Required pre-reading: This article assumes that you have read the LHTS AB fictitious company description. It explains the company’s products, sites, organisation, procurement model and strategic priorities. From this point, the reader is expected to understand the general LHTS AB context.
Facility management is sometimes treated as a collection of routine local services. In reality, it affects employee safety, production availability, energy use, regulatory compliance and the daily experience of everyone working at a site.
This worked example shows how LHTS AB develops a category strategy for facility management across its European operations. It explains how the company defines the category, segments different services, selects an appropriate supplier model and creates commercial incentives that support reliability instead of only reducing visible prices.
Training note: This is a fictitious LHTS AB case created for procurement training. It uses real public information about the relevant external market, combined with invented internal company data, stakeholders and supplier situations.
External data retrieved: 30 July 2026.
The LHTS AB business context
LHTS operates nine manufacturing, engineering or assembly sites in Europe:
- Linköping, Västerås and Gothenburg in Sweden;
- Turku in Finland;
- Aarhus in Denmark;
- Kassel in Germany;
- Brno in the Czech Republic;
- Gdańsk in Poland; and
- Milan in Italy.
The sites perform different activities. Some contain offices and engineering laboratories. Others operate production lines, test equipment, warehouses, refrigerant systems and customer-project assembly.
A facility failure can therefore have very different consequences. A delayed repair in an ordinary meeting room is inconvenient. A failure affecting production ventilation, electrical distribution, cooling, fire protection or site access can stop operations or create a safety and compliance risk.
Facility management must support five LHTS priorities:
- Safe and legally compliant workplaces.
- Reliable manufacturing and engineering operations.
- Competitive total facility cost.
- Lower energy use and environmental impact.
- A consistent employee experience without ignoring local conditions.
Category scope and baseline: where LHTS AB is today
The strategy covers facility-management services for the nine European sites.
The category includes:
- planned and reactive building maintenance;
- heating, ventilation and air-conditioning maintenance;
- electrical and plumbing services;
- cleaning and workplace hygiene;
- security guarding, reception and access support;
- fire-safety maintenance and inspections;
- grounds maintenance, winter services and pest control;
- waste collection and environmental services;
- minor repairs, moves and workplace changes;
- facility-management systems and service-desk coordination.
The scope excludes:
- maintenance of production machinery;
- electricity and fuel commodity contracts;
- major construction and capital-investment projects;
- property leases and real-estate transactions;
- information-technology support; and
- employee catering.
These exclusions are important. Facility management can become so broad that no supplier, cost model or governance structure is suitable for the entire category.
All figures below are fictitious training data.
| Baseline measure | Current LHTS AB position |
|---|---|
| European sites in scope | 9 |
| Total internal floor area | 362,000 square metres |
| Employees regularly using the sites | Approximately 7,400 |
| Annual facility-management spend | SEK 272 million |
| Active facility-management suppliers | 56 |
| Current contracts | 31 |
| Spend covered by current contracts | 72% |
| Planned maintenance completed on time | 79% |
| Building assets recorded in the maintenance system | 58% |
| Reactive work as share of technical-maintenance cost | 36% |
| Waste diverted from disposal | 61% |
| Average internal user satisfaction | 3.4 out of 5 |
Spend by subcategory
| Subcategory | Annual spend |
|---|---|
| Technical building maintenance | SEK 83 million |
| Cleaning and hygiene | SEK 52 million |
| Security and reception | SEK 38 million |
| Waste and environmental services | SEK 27 million |
| Grounds, winter services and pest control | SEK 18 million |
| Fire safety and statutory inspections | SEK 16 million |
| Minor works, moves and workplace services | SEK 22 million |
| Facility coordination and systems | SEK 16 million |
| Total | SEK 272 million |
The current supplier model
Each site has developed its own supplier structure. Some sites use one main facility supplier supported by specialists. Others buy each service separately.
The 56 suppliers include local cleaning companies, security providers, maintenance contractors, waste companies and technical specialists. Several suppliers perform similar work under different service definitions and commercial terms.
