Public building projects under threat as contractors ‘get better terms abroad’
PUBLIC building projects across the country are under serious threat as Irish and international contractors shun Ireland for better contracts abroad, industry leaders have warned.
Construction Industry Federation (CIF) director of main contracting, Paul Sheridan, said public projects will face major delays or worse unless there is significant reform of the procurement process.
Mr Sheridan said the current public works contract is ‘ineffective in managing price volatility and supply chain disruption’, which are key concerns as economic volatility poses a threat to the industry.
He told the Irish Mail on Sunday: ‘Unfortunately, when contractors look at the public works form of contract and the public procurement process, what they see is something that is becoming highly risky.
‘The way those contracts are set up, it doesn’t allow collaboration or problem-solving to take place.
‘It doesn’t have effective price variation clauses. It’s very much a case of transferring risk to the contractor … [all of which] makes it
‘They see something that is becoming highly risky’
highly unattractive.
‘You could almost say it is a bit of reckless trading going into a fixedprice contract in the current environment. Unfortunately, the public works contract is essentially, practically, a fixed-price contract.’
The industry representative said there is a need for more flexible agreements such as the internationally standardised NEC and FIDIC contracts, which are used here in the private sector and for public works projects in many other western countries.
‘We’re in a much more competitive internationalised construction market, and many of the construction contractors in Ireland are now exporting services abroad,’ Mr Sheridan said. ‘[NEC and FIDIC contracts] offer better terms and conditions for both parties, to make sure the project is delivered.’
The chartered engineer said builders are increasingly turning away from public contracts to ensure their businesses can survive.
‘Contractors are looking for better opportunities elsewhere, that is the reality.’
Mr Sheridan said the consequences of the worsening outlook is: ‘If you’re not getting enough tenders, you’re not getting enough competition, which means you may not be able to go forward with the contract, and that can then lead to delays.’
Dr Sarah Ingle, chairperson of the Construction Industry Council which comprises the six major associations representing professional service providers and contractors across the Irish built environment sector, including the CIF, warned contract conditions must ‘continue to attract the industry to bid for public projects’.
She told the MoS: ‘This will require investing in the resources necessary to bring the public procurement process and the public works contract in line with international norms, including fair and effective price variation mechanisms.’
Dr Ingle, who is also a chartered engineer, added: ‘To reflect the increasing complexity of design and delivery of buildings and infrastructure this needs to be urgently addressed.’
In response to queries from the MoS, a spokeswoman for the Department of Public Expenditure and Reform said: ‘The public works contracts were substantially amended in January of this year to permit cost recovery for exceptional price inflation in materials in response to the issues that arose post-pandemic.
‘The response to the further challenges that have arisen since the Russian invasion of Ukraine has been swift. In May, the Minister for Public Expenditure and Reform introduced the Inflation/Supply Chain Delay Co-operation Framework in order to safeguard public assets under construction from the threat posed by materials and fuel price inflation.’