Don't get caught with your pants down when setting up Suppliers on Facilities Management Contracts
Facilities management as we all know is a complex and dynamic field that requires significant planning and attention to detail. Whether you are setting up suppliers for a new facility or reviewing your current suppliers for an existing contract, due diligence is critical to the success of your operations and supplier relationships.
Due diligence is the process of gathering and analysing information about potential suppliers, including their financial stability, reputation, and experience. This process is crucial for identifying potential risks and ensuring that your suppliers meet your requirements and standards.
The importance of due diligence cannot be overstated, especially when it comes to selecting suppliers for facilities management contracts. The quality of your suppliers will directly impact the effectiveness and efficiency of your operations. A lack of due diligence can result in poor service quality, higher costs, and even legal liability.
Why due diligence is essential when setting up supplier contracts:
One of the primary reasons for conducting due diligence is to ensure that your suppliers meet your quality requirements. You need to verify that they have the necessary experience, certifications, and qualifications to deliver the services you need. Due diligence can also help you identify any potential issues that may affect their ability to meet your expectations.
Due diligence is critical for identifying potential risks that may arise during the course of your contract. This could include financial risks, such as a supplier’s insolvency, or operational risks, such as health and safety issues. By conducting due diligence, you can mitigate these risks by selecting suppliers that have a solid track record and meet your standards.
Facilities management contracts are subject to a range of regulations and standards, including health and safety, environmental, insurances and labour laws. Due diligence helps ensure that your suppliers comply with these regulations, which can help you avoid legal issues and reputational damage.
Poor supplier selection can result in higher costs, as you may need to invest additional resources to address issues or find a replacement supplier. By conducting due diligence, you can select suppliers that offer the best value for money, helping you control costs and enjoy a positive supplier relationship experience.
Did You Know?
According to a survey by the Ponemon Institute, 53% of organisations experienced a data breach caused by a third-party vendor. This underscores the need for due diligence when selecting and managing suppliers.
In a study by Accenture, 58% of companies said that they had experienced a supplier-related disruption in the past two years, with 10% experiencing a significant impact on their operations. Due diligence can help mitigate these risks and ensure that your suppliers are reliable and stable.
According to a report by Deloitte, 72% of organisations conduct some form of third-party due diligence, but only 44% have a formal program in place. This highlights the need for more robust due diligence processes, particularly in the facilities management industry.
Do You Carry Out Proper Due Diligence?
Here are five questions that can be used to assess whether your company carries out proper due diligence when selecting suppliers for facilities management contracts:
How do you gather information about potential suppliers?
This question is designed to understand whether your company has a structured approach to gathering information about potential suppliers. A good answer would include a combination of methods, such as internet searches, reference checks, financial reports, and site visits.
What criteria do you use to evaluate suppliers?
This question is designed to understand whether your company has a clear set of criteria for evaluating potential suppliers. A good answer would include a combination of factors, such as experience, certifications, financial stability, and reputation.
How do you ensure that suppliers comply with regulations and standards?
This question is designed to understand whether your company has a process in place for ensuring that suppliers comply with relevant regulations and standards. A good answer would include a combination of methods, such as regular audits, performance monitoring, and robust contractual clauses.
How do you manage supplier relationships?
This question is designed to understand whether your company has a structured approach to managing relationships with suppliers. A good answer would include regular communication, performance reviews, and a process for addressing any issues that arise.
How do you assess and mitigate risks associated with suppliers?
This question is designed to understand whether your company has a process in place for identifying and mitigating risks associated with suppliers. A good answer would include a risk assessment process, regular reviews of supplier performance, and a contingency plan in case of supplier failure.
Are you taking the necessary steps to select reliable and
effective suppliers for their facilities management contracts?
The risks of not conducting due diligence when selecting suppliers for facilities management contracts can be costly;
Poor Service Quality | In a survey by Accenture, 58% of companies said they had experienced a supplier-related disruption in the past two years, with 10% experiencing a significant impact on their operations.
Financial Instability | According to a study by the Ponemon Institute, 53% of organizations experienced a data breach caused by a third-party vendor, which can lead to financial losses and reputational damage.
Regulatory Non-Compliance | In a survey by EY, 69% of respondents said they have experienced a significant legal, regulatory, or compliance event involving third-party vendors in the past three years.
Reputational Damage | In a study by Deloitte, 28% of organisations had experienced a negative event with a third-party supplier that resulted in reputational damage.
Safety and Security Issues | In a survey by Supply Chain Dive, 43% of supply chain professionals said they had experienced a supply chain disruption related to security issues.
Legal Liability | In a survey by IACCM, 85% of organisations said they have had at least one contract dispute with a supplier in the past five years.
Inadequate Insurance Coverage | In a survey by Marsh, 54% of organisations said they have experienced a supply chain disruption due to inadequate insurance coverage.
Poor Communication | In a survey by Deloitte, 25% of organisations had experienced communication breakdowns with a third-party supplier, resulting in delays and service disruptions.
Ineffective Risk Management | In a study by Gartner, 60% of organisations said they have inadequate visibility into their third-party supplier risks.
Hidden Costs | According to a study by Aberdeen Group, poor supplier selection can result in an average cost overrun of 5.5%, with some projects experiencing overruns of up to 20%.
By conducting due diligence on your suppliers for facilities management contracts, your company can mitigate these risks and ensure that they select reliable and effective suppliers. This, in turn, can lead to improved service quality, cost control, and enhanced business performance.
Maxcene Crowe is a facilities management industry expert and Founder of MCFM Global a company that inspires, educates and energises professionals.
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