Four weaknesses are visible.
First, there is no common service catalogue. For example, “preventive maintenance” means different things at different sites. Some contracts define the required activities and frequencies. Others provide only a monthly number of technician hours.
Second, asset information is incomplete. LHTS does not have one reliable register of all building assets, maintenance plans, warranties and legal-inspection dates.
Third, performance data are inconsistent. One site measures response time from the moment a request is submitted. Another measures it from the moment a technician accepts the task. The results cannot be compared properly.
Fourth, supplier incentives are weak. Several technical-maintenance suppliers receive additional revenue when breakdowns occur. They have little financial incentive to reduce reactive maintenance.
The category team concludes that immediate supplier consolidation without first correcting these weaknesses would transfer confusion into a larger contract.
The external facility-management market
The supply market is both global and local
The facility-management market includes international integrated-service providers, regional contractors and small local specialists.
Large providers can coordinate several services, invest in systems and manage multiple countries. Local suppliers may offer stronger technical knowledge, faster site response or licences required in a particular country.
The market should therefore not be viewed as a simple choice between one global provider and many local suppliers. The category manager must determine which activities benefit from integration and which require specialist or local delivery.
Labour cost is a major commercial driver
Cleaning, security, reception, grounds maintenance and many technical services are labour-intensive. Local wages, collective agreements, social costs, shift patterns and required competence materially affect supplier cost.
Eurostat reported that hourly labour costs increased by 3.6% in the European Union during the first quarter of 2026 compared with the same quarter of 2025. The increase in the EU services sector was 3.4%. Eurostat’s labour-cost release shows why a multi-year facility contract needs a transparent national indexation method rather than an unsupported annual price increase.
Labour-cost differences between countries also mean that comparing only cost per square metre can be misleading. Building type, production activity, local wage conditions, opening hours and service level must be considered.
Facility management is becoming more structured
ISO 41001 provides requirements for a facility-management system that supports the objectives of the customer organisation, meets stakeholder requirements and operates sustainably. The standard applies across sectors and organisation sizes.
As of July 2026, ISO still lists ISO 41001:2018 as the published edition, while noting that a revision is expected. LHTS should therefore use its management-system principles but verify the latest edition before placing a formal certification requirement in a tender. ISO’s current standard page provides the status.
The important procurement lesson is that facility management should be governed as a management system, not only as a list of tasks.
Energy requirements are increasing
The revised European Energy Performance of Buildings Directive entered into force on 28 May 2024. Its general deadline for transposition into national law was 29 May 2026. It focuses on renovation, decarbonisation, modernisation and improved energy performance in buildings. The European Commission’s EPBD overview explains the requirements and implementation timeline.
The revised Energy Efficiency Directive also establishes an EU objective to reduce final energy consumption by at least 11.7% compared with the 2020 projections for 2030. It gives legal status to the “energy efficiency first” principle and includes requirements relating to energy audits and energy-management systems. The European Commission’s Energy Efficiency Directive page provides further information.
The directives do not create one identical operational rule for every LHTS site. National implementation, building type and company circumstances must be reviewed locally. However, they strengthen the business case for reliable building data, energy monitoring and documented improvement plans.
Refrigerant management requires qualified delivery
Heating, cooling and refrigeration systems may contain fluorinated greenhouse gases. Regulation (EU) 2024/573 establishes controls relating to these gases, including requirements affecting leakage prevention, servicing, recovery and qualified personnel. The EUR-Lex summary explains the regulation’s objectives.
LHTS cannot treat refrigerant maintenance as an ordinary handyman service. Supplier competence, certification, records, leakage management and equipment transition plans must be verified in each applicable country.
Waste should be managed through a hierarchy
The EU Waste Framework Directive establishes the main concepts and principles for waste management, including the waste hierarchy. Prevention is preferred, followed by preparation for reuse, recycling and other recovery. Disposal is the least preferred option. The European Commission’s Waste Framework Directive overview describes the framework.
A facility-management contract should therefore report more than the total tonnes collected. It should identify waste streams, contamination, reuse, recycling, recovery and disposal.
