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24 APR 2019

Tender prices start 2019 by following inflation rises

The early estimate for the BCIS All-in Tender Price Index (TPI) for the first quarter of 2019 is based on a rise of 0.4% compared with the previous quarter*.

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 resultant 1st quarter figure shows a 1.9% increase in the year from 1st quarter 2018***.

The range of responses from panel members tightened compared to the previous quarter, which may reflect a slowdown in prices. At least two-thirds of panel members reported differences in price movements between regions and procurement routes. Of the panel members, 70% reported M&E prices rising faster than building trades.

1Q19 TPI-BCIS
BCIS All-in Tender Price Index

The Panel also observed that in the latest quarter:

  • there are higher price pressures in some cities outside London, for example Manchester, Birmingham, Leeds and Bristol
  • large, high risk, complex projects where the contractor is taking the risk for inflation are attracting higher inflation
  • two-stage procurement approaches and negotiated contracts are generally awarded at a premium over single-stage competitive tendering; however, two-stage design and build seems to be the preferred route for large projects
  • generally, sectors have little effect on pricing but there are reports of pressures in the housing sector and greater competition in the private commercial sector
  • there is a general perception that M&E prices are rising faster than other trades, but one respondent reported that 'Recent tender returns are very competitive, coming in below benchmark, including low OH&P values'
  • prices are keen for early packages such as demolitions, piling, concrete, while steel, façades, M&E and lifts have increased
  • there are pressures on imported prices generally
  • Brexit uncertainty is increasing the risk of higher labour and material costs
  • there is little evidence that contractors are allowing for any possible post-Brexit tariffs on imported materials
  • the impact of current inflation and the risk of future inflation on current tenders was discussed and the risk drivers identified were:
    • currency, material shortages, labour (Brexit)
    • macro-economic softening: global demand has eased – inflation will increase if global demand returns
    • softening in China's economy has shielded the UK from major inflation

Additional notes

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

  • 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 before 4th quarter 2018 are based on project indices, generally single stage, traditional procurement, average value < £5m, (minimum £100,000, no maximum). Excludes M&E and other specialist trades, e.g. façades. 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.