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CONSTRUCTION TENDER PRICES APPEAR TO HAVE REACHED BOTTOM
CHARTERED SURVEYORS INDEX SHOW PRICES DOWN 33% FROM PEAK
PRICES NOW STABILISING AT 1998 LEVELS
Monday 29th August 2011.
New figures from the Society of Chartered Surveyors
Ireland show that construction tender prices appear to have stabilised.
While tender prices have fallen dramatically over the last four years – down 33% from
peak in the first half of 2007 - the latest Index shows that prices have remained
unchanged from the second half of last year.
It is the first time that prices have remained steady over the last four years and prices
are now back to levels last seen in 1998 when the Index was first published.
Andrew Nugent, Chairman of the Quantity Surveying Professional Group of the Society
of Chartered Surveyors of Ireland, said “while tender prices appear to have stopped
falling and may even start to increase slightly, there is still a severe shortage of work
within all sectors of the construction industry and it is expected that pricing levels will
remain very competitive for the foreseeable future.
Graph.JPG
The graph illustrates the dramatic fall in construction tender prices which began in 2007, slowed
during 2010, and now appears to have reached its floor. "Falling tender prices have been used by successive government departments as a
basis for cutting investment levels in public infrastructure projects. With tender prices
now stabilising, it is no longer possible to attempt to secure the same amount of work
for less investment, as this will inevitably reduce the quality of the project, threaten the
viability of construction firms and their sub-contractors, and promote below-cost
tendering."
A recent survey by the Society of Chartered Surveyors Ireland showed that over half of
all tenders for construction projects are now coming in at around 17% below realistic
construction costs.
“Although below cost tenders may seem attractive in the short term they have long term
consequences for the project, the client and the industry as a whole. We have seen this
at first hand with the collapse of both companies and projects in the public and private
sector’ Nugent said.
The Society has recommendations for better procurement, including selecting
contractors who tender realistic prices for work, rather than the lowest cost tender. The
quality of the materials used and the professional standards applied throughout the
project must also be considered, and assurances must be given that the contractor has
the viability to ensure that the project will be completed on time and within budget and to
the required standards.
The Society has long called for the appointment of a chief construction advisor to work
with all government bodies and agencies to oversee the planning and delivery of the
public capital programme and streamline and reform the tendering and procurement
process.
‘We believe such a person would be able to address issues such as value for money for
the taxpayer, below cost tendering, and planning reform. There will be no winners if the
current race to the bottom is allowed to continue’ Nugent conclude
CHARTERED SURVEYORS INDEX SHOW PRICES DOWN 33% FROM PEAK
PRICES NOW STABILISING AT 1998 LEVELS
Monday 29th August 2011.
New figures from the Society of Chartered Surveyors
Ireland show that construction tender prices appear to have stabilised.
While tender prices have fallen dramatically over the last four years – down 33% from
peak in the first half of 2007 - the latest Index shows that prices have remained
unchanged from the second half of last year.
It is the first time that prices have remained steady over the last four years and prices
are now back to levels last seen in 1998 when the Index was first published.
Andrew Nugent, Chairman of the Quantity Surveying Professional Group of the Society
of Chartered Surveyors of Ireland, said “while tender prices appear to have stopped
falling and may even start to increase slightly, there is still a severe shortage of work
within all sectors of the construction industry and it is expected that pricing levels will
remain very competitive for the foreseeable future.
Graph.JPG
The graph illustrates the dramatic fall in construction tender prices which began in 2007, slowed
during 2010, and now appears to have reached its floor. "Falling tender prices have been used by successive government departments as a
basis for cutting investment levels in public infrastructure projects. With tender prices
now stabilising, it is no longer possible to attempt to secure the same amount of work
for less investment, as this will inevitably reduce the quality of the project, threaten the
viability of construction firms and their sub-contractors, and promote below-cost
tendering."
A recent survey by the Society of Chartered Surveyors Ireland showed that over half of
all tenders for construction projects are now coming in at around 17% below realistic
construction costs.
“Although below cost tenders may seem attractive in the short term they have long term
consequences for the project, the client and the industry as a whole. We have seen this
at first hand with the collapse of both companies and projects in the public and private
sector’ Nugent said.
The Society has recommendations for better procurement, including selecting
contractors who tender realistic prices for work, rather than the lowest cost tender. The
quality of the materials used and the professional standards applied throughout the
project must also be considered, and assurances must be given that the contractor has
the viability to ensure that the project will be completed on time and within budget and to
the required standards.
The Society has long called for the appointment of a chief construction advisor to work
with all government bodies and agencies to oversee the planning and delivery of the
public capital programme and streamline and reform the tendering and procurement
process.
‘We believe such a person would be able to address issues such as value for money for
the taxpayer, below cost tendering, and planning reform. There will be no winners if the
current race to the bottom is allowed to continue’ Nugent conclude