Cleaning can be specified by performance and environmental impact
The European Commission has developed Green Public Procurement criteria for indoor cleaning services. Although these criteria are voluntary and designed for public procurement, they provide useful examples covering cleaning products, consumables, equipment, staff training and environmental performance. The EU Green Public Procurement resources can inform a private-sector specification.
LHTS should use these criteria as input rather than copying them without considering industrial-site hygiene, production conditions and local law.
Connected building systems create cyber risk
Modern building-management systems can connect ventilation, energy monitoring, access control, lighting and other operational technologies. The United States Cybersecurity and Infrastructure Security Agency explicitly includes building-management and energy-management systems within industrial-control-system security. CISA’s industrial-control-system guidance illustrates why facility suppliers’ remote access and connected devices require security governance.
The facility supplier must not independently connect equipment, install remote-access tools or transfer building data without approval from LHTS Digital and Information Security.
Stakeholders and business requirements
The Chief Operations Officer sponsors the strategy. The European Facility Management Category Manager leads the commercial process.
| Stakeholder | Main requirement and decision role |
|---|---|
| Site managers | Delivery continuity, local accountability and implementation |
| Production managers | Availability of production-supporting building systems |
| Environment, Health and Safety | Safety, legal inspections and contractor control |
| Local facility managers | Practical service design, asset knowledge and daily governance |
| Sustainability | Energy, waste, chemicals, emissions data and improvement |
| Information Security | Connected systems, remote access and data protection |
| Finance | Cost baseline, business case and benefit validation |
| Human Resources | Workplace experience and employee communication |
| Legal and Compliance | Contract risk, local labour issues and regulatory provisions |
| Procurement | Category strategy, competition, contracting and supplier governance |
Important stakeholder tensions
Site managers are concerned that a regional strategy will reduce local responsiveness. Procurement sees duplicated contracts and inconsistent terms.
Production wants immediate response to every technical issue. Finance wants lower standby and call-out cost.
Sustainability wants measurable energy and waste improvement. Facility managers are concerned that targets may be set without reliable baseline data.
Information Security wants strict control of remote access. Maintenance suppliers want quick access to systems when troubleshooting.
A good category strategy does not hide these tensions. It establishes who decides, which evidence is required and how exceptions will be controlled.
Category assessment
Facility management should not receive one Kraljic classification.
| Service group | Category characteristics | Strategic implication |
|---|---|---|
| Cleaning, grounds and routine workplace services | Several qualified providers; specifications can be standardised | Use competition and regional leverage |
| Technical building maintenance | High operational impact and transition complexity | Build long-term capability and strong governance |
| Security services | Local licensing, trust and business-continuity requirements | Regional or local sourcing with strict qualification |
| Fire, lifts, high voltage and refrigerants | Specialist competence and regulatory requirements | Retain qualified specialists and continuity controls |
| Waste services | Local infrastructure, permits and environmental data | Regional sourcing with transparent downstream reporting |
| Facility systems and building data | Integration, data ownership and cyber dependency | Treat as a controlled strategic capability |
The main opportunity is not simply to reduce 56 suppliers to the smallest possible number. It is to create a supplier architecture in which every service has an accountable owner, suitable competition and reliable performance information.
The target position and category strategy
LHTS will introduce a hybrid regional facility-management model.
Each site will have one accountable regional facility integrator for the main service portfolio. Certain regulated or technically specialised services will remain with qualified specialists.
The target position has eight elements.
1. Create a common service catalogue
LHTS will define a European service catalogue with standard service names, scope boundaries, responsibilities and performance definitions.
The catalogue will distinguish three facility environments:
- production-critical areas;
- engineering, laboratory and warehouse areas; and
- offices and general workplace areas.
Service levels will reflect business impact. A production-critical ventilation failure will not have the same response target as a damaged office chair.
2. Use three geographic sourcing lots
The competitive process will use three lots:
- Nordic sites;
- Central European sites; and
- the Milan site and associated Italian services.
