The end of FM?

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The end of FM?

With a challenging economic market in the Middle East, many new players are seeking to move into the facilities management sector, as it is often viewed as a safe haven to slip into during tough times, especially for those working in the construction industry.

As many new FM service providers potentially flood the market, it is important to consider whether FM is still the same concept it used to be a decade ago. ‘Outsourcing’ was certainly the buzz in the region then, but is it still?

I believe that effective FM is no longer about sorting out the day-to-day client issues. That is easy. Repairing equipment and facilities on an ad-hoc basis or when required, has a very short-term focus, and what we really need to ask is whether it can meet the client’s long-term needs. I would challenge that FM, as we currently view it in the region, is not fulfilling a long-term goal for the future.

Of course, we read about FM companies expanding, and I am sure some are growing exponentially, but are these service providers nimble enough to lead their customers, or are they just following their customers to provide the cheapest price at any cost?

When a client has that moment of realisation that they do not simply have a procurement function, but are actually asset owners, their obligation to preserve the value of their assets shifts from being not just about today, but about the future. Similarly, the days of in-house teams of 30+ people with clipboards managing the supply chain, are long gone, yet we still see it on a daily basis. FM companies need to be on their game too, as their demise can be equally quick in a saturated and misunderstood market.

If we can take a moment to look at the term asset management. It is not actually about spending money; it is about retaining and creating value. There is a fundamental link between the management and operation of a building and its value today, and even more so in the future in the same way the residual value of an elemental asset and its maintenance have a direct relationship.

Which begs the question, ‘why are clients so focused on getting the cheapest price from FM service providers?’ FM companies are currently killing each other to win new clients by claiming they can achieve the greatest value by getting the cheapest price and making additional savings on current budgets. Typically, the client’s FM manager and the contractor are essentially complicit in extremely short-term gains, creating marginal values over massive long-term liabilities. In my opinion, this clearly isn’t asset management, and I truly struggle to comprehend why any building owners would want this solution. This is definitely a topic for another discussion, but it seems that as a region we can’t move beyond it, and unfortunately, I believe it will eventually be our downfall.

So, what is next? As I alluded to earlier, the evolutionary step of the future is effective asset management, and both the asset owner and the supplier or contractor simply must evolve. With the fast onset of digitisation, remote monitoring, AI and machine-learning, the role of the asset owner can be significantly streamlined.

Digital solutions can provide all the performance monitoring and the condition status of the overall asset while AI can identify how to increase the lifespan of the asset, thereby allowing asset owners to spend their time focusing on how to maximise the current and future value of that asset. This would be in multiple facets, from the occupier’s experience to financial return on investment. Aside from the latest technology, we must consider what we already know. What do we see in the big picture, and how does this impact asset management, especially as there are always a few curveballs?

With many countries looking to move towards low carbon-based economies, the UAE has joined this global trend by committing to reduce its energy consumption by 30% by 2030. The initiative was actually announced in 2015, yet surprisingly only a few major asset owners have understood the real impact of this commitment.

Taking an extract from an article published in 2015, it is surprising how few companies have actually understood the issue. “Some people still prioritise short-term gain without understanding how global megatrends will affect these gains in the coming years. But the science and economics of global warming tell us we need to shift towards a green economy to catalyse growth and ensure resilience in the future, and [the UAE] is making efforts to do this. Real estate developments that are not demonstrably ‘green’ are losing out in terms of how quickly they sell and the values they command.”

For the nation as a whole to achieve a 30% reduction, in simple terms it means that everyone must reduce their consumption of energy proportionally. Inevitably constraint and control will have to be implemented to achieve this commitment, and I believe that it should be at the forefront of all asset owners and manager’s actions.

Also, with the forthcoming energy rating of buildings, potential buyers or tenants will have a transparent view of the energy performance of buildings, which will give them the option to choose the most energy-efficient and cost-efficient building to live or work in.
For this reason, assets that don’t perform, or in some way meet the requirements, are going to fall in relative value. Putting this in context of the current view of FM where focusing on the cheapest price seems to be the norm, while putting off dealing with tomorrow, the outcome is obvious. When regulations are issued, there will be a mad rush to comply, which in real terms will ultimately cost more.

I firmly believe that we need to be ten steps ahead in doing work for the future today, so we are ready for tomorrow. Service and solution partners that can help asset owners achieve a low-carbon asset operation, adding significantly to the sustainability of the built asset, will help to set it apart and add long-term value. It’s definitely time for a ‘greener’ new world and an FM model more focused on the future.

Author: Ian Harfield, EVP ENGIE Solutions, Middle East, South & Central Asia and Turkey

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