Facilities management contract: what to put in it, and how to make it work

01

What a facilities management contract is

A facilities management contract, sometimes called a facilities management agreement, is a service contract between a client and an FM provider for the delivery of building services over a period of years. It may cover a single service, such as mechanical and electrical maintenance, or bundle several, such as maintenance, security and cleaning, reception, waste and grounds, into one integrated or total FM contract. Some also include energy management, or a lifecycle fund for replacing plant as it wears out.

Hard FM is the maintenance of the building and its engineering services, with the statutory testing and surveys that go with it; soft FM is the services people use every day, such as cleaning, security, reception, catering, waste and grounds. The government's own agreement for public buyers, the Government Commercial Agency's Facilities Management and Workplace Services agreement (RM6232), is divided on those lines into Hard FM, Soft FM and Total FM lots: its hard FM lots cover maintenance services and statutory obligations, its soft FM lots cover landscaping, catering, cleaning, workplace, visitor support, security and waste services, and its total FM lots combine maintenance and statutory obligations with the soft services.

Buyers can write their own terms and conditions or start from one of the standard forms of contract. The one written specifically for facilities management in the UK is the NEC4 Facilities Management Contract (FMC), part of the NEC4 contract suite, with a Facilities Management Short Contract (FMSC) for simpler, lower-risk services and a Facilities Management Subcontract for the provider's own supplier and subcontractor chain. Before the FM forms existed, many buyers used the NEC4 Term Service Contract, which remains in use, and the JCT Measured Term Contract is common for maintenance and minor works priced on a schedule of rates.

What's the difference between JCT and NEC contracts for facilities management?

NEC publishes a contract written for facilities management and JCT does not: the NEC4 Facilities Management Contract, launched with the Institute of Workplace and Facilities Management, is for appointing a service provider for a period of time to manage and provide a facility management service, with main options for a priced contract (Option A), a target contract (Option C) or a cost-reimbursable contract (Option E). JCT's list of contract families names no facilities management contract; its forms for maintenance are the Measured Term Contract, for employers with a regular flow of maintenance, minor works and improvements carried out by a single contractor over a specified period and paid by measurement, and the Repair and Maintenance Contract, for a defined programme of repair and maintenance works to specified buildings. Which suits a particular contract is a question for a solicitor with FM experience.

Public sector organisations usually buy FM through a framework agreement or their own tender, under public procurement law: in England, Wales and Northern Ireland that is now the Procurement Act 2023, and Scotland has its own regime. Private buyers are free to choose, but the same logic applies: a clear specification, a fair price and a way to measure what is delivered.

02

What a facilities management contract covers

Whatever the form, most FM contracts contain the same parts, though the names differ:

• Scope: the buildings, the services and the assets and equipment included, and those excluded.
• Service specifications: what each service must achieve, for example planned preventative maintenance to a recognised standard such as SFG20, cleaning to a cleaning specification, security to agreed assignment instructions, and a helpdesk with response times for reactive work.
• Statutory requirements: which inspections and tests the provider arranges, and who holds the records and certificates.
• Price and payment: how the provider is paid for fixed work, reactive work and anything extra, and when.
• Performance regime: key performance indicators, service level agreements, how they are measured and what happens when they are missed.
• Governance: how service delivery is managed, with named contract managers, monthly reports and review meetings, and how disputes are escalated.
• People: staffing, vetting, training, TUPE and pensions.
• Risk and liability: insurances, indemnities, caps on liability, business continuity and health and safety responsibilities, including risk assessments and method statements.
• Change: how services are added, removed or varied during the term, and at what price.
• Term, mobilisation and exit: the start, the length and extension options, and what happens when the contract ends or is terminated.
• Data and systems: who owns the asset register, the maintenance history and the CAFM data, and in what form they are handed back.

The specification does most of the work. A contract with strong clauses and a vague specification will produce arguments about what was included; a contract with a clear specification and ordinary clauses usually works.

03

Payment mechanisms

How the provider is paid shapes how it behaves, so choose the mechanism for each part of the service rather than for the contract as a whole.

• Fixed price: a monthly charge for defined services, such as cleaning or planned maintenance. Simple and predictable, but only as good as the specification it prices.
• Schedule of rates: agreed rates for labour and materials, used for reactive maintenance and small works. Flexible, but costs follow volume, so approval thresholds matter.
• Cost reimbursable: the provider's actual costs plus a fee. Useful where the work is uncertain, but it needs open-book accounting and close control to avoid overspend.
• Target cost: a target price with any saving or overspend shared between client and provider. It rewards both sides for controlling cost, and needs honest measurement of actual cost.
• Pass-through costs: utilities, consumables or subcontracted specialists paid at cost, sometimes with a handling fee.

Most FM contracts combine these: a fixed price for planned and routine services, a schedule of rates for reactive work, and pass-through costs for items the provider does not control. The NEC4 FMC, like NEC's term service contracts, offers a choice of payment options, from a priced contract to a target or cost-reimbursable one. Whatever the mechanism, value for money depends on the client checking what it is paying for.

