Insight 10 October 2024

Local or global FM?: Consider costs

Shaun Carroll, Chief Procurement Officer at Mitie

There are more than just monetary costs at stake when choosing between locally sourced and globally sourced facilities management.

As Mitie’s Chief Procurement Officer, and having worked in both local and global FM, I know there can be a high price for choosing the wrong solution.

In the second instalment of a five-part series on local vs global FM, I’ve presented key considerations to make sure your partner provides the best possible value.

Shaun Carroll, Mitie Chief Procurement Officer

Price is always a key factor in choosing your FM partner. There are cost implications for both local and global FM, which must be kept in mind.

Going local

The cost of partnering a local FM provider usually remains stable and is often better value. This is because they operate in-country, with all the efficiencies that come from:

  • Local employees
  • Self-delivered services
  • Local supply chain that isn’t as vulnerable to global events
  • Simple contract structure without added layers of management overhead
  • Clear chain of command without complex departmental silos across multiple locations

Of course, global events, from natural disasters to pandemics and international terrorism, may impact costs on a local FM contract. But crucially, the agility of such a contract means changes to delivery can be implemented more quickly, mitigating any price instability.

There’s another big benefit to local FM that shouldn’t be overlooked. Local FM providers have the ability to offshore or buy globally, which can sometimes make sense…

  • For non-customer facing or administrative functions such as IT, HR or Finance
  • When there are limited local suppliers for a very specialised service
  • If lower prices due to economies of scale or other factors outweigh risks and logistical challenges

If circumstances mean it’s more cost effective to procure globally, an agile FM contract can do so.

Of course, people costs are usually the biggest spend in any FM contract. When working with local partners, these are direct costs to the customer rather than being marked up by a global managing agent.

Going global

Even with globally procured facilities management, the on-the-ground service is likely to be subcontracted locally, to a patchwork of in-country suppliers. Very few FM organisations (if any) can provide a consistent, self-delivered global presence, with their own staff in each location.

Your management overheads are a major consideration for globally procured FM contracts. Dedicated teams for managing service delivery, contracts and relationships with multiple service providers across regions are required. The overheads of establishing and maintaining this centralised team can be substantial and will be passed on to you through the contract.

Compliance costs are often higher for globally procured FM. Varying regulations, standards and legal requirements need additional resources to make sure local laws are complied with. Navigating country-specific rules and legislation can be time-consuming and costly.

Currency fluctuations can impact global facilities management procurement more too. As exchange rates fluctuate, the cost of procuring FM services through networks of local service providers can vary, often requiring extra contingencies. This unpredictability can make financial planning and budgeting more challenging, particularly when substantial currency fluctuations occur over the life of a contract. It’s important to determine who will bear the foreign exchange risk and decide what happens in the case of significant currency changes.

When making your choice between local and global FM, consider the following:

  • Can my organisation absorb potential price fluctuations from foreign exchange rate changes?
  • What are the cost implications of using a local supplier for any necessary in-country labour?
  • Can some aspects of the contract be offshored to create further savings?

To read my full analysis of local and global FM, check out my mini-guide: Locally sourced FM to secure your success.

Locally sourced FM to secure your success

A CPO’s mini-guide to answering the ‘Local or global?’ FM conundrum.

Find out more

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