Movement in tender prices in Scotland 

BCIS set up the Scottish Tender Price Assessment Panel to help measure the trend of contractors’ pricing levels in accepted tenders in Scotland.

The panel is comprised of cost consultants from firms involved in multiple construction tenders in Scotland.

As well as reporting on quarterly and annual movement in tender prices, the panel provides commentary on conditions affecting pricing levels on construction projects in Scotland.

The BCIS Scottish Contractors Panel separately reports on quarterly movement in construction input costs based on their experiences working with subcontractors and preparing tenders.

Tender price movement in Scotland

The consensus of the panel was that building tender prices in Scotland rose by 0.6% in 4Q2024 compared with 3Q2024, and by 3.3% in the year from 4Q2023.

This compares with increases of 0.65% and 3.4% reported in 3Q2024 and is based on the findings of the BCIS Scottish Tender Price Assessment Panel (STPAP).

Appetite to tender

Most panellists reported that either the desired number of suitable tenderers were found after searching or were more eager to tender in 4Q2024.

Panellists commented that while there is appetite to tender on smaller projects, tier 1 contractors with healthy order books are in a position to pick and choose what they want to do and the procurement route is a key consideration for them.

They suggested that on smaller projects, sub £5 million, there is an observed shift, last seen pre-Covid, with smaller contractors actively enquiring for work. Following the ISG collapse, not many contractors are seeking to scale-up to join tier 1.

Pipeline of work

Panellist responses suggested a slightly more positive pipeline for the next 12 months in 4Q2024 than was reported in 3Q2024. 29% said their anticipated pipeline of projects going to tender has slightly increased, 43% said it is unchanged, and 29% said it had reduced slightly.

Logistics challenges

Supply chain capacity and engagement were highlighted among logistics challenges by panel members, as well as planning issues. They reported lots of projects stuck at the moment, including student accommodation, which, with residential, is one of the biggest private sectors in the central belt.

Sharing of risk

Panellists reported very few instances of the risk of inflation being shared and in some instances a return to fixed pricing. Where risk sharing was reported, mechanisms included indices reviews and cost checks on materials.

Effects of the Autumn Budget

Panellists reported the recently announced increase in National Insurance Contributions will be passed on and will be included in tenders from now on, producing an increase in costs in 2Q2025. The projects that are already on site and will continue beyond April will be looking at invoking compensation events.

There was a suggestion that changes to the minimum wage will have less of an impact than National Insurance as they are generally dealing with more skilled labour above the threshold. However, when apprentice rates go up, there is a domino effect as different skill levels expect to maintain the previous wage differential.

There is currently a holding pattern in the industry before the Scottish Government reveals its spending plans on 4 December.

Differential price movement

Most panellists experienced differential movement between M&E and building work, with the suggestion that it’s more volatile because of labour shortages and because there is low capacity among contractors for larger schemes.

Panellists reported the issue is capacity and resource driven, though there is an element of component cost increases too. Panel members suggested it has become a vicious circle with main contractors trusting only those with a track record of delivery, which pushes up costs because there are so few.

While the majority of respondents said they hadn’t experienced differential price movement between regions in Scotland, among those that had, the northern regions and islands were said to be experiencing higher resource costs, including because of fluctuations in the number of tenderers / contractors.

The majority of panellists reported differential movement between projects of different sizes, partly due to the M&E components on larger projects.

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Panel members:

• Gordon Ritchie, Gardiner & Theobald
• Iain McLean, Doig+Smith
• John McGuire, Thomas & Adamson
• Ken Wilkie, Arcadis
• Lynsay Turnbull, Thomas & Adamson
• Robert Rankin, AECOM
• Ross Lovatt, Thomson Gray
• Ross McKenzie, AtkinsRéalis
• Simon Brooke, Currie & Brown
• Suzanne Graham, Turner & Townsend