The dramatic events that unfolded in the past two years have rocked the world’s economy and have been quite  devastating for some. It seems now that even the world’s largest economies had built their grandiose dreams on shaky foundations. Anyway, recession is officially over now and everywhere reports are being generated regarding its impact on companies, and overall economy.

Although every sector across the world has been affected by the global recession there are few industries or sectors such as facilities management (FM) that has shown positive growth. There is no magic formula for maintaining growth during recession, but a sound business model backed by an apt strategy can alleviate the pain – and this is exactly what EFS has done. With over AED 1 billion projects across the Middle East, EFS is on a roll.

Regionally, the FM sector is growing steadily mainly due to the delivery of a large pool of properties that require services such as maintenance, and sustainable solutions. However, there are rising concerns as asset managers across the region are looking at cost containment and have therefore reduced their budgets significantly. And they still
expect service excellence. “In a sluggish economy, running leaner is a must, but not every money-saving measure is a good one,” says Mr. Chauhan. He feels FM companies should now adopt a more structured approach to ensure its status and future. “You have to be part of your customer’s strategy and be innovative to ensure maximum efficiency and cost savings through the commissioning and operation phases.” Even a few months back, homeowners were levied hefty annual service charges by master developers, which ranged from Dh 12 to Dh 25 and even Dh 40 per square feet. And owners were willing to pay these fees without raising any questions. According to Mr. Chauhan, this can now be done in less than Dh 3 per square foot. He feels cost rationalisation is the need of the hour as current FM costs needs to be relooked at as the big clients of the past don’t have as deep pockets any more. “This can be achieved by focusing more on your core business which means managing overheads well,” he explains. Despite all these odds he is one among many who believes that the FM industry will continue to flourish despite the set-back. “The sector will continue to expand as plunge in construction costs are helping developers to push ahead with projects. All we need to do is create greater awareness about the benefits of the FM model by selling to the organisations the idea that property is a major cost centre!” he exclaims.

Having said that, Chauhan also recognises the challenges that lie ahead and says, “We will continue to focus more on our operational efficiency to ensure we continue to provide unparalled service, while never compromising on safety and delivering value to our customers.” Here’s an excerpt from the interview. 

How has the current economic downturn affected the Facilities Management industry in general worldwide and Middle East in particular?
FM primarily is an essential tool for asset management where the respective stake holders are striving to improvise their bottom lines through effective strategies. During the recent financial crisis, property asset managers did rush to reduce their operating costs through effective FM. We have therefore seen a significant growth in activities across Europe and USA in particular. However, even whilst the industry is growing, there is an increasing pressure to rationalise FM operating costs.

Regionally, the industry has shown signs of growth in revenues even though there is a downward revision in costs. This is more evident in the UAE, where a large pool of properties being completed and therefore needs maintenance, as well as sustainable solutions. This holds true if you compare our current expenditure to the baseline cost of 2008.
The FM industry in the ME can be said to have moved from a ‘silo’ to ‘bundled’ and ‘integrated services’ before the recession.

Any significant  trends that were noticed during the recession and why?
Yes indeed, currently we are seeing an increase in the number of asset managers looking out for integrating FM services with the primary objective of cost consolidation. Dubai in particular is catching up fast with the concept of integrated services. This happened soon after the recent introduction of Strata law. The law requires FM companies to provide all services under one roof to prevent outsourcing and ensure better management.

Are projects moving more towards in-house FM rather than outsourcing to tide over the recession? Has this resulted in lowering the standard of service deliverables?
Yes, the current trend is to move in-house rather than outsource, but that has not lead to lowering service standards. For example, we are currently providing integrated services to over 50 projects with almost 90% of our services managed inhouse. And I can assure you that we have not compromised on quality of our services. Globally, best  practice models of integrated FM, of which in-house FM is a part, assures better cost management and improved service standard and EFS goes by that.

Do you still see a shift towards pricing as a controlling element to determine tenders and contracts rather than service and quality?
Absolutely. 2010 saw pricing as the key element while winning tenders. In my opinion, this trend will continue as those floating tenders will view competitive pricing as the main criterion to award contracts.

Where would the FM industry be today had it not been for the recession?
Fundamentally, no industry can sustain without intrinsic value proposition. Therefore if you look back at 2008 and 2009 when the industry was at its peak, there was indeed a desperate need for rationalised FM structure and pricing that was topheavy. We therefore believe that even without recession, the FM industry would not have managed to carry
on with its core value proposition of sustainability and high quality standard without reasonable pricing strategy.

Thus, if recession never happened and assuming the industry today was at par with 2008-2009 levels, FM by now would still be struggling to set benchmarks for growth, quality assurance, deliverance and value for money.

How has EFS managed to cope with the recession?  What were the steps taken to tide over?
EFS has restructured the organization to rationalise staff and management costs. In addition, we have cut down costs by shifting to our in-house model. This has in turn reduced our reliance on outsourcing thereby mitigating service assurance risks, and ensuring consolidation & cost effectiveness. Besides, we were benefitted significantly after
implementing the Computer Aided Facilities Management (CAFM) system.