ays Christo van Wyk, head of facilities for JHI, a major property services company managing some R41 billion in assets.

“In order to achieve this, there needs to be a delicate balance between competing effectively without compromising on quality and maintaining an attractive portfolio with properties which retain tenants of good calibre. In realising both aims, efficient procurement plays a pivotal role. But what exactly is meant by efficient procurement? While the topic may seem somewhat uninteresting to some, with effective management the procurement of a whole host of services and supplies ultimately impacts either positively or negatively on the bottom line. Van Wyk says in addition to cost savings, effective procurement will also add value in ensuring compliance with statutory requirements such as the Occupational Health and Safety Act, enhancing green building principles and improving the capital value of the building."

Essentially, effective procurement requires working with contractors and suppliers who share goals of continuous improvement in service, quality and life cycle costing – with savings achieved improving the profit and ultimately the competitiveness of the properties in the marketplace,” says van Wyk.
He explains further: “If we consider the role of procurement in a new development such as a retail shopping centre, and firstly focus on the objective of achieving an attractive portfolio, then these are the requirements and expectations of both tenant and the shopper:  to enjoy secure trading and shopping in a clean and hygienic environment and with a sense of ‘the’ place to be in terms of convenience, safety, comfort, fun etc.
“Then what of procurement – these few elementary requirements illustrate some of the services and products procured by the landlord or shareholders of the property portfolio:

• Security services such as guarding, car guards, closed circuit television monitoring, armed response, access control and parking management
• Cleaning services eg hygiene, pest control, waste management, high rise cleaning, contract cleaning, cleaning consumables and landscaping
• Hard services such as maintenance of air conditioning, electrical reticulation, fire equipment, smoke detection, lifts and escalators, and small repair and maintenance works, such as plumbing, carpentry etc.
• Inspection services eg lifts and escalators, sprinklers and infrared scanning.

Van Wyk says the majority of these services, also known as facilities management services, are labour intensive, which has a direct impact on the operational budget of the new development. “The effective management of these costs or expenses, which represent approximately 30-40 percent of a retail centre’s operational budget, will determine how effectively this new development will compete in the marketplace.

“As a result, effective procurement is the nucleus of JHI’s approach to manage these costs and expenses in order to realise savings, thereby improving the profit and ultimately the competitiveness of the shopping centre in the marketplace. However, effective procurement is not only to realise savings, it goes hand in hand with adding value by providing quality - even superior - service, as it’s pointless to save on operational expenses but lose income due to unsatisfied tenants and shoppers. So the drive is to sustain the balance between an attractive portfolio and competitiveness in the marketplace,” he says.

He says the importance and strategic role of procurement within a property portfolio is derived from a number of factors. These include the ability to eliminate wastage and drive down expenses through the re-engineering of service requirements and standardisation of products. “Positive efforts should constantly be made to standardise and consolidate the requirements of the property portfolios under management in order to realise the optimum leverage attainable for all, and this also applies to the advantages of bulk buying power , where considerable bulk procurement discounts can be enjoyed. JHI has realised savings of between 20 and 30 percent on the procurement of facility management services. Ultimately, and importantly, effective procurement leads to efficient housekeeping of properties and the protection and enhancement of the property values – a priority for any investor,” adds van Wyk.