With millions of square feet in commercial property assets scattered throughout the U.S., Charlotte, North Carolina’s Bank of America (BoA) realized years ago that it needed to focus on its core tasks of being a bank, and outsource its property leasing and facility management enterprise to a knowledgeable service provider. But the challenge over time came from the fact that there were simply too many outsourcers providing the same service.
Today’s Bank of America, one of the largest financial institutions in the world, is a collection of a number of banking firms resulting from years of mergers, acquisitions and consolidation. The mergers brought along five incumbent outsourcing suppliers managing different portions of BofA’s commercial property holdings that had swelled to 70 million square feet.
“Those holdings grew over 450 percent in about a 10 year period,” says Bank of America Senior Vice President Mike Mitchell. “In 2001 it became apparent we needed to consolidate the management of our portfolio. We had too much overlap, there was little consistency and it was costing us money.”
The bank pared down five identical outsourcing firms to two: Dallas, Texas based Trammel Crow Company along with Jones Lang LaSalle (JLL) of Chicago, Illinois. BofA managers reviewed all five relationships, knowing it would be difficult for one firm to provide complete management services. But on a regional basis, two could. Within a six-month period of time, BofA whittled down to Crow and JLL. Negotiations led to a clear mission, resulting in a cooperative agreement and shared multi-year service level agreements (SLA).
Today, with a few exceptions, JLL is responsible for BofA’s western U.S. properties, about 30 million square feet. Crow manages the bank’s eastern U.S. holdings, accounting for not quite 40 million square feet.
JJL’s outsourcing relationship with Bank of America began in 1991 with a Chicago banking group that was later acquired by BofA. Crow’s began under a facility management contract with NationsBank in 1993, which BofA acquired shortly thereafter.
Saving $50 Million
Day-to-day management of commercial property falls into three basic categories. Facilities management involves everything from landscaping to heating/air conditioning maintenance to janitorial duties. It also includes, budgetary issues, inspections and energy-saving initiatives. Project management includes anything relating to construction such as tenant improvements, moving tenant offices, building or property improvements such as parking lot paving, painting or facade changes. Transaction management is where the money changes hands from tenant to manager.
In most areas, Crow and JLL provide their services directly. They outsource some to third party service providers, such as janitorial or snow removal. “In the outsourcing arena we see these vendors as partners,” says Crow’s Managing Director Craig Grantham, “as opposed to the direct out-tasking typical of the early 90’s.”
Mitchell says it’s difficult to arrive at a specific amount of money Bank of America saves by consolidating its property management outsourcers, but $50 million in total cost savings is an accurate approximation. He estimates at least half of that comes from eliminating supplier duplication.
Collaboration Leads to Consistency
In addition to the day-to-day management, BofA needed a long-term plan focusing on building expansion, renovation and incorporation of new technology. An alliance between the two management firms has helped the bank make key strategic decisions.
Outsourcing tasks alone without allowing the service provider to become involved in the overall mission is becoming an old model. Robert Materna, vice president of knowledge management for CoreNet, a research center for commercial property managers, says outsourcing has three components: strategy, process and implementation. “Real estate and facilities management are becoming a collaboration between client and vendor in the strategy and process areas, resulting in a more positive effect on how Crow and JLL fulfill services to Bank of America,” he says.
Crow’s Grantham feels this shared responsibility provides a unique and forward-thinking service. He applauds a collaboration that merges systems, processes and procedures from different service providers for the benefit of a single client.
“It tests us to balance good long-term decision making with equally good short-term results,” he says. “We’ve been careful to design this relationship to focus on both sets of objectives and have been very consistent in establishing our service metrics to make it a true collaboration.”
That they hold similar views on management practices and styles was a favorable element during BofA’s deliberations. Crow and JLL have parallel systems and technology as well as similar procedures for managing commercial property. “When BofA began selecting between the five companies, they asked all of us who we could work best with,” says Bruce Ficke, Account Management CEO with Jones Lang LaSalle. “It turns out that we chose Crow and they identified us.”
For example, Ficke says both companies rely on personal digital assistants (PDAs) to track tasks and load information into the company’s database. (Each service provider maintains its own database.) In addition, the companies use a secure Web service to share information between their call centers.
BofA’s Mitchell says this concentric formula keeps his offices on the same page with his two outsourcing vendors. “Compared to how things were before the consolidation, this is such an improvement. We have a much better knowledge of the daily events and how they fit into the big picture, but without the obligation of becoming directly involved.”
Lessons from the Outsourcing Journal:
- If multiple outsourcers manage similar tasks, consolidation saves money and establishes a clearer line of responsibility.
- When paring down a large number of outsourcers to a few, find out which ones can work best with the other incumbents since they’ll have to collaborate in order to fulfill your needs.
- Outsourcing can be divided into three basic categories of strategy, process and implementation. Involving your outsourcer in all three strengthens your relationship and increases the chances of overall success.