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Lawler and Porter also suggested that the key to this match appears to be perceived equitable distribution of rewards. The internal pricing of transactions has prompted the consideration of buying the same service externally. Reinforcing this process has been a mandatory requirement for market testing, exemplified in many UK public sector organizations. This may include not only the operational services cleaning, security, etc. In construction the traditional method of procurement involves the use of a general contractor, who carries a degree of overheads in terms of physical assets and nonmanagement staff, together with management staff.

The analogous situation in facilities management is the fully outsourced package. Subcontractors are employed by the facilities management contractor for specialized services, although many operational activities are undertaken by the main contractor.

Management oriented procurement systems have become much more common in the construction industry over the last two decades.

As explained by J. This trend is also evident in facilities management.

Research Framework

A management oriented system involves the payment of a facilities management organization on a fee basis to administer the management of the facility. Subcontractors may be employed either by the client or the facilities management group, but the main facilities management group possess only management staff and do not carry any overheads in terms of capital assets or operational staff. No single method provides a panacea for all client organizations.

Their characteristics in terms of cost, quality, risk and client participation depend largely on the nature of asset specificity described later in this chapter. The issues which need to be considered in identifying suitable partners in a facilities management contract, whether it be in-house or outsourced, form part of what is known as the transfer pricing system and are detailed in the following section.

Large differentiated organizations, with diverse and complex business activities, continually face the problem of identifying ineffective operations. Under such scrutiny, facilities management must take up a defensible position. Failure to deal with hidden inefficiencies has damaged large corporate giants at the hands of smaller organizations which are capable of identifying inefficiencies. In response to this, the concept of profit centres has emerged.

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This requires individual operations in an organization to apply profit as a constraint or objective. Various authors, including Lawrence and Lorsch in Organization and Environment Managing Differentiation and Integration , argue that profit is rarely an objective in an organization, but profit must be realized in order to sustain an organization and as such is more accurately described as a constraint. The use of profit centres also implies a greater degree of autonomy and decision-making at the local level. This leads to the concept of transfer pricing, which is concerned with the pricing of services which are offered by various operations in an organization.

From the perspective of facilities management, this has a twofold significance. If facilities management is treated as a discrete operation, the unit must be capable of yielding a tangible profit as a profit centre. Alternatively, if facilities management is treated as a supportive organizational function, the question of the amount of rental paid by profit centres becomes a key consideration this essentially involves the question of transfer pricing. Whichever approach is used, the cost accountability of facilities management has become more prominent than ever before.

Transfer pricing deals with more than the transfer price: it addresses the whole mechanism of coordinating transactions, both external and internal. The relationship between the three stages of a transfer pricing system and each of the elements of a transfer pricing system listed above are shown in Figure 4. The greater the degree of specificity, the more important it is to establish ex-ante and ex-post protection against opportunistic behaviour by one of the parties.

Facilities management is characterized by varying levels of asset specificity depending on the complexity of the building s and its their location, among other factors. The four key types of asset specificity relevant to facilities management are as follows. In the most extreme case this is exemplified by bespoke buildings or refurbishments. An understanding of the extent and nature of asset specificity is critical to the formulation of an appropriate contracting method in facilities management. The provider of the facilities management service and the user client or facilities manager are both vulnerable to opportunistic behaviour by the other if issues of asset specificity are not considered.

A common example is the inevitable process of human asset specificity which arises from the incumbent operators of a facility who undergo a considerable learning curve during the duration of a project. As a result they are in a position to demand a premium price when the contract is renewed. Another illustration of the influence of asset specificity is the conflict which inevitably arises between the facilities manager acting as landlord and simultaneously acting as business facilitator. A refurbishment tailored for a specific organizational unit may be attractive from a functional point of view but may not be justifiable in terms of the contribution to the value of the built asset.

The facilities manager, in relation to property management, is in a unique position to provide strategic information. Often, however, even when facilities management is in-house, the quality of information required by senior executives is all too often lacking. With a financial based reporting system, buildings are invariably perceived as a liability which has to be tolerated.

This results in a narrow view of the business with insufficient information on non-financial and external factors. Figure 4. This contrasts with the strategic information shown in Figure 4. This is illustrated by the burgeoning of environmental, health and safety legislation in the US and Europe, it is becoming increasingly untenable to provide in-house staff with sufficient expertise in all areas of legislation.

Lighting schemes must not produce glare and adjustable secondary lighting must be available. Equipment heat must not cause discomfort and an adequate level of humidity must be maintained. This clearly raises fundamental questions about the capacity of building operators—and indeed the enforcers of the legislation—to measure these variables. What is clear from the detailed nature of this kind of legislation is that a considerable level of technical and legal know-hoow will be required for managing the workplace of the future.

For example, it is likely that the most effective FM contracting policy will continue to be the one which considers the interests of the FM employees in terms of job security, opportunity and reward. However, job security needs equal consideration. The modelling of occupancy patterns is another issue. Occupancy patterns are becoming far less predictable with the demise of the 9-to-5 job and the advent of telecommuting. Innovative solutions need to be introduced to monitor occupant movement and to resolve peaks and troughs in space demand.

Automatic identification, radio frequency tracking, machine vision and other IT devices may assist in collecting and interpreting such information. Finally there is the provision of stimulating as well as comfortable environments. This deals not only with the setting of thermal and lighting conditions but variation of these parameters, spatially and over time.

The realization that human activity has a cyclical pattern suggests that a fixed environmental condition is undesirable.

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Instead, an environment which is emphatic to this cyclical pattern needs to be considered. SUMMARY In each sector of the economy, organizations operate quality managed facilities using well developed quality systems supported by effective information management systems. A balanced and cohesive team of in-house managers, supported by consultants, are led by professionally qualified facilities managers.

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Regular audits provide feedback on quality, value and risk, and effective quality systems include regular training with programmes of organizational learning. Organizations have longer-term relationships with carefully selected service organizations giving value-added services.

Demand has to be the impetus for this scenario of the professional practice of facilities management. In any review of facilities management practice, forms of contracting are likely to come under scrutiny first. Purchasing and contracting practice which is at variance with the principles of facilities management is one suspect area.

Long-term objectives can be compromised by short-term contracts, and defensive, adversarial relationships can stem from inappropriate terms and conditions. Any opportunities for rationalization and improvement through integration will be limited while there is a preference for shortterm, separate subcontracts. Joint venture and partnering arrangements are more appropriate forms of relationship to meet facilities management objectives. Smaller organizations can form consortia to improve their skill base and purchasing power.

A structured education and training provision to develop facilities management skills and offer supporting advisory services can promote the necessary development of quality systems, and ensure effective processes for marketing, design, selection and delivery. Schon, D. Recommended reading Davis, G. Lawrence, P. Maren, M.

Maslow, A. Van der Meer-Kooistra, J.

Facilities Management: The Dynamics of Excellence, 3rd Ed.

Preiser, W. Steele, F. Taylor, B. Vischer, J. Williamson, O. Wineman, J. New York. Quality management OVERVIEW Facilities management is a total quality approach to sustaining an operational environment and providing support services to meet the strategic needs of an organization. Centre for Facilities Management Techniques for managing quality, value and risk are key skills for facilities management. Processes for developing and managing social and service partnerships create the conditions for continuous quality improvement and, as a result, managing customer expectations and meeting their requirements implies a total quality approach.