There are a range of pricing strategies that can be utilised within FM contracts. A single contract, particularly for multiple FM services, may well incorporate different pricing strategies for different services to best meet the client’s price objectives.
Fixed Price Services – Typically for services where the details (scope and standard) and quantum (volume/frequency) of the requirement is known or predictable
Variable Service Prices – Usually used in conjunction with Fixed Price Services, for services where either the details (scope and standard) of the requirement are unknown (e.g. project work) or details are known but the frequency of the requirement is unknown or unpredictable, or at the client’s discretion (e.g. turn around cleans to student bedrooms).
Cost Plus – This pricing strategy allows for the supplier to recover all actual costs incurred for the management and delivery of the services including overhead costs with an additional agreed profit margin applied.
Target Price – This is used where a target price for the services is agreed, which is then reconciled against the actual costs and an agreed mechanism to adjust the price (up or down) with a degree of cost sharing between the client and the supplier on a ‘gain/pain’ basis.
The pricing strategy or strategies used in an FM contract should be influenced by a range of factors which are likely to be unique to each contract being procured including:
- Form of contract used
- Number of facilities and services in scope
- Complexity of requirements
- Client objectives in relation to pricing (e.g. price certainty, value for money, flexibility etc.)
- Capacity of client team to manage some pricing strategies (administrative burden) • The quantity and quality of pricing data available