Soaring construction costs may sink Cork flood defence scheme

The original bid about a year ago for the Glashaboy river flood relief scheme in Glanmire was €14m. Now it could cost €17m to deliver

Flood debris on the banks of the Glashaboy River in Glanmire in 2012. The flood caused tens of millions of euro of damage to properties in the Glanmire and Sallybrook area. File picture: Larry Cummins

Soaring construction costs have put a major flood defence scheme in Cork in doubt and prompted fresh calls for a review of public works contracts.

The preferred bidder who was poised to sign contracts and start work within weeks on the Glashaboy river flood relief scheme in Glanmire has raised concerns about the impact of soaring costs, particularly in relation to steel and concrete, on the scheme which was valued at €14m when it was advertised for tender about a year ago.

With construction inflation running at up to 25%, the scheme could now cost up to €17m to deliver. But Tom Parlon, the director-general of the Construction Industry Federation (CIF), said public works contracts preclude negotiation on price variation post-tender.

It is understood that frantic efforts are underway to save the contract and start the work soon. Cork City Council, the body awarding the contract, said it cannot comment on any tender award while the procurement process is ongoing.

The Office of Public Works (OPW), the funding body, was not available for comment. Mr Parlon said the government needs to act soon to save other public works projects facing similar issues.

“Any contractor who had the misfortune to tender for works during this period of high inflation has two choices - deliver the project at a loss and risk going bust, or withdraw from the contract,” he said.

“Companies are obliged not to trade recklessly and people now have to make hard calls - do we sign contracts to deliver and risk the business, or do we pull out?

“Many of these projects were tendered up to 15 months ago when there was no way anyone could have predicted all of the issues that were going to emerge to form the perfect storm for the hyper-inflation we are experiencing now.

We were raising concerns with government about soaring costs, like timber, last year. Now concrete has gone up by between 30-40% over the last year, and steel is up 100%.

“But there is just no flexibility in the public works contract.” 

Last month, Public Expenditure Minister Michael McGrath announced a new process to “facilitate engagement and a speedy determination of the impacts of exceptional inflation and supply chain disruption”.

But Mr Parlon said: “Inflation will be a fact of life for a while and we need a permanent amendment to public works contracts.” 

A severe flood in 2012 caused tens of millions of euro of damage to properties in the Glanmire and Sallybrook area. The Glashaboy scheme, which extends over 4km of the river and some of its tributaries, has been designed by the OPW to protect 82 homes and 30 commercial properties.