What is the story about?
What's Happening?
Construction firms are increasingly turning to alternative contract strategies such as construction management and self-delivery due to rising pricing risks that are stalling two-stage contract negotiations. According to McBains' Summer 2025 Construction Market Report, developers are cautious about lump-sum deals, leading to a resurgence in package-based delivery models. The report also highlights growing interest in co-investment structures and in-house delivery of mechanical and electrical packages. Tender price inflation is expected to rise by 2% in both 2025 and 2026, with construction output forecasted to grow by 1.9% in 2025 and 3.7% in 2026.
Why It's Important?
The shift towards alternative contract strategies reflects the construction industry's adaptation to economic uncertainties and pricing risks. By exploring innovative procurement methods, firms aim to balance delivery risks and maintain project viability. This trend is significant as it impacts project timelines, costs, and overall industry growth. The focus on private housing, infrastructure, and retrofit programs indicates areas of potential growth, while challenges such as labor shortages and supply-chain capacity may affect delivery pace. The industry's response to these challenges will shape future construction practices and economic outcomes.
What's Next?
Construction firms will continue to explore alternative contract strategies to mitigate pricing risks and ensure project success. The industry is expected to see growth in private housing, infrastructure, and retrofit programs, driven by government initiatives and rising demand. However, labor and supply-chain constraints may pose challenges to project delivery. The report suggests a need for additional skilled workers and highlights potential reliance on private real estate partners in the higher education sector.
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