Fragility of the supply chain has become the biggest concern of contractors in London and the South East over the next year according to research by RLB.
RLB UK’s fifth annual Procurement Trends report reveals that 87 per cent named it their number one concern taking over from material cost and availability.
The report says one consequence is that more collaborative practices were being entered into than the nationwide picture.
A total 54 per cent have seen increasing collaborative practices in procurement while 35 per cent state that clients are more willing to share risk. The most collaborative routes to market are generally found on smaller projects, fit-out and refurbishment works, with the highest competitive levels displayed on small to mid-sized projects (£5 million to £7.5m).
London and the South East has the largest proportion of two-stage projects, 42 per cent, reflecting the likely average complexity and size of schemes.
The region is also the most concerned about the impact of the Building Safety Act where there may be a higher concentration of higher-risk buildings.
Other key findings include:
- Six per cent fewer projects being negotiated than in 2023.
- 51 per cent of projects worth more than £60m have the highest proportion of two-stage tenders being utilised.
- 67 per cent of projects now adopt design and build forms of contract, the highest proportion since 2019.
- A one-month increase in fixed price durations being offered by contractors, most noticeably at the mid-scale of projects, £30m to £60m.
- Six-day increase in average tender validity period since RLB’s 2023 survey with 57 per cent of contractors now willing to offer 60 days or longer.
- In response to market volatility 16 per cent of contractors report increased use of project bank accounts and 63 per cent report a significant increase in the cost of performance bonds, with 23 per cent reporting they are placing fewer bonds as clients are no longer willing to pay for them.
- Wider use of both the public and private sector construction playbook.
Mike Righton, managing partner for the Thames Valley region for RLB (pictured), said: “What is clear from RLB’s Procurement Trends report is that in the South East there has been a more collaborative approach to procurement over the last 12 months.
“Clients are responding to a more volatile market positively and recognising the benefits of those collaborative practices. It is no surprise to see that London and the South East are the region most concerned about the Building Safety Act, as it is likely to be most impacted by the new regulations and something that we are seeing clients already asking our advice on what action they need to be undertaking to adhere to this governance.”
The full report can be seen at https://www.rlb.com/europe/insight/procurement-trends-report-2024/
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