Cost of Tendering

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Cost of Tendering

Costs of Procurement in Construction

Project Objectives

This project seeks to identify the cost of procurement, i.e. not only the cost of tendering but also the costs of marketing, monitoring and enforcing contracts, and to compare different procurement routes, notably collaborative working.

Project Description

Phase 1 - Using a self-completion questionnaire, phase 1 of the project generated 90 responses from parties thoughout the supply chain. The total annual construction -related turnover of the business units replying amounted to about £5 billion and ranged fron £115,000 to £806 million. The results suggested that, for each element of a project, the procurement of the supplier by the trade contractor costs about 9%, or the trade contractor by the contractor about 5%, and of the contractor by the client, 3%. Thus, even without allowing for any overheads or profit, the shortest possible supply chain, incorporated around 18% of cost attributable to buying and selling of goods and services. More realistically there are several more layers in the supply chain, so procurement could easily have accounted for 30% or more. Phase 2 - In collaboration with MarketingWorks a much-simplified questionnaire was widely circulated in September. The approach adopted in this phase was to assess tendering-related costgs at an individual project level. Tendering costs per bid were found to be significantly higher for contractors than consultants. The latter are often appointed to help develop a concept.