Strategic Contracts
The differences between the Latin American and North American markets extend beyond regulatory issues. They are also reflected in the way organizations and service providers build long-term relationships.
According to Ana Machado, a civil engineer with master’s and doctoral degrees in Industrial Engineering, a master’s degree in Business Administration, and extensive expertise in Real Estate management across Latin America, one of the most common mistakes in contract management is assuming that transferring the maximum amount of risk to the service provider benefits the client. In practice, she says, the opposite is often true.
“A relatively common mistake is transferring excessive risk to the supplier, which may seem advantageous to the client in the short term but usually leads, over time, to higher costs, lower quality, reduced innovation, and high contract turnover.”
In her view, sustainable contracts are those in which both parties benefit. Achieving that balance begins with clearly defining the risks that each party can effectively manage, continues through the use of performance indicators that are genuinely linked to business value, and is reinforced by ongoing review processes, continuous improvement, and transparency in decision-making.
Rather than simply establishing obligations, governance creates an environment that supports joint development and long-term collaboration.
Ana also emphasizes the importance of recognizing that service providers operate at different levels of maturity. Large companies typically have structured systems, investment capacity, established governance, and the resources needed to develop innovative solutions. Smaller providers, on the other hand, often offer greater flexibility, faster response times, and a deeper understanding of local markets.
Instead of expecting every provider to meet the same level of maturity, she believes contract managers should create a shared path for continuous development.
“The role of today’s contract manager is to create mechanisms that bring out the best in each provider without expecting the same level of maturity from everyone.”
In this context, benchmarking, the exchange of best practices, and joint development plans become valuable tools for gradually strengthening supplier capabilities and improving the entire service delivery chain.
Maria Beatriz Salcedo is a Corporate Real Estate executive responsible for Real Estate strategy for EY’s South Latin America region and Facility Management for EY Brazil. Her work combines real estate planning, supplier governance, contract management, and workplace transformation, with a strong focus on operational efficiency and innovation. She expands on this discussion by addressing a recurring question among large organizations: whether to keep services in-house or outsource them.
In her opinion, the debate is often framed too narrowly, when it should begin with a more strategic question.
“In my view, the discussion should not be about whether to outsource or not. The real question is: Which activities are strategic to the business, and which can be performed more efficiently by specialized partners?”
According to her, the answer depends on four key factors: strategic impact, the need for control, the availability of specialized expertise, and economies of scale.
From this perspective, activities related to strategy, governance, risk management, and decision-making generally remain within the organization, while highly technical or operational activities can be entrusted to specialized partners.
As a result, hybrid operating models are becoming increasingly common among large organizations.
“The company retains leadership and governance internally, while partners take responsibility for execution and bring specialization, innovation, and flexibility.”
Rather than simply dividing responsibilities between internal teams and outsourced providers, this model combines complementary capabilities around shared strategic objectives.
Technology Makes Contracts Smarter
The evolution of strategic contracts is also being driven by rapid technological change.
Artificial intelligence, digital platforms, analytics, and PropTech solutions are transforming the way contracts are managed by reducing the time spent on routine administrative tasks while expanding managers’ analytical capabilities.
Maria Beatriz believes this represents a new stage in contract management.
“I believe we are entering a new era of contract management, where technology and data will play an increasingly important role in decision-making.”
According to her, activities such as document review, contract compliance monitoring, performance tracking, and compliance processes are already becoming automated. As a result, both contract managers and service providers can focus more of their efforts on initiatives that generate meaningful business value.
“The relationship is becoming more transparent, collaborative, and results-oriented.”
She also points out that technology alone cannot solve every challenge. The quality of decisions will continue to depend on the reliability and consistency of the data available.
“Technology is advancing rapidly, but data maturity and reliability are still evolving in many organizations.”
This transformation is also reshaping the profile of Facility Management professionals. Operational expertise remains essential, but it is increasingly complemented by skills in data analysis, technology, supplier management, and evidence-based decision-making.
In Maria Beatriz’s view, Real Estate and Facility Management will continue to become more closely integrated, bringing together properties, contracts, suppliers, and employee experience within a single management ecosystem.
An Irreversible Shift
Although she recognizes that the Brazilian market is still evolving, Ana Machado sees a clear direction for the future of Facility Management contracting.
Among large multinational companies, particularly in the oil and gas, mining, technology, pharmaceutical, and financial sectors, performance-based contracts, employee experience metrics, ESG indicators, performance incentives, and gainsharing mechanisms are becoming increasingly common.
Even so, cultural challenges remain.
According to Ana, many clients continue to prioritize the lowest price over total cost of ownership and long-term business value. At the same time, some service providers are still reluctant to assume contractual risk because they lack a consistent history of performance measurement, governance, or operational maturity.
“The gainsharing model requires something that is still being developed in part of the Brazilian market: trust, data transparency, and a long-term partnership mindset.”
Despite these challenges, she believes the direction is irreversible.
“The latest Facility Management guidelines point toward models based on outcomes, continuous innovation, sustainability, and shared value creation.”
Organizations that move in this direction, she says, will build more resilient contracts, more engaged service providers, and operations that are better equipped to respond to an increasingly dynamic business environment.
Taken together, the experiences of both executives point to a common conclusion: contract management has moved beyond its traditional administrative role to become a core element of business strategy. Governance, performance metrics, balanced risk sharing, cross-functional integration, and the intelligent use of technology now form the foundation of a new generation of Facility Management contracts.
Rather than simply defining legal responsibilities, these contracts are designed to foster partnerships that create lasting business value. In an environment marked by growing operational complexity and rapid technological change, the future of Facility Management will depend less on controlling service providers and more on building collaborative ecosystems where clients and partners share objectives, outcomes, and innovation as part of the same business strategy.