Few contactors widening their supply chain in response to challenging market - report

A report from Midlands construction, property and management consultancy Rider Levett Bucknall (RLB UK) has found that the industry has moved to more negotiated procurement activity as contractors grapple with supply side concerns, but are generally not widening their supply chain in response.

The report, based on RLB 's annual survey that asks key stakeholders their thoughts and concerns about the issues affecting procurement, found that the Midlands was:

• The most evenly distributed routes to market for procurement amongst the UK regions, suggesting diversity in sectors and client activity
• Seeing least trade capacity in brickwork and blockwork, bucking the national trend, followed by cladding and curtain walling - which also dominates other regions.

Findings show that 75 per cent of respondents are seeing fixed price durations decreasing (this follows the trend from last year of 77 per cent).

There is a noticeable fall in use of single stage routes with a 10 per cent fall in single stage, a seven per cent increase in frameworks and a four per cent increase in use of two stage, possibly resulting from the Construction Playbook guidance.

Also, negotiated tenders, frameworks and two stage projects are more frequently taking longer in procurement now than 12 months ago (between 40 per cent and 55 per cent of projects taking longer). Only 16 per cent or less than one-in-five contractors are widening their supply chain to mitigate risk of supply side risks.

In the public sector, value-based contractor selection is now reported in 74 per cent of projects and nearly 60 per cent adopting the best practice of making explicit the project 's value selection criteria at tender stage.

However, in the private sector only 54 per cent of respondents are observing value-based selection criteria, and only 27 per cent of projects making those criteria explicit.

The report also found that health and infrastructure sectors look particularly heated in procurement activity and commercial fit out projects with budgets between £5m- £7.5m are seeing more competitive procurement activity.

Paul Beeston, partner at RLB UK, said: “In a heated procurement market, it comes as no real surprise that single stage routes to market are being dropped in favour of two stage and frameworks.

“It is reassuring to see collaborative practices embraced both by clients making increased use of value-based selection criteria and by contractors ' responses to challenges in material availability.

“Working collaboratively is the only way to achieve better procurement outcomes and more focus must be placed on the supply chain, in a challenging market such as this, to reduce the potential impacts on timing and cost. ”