There are various models to approaching facility management, each with its own advantages and disadvantages. In order to maximize transparency in our approach, our company applies a “Cost Plus Percentage of Cost (CPPC)” contract type to supplying services. A traditional CPPC contract is a contract type where the Supplier (facility management company) is compensated for its actual costs, (e.g. labour, third party costs, cost of goods and materials, etc.) incurred in delivering the facility services plus, a management fee which is a percentage of actual costs. This contract type is highly advantageous to the client, it is commonly referred to as ‘open book’ as the client has the right to inspect accounts at any time and conduct an audit of fees and invoices. This model reveals the true costs and fees associated with the procurement of services, which can be tracked.
The major disadvantage of this contract type to the client is when some unethical suppliers do not control the cost of services so as to, ensure their fee percentage remains high. In order to combat this, our company applies a ‘Guaranteed Maximum Price (GMP)’ model to the traditional CPPC contract. The GMP model builds on the CPPC model, but adds the constrain that the overall price be subject to a maximum ceiling amount such as, a budget.