A global consultancy and construction firm has said it expects tender prices to fall in the next 12 months, as a consequence of the Covid-19 pandemic.
Mace has predicted that although in the short term, tender prices will hold firm, it expects 2021 to be a tougher year for contractors who will be chasing replacement work to fill their order books.
According to the firm’s analysis, it expects new orders to recover from the 50 per cent second-quarter decline, with a forecast of a 2.5 per cent reduction in 2021, before a return to present levels in 2022.
Mace points to a reduction in productivity of 11.4 per cent in the second quarter, due in large part to social distancing being implanted on construction sites.
The report also suggested that Brexit uncertainty could also affect recovery, resulting in tenders becoming more competitive than usual.
Steven Mason, managing director for Cost Consultancy at Mace, said: “As the economy continues through the early stages of recovery, the construction industry has proved so far to be remarkably resilient.
“The focus upon managing the immediate disruption caused by labour and material shortages and drops in output and productivity may have dissipated, but the mitigation of the ongoing impact of Covid-19 and an impending Brexit deadline will continue to have a major influence on the market and tender prices.
“The unprecedented drop in new orders in Q2 has compounded the growing sentiment that our industry faces a turbulent time ahead, and there will be increased pressure on the supply chain to secure workload at any cost.
“In spite of expected further fluctuations in input costs we expect this increasing appetite to secure future work to continue to supress tender prices for the remainder of 2020 and throughout 2021.”
Adam Davis, a Partner with Palmers who specialises in construction law, said: “These predictions will come as no surprise to contractors working in the construction and engineering sector, which means that it is more important than ever to ensure that all tender applications fully meet requirements.
“Our experience in working with the construction and engineering sector means we are ideally placed to provide independent, practical advice to help firms with their contracts, as well as tender submissions.”
For help and support on contract submissions and project delivery compliance, please contact Palmers specialist construction team.