Top 10 trends and issues in the Mideast facility management industry

 

Saudi Arabia and Qatar are expected to open newer opportunities for FM companies and will register a strong growth over the next few years

Publicado por FAMASE el 04/09/2012 (ENG)


 





Exploring new methods in energy management, enforcement of health and safety legislation by some Gulf governments, and frequent breaches of payment terms are some of the top issues and trends that the facility management (FM) industry has to contend with, according to industry heads.



"Bad payers are openly named by the FM industry since it is a primarily resource-based sector with large monthly payrolls to meet," Mick Dalton, managing director at Musanadah FM (Saudi Arabia) and current IFMA Foundation Liaison for the Middle East, told Zawya.



"In 2011, over 32% of the FM revenue was generated by commercial end-users. This segment is offering strong and positive signals for prospective business opportunities," according to research and consultancy firm Frost & Sullivan. In an emailed statement to Zawya, Kumar Ramesh, Industry Manger, Environmental and Building Technologies Practice, MeNASA, at Frost & Sullivan, said: "The commercial segment is mature in terms of understanding FM and implementing best practices."



Ramesh notes that the Gulf Cooperation Council (GCC) market for the FM industry is still in the nascent stages and developing, compared to markets such as Europe and the US. "The overall market for FM in the GCC was estimated at USD 3.9 billion in 2010 and USD 4.5 billion in 2011. Currently, the UAE is the highest contributor in terms of revenue. However, the focus is anticipated to be moving towards the Kingdom of Saudi Arabia and Qatar due to the increasing construction activity in these countries. Government infrastructure is in the spotlight as the GCC's spending on infrastructure development projects, like airports, railways and so on, is boosting the demand for FM in these areas," said Ramesh.



Saudi Arabia and Qatar are expected to open newer opportunities for FM companies and will register a strong growth over the next few years. Frost & Sullivan expects Qatar to grow at over 20% while Saudi Arabia is expected to register over 25% growth by 2017.



However, capacity building is the need of the hour, and strong legislative enforcement and client education need to be given top priority.



Below are the top 10 FM trends and issues based on feedback from Mick Dalton of Musanadah FM; Bruce Moult, an independent consultant; Sean Heckford, international facilities manager at Parsons; and David J. Carey, CEO at METT.



Energy Management Legislation



Over the past 10 years, the Middle East has witnessed an increasing number of developments and heightened construction activity. Due to the continuing dependence on oil as the primary source of energy, the governments in the region are trying to find ways to reduce demand and conserve energy. This is being achieved, albeit at a slow pace, via a limited amount of new legislations, incentive schemes (primarily from the utility providers) and education programs aimed at changing consumer behavior. Solutions to reduce energy consumption could include changes to voltage in some countries and stabilizing power supply.



Other key drivers could come from the regional leadership introducing statutory regulations such as fuel levies on the manufacturing industry or offering incentive schemes to reduce the amount of water or electricity consumed.



Shift to Efficient Lighting



With most countries recognizing the need to conserve energy and banning the sale of incandescent lamps, GCC governments are following suit and introducing regulation to phase out incandescents in favor of compact fluorescent lamps (CFLs) and light-emitting diodes (LEDs). The latter can last up to 30 times longer than the former, yet consumes a tiny percentage of power.



But the return on investment formula has been challenged by subsidized local electrical tariff rates combined with the higher prices of the CFL and LED lamps. So the conversion rate is slow.



Joint Property Ownership Law



With Dubai creating the Jointly-Owned Property legislation (Law No. 27 of 2007), property developers and owners' associations (OAs) were forced to form OA Management (OAM) companies, which aspired to effectively manage their properties and communities. Other Middle Eastern countries also attempted to introduce similar regulations.



In Dubai, initially, this particular law excluded FM companies from fulfilling roles as OAMs and forced them to move away from the market. This left single-source companies and interim OAs in limbo and expected to manage complex real estate sector issues. Generally, OAM representatives are not experts in FM and often cannot understand asset management, life cycle management, defect liability responsibility or planned preventative maintenance. Hence, the legislation needs further improvement in order to clarify respective responsibilities and prevent irreversible damage to building infrastructure since its apparent failure to deliver properly-constituted OAs in good time has resulted in an interim state of hiatus with lack of powers to appoint OAM companies and funds to pay FM providers.



Some OAM and Community Management (CM) companies have also incorrectly interpreted the Dubai legislation - possibly to further secure their positions by appointing various single service providers 'managed' by inexperienced property managers as opposed to experienced multi -FM integrated service providers.



Health and Safety



There is a move in some Middle Eastern countries to introduce and enforce health and safety legislation related to facility management. Though fire and life safety legislation is in place across the region, it is open to abuse due to inconsistent inspection standards and varying levels of enforcement.



Other areas of health and safety are now being considered throughout the region and Abu Dhabi is taking the lead with its EHSMS legislation. Again, many of the experienced facility managers in the region are pushing to improve the general standards of safety in their facilities.



Talent Management



FM is a people business. It is becoming difficult to attract, train and retain experienced people. Industry players highlight the need for serious change in the way people are sourced, hired, trained and retained by FM companies.



Delayed Mobilization



Many countries in the region are actively promoting programs to provide jobs for nationals. But in certain countries, this has led to a protracted process wherein visas denoting nationality are only issued after a contract is signed and registered with the labor ministry. This results in poor performance from the outset, extends the mobilization period and, ultimately, leads to a breakdown in the relationship between the vendor and client.



While this is not unique to the FM industry, it means that clients need to understand that FM providers do not keep a vast array of tradesmen, cleaners and laborers waiting on standby for a contract award. Meanwhile, vendors must also be realistic when providing their mobilization forecasts at the proposal stage. It is essential to have a mutual understanding of the issue.



Breach of Payment Terms



Cash flow is the biggest issue affecting FM companies in the region. Breaches of payment terms are frequent and the industry openly names defaulters. Additionally, the deliberate non-payment of service charges by a large number of end-users and the inability of developers or OAMs to take timely legal action results in huge budget deficits and negative cash flow.



This, in turn, leads to the suspension or downgrading of services and non-payment of service providers, which is detrimental to others tenants who live/work in the development. Some use the service fee money to only maintain utility services in the building.



Regional Unrest



The unrest and uncertainty in certain countries across the Middle East affects FM companies and doing business in such countries is beset with a unique set of risks. Employees from the countries impacted worry about the safety of their families at home. While this could also be considered an opportunity for the industry, many companies do not have robust business continuity plans in place.



Unethical Practice



"We will give you this contract, if you give us..." is a commonly used barter phrase. In some countries in the region, even after agreeing on the price, the procurement department gets involved and starts looking for a 20% reduction with no regard for quality or scope.



Additionally, certain FM companies offer subsidized visa costs, lower profit margin targets and exhibit poor commercial practices. Once a client /owner/ landlord realizes that good FM will save money in the long run by primarily maintaining the resale value or extending the useful life of an asset, this practice will die.



Organisations such as MEFMA, BIFM and IFMA should take the lead in educating and pushing for regulation across the region. It took over 30 years for the FM industry to develop in Europe and the US. Since most countries in the Middle East don't appear to be willing to learn by example, they will learn through bad experience.



Pestilence



The Middle East is witnessing increasing signs of a bacterium named Legionella, which spreads essentially through the air-conditioning systems of large buildings. The pest population is also expanding exponentially as each country develops without the full infrastructure to cope with such issues. Municipalities need to do more to reduce the pest overload, the spread of vermin and the associated health issues.



 



© Zawya 2012



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