search.noResults

search.searching

dataCollection.invalidEmail
note.createNoteMessage

search.noResults

search.searching

orderForm.title

orderForm.productCode
orderForm.description
orderForm.quantity
orderForm.itemPrice
orderForm.price
orderForm.totalPrice
orderForm.deliveryDetails.billingAddress
orderForm.deliveryDetails.deliveryAddress
orderForm.noItems
procurement manager, often externally engaged by clients to manage the process, who is very thorough and will make sure the client’s future requirements are not sacrificed on the altar of cost.


Equally prevalent, however, are those who insist that cost increases over the life of a contract are committed to at the start, leading to uncertainty in pricing and the potential for ‘over-competitive’ bidding based on the hope that things will somehow sort themselves out. The reality of course is that as margins are squeezed, standards will be compromised, leading to reputational problems for both the contractor and the industry at large.


MARGINAL PRESSURE


Lee Andrews, CEO of DOC Cleaning,


asks whether legislative cost pressures are putting service at risk?


Latest reports put the average net profit margin in UK contract cleaning at 2.79%. This is a substantial decrease from the 4% quoted as the industry norm only a couple of years ago, as well as being a much lower figure than the 7% margin recently claimed for FM companies. This raises two worrying questions:


1. Is the downward trend set to continue?


2. What impact could the pressure on margins already be having on service levels?


WHAT’S BEHIND IT? The fact is the last few years have seen the cost of cleaning rising from a number of different sources. Increases in both National Living Wage and Living Wage Foundation pay rates are pushing up frontline wages at close to 4% per annum, which in turn has a knock-on effect on the pay of supervisors and managers who are looking to keep their differential in place.


The cost of auto-enrolment pension employer contributions will have risen from 1% to 3% by next April and the Apprenticeship Levy is now costing medium to larger contractors 0.5% of their payroll. All of this before you consider the rising costs of materials, fuel, and so on.


IS THE ISSUE UNDERSTOOD BY


PROCUREMENT MANAGERS? Whilst public sector contracts may have wage inflation built into their pricing, this is not so common in the commercial sector. On new contracts or re-tenders this results in two styles of procurement. On the one hand, there’s the


www.tomorrowscleaning.com


But shouldn’t higher pay rates increase cleaning productivity on existing contracts? The answer is ‘they can do’. Where a client is sanctioning the LWF rate we, as contractors, can take solace in the financial benefits of lower staff churn and certainly our own experience to date suggests that payment of LWF does filter through to higher productivity and higher standards. This offers the potential for a good partnership based on shared objectives and can encourage investment in innovative, labour- saving equipment – an option that might not otherwise be explored if margins are relentlessly being squeezed.


Elsewhere, however, I am hearing from contractors about existing clients who point blank refuse to pay any increase, or at best are asking for offsetting savings to be made. That’s fine, but a 5% pay increase made up of increases to NLW and pensions is unlikely to result in a corresponding increase in productivity, meaning that harder discussions needed to be had around cutting specifications.


“The reality is that as margins are squeezed, standards will be


compromised, leading to reputational problems for both the contractor and the industry at large.”


A PROBLEM OR AN OPPORTUNITY? They do say necessity is the mother of invention. If cost pressures are forcing us, as contractors, to look for new ways of improving productivity, and work more closely with existing clients to explore savings, then it can’t be a bad thing.


But my concerns are twofold: firstly, that if these joint discussions don’t happen, the savings will lead directly to a decline in standards and a soured relationship; and secondly that if discussions do take place, contractors will forget that when they take out manpower cost, they need to preserve the margin element to cover their overhead. And that, I believe, is what’s contributing to the decline in profitability.


www.doccleaning.co.uk A JOB WORTH DOING | 33


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82