Funding strain jeopardises major infrastructure projects

Funding strain jeopardises major infrastructure projects

Six projects now would not proceed this year due to funding pressures, including the N25 Carrigtwohill to Midleton improvement scheme. Picture: Denis Minihane

Major infrastructure projects proposed in the landmark National Development Plan are facing a “car crash” unless reform is brought to public works contracts, an Oireachtas committee has heard.

Transport committee chair Kieran O’Donnell said “the figures don’t add up” on public works contracts, and said he didn’t want to see the National Development Plan fail and projects left in a “straitjacket”.

Officials from the Department of Transport and the construction industry addressed the committee on Wednesday on the issues around such contracts.

It has heard previously that public works contracts in Ireland are structured in such a way that the contractor takes on significant risk and that rises in costs can leave these contractors exposed. 

At a recent committee meeting, Transport Infrastructure Ireland said the delivery of major road projects in Ireland faced “significant and systemic threats” as it added to its calls for reform of public works contracts.

Tom Parlon, director general of the Construction Industry Federation, told the committee that unless the process is reformed it “will have major implications for the delivery of construction projects for the foreseeable future”.

The level of hyperinflation that has seen construction material costs skyrocket in recent weeks has made it clear to everyone the scale of the flaws that have been built into the public works contracts."

He said with the current inflation “you’re going to get less bang for your buck”, and that projects would inevitably cost more.

Six projects now wouldn’t proceed this year due to funding pressures, including the N25 Carrigtwohill to Midleton improvement scheme.

Mr Parlon told the committee it “shouldn’t have taken the impact of a war for badly needed reforms to be taking place”.

“No contractor in the world is able to avoid price rises when we’re witnessing hyperinflation of this scale,” he said. “For example in recent weeks we’ve seen: 

  • Rolled steel rising by 66%; 
  • A 50% jump in rebar prices, going from €900 per tonne to €1,350; 
  • Cables/ copper up by 31% to €8,642 per tonne; 
  • Delivery times being doubled for A/C units, electronic controls and lighting equipment.” 

Mr Parlon said these rises were “just the tip of the iceberg”.

To coincide with its appearance at the committee, a new report prepared by Idiro Analytics on behalf of CIF said civil engineer contractors believe public works tendering was structured to incentive below-cost bidding.

“In recent years, much has been discussed around public procurement for construction projects,” the report said. 

Many concerns have been raised about the difficulties of getting value for money for large capital projects. There is a general feeling among the contractors that the industry has been taken for granted.” 

That report urged a modern, flexible approach to public contracts similar to those used in other countries, and identifying and penalising below-cost bidding or abnormally low tenders.

Addressing the committee on Wednesday, Department of Transport assistant secretary Ethna Brogan said responsibility for reform of public work contracts rests with the Department of Public Expenditure and Reform and she would therefore not address that issue as it is not in her department’s remit.

“We are, of course, very acutely aware of the difficulties facing the construction industry at present and the potential impact these difficulties may have on delivery of transport projects under the National Development Plan,” she said.

Ms Brogan did add, however, that DPER is considering “a number of options to address the difficulties that are emerging”.

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