Ductwork firms must become more influential members of the supply chain, says Barry Pollard, (below), chairman of the HVCA's Ductwork Group
WHILE the general economic outlook is gloomy, prospects for the ductwork sector remain promising. The on-going investment in schools and hospitals is fuelling business growth, and the 2012 Olympics programme will soon be in full swing.
However, there are clouds on our horizon too. Making a profit is still very difficult in this business because of the vagaries of the procurement process.
Ductwork firms have made giant strides forward in improving manufacturing and installation efficiency, which has allowed us to reduce costs. We have led the way in a number of the productivity innovations called for by the Latham and Egan reviews.
We introduced the practice of producing manufacture and installation drawings before starting on site long before consultants and mechanical contractors took this up.
We were quick to see the advantages that sophisticated IT, such as complex CAD estimating programmes and CAD/CAM machine linked computer systems, could provide in improving design co-ordination and reducing costsall round.
Off-site pre-fabrication of building services systems is regarded by many as 'evolutionary, but ductwork companies have long understood the advantages of this practice and have been the leading exponent for decades.
Yet we continue to languish a long way down the contractual chain and our low profit margins reflect our inability to turn our innovations and investments into profit - the average return for this sector is between 0% and 3% - and we are under continuous pressure from those further up the chain to reduce our prices still further.
Principles
The HVCA's 'Working Together' best practice document makes clear that all sub-contractors deserve to make a profit, get paid on time and should not be subject to payment retentions.
We would like to see these principles adopted universally. We have tried to deliver our side of the bargain with reasonable prices and better quality, but it seems that many of the savings we make are not passed on to the client and are lost in the general inefficiency of the delivery process upstream.
Pricing work accurately at tender stage also remains an infuriatingly inexact science. This is often because we are presented with inaccurate and/or incomplete design information, culminating in re-tendering the same project over and over again, with each re-issue providing a little more detail...and usually more cost.
To be successful off-site fabricators, we need design information that includes important details like plantroom layouts, where fire dampers are required, etc. Too often, such details are missing at early tender stage. This means we are often forced to build a risk element into our initial price to cover re-working later on that we would much prefer to avoid.
However, we do accept that all of the problems are of our own making. Too many ductwork firms accept work that is sub-economic in the hope that they can turn a loss into a profit somewhere during the construction process. This is poor business thinking.
We have also allowed ourselves to be at the mercy of the procurement process by not being prepared to take more responsibility on a project.
It is time for the whole sector to be more enterprising by tendering for complete airside project packages. Our increased sophistication means we are ideally positioned to take on the lead contractor role in such circumstances.
Why should m&e contractors lead the process on predominantly airside projects? What skills do they have that ductwork specialists do not? In many cases, their lack of specialist engineering knowledge and experience means they are ill-equipped to drive the process efficiently. And many of them pass the risk down the chain to the ductwork contractor anyway.
Working in partnership (either directly or indirectly) with our mechanical services colleagues from the outset can avoid such aggravations. But this can only be achieved with trust on both sides, based on an 'open book' policy. The advantages of such arrangements are obvious and proven since they create a better co-ordinated project with fewer variations to the scheme once operational.
The partnership further provides better or more consistent profits for all concerned, and fosters better working relationships among the contracting team. But more importantly for the project as a whole, it provides a more cost-effective job for the end client.
The only real downside to any such arrangement is that, once the ductwork price has been finalised, that cost can only be accepted as a true cost of the project (and why shouldn't it, in the light of the m&e contractor's continual involvement in its evolution?) The need for alternative prices would no longer be necessary, which would eliminate what is universally accepted as the greatest source of mistrust and ill-feeling between our two disciplines.
Reality
Specialist contractors have long argued that they should be closer to the client and be involved at an earlier stage in the design process. The increasing demand for sustainable buildings makes this dream much more likely to become reality. Companies which understand how offsite processes reduce waste, and how energy-consuming building services work, are far better qualified to advise on sustainability issues than general contractors, who have less understanding of how buildings react thermally, how airflows work and where the biggest efficiency savings can be made.
Ductwork firms, particularly those in membership of reputable bodies like the HVCA, have had to provide evidence of their technical competence and business acumen and should therefore be holding their hands up to take on this extra responsibility.
As a major participant on any airside package - including air conditioning, specialist ventilation services, filtration and commissioning - we become part of the professional team and automatically have a seat at the designers' table.
Early in the process is where our expertise provides greatest added value to the client because we can help to mitigate the risk of design failures further down the line, as well as providing valuable recommendations on sustainability and comfort criteria.
By positioning ourselves higher up the supply chain, we increase our responsibilities but reduce our own risks and increase profit and financial security.
We may never get a better chance than the relatively prosperous period we are now going through. If we hesitate, daunted by the extra responsibility, it may be too late to recover the situation later on.