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Breaking the loop of short-term budgeting and poor efficiency

How the short-term budgeting of project procurement impacts the efficiency of operations, and how systemic change is needed to break the vicious cycle

John Bambridge, editor, PMV Middle East.
John Bambridge, editor, PMV Middle East.

It can sometimes be hard to sell novel work concepts to seasoned professionals in the construction segment. In this industry arena, across the scope of activities on any given project site, the same methodologies can quite frequently hold sway for years or even decades.

This is often for good reason — with the tried-and-tested ways of doing things evolving out of the compromise between a range of considerations, including productivity, operational costs, and health and safety. It can then perhaps be forgiven when individuals develop a level of intransigence to attempts to break from the norm. At other times, however, the tendency for individuals to stick to their guns can prove disadvantageous.

In this month’s cover feature (See PMV Middle East Issue 1110), a roundtable with three experienced professionals from the standby and temporary power generation segment, the discussion repeatedly returns to the way in which cash flows and restrictions on capital expenditure influence decision making.

The logic goes like this: contractors have uncertain project pipelines and unpredictable cash flows, and therefore prefer to budget the costs of acquiring generators against individual projects, rather than costing the generators in relation to their total cost of ownership.

For many applications, contractors also prefer rental solutions, which allow them to take both the cost of purchasing and the cost of servicing out of the equation. This leaves just operational costs, which basically consist of fuel costs.

The logic of this whole scenario rests on the fact that generators will be abused on site, that the contractors do not have the technical expertise to maintain more sophisticated solutions — such as a synchronised generator sets — and that if the generators are leased then they have no residual value to the contractor.

Across the contracting business, this results in considerable waste, with generators being operated in sub-optimal conditions that shorten their working lifespan, while over-specified units result in excessive fuel consumption.

The issue also exemplifies the ways in which operational habits rather than performance can drive decision making. The roundtable participants did not mince words, and it is clear that many contractors often operate in a way that stands in direct opposition to the region’s goals of sustainability and environmental protection.

However, the implications of this style of working also extend much further. If contractors cannot find a way to operate in an efficient and conscientious manner with respect to the operation of their on-site generators — which are a simple in-out system where fuel goes in and power comes out — what real hope is there of a more holistic transition towards sustainability?

The remedy to this situation is clear: if local authorities want to meet their national targets with respect to lowering emissions, reducing waste, and more generally promoting sustainability and environmental custodianship, they are going to need to pick up the pace of regulation — and contractors need to follow suit.

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Construction Week - Issue 725
Jan 19, 2019