BCIS tender price index – estimate of tender price inflation

Tender price index, estimate of tender price inflation, 1Q2024 

Tender prices increased by an estimated average of 0.5% between 4Q2023 and 1Q2024, resulting in annual growth of 2.9% 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 4Q2023 and 1Q2024 was between 0.0% and 0.8%.  

Similarly to the last quarter, the panel reported overheads and profit, as a percentage of the contract sum, at an average of 5.3%.  

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

When asked how easy it was to get contractors to tender, the panel pointed to a slightly increased eagerness in 1Q2024 compared with the previous quarter. On a scale of 1 to 5, where 1 means cannot get anyone to tender through to 5 meaning contractors are very eager to tender, the majority (58%) selected 4.

Panellists reported anecdotally on tenders coming in at and under cost plans, with contractors eager to fill their order books for up to a year’s time. This is also being reflected in overheads and profit percentages, which panellists reported were starting to come in below levels observed previously. One panel member noted that while there is noticeably increased interest in new opportunities, risk caution persists, and contractors are looking carefully before committing. 

What’s in the pipeline?  

One-third of respondents reported a slight reduction in anticipated projects going to tender in the next 12 months, compared with the previous 12 months. 42% said their pipeline was unchanged from 4Q2023 to 1Q2024, while 17% said it had increased slightly. 

Reflecting on the decline in new orders outlined in recent ONS data, panellists commented that, while there is generally not fierce competition for tenders in the market, there is also not a huge amount of work available. There was a suggestion that it’s not always easy to determine whether constraints on the supply or demand side are pulling hardest. 

Resources and supply chains

As materials cost inflation has cooled, panellists have reported fewer issues with pricing levels. Among materials highlighted by respondents, there was said to be continuing issues with semiconductors, as well as concrete and M&E product cost increases, but otherwise a stabilisation of steel prices. 

Attacks in the Red Sea were highlighted as a possible risk to inflation. However, panellists reported that they had seen very little effect on tender pricing. While one panellist reported some increases in material costs, another said the effects had only been seen in longer lead times, and that the net cost of diverting ships around the Cape of Good Hope is not much more when the cost of transiting the Suez Canal is factored in. 

There was agreement that, where there have been price increases, it was likely to be as much about incorporating risk into prices, as about actual increases in freight costs. 

With labour availability highlighted as a challenge by several respondents, the panel agreed the effects of reduced demand in the market, but not equally across sectors, is in evidence. While M&E does not have any slack, other sectors do, which is showing in fewer vacancies and wage growth in construction being relatively lower than other industries.

Differences between project size, work type and sectors  

Nearly two-thirds of panel members 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 lack of available specialist contractors and because demand has not dropped in the sector.

Risk of insolvencies to the supply chain

After the risk of insolvencies in the industry were raised by the panel, particularly around supply chain capacity, there was a suggestion that groundworks firms have been particularly affected because they are more exposed to the sectors which have experienced reduced demand.

The next update to the BCIS All-in Tender Price Index will be published on 14 June 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 

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.