In conversation with Mr. Habib Ahmed, Chief Operating Officer at Khadamat Esad Ltd., we tried to understand the Facility Management Market in Saudi Arabia.
“Saudi Arabia Facility Management Market is a growing market and gradually maturing with the implementation of defined frameworks, new standards of service delivery, technology innovation”
Q1. Could you tell us how has the industry been shaped over the past 5 years?
Traditionally, until 2015-16, it was not much of the practice to float RFQs, tendering, and shortlist companies on technical and financial parameters and then award contracts for 3 or 3 plus 2 years to companies. It was a mostly erratic process of business
Now even semi-government or government entities like airports, banks, shopping malls and various retail residential projects have started raising the RFPs. They have clubbed all their service requirements together and started seeking one-stop solutions from integrated facilities management companies. This helped the market players to focus on the disjointed single services and now, they have created a division of Facilities Management in-house to serve the market. So that is one part where the existing companies have structured themselves as Integrated Facilities Management service provider
Immense growth is seen with the upcoming mega projects and cities. Some mega projects are in the partial construction phases like locations and the premises are ready but the construction is not complete. These major projects are promoting the growth of the industry and attracting new entrants into the market. International companies have started entering in Saudi Arabia either directly or through joint ventures with local facility management companies. Even the local business tycoons in Saudi Arabia, have started investing in facilities management by either partnering with international players or by creating their own in-house companies.
Q2. What are the specialized service company operating in Saudi Arabia? What types of services are provided by them?
In reality, every company does not have full in-house capability of providing every other services like fire and safety, CCTV, Security Services, facade cleaning and others. So those services are outsourced to the specialized facility management company with expertise in providing those services.
Specialized services companies are different companies operating in niche services like Security, Housecleaning, CCTV, Façade cleaning and others in remote locations. They are focused on service-specific contracts or sub-contracts received from big Integrated Facility Management companies.
They are licensed and regulated by different agencies like the Ministry of Interior, Police, Civil Defence etc. This sector is less in value but more focused on quality and safety.
Examples of some specialized companies are:
Security Services -Elegant security services company which is mostly working with Aramco, SABIC, and Red Sea Development
Fire and Safety -Heba fire and safety
Waste Management- EDCO, Averda
Q3. What is the value chain in the facility management industry?
Before getting RFPs, Companies have to be registered with various clients providing them with details about the experience, certification, management, organization structure, and experience of the relevant business. After vendor registration is completed, RFPs are received by the Facility Management companies, It is followed by RFP briefings, site visits, understanding of the scope of work and preparation of the quotation. Different clients give different weightage to the commercial and technical specifications of the project. This follows a round of final price negotiation and finalizing the terms and KPIs of the contract.
Q4. What are the challenges that are hindering the growth of the facility management industry?
Large Geographical Coverage- Since Saudi Arabia is a vastly spread country with demand clusters for facility management spread across the country. It needs a volume of operations, and manpower to serve the client’s requirements. It becomes difficult, especially for new entrants companies, so they have to depend more on outsourcing to meet the client’s needs. The well-established companies have built their capabilities to operate of on such a large scale.
Saudization: It is a compliance requirement as per Saudi Law. It pushes up the labour cost, sometimes by 50-60% depending upon the project requirement and further affects the bottom line and profit margins
Q5. What are the major end users of facility management services and which contributes most to the revenue?
The biggest end-user segment is commercial which includes shopping malls, airports, banks, pharmacies, and restaurants. After commercial residential is the second biggest end user for Facility management services. Within the industrial segment, Oil and gas is a major sector comprising companies like Aramco, SABIC and others.
Around 50% of demand is generated from the commercial with around 25-30% from the residential sector. In the future the commercial sector would grow rising the contribution to 60-65% as the mega projects are more focused on the entertainment, retail and business sectors, So when these mega project would complete in year
2024-25, there would be more demand for the commercial and residential segments.
Q6 What are the major trends in Facility Management Industry in Saudi Arabia?
There is a growing trend for technological innovation and adopting the latest technology in the industry. CAFM (Computer Assisted Facility management)system, dashboards, asset monitoring systems are getting popular and clients are also developing a preference for automated services.
In the initial years, technology integration was not seen in the Facility Management industry but now even regular performance monitoring, KPI recording and reporting is being automated using technology.
Q7. How is the trend for integrating facility management affecting the market?
The demand for integrated services is growing rapidly and all Facility Management companies have started improving their in-house capabilities and diversifying their service portfolio to include more services. Currently, Integrated Facility Management accounts for 40% of the revenue. There are many small companies providing single or bundle services. Although, these small companies provide a single service they provide at a large scale across the kingdom to a variety of End users.
Q8 Could you please tell us what are the major 5-6 players operating in the facility management industry in Saudi Arabia?
EFS Facility Services, Initial Saudi, Enova, Al Yamama, and Afras are the 5 major players operating in the industry.
Q9 How many companies are operating in the facility management industry in Saudi Arabia?
There are around 20-25 players providing facility management services. It does not include single or bundle service companies. There are many small companies providing a single service or operating in a particular city or region. It is difficult to estimate the number of these small niche specialized service companies.
Q10 What is the average duration of the contract?
Generally, Contracts are awarded for 3 years but some contracts are for 3+ 2 years. In 3+2 years, performance is evaluated after the completion of 3 years after which the contract is renewed or a new contract is floated. In case of renewal, the facility management company also gets a chance to adjust the prices to account for the inflation, and depreciation changes.
Q11. What are the government initiatives to support the growth of the industry?
The government of Saudi Arabia has not created industry-specific regulations to regulate the facility management industry directly. But they have regulated the manpower supply company affecting the outsourcing activities. They have created an on-demand labour supply system along the lines of Dubai. Instead of providing visas to Facility Management companies, the government started providing visas to manpower supply companies for expat labour and Facility Management companies need to hire labour through these designated manpower companies.
Q12. What is the common practice by Facility Management companies either hiring temporary contract-based labour from manpower companies or just outsourcing the contract altogether?
Even in the case of outsourcing or subcontracting the service to specialized companies, only the labour and their immediate supervisors are hired who then report to the specialized service manager of the original Facility Management company. The Facility Management company manages them through their project managers and is accountable to the clients for them.
Sometimes, Facility Management companies need to disclose the sub-contractor to the client as well in advance during RFPs.
Established Companies generally have their own in-house employees but newly established company, they operate in partial mode. They generally outsource services like cleaning, housekeeping, and pest control and try to keep hard services in-house like engineers and technicians.
For more insights on the market intelligence, refer to the link below: -
KSA Facility Management Market