there is no ‘hand-out’ aspect to it.”

The core service groups of Five D advise on property strategy, negotiate leases, project-manage fit outs, move clients into premises, and manage ongoing maintenance, and are backed up by IT, administration systems, and 24-hour help desks. Typically, potential clients already know roughly what they are looking for, having usually used an external consultant to help them develop a specification, although a number of companies want to engage in a discussion with Five D from square one. “We make a point with potential clients that if we agree to a specific scope of work, we will be happy with that for the full term of the contract,” says Steve, pointing out that Five D doesn’t need to get its foot in the door in order to grow the business. “We are not aggressive in that way. However, we do often find that clients find out about things they did not know at the outset that Five D can help with, especially in the technology space.”

Five D operates through a clearly defined supplier list and does not employ trade workers of its own. “This is a key separator for us—we are a management company. Once someone picks up a spanner, that becomes a third party engaged by us.” The company has around one thousand contractors in its database at any given time, and the selection criteria for the contractor engagement process are, according to Steve, “very strict. They all have to demonstrate to us that they have appropriate quality systems underpinning their service delivery. That is not usually difficult for larger companies, who generally have all the necessary items, but in the case of smaller companies, we often have to work with them to help them understand the various things they need to have in place in order to be considered to be added to our system. Once there, they will get work, not for just a single client but for multiple clients of ours.” There is plenty of incentive to comply with the rules and sign up.

The technology extends to keeping an eye on the suppliers. Workplace insurance coming up for renewal? The system will lock the contractor out until a copy of the renewal note is received. The system keeps tabs on priorities, too, as jobs are logged in grades of urgency, and the response and completion times are monitored automatically. “That means we are able to see on a day-by-day basis how they perform in the delivery of services to site,” Steve explains. “It all makes it feasible for us to keep or get rid of contractors who are underperforming—or not, as the case may be.”

Compliance with workplace health and safety regulations has been tightened up across the country (not just state by state), and in a related move, management and boards are now deemed responsible for the actions of their company in this realm: ignorance is no longer tolerated as an excuse. Steve says there is, rightly, a lot of nervousness: “The ability to answer questions related to WH&S is another driver for our business.” It’s an attractive way to ensure there are no holes in the compliance net.

A crucial and often clinching feature of the Five D technology is its reporting power and the transparency it brings to the entire outsourcing process. It is “very important” to clients that they should be able to see everything that is going on, says Steve. “Whatever happens, in our view they have a right to see it. So they are not losing control but gaining more control. It seems like a paradox that you can outsource but end up with a lot more control of what is happening in your facility but that, typically, is the outcome for our clients.”

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

June 22, 2018, 5:25 PM AEST