Facilities Support Management Services

SIC 8744

Companies in this industry

Industry report:

This group covers establishments primarily engaged in furnishing personnel to perform a range of services in support of the operations of other establishments or in providing a number of different continuing services, on a contract or fee basis, within another establishment. Included in the industry are establishments primarily engaged in the private operation of jails and adult correctional facilities, whether or not providing both management and supporting staff.

Industry Snapshot

The facilities support services industry encompasses firms that provide facilities management services on a contract or fee basis. New government regulations, enacted throughout the 1980s combined with efficiency efforts, bolstered industry revenues past $5.3 billion annually in 1990 and $6.4 billion in 1995. Growth continued throughout the 1990s. By 1997, there were 2,490 establishments in this industry employing 112,137 employees. Annual receipts were nearly $7.6 billion. Over the next decade, the industry continued to expand. According to industry statistics the total number of management support service firms increased to 2,815 in 2005. While the workforce fell to an estimated 80,644 employees, the industry posted revenues of more than $9.6 billion. By 2009, the estimated number of U.S. establishments totaled 3,714, which employed approximately 97,126 workers and combined to generate $8.27 billion in annual revenues.

Organization and Structure

Facilities support management service companies are involved in operating and managing sports complexes, jails, office buildings, stadiums, museums, hospitals, hotels, retail establishments, and almost any other type of facility. Contract facility managers are expected to reduce costs or improve the profitability and efficiency of the establishments or operations they oversee. Indeed, it is because of their expertise that they are expected to operate a facility more efficiently and safely than could a staff employed and managed by the facility owner. Many believe that the impartial opinion of the contract facility manager makes the manager more efficient.

The role of facility management firms has traditionally been associated with janitorial services, mailrooms, and security. Industry participants, however, also may be responsible for facility design and construction, management of computer and communications systems, property acquisition, environmental oversight, and other factors related to the quality and functionality of a facility. A company hired to manage a firm's data processing systems, for example, may bring technical know-how that its employer would have great difficulty cultivating in-house. The ever-changing world of high technology and computers makes it difficult for a company to keep staff continually educated. Soaring educational costs are often a detriment. Additionally, a company hired to operate a sports complex may bring a mix of knowledge related to grounds keeping, accounting and reporting, and sports marketing, among other functions.

Besides expertise and efficiency, establishments that employ facility managers receive other important benefits. A chief advantage of outsourcing facility management duties is that an entity is able to reduce liabilities related to personnel. A corporation that contracts a firm to manage one of its factories, for instance, is able to substantially reduce headaches related to staffing, training, workers compensation expenses and litigation, employee benefits, worker grievances, and general management and payroll responsibilities. Rather than tracking hours and writing checks for an entire staff, it simply pays the management company. In addition, an establishment can quickly reduce or increase its staff on an as-needed basis without worrying about hiring or severance legalities. In other words, a large portion of the benefit provided by contract managers is not directly related to facilities management.

Background and Development

Owners have employed managers to operate their facilities for centuries, and contract management services have been used throughout most of the twentieth century to handle grounds maintenance, janitorial responsibilities, food preparation, and other individual tasks. Only during the latter half of the 1900s, and particularly during the 1980s, has the use of large-scale management services that oversee entire facilities and complexes become widespread. Two dominant factors that have driven this trend are the proliferation of government regulation and the quest for corporate and institutional efficiency.

As government oversight at the federal, state, and local level mushroomed during the period from the 1960s to the early 1990s, many establishments became overwhelmed with complex rules and restrictions. Almost every industry was barraged with a separate set of regulations aimed at their niche. Hospitals, for example, were forced to comply with thousands of complex mandates related to waste disposal, malpractice liability and protection, and safety. But even general regulations that apply to all facilities have ballooned. Churches, schools, and factories alike must comply with stringent laws regarding staffing, employee and civil rights, patron and employee safety and comfort, recycling and energy conservation, and pension and health benefits. Adding to those are a profusion of environmental laws related to factors such as indoor air quality, grounds maintenance, and hazardous emissions.

The emphasis on efficiency, the second influence driving the use of contract facilities managers, emerged during the 1980s. An increasingly competitive global business environment, combined with slower domestic market growth and greater competition at home, forced U.S. companies in all industries to cut costs. Likewise, public pressure to reduce spending convinced many government entities, particularly at the local level, to farm out facilities management duties to more efficient firms in the private sector. Many entities found they could reduce personnel expenses through workforce cutbacks and at the same time boost efficiency by outsourcing tasks to specialized managers. "Outsourcing is a result of downsizing," said William L. Gregory, vice president of the International Facilities Management Association (IFMA).

Facilities support service industry revenue shot up from nearly $2.3 billion per year in 1982 to $6.4 billion by 1995. The trend toward outsourcing continued during the 1990s as corporate cost-cutting and downsizing persisted and government regulatory activity accelerated. Between 1995 and 1997, the industry had grown and increased revenue by almost 16 percent. Indeed, a growing number of companies were viewing the act of employing and managing workers as a hefty liability. The shift in focus toward more employee benefits put a hold on aggressive hiring practices and put a greater demand on contract workers. Rather than risk exposure to lawsuits and workers compensation claims, many establishments were letting more adept facilities managers bear the risk of employing workers so they could concentrate on their core specialties.

