Isn't There a Better Way? ... Let's say that you spend $200 million a year on goods and services operating a national multifamily portfolio. Your local property managers largely control their operating budgets and select their own vendors. In fact, last year they hired 120 different pest control companies. Does this sound efficient? Nope. Not according to Larry Hall, CEO FacilityPro, whose firm has recently set out to reduce this owner's expenses by $20 million.

Launched in 1999 as a web-based marketplace, FacilityPro has evolved into a "total procurement solutions provider" that, says Hall, is close to profitability. Originally FacilityPro's revenues came as a middleman from the spread between FacilityPro's cost of, say, a light bulb, and the price paid by the property owner. Now FacilityPro with its staff of 186 derives revenues from three basic services: its Private Marketplace, Supply Chain Management Consulting, and Business Process Outsourcing.

For example, EquityOffice is implementing FaciltyPro's marketplace to buy its goods and services. According to Hall, by year end, when FacilityPro covers all of EOP's 125 million square feet, EOP will drive down its processing costs by one third. And, in another example, Lucent already outsources the purchasing of all its real estate goods and services to FacilityPro's staff.

I asked Hall how FacilityPro grapples with the natural tension between a local manager who values a personal relationship with a vendor and a national policy that mandates the use of a different vendor. First, make it easy for the manager to engage the new vendor with standardized agreements and local contacts. Second, closely monitor compliance against the national agreement. And third, help the company as it goes through a change management process. Bottom line: Clearly demonstrate to the local manager that it is in everybody's interest to drive cost out of the business.

--Peter Pike