Economic considerations in outsourcing operation and maintenance service for commercial buildings

The overblown property market in Hong Kong burst during the Asian financial crisis in 1997. After a lengthy slump, the property prices are yet to revert to their peak levels. To reduce expenditure while striving for better income, owners have increasingly outsourced operation and maintenance (O&M) services for their buildings. Whether the outsourcing is really economical hinges not only on the cost saving, but also on the change in building value, which is dependent on the performance of the contract service. Through a series of face-to-face interviews with 22 experienced practitioners playing the roles of owner, property management and O&M contractor for commercial buildings, the study examined the perceived importance of the attributes contributory to an efficient contract. Despite the difficulty of measuring transaction costs, a pragmatic model developed via analysing the opinions of the practitioners is submitted for gauging the ex ante and ex post costs variation.