One in four (25 per cent) public sector clients are likely to cancel construction projects over the next six months and a further quarter (25 per cent) will ask their suppliers to slash prices due to budget cuts, a new survey has revealed.
Local authorities admit they are more likely to cancel projects over the next six months (35 per cent) in a hope to save money. Housing associations said they will ask suppliers to cut their prices (50 per cent) and health authorities predict they will retender projects (33 per cent).
The survey, carried out by Constructionline - the UK’s largest pre-qualification certification scheme - highlights the stark continuation of public sector spending cuts, with two thirds (68 per cent) of public sector clients saying they will have less construction budget available over the next six months.
In the face of cutbacks, however, public sector organisations including local authorities, housing associations and health authorities, are working with Constructionline to deliver effective cost savings to their construction budgets. In the next six months, nearly 90 per cent of those surveyed said they will employ new methods to deliver savings to their budgets, in the hope that projects won’t have to be cancelled or prices slashed.
Adding new contractors to supply chains (25 per cent), retendering for frameworks (21 per cent), price benchmarking futures tenders (32 per cent) and retendering for projects (34 per cent) will be popular methods applied by public sector clients over the next six months.
Philip Prince, sales and marketing director at Constructionline, said: “Despite the financial pressures public sector organisations are under, our survey has highlighted the positive steps many organisations are already taking to deliver effective savings. We are helping many of our own clients look at ways to save on procurement costs and therefore reduce their overall construction costs. In the last six months, nearly a third (32 per cent) of public sector clients joined framework agreements and a further quarter (27 per cent) started trialling new forms of framework working. Frameworks can guarantee certainty on time, cost and quality, which means greater predictability and a more timely and efficient programme of delivery.”
Health authorities have been the most active in joining frameworks in the last six months, with half (50 per cent) signing up in search for cost savings. Local authorities, the police, and universities have also joined frameworks.
Constructionline works with hundreds of public sector clients to pre-qualify their frameworks. As well as providing opportunities for clients to find new suppliers to join frameworks, Constructionline reduces the risk to public sector clients by notifying them if one of their suppliers’ statuses has changed.
Philip Prince continued: “Our survey reflects the state of public spending cuts and the lack of building grants available from central government, which has been facing the industry for some time now. In these difficult economic times, it’s important to adapt and find ways to save time and money. Constructionline’s priority is to do just that. We work with clients and suppliers to help improve efficiencies and hope we can help public sector clients to continue building.”