When reviewing a catering, cleaning or soft facilities management contract, the question of contract length can seem fairly straightforward.
Three years? Five? Ten?
But for Estates and Facilities leaders, contract duration is about much more than the number of years written into an agreement.
It can influence the commercial model, the level of investment a supplier is prepared to make, the time available to deliver improvements and, ultimately, whether the organisation achieves the outcomes it expected when the contract was awarded.
So rather than asking “How long should the contract be?”, it is worth asking:
“What do we need this contract to achieve, and how long will it realistically take to get there?”
Start with the outcomes, not the end date
Every organisation will have different priorities.
For one, the focus may be reducing costs. For another, it might be improving service quality, increasing user satisfaction, strengthening compliance or creating greater consistency across multiple sites.
Often, it will be a combination of all of these.
That is why contract length should be considered alongside the objectives of the service.
A complex, multi-site operation may require significant work before a new service is fully embedded. Mobilisation, workforce planning, systems, processes and performance management all take time.
And once the service is established, there needs to be enough time to measure whether the changes are delivering the intended results.
The first year isn’t the whole story
The early stages of a new contract are often about getting the foundations right.
A supplier needs to mobilise effectively. Teams need to understand new processes and expectations. Performance measures need to be established and reporting embedded.
Only then can the organisation start to see whether the service is delivering what was promised.
This is particularly important where the contract involves multiple sites or services. Litmus supports organisations with complex, multi-site reviews and tenders, as well as mobilisation planning designed to create a smooth transition and positive start for stakeholders.
The first year therefore shouldn’t necessarily be viewed as the point at which the contract has delivered its full value.
It may simply be the point at which the organisation has established the foundations for measuring that value.
What happens to the savings after the tender?
Winning a competitive tender can create an immediate commercial opportunity.
But the initial saving is only part of the picture.
Over the life of a contract, there may be further opportunities to improve value through:
- Better workforce productivity
- Changes to service levels
- Improved purchasing
- Reduced waste
- More effective processes
- Supplier performance management
- Technology and innovation
- Changing organisational requirements
- Regular benchmarking against the market
The challenge is making sure those opportunities don’t disappear once the contract has been signed.
This is where ongoing contract performance management becomes important.
A contract should provide a framework for measuring performance, challenging where expectations aren’t being met and identifying opportunities for further improvement.
Contract length varies by sector
It’s also worth recognising that what’s considered a typical contract term can vary significantly depending on the sector and environment.
Within schools, workplace and government, contracts are often relatively short, commonly around three to five years. Regulatory and procurement requirements can be one factor influencing this, alongside the need to demonstrate competition, value and accountability.
In other environments, longer contracts are more common. In public spaces, royal parks, museums and airports, for example, contract terms of around 10 years can be more typical.
This difference highlights an important point: there isn’t a universally “right” contract length.
The appropriate term depends on the nature of the service, the level of investment and change required, the operating environment and the outcomes you’re looking to achieve.
The question isn’t simply how long other organisations appoint suppliers for. It’s whether the contract length gives you enough time to achieve and sustain the outcomes you need.
A longer contract doesn’t mean less scrutiny
There is sometimes an assumption that a longer contract provides stability but reduces flexibility.
It doesn’t have to.
The length of the contract and the strength of its performance management should be considered separately.
A longer-term arrangement can provide continuity and give a supplier greater opportunity to implement improvements. But it should also include clear KPIs, regular reviews and mechanisms for addressing underperformance.
For example, organisations should know:
- What does good performance look like?
- How will it be measured?
- How often will performance be reviewed?
- What happens if performance falls below expectations?
- How will costs be benchmarked?
- How will changing business requirements be reflected?
- Where should further savings or efficiencies come from?
A longer contract without effective performance management can simply mean that an underperforming arrangement lasts longer.
Benchmarking shouldn’t stop when the contract starts
One of the most important considerations is what happens to the commercial position over time.
Market conditions change. Labour costs change. Supplier pricing changes. The organisation itself changes.
A contract that represented good value when it was awarded may not necessarily represent the same value several years later.
That is why benchmarking can be valuable throughout the contract lifecycle, not just during the initial tender.
For organisations managing complex services, independent benchmarking can provide a useful external view of costs, performance and market position, helping leaders understand whether the contract continues to deliver the value they expect. Litmus uses live benchmarking data as part of its approach to assessing bids, costings and opportunities for improvement.
Contract length should reflect the level of change
There is no single contract length that works for every organisation.
A relatively straightforward service with limited mobilisation requirements may need a different approach from a complex, multi-site arrangement involving significant operational change.
Before deciding on duration, Estates and Facilities leaders should consider:
The complexity of the service
How difficult will it be to mobilise and embed?
The level of investment required
Does the supplier need to invest in people, equipment, technology or infrastructure?
The expected savings
Are savings expected immediately, or will they build over time?
The scale of improvement required
Is this a straightforward supplier change, or a fundamental redesign of the service?
The organisation’s future requirements
Are there likely to be changes to sites, occupancy, working patterns or service requirements?
How performance will be managed
Are there robust KPIs, review processes and appropriate commercial controls?
These considerations can help determine a contract length based on the outcomes required, rather than simply following what has been done before.
Don’t let the contract become the strategy
Perhaps the biggest risk is treating the contract award as the destination.
It isn’t.
For catering, cleaning and soft FM services, the contract is the framework through which the service needs to deliver over time.
That means thinking about what success should look like at the point of mobilisation, after the first year and throughout the contract.
It also means being prepared to challenge the status quo.
Is the service still delivering what the organisation needs?
Are costs still competitive?
Are KPIs being achieved?
Has the organisation’s operating environment changed?
Are there opportunities for further improvement?
These are questions that should form part of ongoing contract management, rather than only being asked when the contract is approaching its end.
So, what does contract length really mean?
For Estates and Facilities leaders, contract duration isn’t simply a commercial or legal consideration.
It is part of the wider strategy for achieving value from essential services.
The right contract length should give the organisation enough time to mobilise effectively, realise the intended benefits and measure long-term performance, while retaining the governance and commercial controls needed to ensure the service continues to deliver.
Because ultimately, the value of a contract isn’t determined by how long it lasts.
It’s determined by what it delivers while it does.
Is your current contract structured to deliver the outcomes you need?
Whether you’re reviewing an existing catering, cleaning or soft facilities services contract, preparing for a new tender or considering the right contract length for your organisation, getting the foundations right matters.
Our Workplace team can help you review your current operation, benchmark performance and value, shape the right service model and manage the tender process through to mobilisation and ongoing contract performance.
Find out how we can help you get more from your facilities services: https://litmuspartnership.co.uk/sectors/business-industry/
