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7 August 2013 | Ceri Allan
Scottish builders are avoiding bidding for public sector contracts due to a dramatic increase in the cost of tendering.
The Scottish Building Federation (SBF) estimated the amount spent by the sector on tendering has reached £94 million a year –an increase of 50 per cent over the past five years.
The average cost of completing a PQQ is almost £1,000 per £1 million of public contract value. Once a company is shortlisted for a contract, it would then spend almost £3,700 per £1 million of contract value to complete the procurement process.
The estimated cost to the construction industry participating in public procurement is approximately £44,000 per £1 million.
SBF managing director Vaughan Hart said: “Most contractors will be fulfilling these contracts at best at break even and at worst at a financial loss.
“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.”
He said that when considering reducing the costs, local authorities need to look at the excessive number of contractors being shortlisted. "They should be encouraged to consider a means of reducing the tender costs to shortlisted contractors or reduce the amount of shortlisted companies in the first instance."
Hart believes the government must also introduce a financial incentive to encourage public authorities to run a more efficient and cost-effective tender process. “Consistent enforcement of the standard PQQ would help to reduce public procurement costs further,” he added
A spokesman for the Scottish Government 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.”