Home » 4Q2020 estimate of tender price inflation

4Q20 estimate of tender price Inflation

Published: 20/12/2020

The early estimate for the BCIS All-in Tender Price Index (TPI) for 4th quarter 2020 is based on a 0.4% fall in price compared with the previous quarter*.

The resultant 4th quarter TPI figure shows a fall of -1.5% in the year from 4th quarter 2020*.

The estimate is the consensus of the BCIS TPI Panel** based on the analysed Delphi survey results, it does not necessarily represent the views of individual participants. The average from the survey was down on the previous quarter.

The panel commented that deflation has been steeper in the final part of the year – 3rd and 4th quarters.

In the 4th quarter contractors were willing to renegotiate agreed pricing and reopen packages that had been agreed, to secure the order book for 2021.

Contractors and supply chains are busy, order books are notionally full for 2021, however there is a nervousness about them materialising on site and there is a real anxiety and focus on securing work in 2022 and 2023

Commenting on the impact of the Covid-19 shut down and Site Operating Procedures

  • These seem to have evolved into a new normal working practice and productivity – whether due to the revisions or better approaches – is almost at pre-COVID levels.
  • Things have stabilised but second lock-down created a new wave of uncertainty.
  • The announcements of a successful vaccine had a positive effect on global markets but it is too early to tell if this optimism will be maintained
  • Early trades are less affected by Site Operating Procedures.

Other considerations:

  • While insolvencies in construction have fallen significantly since the second quarter 2020, companies were protected by the furlough scheme and other government support and insolvencies may jump when these are removed.
  • Labour force in the construction industry has fallen by 140,000 this year (7-8% of 2.3 million).
  • Low availability of labour and reduced capacity may hold prices.
  • Many contractors are down-sizing by 15-20% and the pace is significant, however they still need to win the work, even when downsizing.

*Note: the BCIS TPI Panel estimate has been applied to the previous quarter index and rounded to the nearest whole number for publication.

**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.

*** Basis of 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. Where the sample is below 20 the index is also influenced by the BCIS forecast.

The current BCIS TPI Panel members are:

  • Ian Aldous, Arcadis
  • Simon Birchall, Equals consulting
  • Simon Cash, Artelia
  • Rachel Coleman, Alinea
  • James Garner, Gleeds
  • 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
  • Steve Waltho, Turner & Townsend.
  • Max Wilkes, Faithful + Gould