Industry body, the Scottish Building Federation (SBF) has said some contractors are not bidding for public sector contracts because of pressure to lodge "suicidal" bids.

Over the last five years, the SBF has said the cost of tendering for this type of work has increased by up to 50%.

In a survey, which was carried out in June, it suggested public sector contracts were worth £2bn, but contractors were spending almost £100m in order to just be able to secure the work. It added that in some cases, as many as 30 companies would tender for work, with up to 15 being shortlisted.

The firms expected to spend about £1,000 per £1m on filling out questionnaires and a further £3,700 per £1m to complete the process.

-- Advertisement --

In response to the findings, the Scottish Building Federation said there needs to be a financial incentive for public authorities to run a more cost-effective tendering process.

Vaughan Hart, Managing Director of the SBF, said: "Even at the best of times, construction is not a high margin industry.

"If you consider that the cost of tendering for public sector contracts is now more than 4% of contract value, most contractors will be fulfilling these contracts at best at break even and at worst at a financial loss.

"With budgets as tight as they now are, public authorities are sharper than ever before on price.

"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."

The Scottish Government is currently carrying out a review into construction procurement ahead of new legislation to reform the process.

A spokesman is quoted by the BBC as saying: "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."

(JP/CD)