Client articles
MAJOR BANK PICKS M&E SERVICES BY MODEL PROCESS
“The UBS team was one of the most innovative and advanced buying units we have engaged with in the last few years…” Paul Saville-King, managing director, Norland Managed Services
When the London base of leading international bank UBS wanted to competitively test the market for its mechanical and electrical (M&E) engineering maintenance services contract, it chose to take a different, innovative, approach. It wanted to demonstrate that collaborative tendering, where the client engages with the suppliers, produces a far better outcome than the traditional paper-based tendering or RFP process.
Responsibility for M&E engineering maintenance on a day-to-day basis is with the bank’s Corporate Real Estate & Administrative Services (CREAS). It is a critical function as the bank must ensure that its offices are operational all day, every day. As a major global bank, any failure could cost millions in lost revenue, a possible loss of clients and certainly damage to its reputation in an extremely competitive industry.
All third party supplier contract reviews are undertaken in conjunction with the bank’s global centralised sourcing and procurement function, called Supply and Demand Management (SDM). It maintains expertise in the products and services UBS procures, keeping abreast of the latest developments and trends, and monitoring what its peers are doing, continually working towards becoming the leader in procurement management within the financial services industry.
The first, and probably most important, element of the contract review was to produce the brief. Andrew Owen, managing director, regional head of CREAS (North East Europe & MEA), explained: “The challenge was to redefine what we, UBS, understood our M&E requirements to be, not just for today but for the next 20 years.” To assist this process, CREAS met with two international peer organisations who had recently tendered their M&E services, one a pharmaceuticals company and the other an investment bank.
This initial research phase enabled UBS to define what it wanted from the supplier:
o Risk management transfer from UBS to the supplier
o Long term relationship (7-10 year contract)
o Potential for supplier capital injection – depreciation of assets on supplier’s balance sheet
o Change of culture to a win/win relationship with the supplier
o Mechanisms to incentivise the supplier to perform and be rewarded
o More sophistication, control and management techniques
o Comprehensive MI [what is this?] for true ‘total asset life cycle management’
o Deeper supplier integration into CREAS strategy creation
o Market leading talent deployment to lead the supplier operation
Instead of the time-consuming and resource intensive traditional RFP or tender process, SDM chose to take a more collaborative approach, one which ‘engaged’ with suppliers. Research was undertaken to identify the ‘best in class’ supplier firms in the market place, with the briefing document being issued to 11 companies. Instead of submitting a detailed written document, each was invited to give an hour-long presentation explaining how it would meet UBS’s requirements.
Andrew Owen was encouraged by the innovative approach taken, and by the way the M&E industry responded: “What came out of this six month process was a tender document which drove responses towards what we actually needed from these services and away from what the respondent companies could provide us. As a result, the overall quality of all the responses was exceptionally high.”
SDM then selected a shortlist of five vendors and invited each to a three hour workshop. There, suppliers were asked to demonstrate their competencies and capabilities, using case studies of organisations similar to UBS. The workshop process allowed the UBS team to interact with the supplier, challenge and discussing areas of relevance and importance. This in turn provoked the supplier to focus on UBS’s specific business objectives, allowing a more channelled and effective dialogue. It also allowed the UBS team to monitor other aspects such body language when suppliers were challenged – how they reacted; their ability to respond instinctively with confidence; whether they became flustered and needed support from colleagues; whether they were a team that supported one another. It was these small indirect and non-verbal characteristics, not available during paper-based RFP responses, which helped reduce the five shortlisted suppliers down to three.
The final stage involved the UBS team attending a workshop with each of the three, either at their offices or at an existing client location. This allowed them to have the right resource, systems and materials to hand, including, in some circumstances, the actual client. At these final workshops, the UBS evaluation team consisted of two sourcing experts, four building engineers, a health and safety representative, an environmental specialist, a generalist service manager and a PA for taking notes.
Following the final stage, SDM and CREAS selected Norland Managed Services (NMS) for the UBS M&E services contract.
“The decision to engage through this new workshop approach has proved to be right,” said Nick Garniss, executive director, CREA Property Services [is this right, as we have referred to CREAS previously]. “It provided us the opportunity to extract much more information regarding the true capabilities of the vendors, and see them operate in their other client’s premises, enabling us to make far more informed decisions.”
NMS was appointed under a guaranteed maximum price (GMP) model. Although various different model approaches were discussed with suppliers at the final stage, including fixed price and cost plus, SDM wanted an open book approach, with cost certainty (as far as possible), and the GMP model met those requirements. SDM also wanted supplier encouragement or incentivisation to make cost savings to be included, sharing the risk and reward elements of the contract with NMS. Broadly, it would:
o Transfer the risks to NMS and allow for no increases in price other than costs which resulted from UBS changes
o Ensure NMS undertook its due diligence thoroughly as all risks and responsibilities sit firmly with it
o Support a mechanism by which NMS could suggest cost saving changes to the scope of services, with an agreement between both parties to share the savings.
A risk was placed on the profit element, which was split 50:50 against two performance measures – financial and operational. Financial performance was aligned to NMS delivering the total cost of maintenance within defined cost thresholds, and operational performance judged against maintenance specification and the monthly audit of NMS’s compliance against the Key Performance Indicators (KPIs) set out in the Service Level Agreement. The KPIs are weighted against UBS’s priorities – high, medium and low priority with relative scoring.
Paul Saville-King, Norland managing director, said: “The model that UBS and NMS have agreed aligned the long term aims of the bank to realise the true value of the services purchased, over the long term, whilst ensuring there is no compromise on service delivery standards or end-user satisfaction.”
Andrew Owen continued: “In adopting a new collaborative approach, we have demonstrated that engaging with potential suppliers produces a far better result than the traditional tendering process.
“NMS exceeded our expectations in providing us with innovative solutions to our needs whilst ensuring the stability of a strong on-site management structure, clear redefinition of key processes, and what we believe is an industry leading focus on critical facilities and their importance to organisations like UBS. While we are never complacent, we are confident that NMS is the right supplier to meet our current needs and those of the years ahead.”
Paul Saville-King concluded: “The best outcomes happen when the client is innovative, detailed, thorough and what can be described as an ‘intelligent client’. “The UBS team was one of the most innovative and advanced buying units we have engaged with in the last few years, and this has had a major influence on the excellent outcome of this procurement process.”
