RICS survey reveals full extent of suicide bidding in the recession, as firms are forced to ’buy’ work
Two-thirds of consultants have been forced to advise clients not to accept bids because they are below cost price, according to a major survey from the RICS that reveals the full extent of suicide bidding in the recession.
The findings, of a survey of 390 of the RICS’ QS members, also show that more than half of consultants have experience of a client accepting a “sub-economic tender” in the full knowledge it was “potentially unviable”.
The survey found 64% of consultants had advised a client not to accept a tender because they considered it priced too low to be viable. In addition, 57% have seen their clients accept a bid even though it was costed at too low a price. Four-fifths have seen so-called “suicide bidding” increase in the last three years.
Tender prices have fallen by about 15% since the start of the recession. Sub-economic tendering, where firms bid below the cost price of work, is known as suicide bidding because it can drive firms out of business.
The figures come after Wilkins Kennedy reported last week that the number of construction insolvencies has spiked, rising 19% in the last quarter.
Stephen Gee, managing partner at consultant John Rowan & Partners, said: “I’m surprised the figures here aren’t that 100% of people have experienced this. We’re seeing people pricing jobs at half the reasonable fee. You can only describe it as buying work.”
Suzannah Nichol, chief executive of the National Specialist Contractors’ Council, said: “It’s happening a lot as companies are in survival mode. People are thinking they should keep winning work whatever the cost and that’s unsustainable.”
David Bucknall, chair of the RICS’ QS and construction board, called for reform in line with last week’s government construction strategy, in order to stop the practice. He said: “[The survey] is indicative of an industry that may not have changed its custom and practices significantly and it’s disappointing.
“A more integrated approach to delivering projects can be a strong antidote to sub-economic tendering.”