What's the secret to creating and managing an approved list?27th April 2014

Whether you own or manage a single property or are a multi-national responsible for a large property portfolio, everyone relies on external suppliers to ensure the consistent running of their buildings. But how do you know the suppliers you choose to engage are competent in their specialist areas? How do you ensure you are managing risk? How can you guarantee you are getting the best value?

Maintaining an approved list of preferred suppliers is integral to ensuring you - as the agent or property owner - have done everything possible to ensure the integrity and safety of the suppliers, tenants, public and clients interacting with your property.

The term 'approved list' is one that has become commonly used across the commercial property industry, and is increasingly used by service providers in an effort to reassure clients that their suppliers are 'approved'. But what does it stand for?

Every organisation will have a different take on both the meaning and importance of an 'approved list' however the only purpose of an approved list is to ensure that all elements of the supplier you are engaging have been pre-assessed, vetted, approved and are subject to ongoing monitoring and management by competent professionals. It’s not enough to rely on your suppliers and assume they have completed a risk assessment or that the engineer sent to complete the work is qualified to do so. Without physically assessing work in progress and reporting on the activities witnessed, suppliers could be doing anything on site, especially unmanned sites, putting themselves and you at risk.

Most approval processes will look closely at what could be considered as the key assessment points including: cost, health & safety, quality, environmental and the ability to deliver the service. Yet many questions that should be considered and are often ignored:

• Is the work being subcontracted? And, if so,  how do you manage the increased risk of a subcontractor attending site? Has your own approval process assessed your approved suppliers own vetting and approval process? Does one even exist?
• Is the supplier financially secure? Do they have the working capital to complete the work? Can they wait 30 days or more for payment without collapsing mid-way through the contract/project leaving you unable to complete the work?
• Has the Construction Industry Scheme (CIS) risk been identified? Has the contractor been verified with HMRC to ensure you pay them minus the correct deduction? Your CIS status and your clients is at risk if your suppliers do not meet the requirements of the scheme or you treat them incorrectly when making payments.
• Do the engineers receive adequate training and refresher courses as required by law? Is the engineer trained to use a MEWP and work at height?
• What are the administration capabilities of the supplier? Are they able to invoice quickly, provide live time feedback, and return quotations within SLA? I could go on...

While managing this process and requesting ever increasing volumes of information from a supplier you have to encourage supplier engagement. Involve them in the pre qualification process, face to face, conference calls, ask for their input and clarification on areas you are unsure of and build relationships. It’s at the start of a relationship between supplier and client that forms the foundations of a successful long-term partnership.

The supplier needs to understand they will be subject to ongoing monitoring and performance reviews, safety standards will be measured and monitored and costs will be interrogated to ensure best value. They also need to understand your objectives, budget constraints, diversity of portfolio, even tenants, their expectations and sensitivities, maybe a lease coming to an end and you are keen for them to re-sign.  It’s no mean feat to consistently maintain a healthy supply chain, one that is loyal and willing to drop everything to help you at 5pm on Friday afternoon. By engaging with them and working together for the same common goal, the results will pay dividends and are well worth your initial investment of time and effort.

Encouraging suppliers to work with you and your teams breeds a working partnership that benefits everyone involved, tenants are satisfied as the supplier understands the building and the common issues. Costs are also transparent and competitive, and tenant retention is likely to increase and the asset performs well. You are satisfied that you have a solid supplier that is reliable, loyal, cost effective and safe in all aspects of what they do including and importantly limiting the risk to you and your client. 

About the author

Chris MacDonald is managing director of Propertyserve UK