Cost plans will hurt builders, warns CIF

GOVERNMENT plans to curb cost overruns on public projects will send many small and medium building companies out of business, the Construction Industry Federation (CIF) warned yesterday.

The industry umbrella group said proposals to bring in a new form of contract would transfer too much of the risk of overruns to building companies and would make Ireland less builder-friendly than any other developed country.

CIF president Nobby O’Reilly, who is also chief executive of construction heavyweight Pierse, said the new plans were an attempt to buy cost certainty “at any price” and asked construction companies to take a hit in the event of unforeseen developments such as oil price hikes, delays to projects caused by planning, power or water difficulties, or even in cases where the State body behind the project changed its mind. “A simplistic mechanism is used whereby contractors are asked to include for every possible risk, unforeseen or otherwise. It is simply impossible for a contractor to quantify and price all the risks involved and particularly so in the competitive environment and short timeframe allowed to prepare a tender,” he said.

CIF contracting director Don O’Sullivan said builders were happy to work with the government to address the issue of cost overruns on public infrastructure projects but that the new regime could delay progress by up to 10 years because it would require time for the system to bed down. Many of the factors behind cost overruns were outside the control of builders, he said.

The CIF cited the example of the Dublin Port Tunnel, which will cost more than originally planned but would be completed to higher safety standards and more complex tunnelling arrangements than had originally been agreed.

Publishing its autumn commentary on the construction industry yesterday, the body also said the residential housing market remained buoyant and that current record levels of housing output would be equalled in the year ahead.

CIF housing director Hubert Fitzpatrick said demand remained strong and welcomed the recent moderation in house price increases, saying greater stability would be good for the market. He added that the housing market would not suffer if interest rates rose gently and in line with the predictions of most economists.

CIF figures estimated the construction sector’s contribution to the Irish economy was in the region of €28 billion, around 24% of Gross National Product (GNP). Employment in construction now stands at over 300,000.