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BCIS tender price index – estimate of tender price inflation

Published: 13/12/2023

Tender price index, estimate of tender price inflation, 4Q2023 

Tender prices increased by an estimated average of 0.6% between 3Q2023 and 4Q2023, resulting in annual growth of 3.5% 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. 

The range of responses reported on tender price movement between 3Q2023 and 4Q2023 was between 0.0% and 1.0%. 

The panel reported overheads and profit, as a percentage of the contract sum, at an average of 5.3%, slightly up on 5.2% in 3Q2023. 

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

Contractors’ appetite for risk in the current financial climate 

When asked how easy it was to get contractors to tender, more than a half of respondents said, in their experience, contractors were more eager to tender.  

Where contractors are more eager, there was suggestion that contractors are keen to secure work beyond their current pipelines, and to offset the risk of current projects being stalled or cancelled. The viability of projects, and what can be done to reduce costs, remains a fundamental consideration. 

Panellists commented on contractors’ selectiveness over procurement routes, as well as consideration of projects’ risk profiles. More complex and longer programmes, including football stadiums, arenas and theatres, were said to be harder to attract tenderers. 

What’s in the pipeline? 

Two-thirds of panellists reported a slight reduction in anticipated projects going to tender in the next 12 months, compared to the previous 12 months. 13% said their pipeline was unchanged from 3Q2023 to 4Q2023, while another 13% said it had increased slightly. Just one panellist reported a significant reduction. 

Compared with previous quarters, the responses pointed to a more pressure on the project pipeline.  

With difficult conditions creating uncertainty in the investment market, panellists suggested that some projects are being re-phased, particularly on bigger investments, with early costs and liability being reduced through taking a more piecemeal approach. In this way, they are keeping developments moving as best they can. 

Resources and supply chains 

As materials cost inflation has cooled, panellists have reported fewer issues with pricing levels. Resources associated with MEP work were said to have increased in price, while one panellist suggested materials used in recladding projects are experiencing longer lead times due to increased demand. 

Wage growth and skills shortages were reported to be pushing labour costs up, though labour shortages were said to be tempered somewhat by reduced demand. 

Several of the panellists commented on the trends of insolvencies in the construction industry in recent months, suggesting there has been an effect on projects – partly in taking capacity out of the market, at least until labour is redeployed or taken on by other firms. There was also a suggestion that Tier 1 contractors are now talking more about helping their supply chain firms with cash flow. 

Differences between work type and sectors 

Just over half of the panellists reported differential movement between building work and mechanical and electrical work (M&E). Those who said there was a difference stated M&E is seeing higher price levels for a variety of reasons, but particularly because of a shortage of skilled labour, capacity constraints, and that demand is outstripping supply. 

The quality of design information going to tender was also highlighted as an issue that is affecting cost of M&E work, with the suggestion that contractors are being asked to do more design work, and to coordinate more with subcontractors directly. This carries particular risks for contractors and produces increased pricing as a consequence – on top of any underlying movement in input costs. 

Panellists who reported differential movement between procurement routes commented that the perception of risk, and how volatility is priced into contracts, is variable depending on the method chosen. 

Apportioning of risk between client and contractor 

When asked on what proportion of projects the risk of inflation is being shared, the panellists’ responses ranged from 0% to 65%. Most panellists reported it was on the lower side. 

A range of mechanisms to share risk have been used, including price adjustment clauses, prime cost and provisional sums, open book rates and project trackers.

The next update to the BCIS All-in Tender Price Index will be published on 8 March 2024. 

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The current BCIS TPI Panel members are: 

Adam Reeve, calfordseaden 

David Happell, Exigere 

Don Patterson, Equals Consulting 

Gavin Murgatroyd, Gardiner & Theobald 

Ian Aldous, Mace Group 

James Garner, Gleeds 

Mark Lacey, Alinea 

Max Wilkes, F+G 

Nicola Sharkey, Gleeds 

Nigel Hawes, Exigere 

Pablo Cristi Worm, Turner & Townsend 

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 



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 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. 

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