Integrated Outsourcing in a Performance-Based Contract Lowers Costs
Public Utility
Summary
For a major utility company, Capstan managed an RFP process with an expanded scope of services to replace the incumbents with a single service provider under a performance-based contract at a substantially lower cost. We assisted the management team in running a collaborative RFP process, designing a solution that included retention of unionized building engineers, negotiating a contract and transitioning to the new provider with minimal disruption to day to day operations.
Client Challenge
The existing service providers were struggling to implement controls, standard processes and new technology, particularly for project management and accounting. New CRE management inherited a difficult situation but feared changing service providers while submitting a rate case to the Public Utilities Commission for approval of several critical initiatives. And the potential reaction of the union which represented a majority of the FM staff was also a concern.
How Capstan Helped
We assisted the management team in benchmarking the existing contracts to market standards to understand the potential cost savings of a new outsourcing initiative.
We crafted an RFP process that included joint solution design sessions with four qualified bidders who worked with us to create an improved service delivery model and a more flexible and incentive-based contract.
We then managed the transition from the incumbent organizations to the new service provider by staffing a PMO (Project Management Office) that oversaw six transition teams, resolved issues and prepared the business case for senior management approval.
Benefits to the Client
The new integrated delivery model is more cost effective and a better cultural fit for the client. The collaborative involvement of the functional managers from the CRE group with their counterparts at the service provider throughout the RFP process helped pave the way for a smooth transition. We also helped to negotiate a fair settlement with the former service providers whose contracts were terminated, without the negative consequences that can result from such terminations.
