Mobilisation and tender costs

Before a contractor lays a brick, it spends money winning the job and getting ready to start. Under the old IAS 11, many contractors capitalised pre-contract costs; IFRS 15 is stricter. This guide sorts tender, success and mobilisation costs into what is expensed and what is capitalised, and explains how capitalised costs are amortised and tested.

By Hamza Fida, Chartered Accountant. Reviewed by Mirza Fahad Baig, Chartered Accountant. 3 minute read.

Short answer

Construction mobilisation and tender costs follow IFRS 15's rules on contract costs. Bid costs incurred whether or not the contract is won, such as estimating and tender design, are expensed. Incremental costs of obtaining a contract, such as a success fee to an agent, are capitalised if expected to be recovered. Mobilisation costs, setting up the site and moving plant, are capitalised as costs to fulfil the contract when they relate directly to it, create resources used to do the work and are expected to be recovered, then amortised as the work progresses. In this guide's example, 450,000 is capitalised and 150,000 expensed.

At a glance

Tender and bid costs
Expensed as incurred
Success fees
Capitalised if recoverable
Mobilisation
Capitalised if fulfilment criteria met
Site equipment bought
Property, plant and equipment
Amortisation
As the work progresses
Mobilisation fees received
Part of the contract price
Mobilisation and tender costsTender and bid costs: Expensed as incurred; Success fees: Capitalised if recoverable; Mobilisation: Capitalised if fulfilment criteria met; Site equipment bought: Property, plant and equipment; Amortisation: As the work progresses; Mobilisation fees received: Part of the contract price.KEY FACTS AT A GLANCEMobilisation and tender costsTender and bid costsExpensed as incurredSuccess feesCapitalised ifrecoverableMobilisationCapitalised if fulfilmentcriteria metSite equipment boughtProperty, plant andequipmentAmortisationAs the work progressesMobilisation fees receivedPart of the contractpriceTax BakersMobilisation and tender costsTender and bid costs: Expensed as incurred; Success fees: Capitalised if recoverable; Mobilisation: Capitalised if fulfilment criteria met; Site equipment bought: Property, plant and equipment; Amortisation: As the work progresses; Mobilisation fees received: Part of the contract price.KEY FACTS AT A GLANCEMobilisation and tender costsTender and bid costsExpensed as incurredSuccess feesCapitalised if recoverableMobilisationCapitalised if fulfilment criteria metSite equipment boughtProperty, plant and equipmentAmortisationAs the work progressesMobilisation fees receivedPart of the contract priceTax Bakers
Key facts at a glance, as set out in this guide.

Mobilisation and tender costs: an example

A contractor bids for a CU 20 million road contract, with expected costs of 16 million. Its estimating team spends 150,000 preparing the bid. It wins, and pays a local agent a success fee of 50,000 that is due only because the contract was signed. Before construction starts, it spends 400,000 setting up the site compound, temporary access roads and utilities, and transporting its plant to the site.

Pre-contract and start-up costsPre-contract and start-up costsTreatmentWhyTenderpreparationExpenseIncurred winor loseSuccess feeCapitaliseIncrementalSite set-upCapitaliseFulfilmentcostSite cabinsboughtPPEIAS 16
Only costs tied to winning or doing this contract are capitalised.
CostAmountTreatment
Tender preparation150,000Expensed: incurred whether or not the contract was won
Agent's success fee50,000Capitalised: incremental cost of obtaining the contract
Site set-up and moving plant400,000Capitalised: cost to fulfil the contract

The 450,000 of capitalised costs is amortised in line with progress on the contract. When the contract is 25% complete, 112,500 has been amortised to cost of sales.

Why are tender costs expensed?

Because they are incurred whether or not the contract is won, so they are not incremental costs of obtaining it. The only exception is costs explicitly chargeable to the client regardless of whether the contract is obtained, such as a paid design competition. Contractors that bid for many contracts expense their bidding departments' costs as overheads.

When can mobilisation costs be capitalised?

When they meet all three criteria for costs to fulfil a contract in IFRS 15: they relate directly to a contract or a specific anticipated contract, they generate or enhance resources that will be used to satisfy performance obligations in future, and they are expected to be recovered. Costs within another standard follow that standard instead: site cabins and equipment bought for the site are property, plant and equipment under IAS 16, depreciated over their own useful lives.

Do mobilisation costs count towards progress?

Usually not. Setting up a site transfers nothing to the client, so including these costs in a cost-to-cost measure would bring revenue forward. Contractors exclude them from progress and amortise them as a separate asset instead. Where mobilisation activities do transfer something to the client, they are part of performing the contract and count towards progress. See the cost-to-cost method.

What about mobilisation fees paid by the client?

An upfront mobilisation payment from the client is usually not for a separate service; it is an advance of the contract price, held as a contract liability and recognised as revenue as the work is done. See contract assets and liabilities.

What about demobilisation costs?

Costs of leaving the site at the end, such as removing the compound and returning plant, are included in the estimate of total contract costs, so any expected loss reflects them. They are expensed as incurred, and site restoration required by the contract is part of performing it.

How are capitalised costs tested?

An impairment loss is recognised when the carrying amount of capitalised contract costs exceeds the remaining consideration the contractor expects to receive, less the costs still to be incurred to complete the work. On a contract that has become loss-making, this test comes before any onerous contract provision. See loss-making construction contracts, contract costs under IFRS 15 and construction accounting.

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Questions people ask

Are construction tender costs capitalised under IFRS 15?

No, unless explicitly chargeable to the client regardless of outcome; they are incurred whether or not the contract is won.

Can mobilisation costs be capitalised?

Yes, if they relate directly to the contract, create resources used to perform it and are expected to be recovered.

Do mobilisation costs count towards cost-to-cost progress?

Usually not, because setting up a site transfers nothing to the client.

How are mobilisation fees received from the client treated?

As an advance of the contract price, held as a contract liability and recognised as the work is done.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 15 Revenue from Contracts with Customers

Rules and fees change. If you are reading this long after October 7, 2026, confirm the figures with the source before you rely on them.

IFRS 15Contract costs: costs to obtain and fulfil a contract under IFRS 15ConstructionThe cost-to-cost method of measuring progressConstructionConstruction accounting: the key IFRS issues

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This guide is general information. It is not tax or legal advice for your situation.