Construction firms could save more than 30% in costs by sourcing materials and building components from China, India and eastern Europe.
A report by management consultant Pricewaterhouse Coopers (PwC) said engineering and construction firms lag behind the retail and manufacturing industries in sourcing materials from low-cost countries.
It estimates that about 10% of a typical construction and engineering company’s total spend on a project is suitable for low-cost sourcing.
Mark Li, senior consultant with PwC’s low cost sourcing department, said: “We have seen very little evidence of construction firms picking up
on the potential of low-cost sourcing. However, the savings out there are huge, running into hundreds of millions of pounds.”
China is at the forefront of the global market for construction materials, and is making an increasingly wide range of low-cost products. These include electrical goods such as wiring, junction boxes and fusing, mechanical plant, and hardware such as door furniture, sanitary ware and flooring.
Thirty per cent savings are typical of what we have seen in the past
Mark Li, PwC
Li said: “Thirty per cent savings are typical of what we have seen in the past.”
The report said said large orders of electrical cable assemblies can be sourced at a saving of 38%, while items such as hospital steam boilers can be procured at a 30% cut.
The biggest savings can be made on items with more involved manufacturing processes; lower savings can be realised from items such as structural steel, plate glass and plasterboard.
However, Li warned: “A lot of procurement departments are run on skeleton staff, and to make low-cost sourcing work means investing time to get it right.”
For more on construction costs search www.building.co.uk/datatoolkit