Home » Movement in tender prices in Scotland: 3Q2023 

Movement in tender prices in Scotland: 3Q2023 

Published: 31/10/2023

Building tender prices in Scotland rose by 1% in 3Q2023 compared with 2Q2023, and 5% in the year from 3Q2022. 

This is based on the findings of the newly formed BCIS Scottish Tender Price Assessment Panel (STPAP). 

The panel reported that tender prices in Scotland increased by an average of 1.0% between 2Q2023 and 3Q2023 – with a range of responses between 0.5% and 1.5%.  

On an annual basis (3Q2022 to 3Q2023), panellists agreed a consensus increase of 5%, with a range between 3.0% and 8.5%. 

In 3Q2023, underlying costs of labour and material, as measured by the BCIS General Building Cost Index (GBCI), rose by 2.0% compared with the previous quarter and by 2.7% compared with 3Q2022. 

The STPAP reported average overheads and profit, as a percentage of contract sums, of 7% in 3Q2023, with the range of responses between 5% and 10%. 

They also provided some context for the figures, commenting on various aspects linked to the tendering process. 

Regional variations  

All of the panellists reported there being differential movement between regions in Scotland. There was particular mention of higher movement in the Islands compared to elsewhere in the country. This was reported to be due to issues around accommodating workers and the logistics of transporting materials to site. 

Building and mechanical and electrical (M&E) work 

All of the panellists noted differential movement between building work and M&E tender prices in 3Q2023, due to a shortage of M&E tenderers. It was noted that some projects were relying on M&E subcontractors being brought up from England, and that tenderers demanded a tight time scale before they would move on to other work.

There was also reference to certain materials, typically used in M&E work, seeing higher price increases, as well as the impact of wage demands due to a skills shortage. 

Procurement routes 

The panellists agreed that contractors continue to favour two-stage tendering, or the use of Bills of Quantities, and that they are very selective about the work they choose to tender for. In some cases, the procurement route can be the deciding factor for contractors not to bid at all. One panellist noted that of their firm’s recent private sector projects, almost all had been two-stage negotiations. 

Appetite to tender 

There was agreement that contractors are currently selective about the kinds of projects they will tender for, particularly based on the procurement route, with a preference for two stage tenders and tenders based on Bills of Quantity.

It was noted that while demand is holding up and contractors are currently able to pick and choose the kinds of projects they want to tender for, projects are increasingly being reassessed by clients (paused but not dead) and, as the market cools, they may become keener to tender for all types of contract. 

Sharing the risk of inflation 

Respondents noted that most clients still look to pass on the risk of inflation, but contractors were keen to share the risk which was negotiated and fixed at the point the contract was signed.

The risk profile on projects dictated the appetite to tender, particularly where there remain supply chain pressures and labour resource issues.

Mechanisms being used to share the risk included price inflation adjustment clauses, sharing the risk between the client, main contractor and subcontractors, reducing the timescales for accepting fixed prices, and having fixed prices for some resources, with provisional sums on others. 

Movement in input costs and logistics issues 

While there were still issues with some materials, availability generally was said to have improved. While demand is currently strong there is an anticipation that increased interest rates will temper demand, which will have a corresponding effect on supply.

Other issues reported as affecting projects are the introduction of Glasgow’s Low Emission Zone and, more generally, travel, energy and fuel costs.

The availability of specialist sub-contractors was a cause for concern, with reports of difficulty in finding concrete frame contractors and sprinkler installation specialists. There is also a potential issue around the increased number of decarbonisation projects, with a limited number of contractors in Scotland who are experienced in these kinds of projects. 

Project pipeline 

Overall, the panel noted a slight reduction in the anticipated pipeline of projects going to tender within the next 12 months.

Clients were reviewing cost viability and the availability of funding, particularly in the public sector, which might impact on the delivery of projects over the next one to two years. 

Panel Members 

Alan Wilson, Doig+Smith
Gordon Ritchie, Gardiner & Theobald
John McGuire, Thomas & Adamson
Ken Wilkie, Arcadis 
Robert Rankin, AECOM
Ross Lovatt, Thomson Gray
Ross McKenzie, AtkinsRéalis
Suzanne Graham, Turner & Townsend 


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