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IS CUTTING COST ACHIEVING REAL SAVING? Tarek Nizameddin, Senior Executive Director of Ejadha Asset Management Group, explores this burning topic.


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By Tarek Nizameddin

With the economic pressures in the region, there is an emphasis currently on cost cutting in the facilities management sector. Most FM departments are feeling the pressure of cost cutting in their operating budgets.

In fact, some reputable service providers started stepping away from contracts because clients have awarded based purely on price which opened the door to small companies to enter the industry without having the competencies and the qualification to provide professional FM services. Clients and their service provider found themselves forced to jeopardize on the quality to accommodate the budget slash. The common practice to showcase cost cutting is the reduction of manpower and resource optimization. The real concern here is that some clients are adjusting the frequency of the services which is affecting the quality of the service and condition of the assets. As an example, the reduction of the frequency of the PPM to match the man-hour of the reduced number of resources will affect the manufacturer warranties and asset life cycle and in some cases, clients are choosing run to fail model where the breakdown is taken as a point of maintenance, rather than proper PPM program. Needless to say that this may achieve cost saving on short-term that can satisfy your CFO requirements and achieve a cut on your budget but on the long run, this will reduce the asset lifecycle and the capital investment will be much higher than the saving that was achieved. This trend in deferred maintenance is concerning while it may seem like a viable cost-saving measure, the reality for many of these buildings is often years of neglect that can result in significantly greater expenses in the long run and repairs quickly become replacements. Another example that we are seeing is compromising on legislation and statuary requirements to reduce the costs which put the facility and building users at a high risk.

Stanford University published a report which explains how as a building ages, the cumulative cost of maintaining facilities significantly impacts the overall budget — not just the maintenance budget. Even when funds are set aside to construct new buildings, they rarely extend to the ongoing operational costs vital to maintaining the facility and slowing the decline of building utility and performance.

The questions that a facility manager can ask is what he can do to face the pressure that he/ she is encountering to reduce his budget:

• Move to Reliability Centered Maintenance (RCM)
• Implementation of technologies
• Minimize utility consumptions
• Be realistic in SLAs and KPIs
• Make the FM department accountable to the senior management by providing reports that show FM efforts and contribution. For many companies, FM is considered a cost center which by definition, incurs costs without adding any benefit while FM spends funds to assist the organization in achieving its objectives and thus keep money in the circle of the company. On another note, investment in FM prolongs the age of the assets and contribute to the quality of the product.

(The Author, Tarek Nizameddin is the Senior Executive Director of Ejadha Asset Management Group)