Optimising Maintenance Budgets Through Strategic Sourcing

Maintenance budgets are often a major line item for asset-intensive organisations, accounting for thousands if not millions spent annually. With rising costs and increased pressure to maximise value, many owners are looking for ways to optimise these costs.

At WPC Consulting, we've helped numerous clients leverage strategic sourcing principles to lower annual facility and infrastructure maintenance budgets by 10-15% on average. By taking a systematic approach to the sourcing process, owners can gain significant cost savings through increased competition and market leverage.

Performing a Spend Analysis

The first step is conducting a thorough spend analysis to understand where and how maintenance dollars are currently being allocated. This involves categorising expenditures, identifying recurring and one-off costs, and analysing historical spending patterns. This provides visibility into areas primed for cost-cutting.

Identifying Areas for Savings

A key part of the spend analysis is pinpointing specific areas where significant savings can be achieved. Here are some common categories that present opportunities:

• Planned and Preventative Maintenance - Consolidating planned maintenance projects into structured agreements helps standardise pricing for common tasks. This brings visibility to areas of overpayment vs market rates.

• On-Call and Emergency Services - Ad hoc repair and emergency work is often paid at premium rates. Developing prequalified panels and KPI's for on-call support reduces these irregular expenditures.

• Facilities Operations & Minor Works - Services like landscaping, cleaning and minor construction typically feature overlapping scopes. Bundling these into comprehensive facility services contracts captured overlooked savings.

• Indirect Spend Areas - Analysing expenditure categories like tools/PPE, equipment rentals and temporary labor uncover areas frequently paid to multiple suppliers with inconsistent rates.

• Commodity-Based Services - Consumables like cleaning chemicals, fasteners and hardware, and lubricants see bulk savings potential when consolidating supply through supplier agreements.

Developing Supplier Panels

Once high-spend categories are identified, the next phase is to develop prequalified supplier panels through a request for information (RFI) process. This involves rating suppliers based on criteria like pricing, quality, safety, sustainability and requesting most competitive bids to form approved panels.

Structuring Agreements

Strategic agreements need structure to maximise benefits. We help clients establish master service agreements (MSAs) and performance based contracts with pre-negotiated rates as well as gain-share provisions incentivising suppliers to identify further efficiencies. Multi-year terms promote stable pricing.

Leveraging Competitive Bidding

By running competitive bid processes off approved supplier panels for all major maintenance projects, owners introduce competition that drives down costs. Savings come from consolidating ad-hoc spending into gain-share agreements as well as negotiating lower fixed and overtime labour rates.

The results have been impressive. Through applying these strategic sourcing principles, clients have reported lowering maintenance budgets by 10-15% on average – freeing up substantial capital for reinvestment or other priorities. Contact us to see how we can help optimise your organisation's sourcing.