Construction Contracts and Tenders in the UK: Facts, Figures

Construction Contracts

Each year, public sector contracts account for nearly 40% of construction Ventilation systems Telford work available. These commissions total in value of over 33 billion. To claim a portion of the construction budget, businesses must secure tenders. The tender process is the method businesses are required to follow to make their bid on construction contracts. Tender opportunities vary based upon the needs of the public and private sectors.

Sectors where construction tenders are plentiful include schools, hospitals, social housing and roads. The housing sector alone accounted for over 1.7bn in construction across all departments. Tenders are typically related to construction machinery, construction equipment, roof works, special trade construction works, repairs of building installations, maintenance service of building installations, architectural contracts and other related services.

Local Authorities & Construction Contracts

Local authorities have budgeted expenditures in the UK for 2010-2011 year at 121.9 billion. Fourteen percent of this budget is expected to be spent on housing, and 38% of the budget is expected to be spent on education. Currently, the UK local authorities have several construction contracts underway and several more planned. Many of these contracts consist of:

• Department of Children, Schools and Families projects

• Department of Transport projects

• Community and Local Government projects

• Department of Health projects

• Ministry of Justice projects

• Department of Culture, Media and Sports projects

• Department of Environment, Food and Rural Affairs projects

• Others

The budget percentages are not indicative of the remaining contracts in construction for 2010-2011. A large portion of the construction contracts will be allocated towards construction projects related to health. The Department of Transport and Department of Children, Schools and Families also account for a significant portion of the budget. Over 17 million will be spent in the Department of Health, and over 26 million in the Department of Transport is remaining on the budget for this year. Over 8 million in contracts are remaining and will be allocated towards construction related to education.

Construction Tendering Process

The construction tendering process is similar to obtaining tenders in other industries. Most businesses simply locate a tender provider, select a tender and bid for the business. Since the government supplies 25% of local employment, many construction tenders are public contracts. Hence, many businesses rely on government tenders as a vital source of income. The private sector may also provide tenders through tender opportunity providers. Tenders are provided online, by phone or by email. Depending upon the mode of retrieval, tender searches vary. Elaborate websites have been developed to make tender searching easier and more convenient. When tenders are displayed in real time, businesses that identify them quickly have a competitive advantage.

Selecting an appropriate tender provider is almost as important as bidding for the opportunity. Many tender providers offer construction businesses more opportunities than others. The more opportunities available to businesses, the more likely the business will land a viable contract. Ensure that the tender provider offers tenders from both the public and private sector. This will guarantee that your construction company finds the best opportunities.

Through tender websites, businesses may search for tenders by industry, region or other advanced methods. During registration, some websites will gather information about the business to deliver relevant tender opportunities via email. When the company finds a relevant tender, a representative of the company will prepare a PQQ or ITT. These documents contain questions that businesses must adequately answer regarding the opportunity. The questions must be answered thoroughly to demonstrate your business’s competitive advantage over other businesses bidding for the same construction contracts.

Some companies that apply frequently for construction contracts may be tempted to copy and paste answers into the fields provided. While this saves the company time, often the information is not relevant to the question asked. If the information is not relevant, this will make the company appear less informed about the opportunity. The evaluator will then select the next applicant that provided a detailed description of how the project will be completed. The business with the lowest bid that meets the project’s needs will win the contract. When the bid is won, the construction company is expected to meet the criteria outlined in the bid, including the bid price. Those who do not may be penalized.

Businesses that are focused on local authority contracts should recognize that small and medium sized businesses are considered. In 2004 and 2005, these businesses won 59% of the total local authority contracts. Construction contracts were included in this percentage. These types of businesses are encouraged to take advantage of the local authority budgets as well.

Lower Value Contracts

Contracts valued under 100,000 are considered lower value contracts. Some contracts are bid below cost to provide services under special circumstances. Many of these lower value tenders are often found in construction, transport, security and electrical. Businesses should be aware that these contracts exist. Lower value tenders serve as an alternative source of income. Companies that perform well on these contracts may be considered for other tenders at full value.

Changes in Construction Tendering

In 2009, over 13 million was allocated to construction by the local authority, according to the Office of National Statistics. The amount increases steadily year after year. Since 1997, the local authority budget for construction has increased by over 10 million. Each year, the budget increased incrementally by 2 million, despite the global recession. Construction tendering is a viable way for companies to earn a sustainable income.

Currently, the public sector accounts for 40% of the total construction commissions totaling over 33 billion. While local authority construction contracts and other public sector contracts are a sound source of income, they are not the only source of income in the construction industry. Businesses should also consider the private sector and others as a source for tenders. This will increase a business’s chances of obtaining a high value tender.

Summary

Businesses seeking construction contracts will find over 51,000 new opportunities published each month on some tender websites. Each contract is valued based upon the work performed and the length of the contract. Construction tenders typically hold a higher value than other tenders, because the projects are larger and more labour intensive than other tender opportunities.

Construction is a sustainable source of income for businesses located within the UK. Construction companies should develop strategies for bidding that will highlight their competitive advantage over other bidders. This will increase the number of successful bids made by the company. Companies that consistently win bids will increase revenue and sustain their business.

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