To survive and thrive in a fiercely competitive market, contractors will have to display versatility and imagination, says Cofely's Brent Hyde-Smith. Ian Vallely reports.
The building services sector has suffered a series of hammer blows over the past five years culminating in the financial crash of 2008, the worst downturn in the UK economy since WWII.

The waves from this global collapse continue to ripple through the sector with some industry commentators predicting that its impact will last for five more years.
Brent Hyde-Smith, managing director - Project and Engineering Services at Cofely GDF Suez, is more sanguine: 'I expect our business to be out of the recession in a couple of years, but I don't think we have seen the bottom of it yet. When the financial crisis hit, the building services sector was well supported by the public sector, but the Government cutbacks last year - primarily in the Building Schools for Future programme - has had a huge effect.'

Mr Hyde-Smith believes the cutbacks are bringing some opportunities for outsourcing, albeit it at more competitive rates, as the Government looks to the private sector to resource an increasing number of projects, especially in maintenance.

Nonetheless, the challenge for building services companies is survival, 'which will ultimately depend on the strength of their balance sheets'.

Other European markets are also struggling because of the worldwide slump. As a result, some of their contractors are moving into the UK in search of work, increasing the competitive pressure on our home-grown contractors.

Says Mr Hyde-Smith: 'This is not necessarily a bad thing if people are being sensible about pricing. However, there are many companies bidding below cost in order to support their cashflow and keep their workforces going. They are buying a future problem. I believe that [sub-economic tendering] is likely to lead to more business failures and consolidation in the market.'

This consolidation could, he believes, lead to workforce problems: 'We will find that there will be redundancies, skill-sets will move away from the industry and not return, and that will create a pressure in the future.'

And he warns: 'If you insist on buying work you will end up losing customers.'
Cofely is not prepared to do this. Rather, it focuses on long-term partnerships and working closely with its customers. Mr Hyde-Smith again: 'I believe that the peak performers in our industry have a clear focus on strong customer relationships. Meeting customer expectations is all to do with working out the right solutions with them collaboratively through innovative ways of working, value engineering and using emerging technologies.'
Operating in this way creates knock-on business benefits: 'Working in a progressive and enlightened way generates more work. People want to work with people who are doing things for the right reasons. I believe that whether partnerships work is down to personal relationships. People buy people because they believe in them.

'Honesty, integrity, transparency and trust - these are the qualities that bind a partnership and make it work in the long-term.'

But better partnerships are not the only way businesses are changing. Legislation is also impacting on the way companies operate because of the drive towards a low carbon economy. This, Mr Hyde-Smith believes, will encourage businesses to move away from the traditional methods of contracting.

'Local authorities have very strict Government-inspired targets to reduce carbon, introduce renewable energy, and other green technologies. I believe this will encourage more urban regeneration and the hvac industry is probably going to have to evolve to capture that market by creating district heating schemes, energy centres and local distributed generation.'

For Mr Hyde-Smith, finding technical and innovative solutions to support the low carbon economy is crucial, but he warns: 'We need to ensure that we in the hvac sector have the right skills to address legislative and technological changes. Having these skill-sets will be the big differentiator between companies. The winners will be those companies that employ people with the right qualifications who can successfully take design concepts and model new technology into a viable business proposition.'

For Mr Hyde-Smith, one of Cofely's big competitive differentiators is the energy side of the business and, specifically, its ability to design, build, finance and operate energy centres over a long period - typically 16 to 40 years.

He adds: 'The 'cradle-to-grave' scenario is probably the future. There will still be a requirement for traditional contracting in new build, but in infrastructure works and urban regeneration I believe we will find a lot more of these whole-life approaches being used...

'I think companies will have to take more risks and be more flexible along the lines of the ESCO (Energy Service Company) model.'

An ESCO takes on the lifecycle risk involved in designing, building, financing and operating an energy saving scheme. The ESCO analyses the property, designs an energy efficient solution, installs the required elements and maintains the system to maintain energy savings during the payback period.

As Mr Hyde-Smith succinctly puts it: 'It is a one-stop shop for urban regeneration.' He believes that energy supply - and the infrastructure that supplies it - is going to be an issue for the mature markets in Europe and the UK: 'We have aging transmission and distribution assets and the drive towards small-scale distributed renewable energy such as wind, tidal, biomass, solar PV and micro CHP will require a robust yet flexible electrical infrastructure.

'Some renewable energy is very 'peaky' generation so, for example, you only generate wind energy when the wind blows. This will mean developing solutions for electricity storage in the future.'

The unreliable nature of the generation also implies a problem of demand response. Mr Hyde-Smith again: 'We will have to have a very smart, connected grid where we can predict demand and respond accordingly with the appropriate embedded generation.

'This will bring potential new business as long as companies can adapt to capture the business associated with this new technology. That means a multidisciplinary approach including waste, grey water, recycling, taking out heat from water, etc.'