Large schemes blamed for cost premiums, warns Davis Langdon

Building prices in Greater London were up 1.5% in the last quarter, according to a report by Davis Langdon. This is an 8% rise over the previous year, with similar rates of inflation expected in the next two years.

The project and cost manager reported a continued trend in soaring tender prices particularly for larger, more complex schemes in central London.

St Pancras station

The firm said contractors who have benefited due to the rise of private commercial sector in particular, now hold the bargaining power in contract negotiations. This has enabled them to include larger risk allowances and healthy margins in their bids as well as be selective in their bidding.

The report says factors contributing to cost premium include the disproportionate number of large schemes, a limited number of contractors able to take on these schemes, competition amongst contractors for management personnel and the risk and complexity of the logistics involved in some of these projects.

The consultant also confirmed that last year’s materials price rise of 10% has continued into 2007. The first five months saw prices rise 2.9%.