Tender Inflation: What we are seeing and how to respond
30 June 2026
Tender inflation remains one of the biggest areas of uncertainty across the construction industry in 2026. We may have moved on from the post-pandemic volatility, but the market is still experiencing significant fluctuations driven by global events, labour shortages, energy costs and supply chain disruption.
Geopolitical tensions in the Middle East, including the conflict involving Iran, have created further instability around fuel, shipping and material prices. This has already contributed to rising costs across parts of the construction supply chain, particularly where projects rely on imported materials or energy-intensive manufacturing processes, such as steel and cement.
At the same time, the latest S&P Global Construction Purchasing Managers’ Index (PMI) data released in May suggested contractors were facing the steepest rise in input costs seen for nearly three decades, driven by material inflation, labour pressures and supply chain volatility.
But we are not seeing a uniform picture. Some sectors remain highly competitive, with contractors pricing aggressively to secure work, while others are showing more cautious tendering behaviour and higher contingency allowances. Procurement timing, project complexity, location and contractor appetite are all having a significant impact on tender returns.
The reality is that nobody can predict with certainty what is going to happen – whether prices will continue to rise, stabilise or even reduce over the coming months. However, uncertainty itself creates risk, particularly for projects with longer programmes or complex procurement requirements.
This is where proactive cost management becomes critical.
How to navigate inflation fluctuations
At Daniel Connal Partnership, our role is not simply to report cost increases after they occur, but to actively manage commercial risk throughout the life of a project. We work closely with clients, design teams and contractors to identify potential exposure early and implement strategies that improve cost certainty and procurement resilience.
This includes:
- Reviewing live market intelligence and providing cost forecasting to identify emerging risks before they affect budgets.
- Advising on procurement strategies that reduce exposure to material price volatility and supply chain disruption.
- Structuring contracts and tender documentation to appropriately allocate inflation and escalation risk.
- Identifying opportunities for early procurement of critical materials and long lead items.
- Stress-testing project budgets against different inflation and escalation scenarios.
- Managing contingency allowances in a disciplined and transparent way.
- Closely monitoring contractor pricing, tender assumptions and supply chain dependencies.
- Maintaining programme control to minimise delays caused by procurement uncertainty or material shortages.
In uncertain markets, early planning, strong project leadership and informed commercial advice become even more important. While inflationary pressures may fluctuate, careful cost management and robust procurement strategies can help place projects in the strongest possible position moving forward.
If you’re concerned about how inflation could impact your building project, we would be happy to discuss how we can help to protect you from market volatility.
Find out more about Daniel Connal Partnership’s cost consultancy services here.
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