Half Of Tenders 'Below Cost'

A major construction institute has revealed findings that over half of all construction tenders are coming in below cost, leading to the collapse of major projects.

The survey, carried out by the Society of Chartered Surveyors Ireland, shows below cost tenders are approximately 17% below realistic construction costs, and that several state projects have collapsed due to below cost tendering.

Below cost tenders have risen from just over 37% to over a half in the last two years, as construction companies battle to secure contracts, keeping their margins on a knife edge.

The Society of Chartered Surveyors Ireland warned construction companies that the practice was "unsustainable", and would result in longer-term problems for industry clients, costing the industry jobs and expertise.

President of the society, John Curtin said that below-cost tendering had already led to the collapse of a number of State construction projects, including school buildings.

"Below-cost tendering by contractors is likely to continue over the next twelve months. This 'race to the bottom' poses a real threat that tenders will not provide the required standard of construction quality and professional expertise needed for the long term viability and return on investment of any project over its life cycle."

The survey also showed that 83% of Quantity Surveyors have experience of a client accepting below cost bids; that 55% have experience of projects failing to be completed because they were below-cost, most of which were public projects; and that 83% of believe they or their clients have lost business to tenders that were submitted below cost.

The Society of Chartered Surveyors Ireland said that in light of the findings it was warning contractors of the dangers of tendering for projects at a value below the cost of undertaking the work, and warning clients of the dangers associated with accepting tenders which they believe to be below-cost, however attractive they might seem in the short-term.

John Curtin added: "The longer-term consequences for projects that cannot be completed at the tendered price cannot be underestimated. It is in the public interest to ensure that the highest construction standards are provided for at the outset and can be maintained over the life-time of the construction project.

"Ensuring that the tender takes these factors into account and is not just based on the lowest price is crucial."

(DW/BMcC)