Tender Prices Rise as Project Delays Hamper Construction Sector

Tender prices in the civil engineering sector have increased by 2% year-on-year in the second quarter of 2026, according to the Building Cost Information Service (BCIS) civil engineering tender price index panel. However, the panel warns that the costs of tendering are prompting contractors to be more selective, slowing down project advancement.

What Happened
The BCIS panel's findings indicate that while infrastructure demand remained stable during Q2 2026, there was significant variability in activity levels across different subsectors. Aviation and defense sectors are among the strongest performers, although they face challenges such as capacity constraints and delayed funding allocations, respectively. A notable concern is the slow progress in bringing projects to market. Extended cost-planning and value-engineering exercises are reportedly delaying schemes as clients aim to reduce expenses before procurement.

Dr. David Crosthwaite, chief economist at BCIS, highlighted that prolonged project delays could lead to increased project costs. The rising cost of tendering is making contractors more selective, often favoring projects that require lower resource investment during tendering. This selectivity is exacerbated by more restrictive and expensive performance bonds, which discourage participation in various procurements.

The industry is also grappling with skills shortages, particularly among professional roles within consultancies and specialist trades required in later project stages. While these constraints are less severe in the current softer market, any uptick in activity could quickly expose existing capacity gaps. Additionally, potential changes in steel package costs are under scrutiny due to multiple influencing factors, including geopolitical tensions and policy changes.

What This Means for Your Business
For AECM industry professionals and government contractors, these developments signal a need for strategic adaptation. The increase in tender prices and the selective nature of contractors could impact procurement strategies and project timelines. Businesses should anticipate tighter competition for contract awards, with an emphasis on cost efficiency and resource allocation.

Compliance requirements, such as CMMC and NIST, alongside federal funding opportunities, remain critical areas for focus. As performance bonds become more restrictive, understanding these financial instruments' implications is vital for maintaining competitive positioning. Additionally, businesses should consider the potential cost impacts of geopolitical factors and regulatory changes on material costs, particularly steel.

What US Operators Should Watch
US operators should closely monitor federal procurement windows and regulation timelines, especially concerning the CMMC audit dates and bid opportunities. Staying ahead of these deadlines ensures preparedness and compliance, which are crucial for securing contracts in an increasingly selective market.

Operators should also track developments in performance bond requirements and steel package costs, as these can significantly affect project budgeting and planning. Understanding the broader economic and geopolitical landscape will be essential for navigating potential disruptions in material supply and cost.

Source: https://www.theconstructionindex.co.uk/news/view/bcis-tender-prices-up-but-processes-slowed. Read the original story ->