6 Really Good Reasons to Conduct a Financial / Operational Audit of Your Janitorial Program
In addition to a comprehensive Lease Compliance Audit, whether you are a net lease tenant responsible for vendor selection and procurement of janitorial services or a modified gross lease tenant required to procure “additional services” above janitorial lease provisions due to usage requirements, todayâ€™s most cost effective programs include a regularly performed, single source lease audit and operational analysis to identify retroactive and future savings.
Modified Gross Lease Tenants
1. Tenant Lease vs. Buildingâ€™s Vendor Agreement Specifications:
The competitive nature of the real estate market has paved the way for more and more janitorial lease provisions to be tailored to individual tenant concerns while the buildingâ€™s agreement with their cleaning vendor remains as one set of standard task requirements throughout the location. This allows for the possibility that you may not be receiving or may be charged extra for, services that should be provided as part of your lease or are part of the cleanerâ€™s obligation to ownership.
2. Non-Competitive Atmosphere:
Many tenants are required, either through lease stipulations or business concerns, to use the â€śbuilding selectedâ€ť janitorial contractor for contractual and one time additional service requirements. Unfortunately this eliminates the effectiveness of many traditional procurement practices such as bidding procedures and often results in overpriced agreements. Understanding your real maintenance requirements and the vendorâ€™s associated costs as well as being able to negotiate from a position of industry expertise, levels the playing field toward a more cost effective program.
3. Change in the Building Selected Contractor:
Whether a building has new ownership, new management or simply in an effort to keep building costs to a minimum, building owners and managers typically bid cleaning services on a regular basis and often change vendors. This should always trigger a financial and operational audit of your service program. Turning over the previous vendor agreement is a lost opportunity to reevaluate all aspects of the program. Asking the new vendor to bid your earlier program only serves to have them initially bid high (seeing you as a captive audience) and later â€śsettleâ€ť at your previous vendorâ€™s price. Your requirements may have changed and you should be sure to take advantage of any pricing advantages / efficiencies of the new vendor.
Net Lease Tenants
4. Typical Bidding Practices:
Many tenants re bid services over time only to find out that their price has now â€śbottomed outâ€ť and can no longer offer savings. Our audit / operational review can find additional cost savings by identifying current program costs and evaluating a host of other factors including service scope, contract type, service models, work station assignments, productivity levels, technology, vendor specializations, etc. to offer alternative program suggestions that reduce costs without negatively effecting the perception of service delivery levels. Since these suggestions come from us as an impartial source as opposed to vendor suggestions, you can be sure only your interests are served. It also helps you avoid potential vendor â€śmistakesâ€ť or â€ślow bidâ€ť strategies where savings are only temporary and usually at the expense of service levels.
5. Annual Rate Increases:
Annual price increases based on labor wage and benefit escalations, supply costs, etc. should be audited in conjunction with an operational review of potential vendor cost cutting measures. In many union environments, annual increases are often â€śpassed onâ€ť at inappropriate percentages and without consideration of achieved vendor efficiencies in other areas of their operation.
6. Occupancy Level Adjustments:
Service provider costs associated with the increase / decrease in space requirements are rarely proportional to the square footage adjustment. Specification frequencies, traffic patterns, usage areas, floor surface types, etc. all need to be considered as a prelude to determining a revised price that preserves the success of your original purchase.