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Dublin: 15 °C Friday 29 August, 2014

Half of constructors submitting tenders ‘below cost’ to try and find work

Over half of construction tenders submitted now are below cost – with the actual costs around 17 per cent higher than given.

Image: Sasko Lazarov/Photocall Ireland

A NEW SURVEY has found that over half of all tenders for construction projects in Ireland are now submitted carrying prices below their actual cost, as construction firms fight to win new projects.

The Society of Chartered Surveyors in Ireland says that the percentage of tenders being submitted ‘below cost’ has increased to 52 per cent – up from 37 per cent around two years ago.

Its survey added that below-cost tenders were, on average, valued 17 per cent lower than their true cost – and warned that below-cost tendering was “unsustainable” and “will result in longer-term problems for industry clients”.

It also added that the practice would ultimately cost jobs and expertise.

The survey found that 97 per cent of quantity surveyors had experienced an increased in below-cost tendering over the last three years, while six out of seven surveyors said clients had accepted the cheapest tender available even when it was below-cost.

Over half of quantity surveyors responding to the survey said they had seen projects collapse because they were below cost. Over two-thirds of projects which failed to be completed were public projects.

SCSI president John Curtin said that below-cost tenders being accepted had already led to the collapse of a number of State construction projects, including contracts to build new schools.

“Below-cost tendering by contractors is likely to continue over the next twelve months,” Curtin said.

“This race to the bottom poses a real threat that tenders will not provide the required standard of construction quality and professional expertise needed for the long-term viability, and return on investment, of any project over its life cycle.”

Curtin added that it was in the public interest to ensure that the highest possible quality of construction standards were provided for at the outset of any new construction project.

“Ensuring that the tender takes these factors into account, and is not just based on the lowest price, is crucial,” he said.

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