Tender prices drop to 1999 levels

CONSTRUCTION tender prices fell by as much as 10.5% in the first half of this year, bringing the average amount firms are offering for building project contracts down to levels last seen in 1999.

Latest figures just published by the Society of Chartered Surveyors show that prices have dropped by 17.3% over the past 12 months. In the last calendar year, they fell by 11%.

While the continued falls have come off the back in the general decline in all sectors of the construction industry, the situation could provide the Government with the chance to move ahead with key infrastructural projects, while at the same time securing jobs and retaining skills within the construction sector.

President of the Society of Chartered Surveyors Ken Cribbin said the current low prices have presented the Government with “an excellent opportunity”.

“Given that the estimated job losses in construction are likely to be just short of 200,000 by the year end, it is essential that the Government prioritises projects that generate more jobs and get such projects to construction as quickly as possible. Investment in public infrastructure also generates a return and improves the competitiveness of the economy while at the same time laying the foundations for the next economic upturn,” said Mr Cribbin.

“Tender prices have declined by 23% since reaching their peak in the first half of 2007.

“The fall comes despite significant increases in the cost of labour and materials inputs over the last 10 years. The only explanation for this is that contractors and sub-contractors are bidding well below cost and under pricing risk, particularly the extra risks being passed to them in the new public works contracts.”

Mr Cribbin’s comments echo those of his predecessor, Sean McCormack. Earlier this year, on the back of last year’s full figures Mr McCormack said that below cost tendering could only really prove a solution in the short term.

However, rather than slowing down – as thesociety anticipated – this year has seen a markedacceleration in the fall in tender prices. The society has already said that without strong government intervention, construction output could shrink to €14bn by next year.