Price stability and the business cycle: UK construction bidding patterns 1970-91

Problems of competitive pricing and strategic management in the construction industry are discussed. A statistical analysis of tender spread patterns over the period 1970-91 shows that changing market conditions influence levels of risk exposure and in turn affect the establishment of a market-generated 'going rate' for construction. A pattern of increasing stability of pricing is identified during the 1980s, and this pattern is linked to developments in the strategic management of contracting organizations. Despite trenchant criticism of the sealed bid as a method of price determination, the industry's price levels do respond relatively quickly to changed economic conditions.