Housing associations will exert the biggest squeeze with 50% demanding price cuts from subcontractors while health authorities will retender a third of projects to secure lower bids.

One in four public sector clients are also likely to cancel construction projects this year according to a survey by pre-qualification certification scheme Constructionline.

Public sector organisations are working with Constructionline to deliver cost savings to their construction budgets in the hope that projects won’t have to be cancelled or prices slashed.

Tactics include adding new contractors to supply chains (25%), retendering for frameworks (21%), price benchmarking future tenders (32%) and retendering for projects (34%).

Philip Prince, sales and marketing director at Constructionline, said: “Despite the financial pressures public sector organisations are under, our survey has highlighted the positive steps many organisations are already taking to deliver effective savings.

“We are helping many of our own clients look at ways to save on procurement costs and therefore reduce their overall construction costs.

“In the last six months, nearly a third of public sector clients joined framework agreements and a further quarter started trialling new forms of framework working. Frameworks can guarantee certainty on time, cost and quality, which means greater predictability and a more timely and efficient programme of delivery.”

“Health authorities have been the most active in joining frameworks in the last six months, with half (50 per cent) signing up in search for cost savings. Local authorities, the police, and universities have also joined frameworks.

“Our survey reflects the state of public spending cuts and the lack of building grants available from central government, which has been facing the industry for some time now.

“In these difficult economic times, it’s important to adapt and find ways to save time and money.

“Constructionline’s priority is to do just that. We work with clients and suppliers to help improve efficiencies and hope we can help public sector clients to continue building.”