The services sector accounts for more than a quarter of construction by value. In our latest specialist update, the expert team at Gardiner & Theobald take a look at the latest trends and costs in the mechanical, electrical and plumbing, lifts and escalators and ICT markets
01 The services sector
The services market accounts for an estimated 27% of construction by value, and falls naturally into three segments: mechanical, electrical and plumbing (MEP), valued at about £21bn, making up 21% of the construction market; lifts and escalators, valued at £1bn, or 1% of the market; and ICT, valued at £5bn, or 5%.
Generally the MEP market is very buoyant with major investment from the government in transport, health, defence and schools. Infrastructure and utility upgrade projects are also seeing enormous growth and, with the Olympic programme imminent, this is set to continue.
The major lifts manufacturers are now feeling the impact of the smaller privately owned companies offering the same package for less – this can only mean better news for all.
The ICT market has been evolving within the industry over recent years as communications have become increasingly harmonised with IT. ICT is the boom industry of the moment – it is almost impossible to avoid installing some sort of ICT today, even in the lowest specification and smallest of buildings. Every sector within the industry is embracing more and more advanced ICT, to enable higher productivity, create a better working environment, minimise energy consumption and improving services and end products – to name just a few of its uses.
Mechanical, electrical and plumbing
Simon Willis reviews the cost of air-conditioning and the effect of design-and-build contracts on this increasingly busy sector
02 Market overview
Generally the market conditions are good and the busiest areas in the UK remain in southern England, predominantly London, with much retail and office fit-out work on offer.
Conditions in the Midlands are good with a fair amount of PFI work. Scotland is benefiting from government investment in schools initiatives, although feedback from the market suggests there are some difficulties in tendering due to terms of payment conditions.
The whole mechanical, electrical and plumbing sector is still suffering from skills shortages. This hasn’t been helped by the increase in demand in the industry, which appears to have been fuelled by both recent legislative changes and a growth in retail, offices and warehouse construction projects.
The skills shortage is set to continue, although the use of prefabrication and modularisation techniques help to maintain operating efficiencies.
03 Hot topic: Sustainability
All projects are now subjected to the sustainability test. The new Part L of the Building Regulations, which came into effect in April, includes directives on adopting methodologies for calculating the energy performance of buildings, setting minimum energy performance requirements and encouraging the consideration and feasibility of adopting alternative sources of energy. Further updates are expected in 2007, requiring energy performance certificates to be provided whenever buildings are constructed, sold or rented.
04 Procurement and tendering
Design and build is now the preferred choice across many different commercial sectors. The effect on the M&E industry is somewhat dramatic as M&E consultants are often novated to the main contractor. This makes defining the particular design roles and responsibilities between parties even more crucial. Several standard forms exist, which do identify the different roles and responsibilities and generally assist in the process of understanding design line responsibility.
Use of the NEC engineering and construction contract seems to be growing; once used in the procurement of civil engineering
works the standard form is now being applied within various different sectors. Feedback from the M&E industry shows a mixed response. Although colleagues on major infrastructure projects praise and fully support its use, others in the commercial sector understand its intention and appreciate its limitations. The upfront resources required to administrate the contract appear to be significant and like all procurement and contractual procedures, the skill is setting up the whole process correctly at the outset. Is it here to stay?
Massive increases in the price of copper cable have been found with instances of hikes of over 50% from December 2005 to May 2006. This increase is being fuelled by the rise in the price of copper on the world markets. Last May, the price of raw copper was at about $3000 (£1600) per tonne and rose steadily to the end of 2005 to $5000 (£2700) per tonne. However there has been a sudden rise in raw copper prices, which has seen the price shoot up to just short of $9000 (£4800) and rising. This is being put down to huge demand from the Chinese and Indian markets coupled with a drop in production levels from the world’s copper mines. Although some analysts are predicting a fall in the next two years, the implications of these rises will ripple through the construction industry and the effect will need to be carefully monitored.
The elemental cost comparison chart, right, shows a typical range of costs for alternative air-conditioning types based on total current mechanical-only costs, excluding public health, fire protection, electrical services, preliminaries, professional fees, on costs, contingencies, design reserves and VAT.
The cost comparison relates to a high-quality London office completed to a category A finish with a gross floor area of 10,000 ft².
(See attached: "a - Air-conditioning cost comparison")
Lifts and escalators
Jonathan Kaye reports on the latest developments in this innovative and fast-growing sector, including double-deck lifts and more sophisticated control systems
06 Market overview
The lifts and escalators market remains dominated by the five large lift manufacturers. However, growth in the smaller and bespoke companies is evident, with the increase in fit-out and refurbishment projects and the implications of complying with the Disability Discrimination Act filtering through the industry. The drive for greater efficiency in lift utilisation, with the corresponding reduction in lift shaft space in high-rise developments, has resulted in new technology including double-deck lifts and more sophisticated control systems.
According to the Lift and Escalator Industry Association the number of lift and escalator units has risen 25% from 7006 to 8800 since 2003.
This has remained constant for the past year but industry sources expect this to increase by up to 11% in terms of new work by 2008. This is because of the increase in work within the residential and commercial sectors.
Over the past year, construction orders have grown 8%. From 2008, industry sources expect to see a significant rise in new work because of the Olympic workload. The largest sectors by contracts awarded at the end of 2005 were commercial and retail, residential, civils, hotel, leisure and sports, and education.
