Contract Cleaning: How Auditel reduced Daiichi-Sankyo’s costs by 28%03 Jun 2011 | Filed under: Cost & Purchase Management
Posted by: David Egerton
Daiichi-Sankyo, a global pharmaceutical company with offices just outside London in the UK, asked Auditel to review their contract cleaning expenditure in an effort to reduce their costs and boost their bottom line. With office space covering three floors of a dedicated building their expenses were significant.
Auditel first looked to ascertain what service they were currently buying and at what price. We also needed to check that they’d been invoiced correctly (the last 12 months invoices and the supplier contract helped to fill in much of this detail). These showed that a fixed monthly price was charged for a set number of hours cleaning. In addition there were ad hoc invoices for the supply of consumables such as toilet roll. Comparing these invoices to the contract prices showed that everything invoiced in the last twelve months had been done so correctly.
It was also noted that during the year, the fixed monthly fee had been increased substantially along with a corresponding increase in hours. This was found to be due to an additional service being sold in by the cleaning company to improve protection against swine flu.
In summary, expenditure and hours worked were as follows:
|Annual expenditure||Weekly hours|
|Swine Flu additional cleaning||9%||9|
Auditel’s next task was to check whether the current level of service being provided was adequate for Daiichi-Sankyo’s needs. With the help of the incumbent supplier, Auditel put together a ‘Contract Cleaning Specification’. This document specified in detail everything that is to be cleaned, how often, and the method by which it should be cleaned. An example of what a Contract Cleaning Specification contains is shown below.
|E.g. Work surfaces||Daily||Wiped down with antibacterial spray.||Dirty crockery moved, washed and put back in cupboards.|
This document was important for a number of reasons; the first of which was to ensure Daiichi-Sankyo was happy with the level of service being currently provided. But it was also critical for the pitching process, as it ensured all prospective suppliers were working off the same brief. The contract cleaning specification, along with other important information (the most important being hours worked), provided the basis of the brief, and allowed the client to judge all responses on an equal basis. Finally, the document was also useful on an ongoing basis, as it set out what was expected of the cleaning company, so should they fall short it would be very clear that they had done so.
As part of this process it became apparent that the additional swine flu cleaning was the daily cleaning of all door handles, lift buttons and reception desk with an anti-bacterial spray. This was a temporary measure to run over the winter.
Recommendations and savings
Prior to briefing in other suppliers, Auditel challenged the client on the brief, in connection with the additional swine flu cleaning. Daiichi-Sankyo’s cleaning all took place in the evening as it does with most offices. However, according to the government website on swine flu, the virus can only live on surfaces for a maximum of 8 hours:
From the CDC and Flu.Gov web pages:
“The H1N1 virus is new. Research is being conducted to better understand its characteristics. Studies have shown that flu viruses can survive on hard surfaces and can infect a person for up to 2 to 8 hours after being left on items like cafeteria tables, doorknobs, and desks. Frequent handwashing will help you reduce the chance of getting contamination from these common surfaces.”
Auditel recognised that there was little benefit to this additional cleaning taking place, and consequently recommended to the client that this be stopped immediately and removed from the brief. The client agreed.
The revised brief was given to six cleaning companies, including the incumbent. The responses were collated and presented to the client. Whilst the incumbent was not quite the cheapest, it was thought to be the best value as they were a reliable company that Daiichi-Sankyo had used for many years. As a result the client chose to retain the incumbent on better terms. A saving of 19% for exactly the same cleaning service from same people!
Taken together with the swine flu saving total annual expenditure was 28% lower than the previous year as shown below:
|Previous annual expenditure||New annual expenditure|
|Swine Flu additional cleaning||9%||0%|
Client Comment: Dharmendra Lakhani of Daiichi Sankyo
‘We were initially sceptical that Auditel could make us savings in this category without there being a drop in service levels. But the provision of the contract cleaning specification was a really smart way of ensuring this could not happen.