"Input" or "output" specifications for facilities management contracts?

United Kingdom
Marc Hanson examines the pros and cons

The specification is an extremely important document in any facilities management contract. It will usually set out the client's requirements in relation to services to be performed, quality standards to be met and all information that the facilities management contractor will need in order to perform the services in accordance with the contract. It may also set out any mechanism the client may wish to include in the contract to adjust payment to reflect performance.

As it is the specification that the contractor will look at when calculating his tender for supplying facilities management services, the client should take great care in drafting the specification to ensure that it contains all information necessary for the contractor to adequately price the provision of the services. It should, for example, set out in some detail the services to be performed. Any restrictions in relation to operating hours on site or in relation to access to or from the site should be clearly stated. If the contractor is to undertake any work prior to commencing the services on site, for example in relation to liaising with an outgoing contractor to ensure an efficient handover of any plant, staff and equipment, then such work needs to be described in the specification.

Whilst the specification will set out the services to be performed, for example cleaning services, catering services and maintenance services, there are two different approaches to describing in the specification how any performance standards in relation to such services are to be met.

Input specification

A traditional "input" specification will set out in detail the exact services to be performed by the contractor in a prescriptive fashion. For example, in relation to cleaning services, not only would the standards the contractor is to achieve be set out in the specification but also the exact means by which those standards are to be met. If a contractor fails to perform the services in accordance with the prescribed methodology then this will be a breach of contract which may allow the client certain remedies under the contract, for example the accrual of service credits, abatements from sums due to the contractor or even the termination of the contractor's employment.

In recent years, clients have increasingly moved away from the use of "input" specifications in favour of "output" specifications. An "output" specification would not prescribe how the contractor is to achieve performance standards set out in the specification. The contractor would be expected to come up with his own proposals for how to achieve those standards. The logic behind the use of "output" specifications is that the client's main concern is not the means by which performance standards are met but the fact that those performance standards are met. A contractor should be entitled to use his own expertise to offer solutions that achieve and exceed the client's performance requirements. It is argued that an "input" specification will not allow the contractor sufficient freedom to use his expertise and to offer innovative solutions to the client's performance requirements. Also allowing the contractor to define how he will achieve the client's performance requirements will result in lower tenders being received by the client as contractors may be able to suggest more cost-effective ways of achieving the client's requirements than those that may have been specified by the client in an "input" specification.

Output specification

"Output" specifications offer further advantages. As the contractor is to define how performance requirements are to be met, this obviates the need for the client to spend the considerable time and expense necessary in preparing detailed "input" specifications. This in turn should reduce the cost to the client of tendering the outsourcing of services. It will, however, result in an increase in the tender costs of the contractor and it can be expected that the contractor will endeavour to recover such costs in his tender.

Whilst "output" specifications do not require the detailed text necessary for an "input" specification, they do require very careful drafting. The client should be aware that if an "output" specification is used, unless they make detailed references in the specification as to how particular services are to be performed they will lose control over the detail of how the services are to be performed. For example, if the client has very specific requirements in relation to security arrangements for the site, if these are not set out in a prescriptive fashion, the contractor will be free to provide a level of service he feels meets the client's performance requirements. In certain circumstances, it may therefore be necessary to utilise a hybrid specification incorporating both "input" and "output" elements.

It is also important for the client to be precise in the output specification on what exactly is required. A service simply stating that a room is to be "kept clean" is too vague. Is this to include cleaning blinds and upholstery? Telephones? Computer equipment? Floors or windows? If a service in an output specification is too vague, the contractor may not price for performing a service that the client expected to be included in the contract price, and this will invariably lead to conflict between the client and the contractor. In addition if a specific service is not referred to, and if it cannot be argued that such a service was obviously required, then the contractor may demand additional payment for performing the service.

A final point for those considering whether or not to use an "output" specification is the different approach required of the client in assessing the performance of the contractor. Whilst it is relatively easy using an "input" specification to judge whether the contractor has complied with the same (has the relevant task been carried out?), with an "output" specification, the client must look instead at whether the performance requirements, often drafted in a relatively subjective way, have been met. The very subjective nature of many performance requirements mean that "output" specifications are most likely to be successful when used in a contract where the relationship between the contractor and the client is not adversarial but is proceeding on a "partnering" basis.

For further information please contact Marc at mch@cms-cmck.com or on +44 20 7367 2366.