The methodology of maximizing the profit margin of MEP projects - Essay Example

Abstract

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Resource management in contracting companies is critical especially in financial turmoil. Many studies that explore planning methods, the best practice in organizations take place continually. The methods preferred are those that enable organizations to be competitive as they enhance profitability and performance. The aim of this dissertation is to assess and identify the methodology of maximizing profit margins of MEP projects in UAE building industry. The objective is to maximize output while maintaining projected profit margins. A qualitative research method suits the nature of the construction industry given the many variables that define it. Literature reviews, documentation and project papers form the major component of this research. Key findings are that profits margins are prone to poor planning and implementation of resources.

The aim of this study is to investigate methods used to maximize profit on MEP projects in UAE construction industry. The study will use a mixed research methodology approach. Stakeholders now value the safety of projects in their investments. The stakeholders are tenants, property owners, developers, government, and consulting agencies. Greater awareness resulted in the need to build a maintained structure installed with fire and safety systems. New regulations from government agencies such as civil defense will require building owners to adhere to strict fire and security guidelines. There are no new rules, what is happening is strict enforcement of existing standards and codes. Major stakeholder endeavor to maintain their building reputations by branding on incidents and accidents related to structure safety.

Findings in this paper indicate that the profit margins that contractors get, is dependent on project managers, performance estimators and their clients. The best approach that contractors can apply in maximizing the profit margins is by either using completed project profits analysis (CPPA) or moving out of price based environment.  Conclusively, companies in UAE MEP projects register small margins in their profits. Emerging factors such as drop in oil prices, affects the industry, given the regions dependence on oil in running the economy. It is recommended that governments should come up with strategies that will ensure timely implementation of housing and office structures. Nevertheless, further studies need to get underway aimed at fully exploiting the profit maximization strategies in this industry.

 

Acknowledgement

I would like to acknowledge the role played by my family members particularly my dear mum a Caroline and siblings for the support they gave me in pursuing my studies. Without the constant and persistent revisions from my classmates and tutor I would not be what I am today. Thanks to the college administration and Engineering department for providing a conducive environment in which I was able to pursue my studies. To all and sundry who participated directly or indirectly in ensuring that this day comes to pass I say God bless you. My ineptudeness and gratefulness will forever be engrained in your hearts.

Abbreviation

MEP Mechanical Electrical and Plumbing

FIDIC – Federation Internationale Des Ingenieurs-Conseils

UNESCO – United Nations Educational, Scientific and Cultural Organization

CPPA – completed project profits analysis

IEA – International Energy Agency

WIP Work in Progress

BTS Built to Suit

AED Arab Emirates Dirham

BIM Building Information Modeling

CCS Construction Computer Software

GDP Gross Domestic Products

CPM Critical Path Method

1.0 Introduction

Major economies such as Europe and America are facing turbulent financial time. It makes it a priority for MEP industry in the UAE region to examine and evaluate their options. MEP industry is growing this is due to the economic expansion, population growth, and the increasing environmental awareness (Brunns, 2011,p 69). Studies conclude that the rise in international trade, which led to an increase in international and business travel, resulted in significant investment in hotels, hospitals, housing, offices, and shopping malls. It led to growth in the construction industry. To remain dynamic in the changing environment MEP services evolved from the previous conventional services to a newly integrated service delivery that entails procuring, designing, supplying, testing, integrating, and commissioning, Also, maintenance and operation in pursuit of delivering safer, friendly, and comfortable operations in modern buildings ( MEPS, 2012, p.75 ). The increase in demand for electrical services contributes to around 35% to 405 of market share, plumbing 20% while mechanical services account to 35% to 40% (UNESCO, 2010,p. 43).

A major project is ongoing, of the total US$2.8 trillion project that is on execution phase and pre-execution phase, approximately 40% of the value is associated with leisure, residential and hospitality buildings while mixed use apartments sum up to US41.1 trillion. The projects are sensitive in balancing supply and demand in the countries since timing is crucial in addition to project viability in terms of return on investment. The construction industry remains viable despite low oil prices and geopolitical risks that heighten business uncertainty in the economy. The future of the building industry depends on long-term infrastructure funding and upcoming events. The two factors will sustain the sector and reduce the chances of another boom-bust cycle. The future looks bright, however, risks of increased slow down are imminent. The prices of oil products are a major concern to construction stakeholders; it affects both the private sector and governed sectors.

This paper looks into the design trends in mixed-use developments. In an attempt to create sustainable societies, diversify their income conduits, and easily manage asset risks, developers are now differentiating their developments. Apart from sustainable development Capital Reserve Funds is a tool needed to maintain the competitiveness of assets as they evolve. The Middle East has a long way in fully capitalizing on Building Information Modeling, which requires a proper implementation project and business level (IRMA, 2016, P.243).

1.1 Aim and objective

1.1.1 Aim

To investigating methods used to maximize profit on MEP projects in UAE construction industry.

1.1.2 Objectives

O To investigate whether MEP projects within the United Arabs Emirates have a profit margin to the investors

O To investigate the best methodologies that can lead to an increase in the expected profit margin in MEP projects

O To effective strategy that can be recommended for use to maximize the profit margins in organizations

1.1.3 Research questions

The main question being pursued in this study is: What is the methodology of maximizing the profit margin of MEP projects in the UAE construction industry?

This will be followed by the following sub questions

O Do MEP projects within the United Arabs Emirates have a profit margin to the investors

O What are the factors that affect determine what facilities are responsible for influencing the expected profit margins in MEP projects

O To investigate the most

O the profit margins in MEP projects

O What are other benefits does MEP projects have to investors other than profits

O How does costs affect the profit margins in the MEP projects

O What are best methodologies that can lead to an increase in the expected profit margin in MEP projects

O What can investors do to increase the profits margins when investing in MEP projects

O What facilities are responsible for influencing the expected profit margins in MEP projects

O Which is the most efficient plan used in increasing profit margins in MEP

O Who are the recommended persons that are instrumental in making the profit margins to increase

O What is the most effective strategy that can be recommended for use to maximize the profits margins in organizations

1.2 Research hypotheses

1.                          MEP projects within the United Arabs Emirates do not have a profit margin to the investors

2.                          There are no any factors that affect the profit margins in MEP projects

3.                          There are no other benefits that MEP projects have to investors other than profits

4.                          Cost does not affect the profit margins in the MEP projects

5.                          There are no any best methodologies that can lead to an increase in the expected profit margin in MEP projects

6.                          Investors do not increase the profits margins when investing in MEP projects

7.                          There are no facilities responsible for influencing the expected profit margins in MEP projects

8.                          No effective plan is used in increasing profit margins in MEP projects

9.                          No, any recommended person are instrumental in making the profit margins to increase

10.                    There is no effective strategy for use to maximize the profits margins in the organization.

2.0 Research Methodology

There are various methods are available as research methodologies as listed below. However, appropriate research methodology is highly essential to collect data in order to address the aim and objectives. Especially, this would help for ensure that the research process moving toward a right way. The methodology employed in obtaining data for this project entails the use of available research and primary data collected using questionnaires. The questions are based on the research objectives and the literature review.