On average, a Scottish contractor has to submit 36 pre-qualification questionnaires (PQQ) for every contract won. The Scottish Building Federation (SBF) described the current system as a ‘lottery’.
It is so bad that 63% of construction firms with a turnover less than £2m say they have submitted no PQQs for public procurement in the past three years.
These are among the findings of the latest Scottish Construction Monitor, a quarterly survey of employers in the Scottish construction industry carried out by the SBF.
The survey found that an average of more than three out of every four pre-qualification questionnaires completed by construction firms for public tenders failed to secure them a place on the tender shortlist. Even when shortlisted, the success rate was only one in eight.
The Scottish Construction Monitor measures general confidence within the industry by asking participants how confident they feel about the outlook for their business over the next 12 months compared to the past year.
The latest Monitor finds confidence has subsided for the fourth consecutive survey period and now stands at minus 40. Confidence has fallen by 34 points in the past year and now stands three points below where it was in the third quarter of 2010 when the impact of the previous recession was at its height. More than two-thirds of all respondents are now less confident about the prospects for their business in the year ahead compared to the preceding 12 months.
SBF chief executive Michael Levack said: “This latest survey shows what a lottery the current public procurement process has become. I’ve heard employers representing businesses of all sizes argue they would have better odds of generating revenue by placing bets at the roulette wheel than tendering for public contracts. The root and branch reform of construction procurement the Scottish Government has promised is clearly long overdue.
“It’s particularly concerning that so many SMEs in the industry are avoiding public procurement altogether because they find the costs so prohibitively high. Scottish ministers have set great store by their commitment to give SMEs greater access to the public procurement market. This survey demonstrates the urgent need to tackle sky high procurement costs if more smaller construction firms are to be persuaded of the benefits of tendering for public contracts.”
Mr Levack concluded: “I’m pleased that the Scottish government has finally launched a public consultation on its proposed Procurement Reform Bill. But we already know that the current procurement system is broken and the measures needed to fix it. With the industry now facing a second recession in the space of four years and confidence continuing to slide, Scottish ministers need to act immediately to streamline the procurement process and provide fairer and more cost-effective access to publicly funded building contracts for firms of all sizes.”
Main findings of the latest Scottish Construction Monitor survey are:
- Industry confidence continues to fall and has dropped a further 12 points since the previous quarter, having now reached MINUS 40;
- The industry’s confidence rating now stands three points below where it was in the third quarter of 2010, when the impact of the previous recession was at its height;
- The percentage of respondents who are more confident about their prospects for the next 12 months compared to the past year has slumped from 15.2% in the previous quarter to 5.4% this quarter, while the percentage of respondents less confident about their firm’s future prospects has risen from 55.7% in Q1 2012 to 67.9% this quarter;
- 63% of construction firms with a turnover less than £2 million say they have submitted no PQQs for public procurement in the past three years;
- A number of small firms responding to the survey submitted supplementary comments to the effect that they were dissuaded from participating in public procurement due to prohibitively high associated costs;
- The average construction firm has to submit 36 pre-qualification questionnaires for every successfully secured public contract, an average success rate of 3%;
- On average, less than one in four PQQs completed results in a company getting through to the tender shortlist;
- On average, one out of every eight procurement processes where the company is shortlisted finally results in that company being successfully selected to carry out the work, an average success rate from shortlist to successful tender of 12.5%.