Bidders may compete for one or several lots. At implementation, no provider will receive all three lots unless its proposal provides a clear business advantage and the concentration risk is formally accepted.
This creates regional leverage without making LHTS dependent on one provider across Europe.
3. Retain controlled specialist services
The regional integrator may coordinate specialist work, but LHTS will retain the right to contract critical specialists directly.
This applies particularly to:
- fire-safety systems;
- lifts;
- high-voltage installations;
- refrigerant and cooling systems;
- hazardous waste;
- security technology; and
- legally required inspections.
The decision will depend on local law, competence, market structure and the importance of direct technical control.
4. Build a verified asset baseline
Before final pricing, bidders will receive an asset register showing equipment type, location, criticality, condition, maintenance history and legal-inspection requirements.
Where information is missing, the mobilisation phase will include a controlled asset-verification programme.
The maintenance strategy will use asset criticality:
- Critical assets: preventive or condition-based maintenance, defined spares and continuity plans.
- Important assets: planned maintenance and monitored failure history.
- Non-critical assets: economical repair or replacement when required.
This prevents every asset from receiving the same expensive maintenance approach.
5. Specify outcomes, not only labour hours
Cleaning will be specified by required quality and hygiene outcomes, adjusted for occupancy and use.
Technical services will be specified through asset availability, maintenance completion and restoration requirements.
Security will be specified through risk, site opening hours, incident response and access requirements.
The supplier remains responsible for staffing and work organisation, provided that legal, safety and competence requirements are met.
6. Introduce a transparent commercial model
The contract will combine:
- a fixed management fee;
- agreed prices for recurring services;
- schedules of rates for defined additional work;
- open-book third-party costs where required;
- capped subcontractor mark-ups;
- pre-agreed approval thresholds; and
- verified gain-sharing for selected improvements.
Price adjustment will use relevant national labour indices for labour-driven services and appropriate material or energy indices where these are genuinely relevant. LHTS will not accept one general inflation adjustment for every cost element.
Suppliers will not receive gain-sharing for savings created only by deferred maintenance or reduced service quality.
7. Make sustainability operational
The strategy will require:
- energy-improvement proposals supported by measured data;
- refrigerant records and leakage management;
- lower-impact cleaning products where technically suitable;
- reduced chemical and water consumption;
- improved waste separation and verified downstream treatment;
- low-emission service vehicles where practical;
- repair and reuse before replacement; and
- environmental data that can be audited.
LHTS will retain responsibility for investment decisions. The facility supplier may identify and implement opportunities but cannot approve capital expenditure.
8. Protect continuity, data and exit readiness
The contracts will include:
- business-continuity plans;
- approved subcontractor lists;
- key-person and competence requirements;
- cyber and remote-access controls;
- ownership of asset and maintenance data;
- data-portability requirements;
- emergency step-in rights;
- mobilisation and exit plans; and
- obligations to support a successor supplier.
Exit requirements will be agreed at contract signature, not when the relationship is already ending.
Why LHTS does not select one global provider
A single European provider could create one interface and strong spend leverage. It could also create high dependency, reduce access to local specialists and make a future transition difficult.
Keeping every service local would preserve flexibility but maintain fragmented governance and weak data.
The hybrid regional model is selected because it creates:
- meaningful regional competition;
- one accountable integrator at each site;
- access to qualified specialists;
- common data and performance standards;
- lower transition risk; and
- credible alternatives if one provider underperforms.
The objective is controlled integration, not maximum consolidation.
