Fresh research has highlighted the debilitating cost of bidding for work in the construction sector, suggesting the annual total hits around £3bn a year, in an industry where profit margins are often between 1-3%.
The construction industry is worth £110bn per year in project turnover costs with the cost of bidding for work reaching roughly 2% to 3% of total revenue, the findings suggest.
Conducted by MarketingWorks - in association with myConsole - and Reading University, the research took evidence from 140 contractors and looked at around £8bn worth of projects. It found that the average cost per contractor to win each bid is 0.57% of the project value.
Results from MarketingWorks and Reading University research
With contractors reporting a roughly one in five win rate, this means the costs of bidding for work can potentially cancel out the profit margin made on the winning project.
Philip Collard, chief executive of myConsole – which provides a software as a service (SAAS) tool to help companies make their bidding process more efficient – said: ‘The bidding process often escapes serious scrutiny and analysis. Our research highlights that this needs to change. The potential for efficiencies and savings in time and money are massive.
‘We discovered the true cost for a winning bid is the cost of four losing bids, plus the cost of the winning bid. This brings the cost of the bid process up to a staggering 2% to 3% of total revenue.
‘We have valuable insights into the behaviour and processes that win work, and can help procurement teams create massive efficiencies.’
myConsole identified a range of 'work winning behaviours' that mark out winning bidders.
Analysis of winning behaviour:
myConsole is organising a webinar series to highlight areas that provide opportunities for improvement.
The bidding costs relate to the industry as a whole, with costs incurred through developing and analysing a bid.