04

Performance regimes, KPIs and deductions

The performance regime is how the contract turns a specification into consequences. A typical one has:

1. Service levels for individual tasks, such as response and fix times for reactive work by priority, or planned maintenance completed within its window.
2. KPIs that measure performance across the service each month, such as statutory compliance, planned maintenance completion, helpdesk performance, audit scores and customer satisfaction.
3. Service credits or deductions: a reduction in the monthly payment when a KPI is missed, often weighted towards the measures that matter most and capped at a share of the monthly charge.
4. Rectification and earn-back: time to put a failure right before a deduction applies, and sometimes a way for the provider to earn a deduction back through sustained improvement.
5. Persistent failure: warning notices, improvement plans and, in the end, a right to terminate for repeated serious failure.

Two cautions. First, deductions should be a proportionate price adjustment, not a punishment: under the law of England and Wales a clause out of all proportion to the client's legitimate interest in performance risks being unenforceable as a penalty. Second, every KPI needs an agreed data source and an agreed way of measuring it. If the provider's own CAFM system is the only record, the client should be able to audit it. Many contracts allow a bedding-in period after mobilisation during which KPIs are measured and reported but deductions do not apply.

05

TUPE, mobilisation and exit

TUPE. The Transfer of Undertakings (Protection of Employment) Regulations 2006 usually apply when a service moves from the client to a contractor, from one contractor to another, or back in-house, which the regulations call a service provision change. Employees assigned to the service transfer to the new provider on their existing terms. The outgoing employer must give the incoming one employee liability information at least 28 days before the transfer, and both must inform and consult affected employees. TUPE costs are a real part of the price, and FM contracts usually contain indemnities about who bears them at the start and at the end. Take specific advice; this is where FM contracts carry the most legal risk.

Mobilisation is the period between award and the service start date. A good mobilisation plan covers the staff transfer, site visits and surveys to check the asset register, a baseline of statutory compliance so the new provider knows what it has inherited, setting up the helpdesk and CAFM system, keys and access, and handing over log books and records. The weeks after the start date are when most service failures happen, so plan the first month of reporting as carefully as the first day. The same principles are set out for cleaning in cleaning contract mobilisation.

Exit should be planned at the start. The contract should require an exit plan, cooperation with the incoming provider, the return of the asset register, maintenance history, compliance records and any client data in a usable form, and the TUPE information the next provider will need. A client that does not own its own FM data will find re-tendering slow and expensive.

06

Where the evidence fails, and what SiteClara does about it

FM contracts are good at measuring what the provider's systems measure: work orders raised and closed, planned maintenance tasks completed, helpdesk calls answered. They are weaker on the routine soft services that happen every day without a work order: the washroom checks, the cleaning of each floor, the security officer's patrol, the fault noticed on a walk-round. Those are often evidenced by paper sheets on site and a line in the monthly report saying the service was delivered.

SiteClara records those routine checks at the place they happen. A printed QR poster at each location, with an optional NFC tag behind it, lets the provider's cleaning or security staff scan the code or tap the tag on their own phone, with no app to install. They see the scheduled checks due there and mark each one done or explain what stopped them, with a photo when it helps, and an issue reported there goes onto the team's list of jobs until someone closes it. The supervisor sees what is due, done and missed, and can record why a check was missed.

Each day the supervisor reviews and approves a report, which goes to nominated client and management contacts at 8am the next morning, showing what was reported, completed and still open, and how scheduled checks went, for example 12 of 12 completed. Where two companies, such as a cleaning provider and a security provider, work on the same site, each can run its own staff, forms and approval. It is priced per building, with no per-person fees.

07

Further reading, and a list to take away

NEC publishes the NEC4 Facilities Management Contract, the Short Contract and the Subcontract, with user guides and flow charts. JCT publishes the Measured Term Contract. The Institute of Workplace and Facilities Management (IWFM) publishes professional guidance for the FM sector, including on procurement. Public buyers should read the government's guidance on the Procurement Act 2023 and the Government Commercial Function's Sourcing Playbook, and ACAS and GOV.UK publish plain guidance on TUPE. BESA publishes SFG20, the maintenance specification standard many FM contracts refer to.

Before you issue an FM tender or sign a facilities management contract, check that:

• the scope lists every building, service and asset, and names what is excluded;
• each service has a specification someone could inspect against;
• the payment mechanism suits each service, with approval thresholds for reactive and extra work;
• every KPI has a definition, a data source, a target and a consequence;
• deductions are proportionate and capped, with a bedding-in period after mobilisation;
• TUPE information, indemnities and pensions have been reviewed by someone qualified;
• the mobilisation plan and the exit plan are both in the contract;
• you will own the asset register, compliance records and service data at the end;
• a solicitor has reviewed the terms before signature.