Tender prices and site productivity

As the UK gets back to work, tender prices have reached a tipping point. While some tenders have been delayed over the past two months, prices seem to have, in general, remained unchanged. However, there are reports of specific projects where prices are well below pre-tender estimates.

Site Productivity has improved faster than previously anticipated but there are delays on most existing projects.

BCIS carried out an interim survey of TPI panel members covering the period Mid-May to end of June 2020. The median of the responses was no change, but a quarter of respondents reported falling prices.

There were reports of recent tender returns where lowest tender was significantly below pre-tender estimates/cost plans. Anecdotal evidence from contractors suggested that the savings were coming from the supply chain rather than the Tier1 and major Tier 2 contractors.

There was a wide variation in reports on the number of delayed/cancelled projects but the average was less than 20%.

The majority of respondents felt that prices are likely to fall over the rest of the year.

The panel also reported:

• With demand likely to fall, big contractors are now prepared to tender for a wider range of projects and procurement routes.
• Both demand and prices are likely to vary between sectors.
• Concerns that any reduced Tender Prices might result in problems in contract delivery.
• It will only take a few insolvencies to create real problems
• Private commercial demand will be affected by changes in working practices and reluctance from investors to commit to schemes. However, there is likely to be growth in public sector and infrastructure demand.

The panel consensus was that site productivity had risen to 80% of the pre Covid-19 levels, which was up from around 60% in mid-May. However, there are differences by sector and trade. Productivity is higher in the housing, industrial and infrastructure sectors and on mechanised trades such substructure where it is back to 100%.

The panel expects productivity to continue improve but that it is unlikely to get back to pre-lockdown levels while the Site Operating Procedures are in force.

Contractors report that extended working hours and two-shift working have helped moderate project delays but that despite this most projects are facing delays.

It was reported that, while some materials were still difficult to source the problems resulting from earlier factory/manufacturing closures were now easing. There were still some problems with overseas products, both those coming from areas affected by COVID-19, e.g. lifts from Italy, and from factory closures. Some contractors reported that they have benefitted from stockpiling in preparation for Brexit.

*Note: The BCIS TPI Panel. BCIS has recruited a panel of practising cost consultants from firms involved in multiple tenders in each quarter to provide an early estimate of tender price movement in the latest quarter based on a panel (Delphi) survey approach. For further details see New BCIS methodology for Tender Price Index estimates. Insert link https://www.rics.org/uk/products/data-products/insights/new-bcis-methodology-for-tender-price-index-estimates/

The current BCIS TPI Panel members are:

• Ian Aldous, Arcadis
• Simon Birchall, Equals consulting
• Simon Cash, Artelia
• Rachel Coleman, Alinea
• Richard Hill, Currie and Brown
• Roger Hogg, RLB
• Karl Horton, Mott MacDonald Group
• Kristopher Hudson, Turner & Townsend
• Agnieszka Krzyzaniak, Arcadis
• Mark Lacey, Alinea
• Brian Livingston, Gardiner & Theobald
• Peter Maguire, WT Partnership
• Simon Rawlinson, Arcadis
• Adam Reeve, Calfordseaden
• Phil Southgate, Gleeds
• Steve Waltho, Turner & Townsend.
• Max Wilkes, Faithful + Gould