EFS sees facilities management take off in the Middle East

Facilities management in the Middle East may be in its infancy, but as the region continues to grow and attract investment, it certainly won’t be for long

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The facilities management market in the Middle East is rapidly expanding, and companies such as EFS Facilities Services are doing much to promote its growth

The facilities management (FM) market in the Middle East is in its infancy when compared to other developed regions such as Europe and North America. Nevertheless, the sheer size of expected investments in construction in the region is testament to the abundant opportunities that will be present in the future.

Today, the FM sector is a large and complex field comprising a mix of in-house departments, specialist contractors, large multi-service companies and consortia, which deliver a full range of design, build, finance and management functions. Currently, the industry in the region is fragmented and the growing awareness for facilities services requires the establishment of trusted supply chain mechanisms that can consolidate and adopt to meet new market trends.

Experts estimate that Middle Eastern states will invest between €110.5bn and €147.3bn in infrastructure over the next
10 years

In the GCC, the FM sector is expanding fast due to the delivery of a large pool of properties that need maintenance, as well as the need for sustainable solutions. Here, there are multiple stakeholders that stand to benefit from the increasing use of FM, including the residents, building owners, government, service providers and the society at large.

For most GCC residents, FM services mean big, fat service charges. Until recently, most homeowners were fighting service charges levied by master developers, which ranged from AED12 to AED25 per square foot per annum. This adds up to as much as AED25,000 (just over €5,000) worth of charges for the cooling, cleaning, maintenance and security of a 1,000sq ft apartment.

Tariq Chauhan, Group CEO and board member of EFS Facilities Services, one of the largest regional FM service providers, feels that the fragmented market is the reason for ineffective and costly service delivery, for which he says the residents are paying.

Chauhan, winner of European CEO’s Best CEO, Middle East – 2014 award, and EFS has developed a cost-effective, comprehensive FM model for property owners.

Industry awareness
With the industry moving from the nascent stage to maturity, operators must emphasise real FM issues such as the need for a ‘sinking fund’ or a capital life cycle replacement fund, which ensures raising financial provisions in advance to manage the fabric of the facility and refurbishment during the life cycle. However, the key challenge for the industry is about FM awareness and getting the right skills set.

FM is about overall sustainability and longevity of assets and building fabric, through qualitative maintenance. It provides sustainable qualitative lifestyle support in regard to a safe and healthy environment, as well as rationalising all related costs for end users and property owners. There is an increasing awareness surrounding FM, and yet there is still a great deal to be done with regard to educating people on its benefits and importance. For instance, the sustainability of conventional building maintenance models and frameworks is becoming increasingly important.

In addition, FM needs to be involved right at the design stage and thereafter from construction and commissioning to the handover stage. EFS believes that substantial benefits can be derived in the rationalisation of long-term costs, including service-level fees and, if appropriate, FM guidelines are followed in the beginning stage that will deliver benefits to all stakeholders.

In this regard, EFS now has a specialised training centre with the intention of promoting workshops and courses on sustainable FM models, especially in freehold sectors in the middle-income group-housing sector. As a responsible and leading FM service provider, it is EFS’s mission to provide qualitative FM services based on transparent and prudent commercials. The lead developers and master community tenants associations must take a lead to educate communities on the FM benefits and related costs. The perception of high FM costs needs to be tackled through awareness, especially in freehold communities where there is pressure on tenants’ associations to cut costs.

Reducing costs
EFS foresees the entry of many large international FM service providers, with the local FM service providers having the opportunity for vertical and horizontal growth. As per a survey by KPMG, the GCC FM contract values are estimated at around AED117bn (€23.5bn) in 2014 and this is expected to rise to AED300bn (€60.1bn) by 2020.

There is an increasing trend in the market towards shifting from fixed costs to variable costs in order to increase the flexibility for reallocation of resources as and when required. Service providers such as EFS are now stepping in to ensure of sustainable FM initiatives, which focus on the delivery of a truly integrated model capable of meeting the changing trends. In addition to this, new realty and strata laws are also setting FM benchmarks and road maps for sustainable FM models in the Middle East. Moreover, the infrastructure investment projects in the UAE, Egypt and India are matured and require scalable and challenging FM solutions.

