Fear of supply chain failures boosting collaboration

Aaron Morby 1 month ago

Around nine out of 10 contractors say the biggest headache they currently face is industry supply chain fragility.

Fear of supply chain failure now dominates all other concerns like labour availability and materials cost and supply, according to consultant RLB’s annual procurement trends report.

But widespread concern about the supply chain in construction has pushed clients towards greater collaboration with contractors.

Contractors are also seeing an improved appetite for sharing more risk as the climate switches from managing towards investing in the supply chain.

RLB’s Procurement Trends survey found more than half of contractors (54%) saw increasing collaborative practices in procurement, while 35% of contractors stated that clients were more willing to share risk.

In response to market volatility, 16% of contractors now report increased use of project bank accounts.

Around two-thirds of firms also warned of a significant increase in the cost of performance bonds, with 23% reporting they were placing fewer bonds as clients were no longer willing to pay for them.

Paul Beeston, RLB Head of Industry and Service Insight, said: “In previous tightening markets, more competitive forms of procurement have seen a resurgence.

“But that is not universally the case in our 2024 survey. More than half of contractors are seeing collaborative practices in procurement, including a willingness to share risk.

“Clients may still have red lines for their own risk appetite, but they are willing to procure in ways that avoid just shifting that risk to the supply chain.

“The most collaborative routes to market are generally found on smaller projects, fit-outs and refurbishment works, with the highest competitive levels displayed on small to mid-sized projects (£5m to £7.5m) and within the retail and infrastructure sectors.”

At the same time RLB’s survey also found a 9% increase in the use of design and build to 67%, the highest proportion since the start of the survey.

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