While local authorities are more likely to join a framework or a buying consortium to reduce construction bills, housing associations and health sector clients are far more likely to just come right out and demand that suppliers cut their costs.
Some 46% of housing associations and 40% of health authorities are asking suppliers to cut their prices, compared to just 29% of local authorities.
The anonymous survey of 136 public sector construction clients by Constructionline has revealed how the procurement landscape has changed since the government’s comprehensive spending review (CSR) last autumn.
Unsurprisingly, 96% of respondents have less construction budget following the CSR, but 57% of NHS organisations have saved their construction projects from the cuts.
Among the 62% of local authorities planning cancellations, almost all (98%) are scrapping new build over maintenance.
Among the minority of NHS organisations postponing projects, only 51% are scrapping new build projects.
In the search for cost savings, only 16% of health sector respondents plan to join a framework or a buying consortium to achieve economies of scale compared to a third of local authorities.
A third of health sector respondents plan to quit a framework or buying consortium and decentralise their procurement practices. This again contrasts with local authorities, 53% of whom plan to centralise procurement to a single office or department.
Both local authorities and housing associations ranked a supplier’s price and its financial health as the most important considerations during the selection process.
Constructionline director Philip Prince said that this highlighted the ‘procurement paradox’ faced by many in the public sector who are under pressure to cut costs but simultaneously guarding against the dangers of lowest cost bidding.
Mr Prince said: “The high-profile collapse of both Rok and Connaught provided concrete proof, if ever it were needed, about the dangers of lowest cost tendering. But with almost all of our respondents facing reduced budgets clearly there has rarely been a bigger pressure to reduce expenditure.
“Our survey highlights this paradox of procurement perfectly, with cost being the number one consideration when selecting bids followed by concern over whether a contractor is built on sound enough financial foundations to see the project through.”
Constructionline is a national database of pre-qualified contractors and consultants run by the government’s Department of Business, Innovation & Skills (formerly BERR) and Capita Business Services as a way of simplifying procurement.
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