Bid Costs

The costs will be often recovered at financial close in the case of successful bids, although when not successful, they represent a direct cost for the business. In order to mitigate these, Laing carefully targets and selects the projects for which it bids to ensure the highest chance of submitting a successful bid.  Where possible, we use internal resources, which can also reduce costs. In addition, the group has a retained team of advisors who may be willing to work at risk prior to the PB stage.

Before 2001, there were no formal accounting rules regarding whether costs relating to PFI bids should be expensed or capitalised. This was resolved in Urgent Issues Taskforce Abstract (UITF) 34 – Pre-contract Costs. Under these rules, until preferred bidder status is achieved, all costs must be expensed as they are incurred, i.e. written off to the Profit & Loss account.  

During the PB stage all costs will be capitalised and an asset created on the sponsor’s (e.g. Laing’s) balance sheet(s).  When financial close is reached, a recoupment of the bid costs and a development fee are charged to the project company by the sponsors. The element of deferred income is calculated, and is then released to the Profit & Loss account over the construction period of the asset.