Besides employee regulations, sweeping new mandates during the early 1990s that intensified the emphasis on facilities managers included the Americans with Disabilities Act (ADA) and Clean Air Act (CAA). The ADA decreed a long list of requirements related to disabled employee and patron access with which most facilities must comply. The CAA created new standards for indoor air quality and hazardous emissions. In addition to legislation, court rulings were forcing employers to respond to health risks, such as carpal tunnel syndrome and eye strain provoked by working with computers.

In addition to efficiency and regulatory factors, security issues increased the need for contract facilities managers in the mid-1990s. One of the fastest growing industry segments was corporate security services. Contractors were being called in to manage advanced electronic security and surveillance systems that controlled employee access to electronic information, reduced the possibility of workplace violence, and discouraged theft and vandalism by employees and patrons. An abundance of outside security firms were enlisted by the retail industry to control theft problems such as shrinkage, an industry term used to describe shoplifting by both patrons and employees.

In 2006, results from one study conducted by the International Facility Management Association concluded that 15 percent of companies were outsourcing facility services. The research revealed that some 90 percent of respondents outsourced architectural/engineering/interior design services. Next were housekeeping services (77%), property appraisals (72%), and roads/parking/garage maintenance (70%). Between 1993 and 2006, the strongest growth occurred in the outsourcing of utility system maintenance, which experienced growth of 23 percent. The study concluded that an estimated 50 percent of those queried used fewer support services, which translated into significant contracts for those on the receiving end.

The environmental remediation sector totaled 951 firms, or 33.8 percent of the industry, with 8,040 employees generating an estimated $1 billion in revenues for 2005. With a workforce of 18,986 employees, correctional facilities numbered 265, posting revenues of $776 million. The base management sector that provided personnel on a continuing basis represented 216 firms, some 9,995 employees, and more than $2 billion in revenues. Finally, privately operated jails totaled 53, with 3,239 employees and revenues of more than $1.5 billion.

Current Conditions

In 2009, facilities management services was represented by 3,714 firms, which employed 97,126 workers and generated over $8.27 billion. Facilities support services represented 1,989 firms, or 53.6 percent of the industry total, employing 50,140 people. The facilities support services garnered annual receipts of more than $2.89 billion as well. Environmental remediation accounted for about one-third of the industry's establishments (1,168 firms), employed 13,051, and generated $1.40 billion in revenues. Smaller segments of the industry included base maintenance, correctional facility maintenance, and privately operated jail maintenance. As the industry approached maturity, mergers and acquisitions were expected to continued to increase during the 2010s. Employment prospects for the industry were positive, because facilities management outsourcing was expected to proliferate.

The industry grew throughout 2000s as businesses increasingly outsourced their maintenance to focus on their core competencies. By the approach of the end of the decade the industry was reaching maturity, and growth was starting to develop more and more as a result of mergers and acquisitions. Beginning in 2008, the economic slowdown began to put price pressure on the facilities management industry and competition increased. However, because much of the industry operates on long-term contracts, the facilities management sector fared better than other industries during the recession. Those best prepared to come out of the recession in the best position were the companies that offered multiple, or "bundled," services.

Efficiency and renewability were key trends in the late 2000s as facilities management firms sought to offer their clients more environmentally friendly and more fuel-efficient services. For example, in late 2009, Reno Contracting, a leading general contractor located in southern California, announced the introduction of Reno ESP (Efficient Sustainable Practices). According to a report by Facilities Management News, Energy Star rated buildings "command a 10 percent premium over non-retrofit buildings, while LEED-certified retrofitted buildings command price premiums averaging 31 percent higher than non-retrofitted buildings." The Leadership in Energy and Environmental Design (LEED) Green Building Rating System, a function of the U.S Green Building Council, is a certification program and a nationally recognized benchmark for design, construction, and operation of green buildings.

Other industry trends and priorities, along with ASP, included building information modeling, intelligent buildings, and building information systems; the incorporation of the Internet and intranet in facilities management; the integration of wireless and handheld devices into facilities management; converting from off-the-shelf programs to Web-based systems; and analyzing and comparing internal and external data to ensure highest levels of efficiency and cost controls.

Often large companies that provide design and construction services also provide facilities management services, specializing their facilities management services within the sectors that they otherwise operate. CH2M HILL, of Englewood, Colorado, provides operations and maintenance, project management, facilities engineering, and support and administration for Fortune 100 companies. Privately held, the company reportedly brought in nearly $4.4 billion in revenues in 2007. URS Corporation, headquartered in San Francisco, California, provides design, construction management, and operations and maintenance services primarily to U.S. government agencies in the United States and around the world. It specializes in transportation systems, environmental systems, facilities, wastewater systems, and defense systems, among others. The publicly held company posted revenues of $10.1 billion in 2008 and employed 50,000 worldwide. Fluor Corporation, of Irving, Texas, is a leading provider of design, engineering, and contracting services, including facilities maintenance, to a number of industrial sectors including refineries, pharmaceuticals, healthcare, and power plants. Oil and gas facilities account for over half of its revenues. In 2008 the publicly traded company reported sales of $22.3 billion and employed 42,119.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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