BCIS tender price index – estimate of tender price inflation

Tender price index, estimate of tender price inflation, 1Q2025

Tender prices increased by an estimated average of 0.5% between 4Q2024 and 1Q2025, resulting in annual growth of 2.3% in the BCIS All-in Tender Price Index (TPI)¹. This is down from a peak of 10.3% observed in 2Q2022.

The estimate is the consensus of the BCIS TPI Panel², based on analysed Delphi survey results, and does not necessarily represent the views of individual participants.

Through their survey responses and in discussion, panellists pointed to various pertinent factors in the industry and wider financial climate impacting on tender pricing.

Quarterly movement

Panellists suggested tender price movement in 1Q2025 has bucked the usual trend of price inflation accelerating at the start of the year, particularly as it’s typically when published price rises come through. Possible reasons suggested included ongoing economic uncertainty and many waiting to see what happens with the next stage of the government’s spending review, due in June.

Differential movement in prices

Panellists who reported differential movement in prices between regions said London and the south east are seeing greater demand against limited supply.

Respondents who pointed to differential movement between projects of different size suggested a shrinking of the tier 1 supply chain for main contractors and sub-contractors is resulting in higher prices for major projects. They also said caution within the supply chain is leading to a reluctance to overstretch and take on risk that they may have done historically. This means contractors are now more inclined to bid for simpler projects so they can mitigate cash flow exposure.

Panellists who reported differential movement between procurement routes commented that contractors are being more selective on tender routes, preferring two-stage or target cost contracts, and the risk of volatility is still being priced into fixed price contracts, particularly ones with a long programme.

While there were some comments that higher inflation associated with M&E work had topped out, some panellists said they are still seeing differential movement from building work. Panellists pointed to demand in the sector being driven by decarbonisation projects and data centres, with limited supply. There was also a suggestion that the market will likely become tighter with major projects like Hinkley Point C taking much of the capacity of MEP specialists.

Appetite to tender

One-third of panellists said they were able to find the desired number of contractors to tender after searching, but a higher proportion (42%) said they were more eager. One-quarter said tenderers were less eager. This was a slightly more positive picture than panellists reported in 4Q2024.

Project pipeline

One-third of respondents said their expected pipeline of work over the next 12 months was unchanged in 1Q2025, while one-quarter said it had reduced slightly and a further one-quarter said it had increased slightly. 17% said it had increased significantly.

Panellists said the effects of the water sector price determination (AMP8) will start to come through later in the year, which will lead to a huge uptick in workload and switch resources away from what have been the busier sectors of road and rail.

Logistical challenges

Panellists reported that the impact of insolvencies is being felt in the market and that the combined effect of challenging and uncertain financial conditions, disruptions in supply chains and labour shortages has led contractors to become more risk-averse, particularly on bigger projects.

There was a suggestion that it will take more time to understand the full implications of the ISG collapse and there is still a lot of ambiguity about how much loss there has actually been to the supply chain, especially as many affected were quickly re-employed and are now with other firms that have already become more involved in the market. Potentially, it has provided a much-needed shake up in the market, bringing in new entrants.

The impact of the planned increase to employers’ National Insurance contributions will be dependent on the proportion of directly employed and self-employed workers. Panellists suggested costs will increase on average in the range of 0.7-1.0%, but this will potentially vary by sector.

The next update to the BCIS All-in Tender Price Index is due to be published on 13 June 2025.

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Panel members

The current BCIS TPI Panel members are:

• Adam Reeve, calfordseaden
• David Thornton, Exigere
• Don Patterson, Equals Consulting
• Gavin Murgatroyd, Gardiner & Theobald
• Ian Aldous, Mace Group
• James Garner, Gleeds
• Mark Lacey, Alinea
• Max Wilkes, AtkinsRéalis
• Nicola Sharkey, Gleeds
• Nigel Hawes, Exigere
• Pablo Cristi Worm, AECOM
• Peter Maguire, WT Partnership
• Rachel Coleman, Alinea
• Richard Hill, Currie and Brown
• Roger Hogg, Rider Levett Bucknall
• Simon Cash, Artelia
• Simon Rawlinson, Arcadis
• Steve Waltho, Turner & Townsend
• Stuart Wigley, Baily Garner

Notes

¹ The BCIS TPI Panel estimate has been applied to the previous quarter index and rounded to the nearest whole number for publication.

² BCIS has recruited a panel of practising cost consultants from firms involved in multiple tenders to, in each quarter, provide an early estimate of tender price movement in the latest quarter based on a panel (Delphi) survey approach. For further details see: BCIS Tender Price Index Panel.

Basis of the All-in BCIS Tender Price Index

TPI figures prior to 4th quarter 2018 are based on project indices, generally single stage, traditional procurement, average value < £5million, (minimum £100,000, no maximum).

Excludes M+E and other specialist trades, e.g. facades. BCIS has assumed this reflects market projects let on single-stage Design and Build and Specification and Drawings.

Indices are normalised for location, size and procurement. Percentage changes are mid-quarter to mid-quarter.