Public sector work 'too costly' for builders
- 5 August 2013
- From the section Scotland business
Some contractors avoid bidding for public sector contracts amid pressure to submit "suicidal" bids, according to an industry body.
The Scottish Building Federation said the cost of tendering for this work had risen by up to 50% over five years.
Its survey of firms suggested contracts were worth £2bn, but contractors spent almost £100m just to secure the work.
It said there were incidences where up to 30 firms would tender for work and up to 15 would be shortlisted.
Firms expected to spend about £1,000 per £1m on filling out questionnaires and a further £3,700 per million to complete the process, it said.
The federation said there needed to be a financial incentive for public authorities to run a more efficient and cost-effective tender process.
The survey of 96 businesses was carried out in June.
Scottish Building Federation managing director, Vaughan Hart, said: "Even at the best of times, construction is not a high margin industry.
"If you consider that the cost of tendering for public sector contracts is now more than 4% of contract value, most contractors will be fulfilling these contracts at best at break even and at worst at a financial loss.
"With budgets as tight as they now are, public authorities are sharper than ever before on price.
"I know a number of contractors are actively avoiding the public sector market because they feel they'd have to make suicidal bids to secure the work."
Mr Hart said those in charge of public sector contracts needed to be encouraged to find ways to reduce tender costs, or to cut the number of shortlisted companies.
He added that enforcement of a standard pre-qualification questionnaire would help to reduce public procurement costs further.
The Scottish government is carrying out a review into construction procurement ahead of new legislation to reform the process.
A spokesman said: "Scottish ministers are listening to the concerns of industry.
"This is one of the reasons why the deputy first minister has set up an independent review of the way in which the public sector carries out the procurement of construction works.
"We understand that the review is aware of these issues, and we look forward to receiving their recommendations."