07 Hot topic: Hall call destination
Hall call destination systems use information inputted by passengers to group them by common destinations, thus minimising the number of stops.
With hall call destination, passengers input their destination using keypads or touch screens strategically placed throughout lobby areas. The system will then direct each passenger to a designated lift car to his or her desired floor. This alleviates confusion, as the passenger will know which lift car to board. This in turn reduces the passenger rush to each arriving lift thereby improving lobby traffic flow.
The hall call destination system continuously monitors passenger demand, implementing the most effective passenger movement at any given moment. It constantly calculates real-time passenger origin and destination data in order to assign cars.
This allows the system to better accommodate changing passenger patterns throughout the day, for example, heavy one-way traffic during morning peak hours and heavy two-way traffic during lunchtime. The result is that passengers will benefit from reduced waiting and travel times, less car crowding and fewer stops per trip.
08 Hot topic II: Double-deck or twin lifts
The double-deck or twin lifts system allows particular buildings to use fewer lifts. These lifts offer a potential saving of up to 30% in the number of lifts and the building core area required, therefore increasing the usable or net rentable area.
The most suitable buildings for these systems are those with high floor populations since the main advantage of double-deck or twin lifts is their high handling capacity. Where heavy peak traffic is anticipated (populations of 125 or more people per floor) an analysis should be undertaken to determine whether the additional capital cost of double-deck or twin lifts would provide the customer with the best overall solution for the project.
09 Lead times
Lead times for bespoke lifts on major projects remained constant at 38 weeks from the end of 2001 up to the first quarter of 2006. Recent indications from contractors suggest lead times could increase to 42 weeks. This is because of increases in mobilisation, design and delivery periods. This would reflect the pressure that a strengthening UK construction market is placing on the UK lift and escalator market, as well as the external pressure from the construction boom in China. This is affecting the cost of raw materials but also shortages of components such as hydraulic equipment or motors.
Smaller bespoke schemes have seen lead times of between 32 and 35 weeks. However, standard lifts lead times remain between 16 and 22 weeks.
The lift industry is being affected by increases in steel prices because of the growing demand in China. The British Constructional Steelwork Association estimates price increases of up to 8-10%. This could affect prices in the lift industry globally.
The costs given below are standard typical lift and escalator costs. Lift costs are determined by a number of categories: passenger capacity, speed of lift, number of floors being served, fire fighting, type of control (that is, hydraulic or traction), internal and external finishes, and the physical restrictions of the project. When designing, one person equals about 75-80 kg of the load.
(See table: "Lifts & Escalators - Typical costs")
Stuart Guy takes a look at the current trends, including the cost implications of ICT services taking over from traditional data networks to handle all of buildings’ infrastructure needs
11 Market overview
The infrastructure side of the ICT market is currently in a consolidation phase. Rather than making large jumps in new technologies the market is now moving into a strong base where ICT services are mature enough to form the backbone of any building or organisation’s needs.
Elements traditionally associated with the building phase, such as telephones, CCTV, access control and building management systems are moving within ICT. They are merging with email, video conferencing and audiovisual systems, which are all supported and managed over a traditional data network. This single infrastructure should now be considered as a basic utility, and for the first time can be managed as a single entity.
This consolidation means that almost all new buildings will have a high degree of ICT present on day one. However they must be integrated into the fabric of the design at an early stage, providing power and data requirements to the right places, with the right quantities, at the right time within the construction programme.
The current trend is to push for centralisation of equipment; this will increase the use of thin client systems rather than PCs – on thin client systems, data is hosted centrally. This trend is growing rapidly, particularly in education and healthcare sectors where dramatic returns on both cost and flexibility can be achieved. Projects incorporating such a system can provide the ability to work anywhere in a more relaxed environment.
12 Hot topic: Mobile computing
Mobile computing continues to be a newsworthy item in the ICT marketplace. With the introduction of Windows Mobile 2005 and Ultra Mobile PC operating systems from Microsoft the stability and the usability of the platforms continues to improve. At the same time, the mobile hardware is improving, with better displays, longer battery life and improved communications.
The increase in public wireless networks is further helping to drive mobile computing forward, as most users are now within easy reach of a fast internet service, providing a cheap and efficient way to work with office-based colleagues. Companies such as Google are starting to install their own networks. In San Francisco, for instance, Google intends to blanket the city in a free wireless internet network supported solely by advertising.
Centralised storage is a growing market, with companies opting to store their corporate systems in an off-site data centre. This realises large cost savings in the reduction of computer equipment rooms, and associated heating, electricity and other costs.
13 Lead times
The following table provides average lead times for typical components. These have been sourced from a number of major manufacturers to provide guidance when considering the implications within a construction programme.
(See table: "ICT - Lead times")
With the rise in mobile computing, the total cost of ownership of equipment can escalate very quickly as these devices are subject to more wear and tear than a traditional desktop PC. However, the benefits gained from the flexible working practices often outweigh these costs.
Copper costs are hitting the cabling markets pretty hard with the current cost of copper increasing nearly three-fold in the past year. It is wise to ensure that cabling contracts are placed as early as possible in a construction programme and the costs are fixed for the duration – this is becoming more critical then ever.
The tables below have been updated since the last publication.
(See attached PDF: "Voiceover internet protocol vs traditional system")