This group covers establishments primarily engaged in furnishing personnel to perform a range of services in support of the operations of other establishments or in providing a number of different continuing services, on a contract or fee basis, within another establishment. Included in the industry are establishments primarily engaged in the private operation of jails and adult correctional facilities, whether or not providing both management and supporting staff.
561210 (Facilities Support Services)
The facilities support services industry encompasses firms that provide facilities management services on a contract or fee basis. New government regulations enacted throughout the 1980s combined with efficiency efforts bolstered industry revenues past $5.3 billion annually in 1990 and $6.4 billion in 1995. Growth continued throughout the 1990s. By 1997, there were 2,490 establishments in this industry employing 112,137 employees. Annual receipts were nearly $7.6 billion.
Facilities support management service companies are involved in operating and managing sports complexes, jails, office buildings, stadiums, museums, hospitals, hotels, retail establishments, and almost any other type of facility. Contract facility managers are expected to reduce costs or improve the profitability and efficiency of the establishments or operations they oversee. Indeed, it is because of their expertise that they are expected to operate a facility more efficiently and safely than could a staff employed and managed by the facility owner. Many believe that the impartial opinion of the contract facility manager makes them more efficient.
The role of facility management firms has traditionally been associated with janitorial services, mailrooms, and security. Industry participants, however, in the 1990s, may also be responsible for facility design and construction, management of computer and communications systems, property acquisition, environmental oversight, and other factors related to the quality and functionality of a facility. A company hired to manage a firm's data processing systems, for example, may bring technical know-how that its employer would have great difficulty cultivating in-house. The ever-changing world of high technology and computers make it difficult for a company to keep staff continually educated. Soaring educational costs are often a detriment. Additionally, a company hired to operate a sports complex may bring a mix of knowledge related to grounds keeping, accounting and reporting, and sports marketing, among other functions.
Besides expertise and efficiency, establishments that employ facility managers receive other important benefits. A chief advantage of outsourcing facility management duties is that an entity is able to reduce liabilities related to personnel. A corporation that contracts a firm to manage one of its factories, for instance, is able to substantially reduce headaches related to staffing, training, workers compensation expenses and litigation, employee benefits, worker grievances, and general management and payroll responsibilities. Rather than tracking hours and writing checks for an entire staff, it simply pays the management company. In addition, an establishment can quickly reduce or increase its staff on an asneeded basis without worrying about hiring or severance legalities. In other words, a large portion of the benefit provided by contract managers is not directly related to facilities management.
Owners have employed managers to operate their facilities for centuries, and contract management services have been used throughout most of the twentieth century to handle grounds maintenance, janitorial responsibilities, food preparation, and other individual tasks. Only during the latter half of the 1900s, and particularly during the 1980s, has the use of large-scale management services that oversee entire facilities and complexes become widespread. Two dominant factors that have driven this trend are the proliferation of government regulation and the quest for corporate and institutional efficiency.
As government oversight at the federal, state, and local level mushroomed during the period from the 1960s to the early 1990s, many establishments became over-whelmed with complex rules and restrictions. Almost every industry was barraged with a separate set of regulations aimed at their niche. Hospitals, for example, were forced to comply with thousands of complex mandates related to waste disposal, malpractice liability and protection, and safety. But even general regulations that apply to all facilities have ballooned. Churches, schools, and factories alike must comply with stringent laws regarding staffing, employee and civil rights, patron and employee safety and comfort, recycling and energy conservation, and pension and health benefits. Adding to those are a profusion of environmental laws related to factors such as indoor air quality, grounds maintenance, and hazardous emissions.
The emphasis on efficiency, the second influence driving the use of contract facilities managers, emerged during the 1980s. An increasingly competitive global business environment, combined with slower domestic market growth and greater competition at home, forced U.S. companies in all industries to cut costs. Likewise, public pressure to reduce spending convinced many government entities, particularly at the local level, to farm out facilities management duties to more efficient firms in the private sector. Many entities found they could reduce personnel expenses through workforce cutbacks and at the same time boost efficiency by outsourcing tasks to specialized managers. "Outsourcing is a result of downsizing," said William L. Gregory, vice president of the International Facilities Management Association (IFMA).
Facilities support service industry revenue shot up from about $2.25 billion per year in 1982 to $6.4 billion by 1995. The trend toward outsourcing continued during the 1990s as corporate cost-cutting and downsizing persisted and government regulatory activity accelerated. Between 1995 and 1997, the industry had grown and increased revenue by almost 16 percent. Indeed, a growing number of companies were viewing the act of employing and managing workers as a hefty liability. The shift in focus toward more employee benefits put a hold on aggressive hiring practices and put a greater demand on contract workers. Rather than risk exposure to lawsuits and workers compensation claims, many establishments were letting more adept facilities managers bear the risk of employing workers so they could concentrate on their core specialties.