Action plan and implementation
| Phase | Main activities | Accountable owner | Timing |
|---|---|---|---|
| Baseline | Validate spend, suppliers, buildings, assets and contract position | Category Manager | Months 0–3 |
| Service design | Create service catalogue, criticality model and KPI definitions | European Facilities Lead | Months 2–5 |
| Stakeholder approval | Approve lots, specialist-service boundaries and business case | Chief Operations Officer | Month 5 |
| Market engagement | Conduct supplier workshops and request information | Category Manager | Months 4–6 |
| Competitive sourcing | Issue request for proposal, site visits and dialogue rounds | Procurement | Months 6–9 |
| Evaluation | Complete commercial, technical, safety, sustainability and cyber evaluation | Cross-functional team | Months 9–11 |
| Contracting | Finalise agreements, guarantees, transition and exit provisions | Procurement and Legal | Months 11–12 |
| Mobilisation | Verify assets, transfer staff where applicable, configure systems and test escalation | Facility leads and suppliers | Months 12–16 |
| Stabilisation | Correct data, close service gaps and establish reporting | Regional contract owners | Months 16–19 |
| Improvement | Launch energy, maintenance and waste programmes | Supplier and LHTS owners | Months 19–30 |
The transition will be phased. LHTS will not change all nine sites on the same day.
One Nordic and one Central European site will enter the new model first. Lessons will be applied before the remaining sites move.
Measures and review
| KPI | Definition | Owner | Management purpose |
|---|---|---|---|
| Critical asset availability | Percentage of required operating time that critical building assets are available | Site Facility Manager | Protect production and site operation |
| Planned maintenance compliance | Approved maintenance tasks completed correctly and on time | Supplier Technical Lead | Reduce avoidable failure |
| Reactive-maintenance ratio | Reactive maintenance cost as a share of technical-maintenance cost | Category Manager | Measure movement from breakdown to prevention |
| Restoration performance | Percentage of priority incidents restored within the agreed time | Site Facility Manager | Test real service recovery |
| Normalised FM cost | Facility cost per square metre, adjusted for scope and material site changes | Finance | Compare total cost without false conclusions |
| Contractor safety | Incidents, observations and corrective-action completion | Environment, Health and Safety | Protect people and control supplier work |
| Building energy intensity | Weather- and occupancy-adjusted building energy per square metre | Sustainability | Track operational efficiency |
| Waste recovery and traceability | Percentage reused, recycled or recovered with validated records | Sustainability | Improve circularity and data quality |
User satisfaction will be measured separately through short site surveys. It will support service improvement but will not replace objective safety, availability or compliance measures.
Benefit validation
The fictitious business case targets a net annual improvement of SEK 15 million after full implementation.
The benefit is expected to come from:
- removal of duplicated coordination;
- better contract coverage;
- reduced emergency maintenance;
- more efficient cleaning and security specifications;
- controlled subcontractor mark-ups;
- improved waste arrangements; and
- energy and maintenance improvements.
Finance will validate each benefit against an agreed baseline.
Purchase-price reductions, cost avoidance, energy savings and risk reduction will be reported separately. The same improvement will not be counted twice.
What future buyers should learn from this example
- Facility management must be divided into services with different markets, risks and qualification needs.
- Supplier consolidation should follow clear service design and reliable baseline data.
- A single integrated provider is not automatically the best answer.
- Performance-based specifications require measurable outcomes and strong contract governance.
- Mobilisation, building data, cyber controls and exit planning are part of the sourcing decision.
- The cheapest maintenance contract may create the highest cost if it rewards breakdowns and deferred work.
Conclusion
The LHTS AB facility-management strategy replaces fragmented local arrangements with common service definitions, regional competition and accountable site delivery.
It does not place every activity with one provider. Regional integrators manage the main service portfolio, while critical and regulated work remains with qualified specialists where appropriate.
The strategy is designed to improve safety, facility reliability, cost transparency, environmental performance and data quality. Its success will depend less on signing a large contract and more on disciplined mobilisation, local implementation and continuous supplier management.
That is the difference between procuring individual facility services and managing facility management as a business category.
Sources
- Eurostat – Annual increase in labour costs, first quarter 2026
- ISO – ISO 41001 Facility Management Systems
- European Commission – Energy Performance of Buildings Directive
- European Commission – Energy Efficiency Directive
- EUR-Lex – Fluorinated Greenhouse Gases
- European Commission – Waste Framework Directive
- European Commission – Green Public Procurement Training Toolkit
- CISA – Industrial Control Systems
