SMALL businesses have lashed out at the spiralling cost of pitching for public sector contracts after new figures showed the burden of tendering for construction work had rocketed to nearly £100 million each year.
But public bodies hit back over the blacklash, claiming they were “damned if they do and damned if we don’t” over the awarding of deals.
Contractors believe the costs of bidding for work had risen by up to 50 per cent over the past five years.
Construction firms estimated that they spend about £1,000 filling in pre-qualification questionnaires (PQQs) for a £1m contract and a further £3,700 if they were shortlisted for the work.
Vaughan Hart, managing director of the Scottish Building Federation (SBF), which compiled the report, said: “I know a number of contractors are actively avoiding the public sector market because they feel they’d have to make suicidal bids to secure the work.
“Even at the best of times, construction is not a high-margin industry. If you consider the cost of tendering for public sector contracts is now more than 4 per cent of contract value, most contractors will be fulfilling these contracts at best at break‑even and at worst a financial loss.”
Hart said the solution was to introduce a financial incentive for public authorities to run a more efficient and cost-effective tender process.
“They should be encouraged to consider a means of reducing the tender costs to shortlisted contractors or reduce the amount of shortlisted companies in the first instance,” he added.
More than 60 per cent of the firms that responded to the SBF’s survey think unsuccessful tenderers should be able to recover a proportion of their bid costs.
Colin Borland, head of external affairs at the Federation of Small Businesses in Scotland, said the report highlighted yet again “the barriers caused by excessive paperwork” at the pre-qualification stage.
He said: “The complexities and cost of this can discourage many businesses, even relatively large independent firms, from bidding. This takes away from local firms and money from the communities in which they are based.
“While a start has been made to tackle this through the introduction of a standard PQQ, it needs to be used by all public bodies if it’s to be effective.”
However, the Convention of Scottish Local Authorities (Cosla), the umbrella body which represents Scotland’s 32 unitary locals, hit back at the criticism of the public sector. It questioned the “low response rate” for the SBF’s survey, with responses only coming from 19 of the 96 members questioned.
A Cosla spokeswoman said: “The low response rate suggests that, for many businesses, this is nowhere near the top of their agenda.”
She added: “We are damned if we do and damned if we don’t because, when councils have fought to reduce costs by limiting the number of businesses tendering, any business excluded has complained very loudly indeed.”
In October, the Scottish Government launched a review of public sector construction contracts, led by former KPMG partner Robin Crawford and ex-Clydesdale Bank executive Ken Lewandowski.
A Scottish Government spokesman said: “Ministers are listening to the concerns of industry. We understand the review is aware of these issues.”