FM ensures substantial reduction of utility and other costs, as well as the sustainability of lifestyle, health, safety, environment and quality. Thus, it ensures synchronisation of these elements and is therefore essential in prolonging the life of any property. The concept of a sinking fund needs to be understood and developers or building owners must understand the need to provide for this. Developers have their objective to sell, therefore often cutting the core FM costs to undercut service charges and make their selling proposition attractive. Landlords want to drive the costs down, whereas their tenants want sustainable service standards. Therefore, responsible FM service providers are required to ensure a balance is maintained between expectations and ultimate FM sustainability, which is a major challenge in the view of the rising costs and stressed margins.

Measures of quality
The application of quality assurance, quality control and service level management are all important factors of the overarching service of FM, which is to ensure customer satisfaction is maintained and indeed surpassed. To ensure these are delivered each needs to be defined.

Quality assurance is the systematic process of implementing those ISOs, and is vital to ensure the product is meeting internal specified standards. This helps to inspire customer confidence and company credibility, while maintaining process and internal efficiencies.

Quality control focuses on the procedures by which we ensure the service delivery adheres to set criteria. For example, monitoring cleaning delivery to British Institute of Cleaning Science standards, or equipment maintenance to National Fire Protection Association standards, to ensure consistent and compliant service provision across contracts. Service level management is the key to ensuring performance is not only maintained, but delivered consistently. Performance then can be monitored frequently and form part of client/supplier’s key performance indicators (KPIs). Applied internally to the organisation itself, KPIs can be a fantastic tool to measure internal department delivery, improve internal process through monitoring and continual improvement.

The end users’ expectations and the sourcing are often disconnected between their expecting lower cost, while the operations are expecting higher standards. To maintain this is becoming a challenge, there is a need for definitive deep-dive for the leaders.

Elsewhere, property has become more of a trading commodity than earlier. People would own buildings for years and years, and they would manage it as a long-term asset. So they were investing, aptly, into life cycle management, they were also spending a lot in the building itself to increase the overall efficiency of the building. Whereas the investors coming into the property domain – who are looking for short-term turnaround – often cut on cost.

Another element of the challenge is that there is not yet a great technology coming into FM. There are various computer programs, but they’re still driven around the traditional FM, which is preventable on maintenance. It has to move to integrated facility management.

Growth and investment
Experts estimate that Middle Eastern states will invest between €110.5bn and €147.3bn in infrastructure over the next 10 years, and even more in the longer term. Much of this will be spent on plans intended to satisfy people’s everyday needs and to create sustainable employment in the long term, as governments seek to deliver widespread economic prosperity to help ensure political stability.

Planned projects in leading Gulf states include new power plants, wastewater treatment systems, oil and gas infrastructure, roads, airports and port facilities. In the UAE, celebrating its 43rd birthday this year, Dubai’s Al Maktoum International airport received its first scheduled passenger flights to take pressure off the Emirate’s older airport. Bahrain, too, is expanding its international airport. Saudi Arabia, where King Abdallah has approved very substantial funding for new infrastructure across a range of sectors, is aiming to treble passenger capacity over the next 20 years.

Led by oil-rich Saudi Arabia and the UAE, countries that make up the GCC are spending rapidly on infrastructure to modernise and help diversify their heavily dependent, hydrocarbon-based economies and deal with parched desert climates. As such, more than 25 percent year-on-year growth is expected across the GCC over the next 10 years, as more and more projects are completed.

It is only through systematic FM that these investments can be safeguarded and sustained with an extended life cycle for the benefit of the environment and the society. Properly maintained assets will contribute to reducing operating expenses through effective and efficient operations. It is key that the market understands the cost of maintenance should be maintained to be able to gain larger benefits from reduced operating and asset replacement costs.

There is significant opportunity for growth in the FM industry in the Middle East as the market matures and the awareness of the benefits from the industry are realised by the general market. There are already several measures to ensure that sustainable investments in long-term assets are efficiently managed. These will not only reduce operating costs, but will reduce the asset replacement costs, improve the carbon-footprint and provide a sustainable solution to the society.