Yorkshire & Humber shows strong market with more competitive procurement approach
Local Yorkshire construction and property management consultancy, RLB UK’s fifth annual Procurement Trends report reveals that Yorkshire & Humber shows a strong market and more competitive procurement practices than the national picture.
Indicators such as Yorkshire having the highest proportion of single-stage projects and with single-stage procurement activity likely to continue going forward, show confidence in the market. Top heated trades include groundworks (21%), façade & curtain walling (12%) and brickwork and blockwork (29%) with the least capacity in the region.
Yorkshire & Humber Procurement route to market:
Single-stage: 39%
Two-stage: 24%
Framework: 16%
Negotiated: 21%
With 87% of contractors nationally saying the greatest issue they face in the next 12 months is fragility of supply chain, taking over from material cost and availability, the latest data reflects a changing procurement landscape where the long-term operating models of contractors have been questioned and clients are realising the risk that supply chain fragility poses to their own operating models.
More than half of contractors (54%) have seen increasing collaborative practices in procurement while 35% of contractors state that clients are more willing to share risk. The most collaborative routes to market are generally found on smaller projects, fit-out and refurbishment works, with the highest competitive levels displayed on small to mid-sized projects (£5m to £7.5m) and within the retail and infrastructure sectors.
Key findings include:
– 6% fewer projects being negotiated than in 2023.
– 51% of larger projects (>£60m) showing the highest proportion of two-state tenders being utilised, with +8% YOY increase in the use of two-stage tendering (and almost identical reduction in the use of negotiation).
– 67% of projects now adopting design and build forms of contract, the highest proportion since 2019, and a 9% increase YOY.
– One-month increase in fixed price durations being offered by contractors, which is most noticeable at the mid-scale of projects, £30 to £60m.
– Six-day increase in average tender validity period since RLB’s 2023 survey.
– In response to market volatility 16% of contractors report increased use of project bank accounts and 63% of contractors report a significant increase in the cost of performance bonds, with 23% reporting they are placing fewer bonds as clients are no longer willing to pay for them.
– Wider use of both the Public and Private Sector Construction Playbook with 18% and 16% of contractors reporting increased adoption respectively.
Move to procuring for value
When in force, the Procurement Act might be more of an evolution than revolution, but it will place increased emphasis on procuring for value and the introduction and reporting of KPIs, seeing a further move to procuring better outcomes. However, the RLB research found that 34% of public sector projects still do not use value-based procurement and 25% of public sector projects are procured without explicitly stating the value selection criteria.
MMC adoption on projects
On average 24% of projects are adopting MMC techniques, which has stayed consistent since the RLB survey started in 2019. Yet, the greatest barrier to adoption is design teams of which 24% are resistant to MMC. Further barriers include cost (21%), supply chain capacity (19%), client resistance (18%) and continuity of workload (15%). Design teams are likely to be responding to legislative change, including the impact of the Building Safety Act, specialist MMC contractors’ insolvencies and historic quality ‘failures’ in the sector.
Green procurement
The trends analysis also found that there is a 19% increase in contactors who report they are being asked to provide whole life carbon assessments, to 33% in 2023 compared to 14% in 2023, showing a shift in a more focused approach to sustainability measures. 27% of contractors report that tenders explicitly communicate project sustainability objectives and 24% of tenders are asking for open commitments to reduce waste during construction. Other sustainable procurement findings include 18% of contractors saying that tenders are asking for a commitment from them to achieve net zero carbon by 2025, 17% see the use of contract amendments specifying sustainability objectives and 14% to commit to reduce carbon during construction.
Preparedness for the Building Safety Act
25% of contractors “strongly agree” that they are “fully prepared” for the Building Safety Act with 75% of contractors agreeing that they have adjusted resourcing of projects and expect preliminary costs to be impacted for higher-risk buildings. However, 56% of contractors “agree” or “strongly agree” that they have concerns on the impact of the gateway approvals on the industry.
Matt Summerhill, RLB’s Managing Partner for Yorkshire, Humber & the North East comments, “What is clear from RLB’s Procurement Trends report is that construction activity is still positive in the Yorkshire region and with more competitive procurement practices than nationally. This is something we are also seeing at RLB with the public sector particularly active in regeneration and refurbishment campaigns for our city and town centres as well as there being continued investment in infrastructure, educational and residential facilities in the region.”
For the full findings from RLB’s Procurement Trends survey, please go to https://www.rlb.com/europe/insight/procurement-trends-report-2024/