Executive Summary

Key reflections

Protecting the supply chain in the face of volatility

For five years the RLB Procurement Trends survey has been titled ‘Getting Closer to Your Supply Chain’. It perhaps now feels more appropriate to rename it ‘Investing in Your Supply Chain’. In a volatile market the long-term operating models of contractors have been questioned and clients are realising the risk that supply chain fragility poses to their own operating models.

So is collaboration the winner?

In previous tightening markets, more competitive forms of procurement have seen a resurgence. But that is not universally the case in our 2024 survey. More than half of contractors are seeing collaborative practices in procurement, including a willingness to share risk. Clients may still have red lines for their own risk appetite, but they are willing to procure in ways that avoid just shifting that risk to the supply chain.

And will we finally move to procuring better outcomes?

Over the five years of our survey there has been a positive move in both the public and private sectors in the adoption of practices seeking to procure for value and not just at lowest cost. There is still a way to go in contracting for those outcomes, as evidenced by some of the responses we have received on green procurement practices. When in force the Procurement Act may be more evolution than revolution, but the introduction and reporting of KPIs may, if implemented well, see a further shift to procuring better outcomes.

Summary of our main findings

of larger projects (>£60m) show the highest proportion of two-stage tenders being utilised.

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of projects use design and build forms of contract, the highest proportion since the start of our survey.

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of contractors reporting a significant increase in the cost of performance bonds.

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of contractors seeing an increased willingness from clients to consider risk sharing.

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average work content adopting modern methods of construction (MMC) on projects.

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London and the South East have the highest proportion of two-stage tendering, while at 38% Yorkshire & Humber and the South West have the highest proportion of single-stage tendering.

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The key changes since our 2023 survey

increase in the use of two-stage tendering (with an almost identical reduction in the use of negotiation).

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month increase in fixed price durations being offered, which is most noticeable at the mid-scale of projects, £30m to £60m.

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day increase in average tender validity period.

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of contractors have seen an increased use of collaborative working during procurement in the past 12 months.

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increase in contractors who report they are being asked to provide whole life carbon assessments.

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of contractors report that the greatest issue they face in the next 12 months is robustness of supply chain, taking over from material cost and availability.

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Macro-economic conditions

Looking back over the previous 12 months, input cost inflation has finally stabilised, but at the same time economic conditions have worsened and pipelines have slowed. This graph compares the BCIS All-in Tender Price Index with the BCIS Building Cost Index.

▉ Building Cost Index ▉ Tender Price Index

Common base date of 100: Feb 2023

Key market conditions

For the past 12 months tender price inflation and input cost inflation have broadly moved consistently.
This follows the 2022/2023 period which saw a sustained period of input costs increases outstripping tender price uplifts.
For the forecast 12 months ahead, slowing pipelines are expected to result in input costs once again outstripping tender prices, resulting in margin compression.

What it means for projects

The industry is entering a more challenging market while not having any real period of recovery from 2022, when input costs significantly outstripped tender prices.

In the procurement landscape, contractors are therefore keenly chasing pipeline, while being mindful of risk exposure both upstream (in contract conditions) and in downstream supply chain fragility.

The urgency for replacement workload will influence bidding and procurement.

- Roger Hogg, Research and Development Manager

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