Commercial surveying news from the Beattie Partnership

Schools: How Will the Tender and Build Costs Gap Affect You?

The Beattie Partnership have recently published a business rates guide for the education sector. Our research uncovered noticeable differences between tenders and final build costs in a number of instances. The initial results suggest that tender pricing could be understating what the final building costs were.

When organisations go out to tender for building work, the pressure is on to ensure that they get the lowest possible price, and the convention for doing this is through sequential lowest price tendering.

This has two distinct disadvantages. Firstly, the non-integrated nature of tendering, whereby building design and construction are dealt with separately, leaves projects open to increased costs down the line because the two areas aren’t joined up enough at an early costings stage. Secondly, contractors are tendering low to win contracts and then adding real costs incurred when the actual building work is underway.

If contractors feel forced to price their work at unrealistically low levels this is likely to impact either on the quality of the work itself or on the final building costs to the client. So in terms of delivering a saving, low tendering can in fact be more costly to the client in the long run. It may also incur reputational damage to the contractor if the gap between tender and actual cost is significant.

For the education sector in particular, building costs are crucial in the impact they can have on future rateable values. Any educational establishment will need to consider not only the projected cost of their build, but also the long-term cost to them in terms of possible business rate increases. Additional questions around the gap between the tender and the final building cost, upon which rateable value is based, will only add to the uncertainty.

When it comes down to it, controlling the budget for building projects is paramount, and having a tendering process that reflects the actual cost of a build is clearly going to be better than perpetuating a situation where competition is actually costing clients more.

Click here to download your copy of “Education Sector: 2017 Rating Revaluation – What You Need to Know”.