BCIS tender price index – estimate of tender price inflation

Tender price index, estimate of tender price inflation, 3Q2024

Tender prices increased by an estimated average of 0.5% between 2Q2024 and 3Q2024, resulting in annual growth of 2.1% 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.

Appetite to tender

All panellists commented that contractor selectivity and risk aversion are affecting tendering. The majority (62%) said the desired number of suitable tenderers was found after searching. 23% said it was more difficult and 15% said it was easier. This quarter, there were no reports from the panel of an inability to get anyone to tender or contractors being very eager to tender.

Project pipeline

Overall, there has been more positivity around the project pipeline: 69% of panellists reported their anticipated pipeline of projects going to tender within the next 12 months as increased slightly in the third quarter, compared with the previous 12 months. The remaining panellists said their pipeline was either unchanged (15%) or reduced slightly (15%).

Panellists cited the upcoming Autumn Budget as hopefully being a turning point for projects getting the go-ahead. While there was particular uncertainty in the run-up to the General Election, until the government announces its spending plans, a lot of that uncertainty remains.

Higher education was highlighted as a particularly uncertain sector, especially around student numbers. Panellists commented that some universities are holding back on capital projects of any size because, as well as issues around international student numbers, fees haven’t increased in recent years, which means the same amount of income does not go as far as it did previously.

Differential movement in prices

Three-quarters of panellists said there is differential movement between building work and mechanical and electrical (M&E) work, with panellists citing capacity constraints, longer lead times, more complex projects and greater materials price fluctuations.

The majority of the panellists reported differential movement in pricing between different size projects. Reasons given for this included higher levels of risk associated with larger projects and the challenges associated with a changing regulatory landscape.

62% of the panellists experienced differential movement between procurement routes. There were comments that two-stage tendering tends to be preferred by contractors, but it comes with challenges, particularly around pricing risk management.

While most panellists said there is no differential price movement between regions, those that did pointed to some differences between London and other regions, including Scotland and Northern Ireland, in part because of different funding models.

Logistical challenges

Skilled labour shortages and longer lead times for MEP equipment, particularly for data centres and deliveries from China, were highlighted among current logistical challenges.

International supply chains have also been affected by port strikes in Singapore and a shortage of containers.

While panellists agreed labour shortages are not new, they said they are potentially impacting on prices. An example was given of a public sector project which wasn’t able to be accelerated due to labour challenges in the project region, which had a knock-on effect on the supply chain and getting subcontractors.

Panellists also commented on the impact of programme changes in line with the Building Safety Act and ongoing shortages in planning.

A tendency for clients to try to get projects out to tender too quickly causing issues with the quality of tendering information provided was cited as problematic, particularly when there is too little design information. Panellists commented this can lead to contractors pushing back because they can’t price such scant information, increasing their risk.

The next update to the BCIS All-in Tender Price Index will be published on 6 December 2024.

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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

Ian Goodridge, Arcadis

James Garner, Gleeds

Mark Lacey, Alinea

Max Wilkes, AtkinsRéalis

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

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.