KPIs for M&E contractors - 2010 resultsJanuary 2011

Can M&E contractors continue their steady improvement or will the recession for a U-turn? Gerry Samuelsson-Brown discusses the latest KPI results.

The UK could be accused of being obsessed with benchmarking. Whether it is university ratings, hospital waiting lists or the percentage of trains that get us to work on time, benchmarks are everywhere. Eyes may roll at the sight of yet another suite of key performance indicators (KPIs) - this time for the M&E industry. Love them or hate them, the latest KPIs provide evidence that M&E service delivery has changed, and largely in the right direction.

At least, that's the general trend. Table 1 provides feedback on the 14 headline KPIs, showing the trend over the last three years against the first year of data collection. Overall, design satisfaction is interesting as it's shown the greatest improvement since 2001, compared with the other headline customer satisfaction KPIs. Admittedly this started from a very low base of 38 per cent, but in 2001 only 50 per cent of M&E contractors were actively involved in design (50 per cent being procured on an installation-only basis). By 2010 this was closer to 80 per cent. Clearly the more experience contractors had, the better they got.

BSRIA's calculation for productivity removes cost of goods supplied and the labour costs, leaving turnover derived by M&E activity. Even allowing for inflation, this has improved significantly over time. Each M&E operative contributes an average £46 000 to pure turnover, an increase from £26,000 in 2001 (2001 values allowing for inflation).

Environmental issues

The KPI for environmental impact was introduced in 2005 to capture how well M&E contractors control it during the installation phase. This year saw a vast improvement compared with 2009.

It might be a blip or it might not, but what with rising interest in corporate responsibility, display energy certification, and attractive feed-in tariffs for renewables, more clients are demanding good practice from their professional teams. The KPI results indicate that contractors have risen to the challenge.

The M&E contractors are also taking more notice of energy and environmental issues due to pressure across all parties to reduce carbon dioxide emissions. BSRIA intelligence has uncovered that more M&E contracting firms are perceiving that tackling energy and environmental issues is a strategic business opportunity.

As Figure 1 shows, defects on handover dipped last year. However, the mean score did not vary much, down from 7.5 to 7.3 out of ten. Several scores of seven were awarded, with M&E contractors just falling short of the 'satisfaction' post. This might be a reflection of the recession, leading to leaner working and a lack of resources at the tail end of projects. Figure 1 also highlights just how far design (done by M&E contractors) and the quality of O&M manuals have improved. It also reveals that the quality of workmanship of the building services installations has always been the best KPI by far.

So how does all this success fit with all the grief caused by the recession, and how can we make sense of the latest profitability figures? Although productivity increased to 4.5 per cent in 2010, it is likely that many companies will have returned far lower margins and will simply not identify with these figures.

So what's going on? Apparently 2009 was not so bad for many firms. While larger firms working on projects of a long duration were kept busy, they had cut back on staff in readiness for a recession. This also ties in with the improved productivity figures. It should also be noted that the 4.5 per cent figure includes all sizes of M&E firm. Typically, the larger firms would have an average of 10 per cent less profitability than smaller firms, so the profitability benchmark is nearer 4 per cent.

Although losses are picked up in the KPI survey every year, many smaller firms may have gone out of business. It is likely that some remaining smaller firms are not in the sample, as the struggle to survive is a more pressing priority than the annual KPI survey. Firms that were kept busy last year have expressed concern about 2010 and 2011. For example, the Coalition's cutbacks such as on the Building Schools for the Future programme will have a significant negative effect on business.

2011 is likely to reflect a downturn in profitability, but hopefully an M&E service delivery still worthy of praise.

This data has been collected by Glenigan and interpreted by BSRIA. For more details about BSRIA's customers satisfaction consultancy using KPIs and benchmarking, contact Gerry Samuelsson-Brown at kpi@bsria.co.uk or phone on 01344 465576.