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Tier

Functional Standards Common Glossary, published by the Cabinet Office, defines a tier as: ‘The level a contract is assigned to in the organisation’s hierarchy of criticality, as defined by its risk assumptions.’

BIS Research paper No. 145, Supply Chain Analysis into the Construction Industry, A Report for the Construction Industrial Strategy, published by the Department for Business Innovation and Skills in October 2013 assessed five projects ranging in value from £1 million to £25 million.

It defined suppliers as:

TIER DESCRIPTION EXAMPLES
Tier 1 Designers and constructor that have a direct contract with the ultimate client. NB: PAS 1192-2 suggests that ‘A tier 1 supplier can provide services to the project (for example, development of the project brief, architectural services, engineering services, construction management services), or can provide goods to the project (for example, constructed assets).’
Tier 2 Designers, constructors and suppliers with a sub-contract with the tier one contractor.

Novated design consultants. Sub-contractors.

Manufacturers and material distributors.

Suppliers of major plant and equipment such as tower cranes.

Tier 3 Designers, constructors and suppliers with a sub-contract with a tier two sub-contractor.

Designers providing working details. Specialist sub-contractors.

Manufacturers and material distributors.

Plant and equipment supply and hire firms.

Tier n Tier 3 sub-contractors also employ suppliers and sub-contractors, so in many cases there will be a fourth or even fifth tier involved in construction delivery.

The report suggests that, ‘Tier 1 contractors are typically termed main contractors, and many tier 2 contractors are described as specialist contractors. Labour-only sub-contractors typically operate at the third tier.’

It found that it was not uncommon to have 50 to 70 tier 2 suppliers and sub-contractors and suggested that the, ‘…duplication of multiple layers of profit, overhead and risk could represent a source of non-value added cost and waste.’

For more information see: Suppliers for design and construction.

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