Built environment consultancy, RLB, release its latest construction activity report
RLB’s TPF Q3 2023 provides a forecast of tender price uplifts for UK regions, for 2023 to 2026
Leading construction, property and management consultancy, Rider Levett Bucknall’s Tender Price Forecast Q3 2023 report launches this week. The report explores the local effects of the wider national economic situation, by focusing on regional perspectives and regional effects across the country.
The third quarter of the year is showing a reasonably consistent continuation of the first half of the year, with high levels of construction industry activity alongside issues surrounding lead-times, labour shortage concerns, programme delays and the continued effects of the previous year’s materials’ costs inflationary spike.
Rider Levett Bucknall, Research & Development Manager, Roger Hogg said: “Although commodities and materials prices have been noted across the regions as having moderated, construction costs have risen significantly over the last couple of years and have consequently brought viability issues into sharp focus. Just as contractors’ margins can be squeezed in competitive circumstances, so too can client business cases suffer when cost imposts exceed value growth. What we have previously referred-to as ‘sticky’ inflation, is persisting and there is no real prospect of actual falls in construction prices.”
Key findings include:
– ‘Sticky’ inflation persists, with no real prospect of actual falls in overall construction prices (despite some individual input cost falls), bringing viability issues into sharp focus.
– this ’sticky’ inflation and a number of high profile contractor and sub contractor insolvencies are leading to risk management at the forefront of contractor bidding strategies.
– this quarter (Q3) reflects the first half of the year with high levels of onsite construction activity, but with challenges on lead-times and labour shortages.
– less pipeline has partly driven increased appetite for single stage competitive tenders, such appetite is tempered by the overall risk structure of the intended contractual arrangements.
– risk aversion in bidding strategies in demand for ’non-standard’ procurement solutions, which in the long term will of course become ’standard’ and then the world of procurement will have changed.
– this more sophisticated approach to pre-contract dealings could favour the larger contractors and sub-contractors with more internal procurement expertise, giving rise of further differentials between tiers of contracting.
– labour shortages are not easily resolved, particularly if new orders return to growth and existing projects are yet incomplete.
– this might drive production off site, but that process is not an overnight solution.
– With the design of JCT Constructing Excellence (Partnering) and New Engineering Contract (NEC) to support sustainability targets, the challenge will be how to impress on clients that a more balanced approach to risk management promotes better project outcomes, even if this means not having absolute cost certainty at the outset.