Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

The cost versus value challenge

Describing his role as encompassing the management of risk and opportunities, Paul Newby says NG Bailey is meeting both
economic and environmental challenges.

One of two technical directors in the company’s building services section, Mr Newby has worked for the company for more than five years, working in technical roles before being promoted to his current position.

He is now responsible for business in the north of England and Scotland, which includes the supply of building services to a wide range of clients.

Challenging times

These are challenging times for the company and the M&E sector in general. The main areas are those created by the recent recession, combined with challenges of an environmental nature.

“We’re just starting to dip our toe in the water away from our traditional market, which has always been the plan and strategy, but we’re seeing a decent level of interest already,” says Mr Newby.

He is referring to the change in NG Bailey’s approach to begin to move away from the supply and demand method of dealing with clients, to a position where the company provides a more comprehensive and wholistic service, working with customers and its suppliers at a higher level of involvement.

“In our traditional customer base, value is perceived as the least cost,” he explains. “There is an overuse of the word but an underuse of the philosophy. Everybody talks about value: ‘You need to bring value into the process, you need to bring value into the project’, and they want competitive advantage and differentiation, but they’re not prepared to pay for it.”

Although he understands the need to control costs, his reasons for examining the meaning of value is to show that there is an alternative view that brings advantages to all concerned.

In NG Bailey’s case, the process began five years ago, when the company identified the changes emerging in the market. Many of these were driven by environmental issues, as legislative requirements combined with those of industry seeking to reduce its impact on the environment.

While the recession has seen the value of contracts shrink, the environmental issues have increased as companies have begun to prepare for the various legislative deadlines. The company’s response has therefore been to seek to change its method of dealing with clients where appropriate, becoming more of a business partner and moving away from the traditional contractor/customer arrangement.

Shift in culture

This has required a culture change within the company, which Mr Newby describes as a work in progress. “One of my jobs is to create collaboration, integration, differentiation and try to create competitive advantage for ourselves and our customers,” he continues. “We’re not traditional M&E contractors any more. We want to be seen more as solutions providers.”

He describes the process of creating this change as a major task that has essentially required providing colleagues with the confidence to think and act differently under the general title of For Life in Buildings. Inevitably, some individuals have made the transition quickly, while others need more time to gain confidence and new skills.

The main element within the process has to be a willingness to understand all aspects of the customer’s business. The advantages include increasing the company’s competitiveness and making the role of each individual more enjoyable.

A successful illustration of the company’s new culture was seen in its dealings with a customer requiring a new data centre. NG Bailey completed its traditional role of fitting out the shell and core within the design and build requirement and has continued working with the client on a much deeper level, engaging with consultants to provide the optimum solution for the building’s tenants.

“When we first developed this strategy, it was quite difficult to articulate what it meant to our business and our customers,” he says. The process has taken two years to date but continues to show considerable potential.

Mr Newby says the company now has the opportunity to be involved at the inception stage of projects, continuing through the design and implementation phases, then remaining involved with the provision of ongoing services that also include decommissioning at the end of the building’s lifecycle.

The company’s preparation for changes in Building Regulations began in 2006 and has fitted in with its change of culture.

“We broadened that out into wider, low-energy design, proper use of renewable energy systems, integrated systems and sustainability,” Mr Newby says.

“And we have individuals in the business who are expert at that. We have over 20 low carbon consultants, we have low carbon energy assessors, we have our own building physics engineers. We didn’t just create a zeitgeist at the time, we committed to changing the business, and with Part L changing again and becoming more and more complicated, sustainability will be taking a key role.

“But we wouldn’t dream of going out there and telling everyone that we’re cleverer than everyone else, because we’re not. But we’re as clever as the others.”

Mr Newby identifies a number of ongoing issues, including the pricing of tender and procurement procedures. He believes that tender prices will continue on a downward course for the next 18 months.

“It’s really tight out there and the pipelines are diminishing. Everybody wants to survive and there are some crazy prices. It’s very difficult to know where to pitch your price. You’ve got to have a strategy where you know you’re getting the optimum prime cost.”

As instability within the market continues, competition will increase, says Mr Newby. The larger contracts of £5 million and above have reduced in number, which means that the larger M&E suppliers have to look at those worth between £2 to £5m. But the smaller contracts have also been affected, so the market is becoming even more condensed.

Collaboration is key

As companies continue to focus on their own project, or part of the project, the lack of collaboration means that zero carbon targets will not be achieved.

“Collaborative working is the key to success and collaborative working is the key to creating value within the built environment,” he says.

“My fear is that if procurement doesn’t change and the economy stays where it is, who’s going to drive the innovation, collaboration and value that’s going to set us in the right place for delivering what we’ve committed to?”

The imminent deadline for Part L of the Building Regulations is a cause for concern, says Mr Newby. “We’re two months away from it, it’s already been delayed once. We don’t have any software to run any models and we’re already being asked by the market to price for L2 2010.”

He believes some companies will be forced to take risks to secure work and this could result in consolidation and possible failures. Mr Newby says that it was increasingly common for potential clients to stress test suppliers’ financial stability to ensure that they would be able to supply the services required for the duration of the project.

As the ongoing deadlines for legislation compliance loom ever nearer, Mr Newby and NG Bailey have started the journey to look at the broader picture and are now seeing their efforts bear fruit.