It would take a brave person to confidently state what 2019 will bring.
While no one can be certain what will come of all the possible political, economic, societal, technological, legal and environmental changes, what is certain is that 2019 will bring some of the most challenging conditions for businesses since the last recession.
What will the likely impacts be for bidding? Here is my take on some of the main ones:
The Brexit vote in June 2016 had an immediate impact on the currency markets, which affected both the cost of imported materials and the UK’s attractiveness to EU labour. Continuing uncertainties over the outcome of Brexit, including the prospect of further referendums, will likely affect clients’ willingness to go to market and bidders’ appetite for fixed-price contracts. Expect to see both focus on the change control provisions of contracts to try to mitigate some of the potential downsides of currency and labour market fluctuations.
Access to finance
Some tier one contractors are facing financial difficulties. The aftermath of Carillion’s collapse continues to be felt, with some lenders looking to reduce their exposure – including to the supply chain partners of large contractors. We may see further company failures if access to finance becomes a more enduring issue – when the tide of borrowed money goes out, we will find out who was swimming with no trunks on.
There is now a greater focus on payment terms throughout the supply chain. The public sector is waking up to the problems caused when they pay late (not such a common issue now) and when large contractors pay their supply chain late. For example, we are seeing more invitations to tender expecting to see membership of the Prompt Payment Code.
The Grenfell public inquiry is likely to publish reports that will have something to say about the ‘value engineering’ that took place as part of the tower’s refurbishment. Greater emphasis on technical specifications, materials testing, health, safety and risk will all feature on construction, refurbishment and energy efficiency projects.
Ageing workforce and skills shortages
The construction sector faces a double whammy of an ageing workforce and skills shortages. These problems are likely to manifest over time on contract delivery. Organisations that can attract and retain a young workforce are likely to score well in bid processes, as they can provide some evidence / pointers on delivery capability.
Modern methods of construction
There are ambitious housebuilding targets both in the public and private sectors. We are seeing growing interest from clients in offsite manufacture, as well as BIM and BREEAM. Compared with many other sectors, construction has not been an early adopter of technological change. However, the pace of change now seems inexorable.
As budgets get tighter, clients are looking to added value within bids as a way of getting something extra. Monetising your added-value benefits is important to demonstrate the financial value. Of course, there can be other benefits too – social value, for example.
Outsourced bids is a growing trend, with many bidding firms seeing the value of bringing in specialist bidders who provide valuable external perspectives to their strategic bids. In-house teams can also be strengthened by bringing in additional external resource to cover busy periods.
There will be certain changes to procurement rules if there is a no-deal Brexit, with the government planning to set up a new UK e-notification service if access to OJEU / TED is closed off to public sector bodies. Access to OJEU would be the main difference rather than expecting to see immediate changes to the Public Procurement Regulations, which are already enshrined in UK law.
While all eyes will be on what’s happening (or not happening) with Brexit, there are plenty of other important issues that will affect bid trends for 2019.
Andrew Morrison is managing director of bid consultancy AM Bid