Besides employee regulations, sweeping new mandates during the early 1990s that intensified the emphasis on facilities managers included the Americans with Disabilities Act (ADA) and Clean Air Act (CAA). The ADA decreed a long list of requirements related to disabled employee and patron access with which most facilities must comply. The CAA created new standards for indoor air quality and hazardous emissions. In addition to legislation, court rulings were forcing employers to respond to health risks, such as carpal tunnel syndrome and eye strain provoked by working with computers.
In addition to efficiency and regulatory factors, security issues were increasing the need for contract facilities managers in the mid 1990s. One of the fastest growing industry segments was corporate security services. Contractors were being called in to manage advanced electronic security and surveillance systems that controlled employee access to electronic information, reduced the possibility of work place violence, and discouraged theft and vandalism by employees and patrons. An abundance of outside security firms were enlisted by the retail industry to control theft problems such as shrinkage, an industry term used to describe shop lifting by both patrons and employees.
An example of a fast growing facilities support services firm in the mid 1990s was Wackenhut Corrections Corp., of Florida, a subsidiary of Wackenhut Corp. Established in 1984, Wackenhut Corrections Corp. emerged as a dominant international provider of prison design, construction, and management services. The company designs buildings; staffs prisons with guards, social workers, doctors, and cooks; and manages inmate education programs, among other tasks. By mid 1997, Wackenhut managed 28 prisons in the United States, 3 in Australia, 2 in England, 1 in Canada and 1 in Puerto Rico. Company revenue topped $312.8 million in 1998 and employees numbered approximately 8,000. "It is raining prison deals," said President George C. Zoley, in the February 18, 1994 issue of South Florida Business Journal. "… the business is growing exponentially."
Another successful facilities support company in the mid 1990s was Axiom Real Estate Management Inc., of Connecticut. Formed in 1992, Axiom was a joint venture between International Business Machines and Grub & Ellis Co., a national real estate company. Later, in September of 1997, Axiom became a wholly-owned subsidiary of Grub & Ellis; the venture was renamed to Grubb & Ellis Management Services, Inc. Although property management firms are excluded from this industry classification, Axiom provided a range of support services ranging from computer systems management to complete facilities oversight. The joint venture was established to take advantage of the corporate downsizing trend. Among other services, Axiom performs a full array of engineering, administrative, and financial duties.
About 800 companies competed in the facilities support services industry throughout the 1990s. Most of these companies were relatively large — the average industry participant had 80 workers, compared to an average of 13 for all U.S. service firms. The largest competitor by far was Ogden Corporation, a global provider of support services to energy and environmental agencies, airports and airlines, sports and entertainment facilities, industrial plants, office buildings, and government agencies. Ogden increased its net income 15 percent in 1993 to $17.5 million, but by 1998 its 21,970 employees helped bring in revenue of almost $1.7 billion.
During the 1990s, other large companies in the industry were Serv-Air Inc. of Texas, Canisco Resources, Inc. of Delaware, Nuclear Support Services of Pennsylvania; Bionetics Corp., of Virginia, and Antarctic Support Associates of Colorado. The median annual revenue of the top ten competitors during the 1990s typically ranged from $50 to $100 million.
Employment prospects for the industry are positive, since facilities management outsourcing is expected to proliferate. Jobs for secretaries and other clerical workers, which account for a large share of this industry's workforce, should increase more than 50 percent between 1990 and 2005, according to the U.S. Bureau of Labor Statistics. Most labor and management opportunities should increase similarly. Employment of computer programmers and systems analysts will leap by more than 100 percent by 2005, as will openings for management and financial analysts and marketing professionals. Furthermore, workers in this industry are well compensated. The average payroll per employee in the mid 1990s was about $33,000—35 percent higher than the average for all other U.S. service industries.
About Axiom. Available from http://www.axiom.com .
Darnay, Arsen J., ed. Finance, Insurance, and Real Estate, USA. Farmington Hills, MI: Gale Group, 1995.
Eyerdam, Rick. "Wackenhut Goes Abroad for Prison Work." South Florida Business Journal, 18 February 1994.
Hoover's Company Capsules. Austin, TX: Hoover's Inc., 2000. Available from http://www.hoovers.com/ .
U.S. Department of Commerce, Bureau of the Census. 1997 Economic Census: Administrative and Support and Waste Management and Remediation Services. Washington: GPO, 2000.
Wackenhut Corporation Organizational History, 20 March 2000. Available from http://www.wackenhut.com .
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