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Joint Committee on Transport and Communications debate -
Wednesday, 27 Apr 2022

Reform of Public Works Contracts for the Construction of Transport Infrastructure: Discussion

The purpose of today’s meeting is to consider the need to reform public works contracts for the construction of transport infrastructure. I welcome from the Department of Transport, Ms Ethna Brogan, assistant secretary, Mr. Andrew Ebrill, principal officer, and Mr. Dominic Mullaney, principal adviser on roads. They are all very welcome. I thank them for accommodating us on this matter.

All witnesses are reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against a person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction. For witnesses attending remotely from outside the Leinster House campus, there are some limitations to parliamentary privilege and, as such, they may not benefit from the same level of immunity from legal proceedings as a witness who is physically present does. Witnesses participating in this committee session from a jurisdiction outside the State are advised that they should be mindful of domestic law and how it may apply to the evidence they give.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex to participate in public meetings. Reluctantly, I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts of Leinster House will be asked to leave the meeting. In this regard, I ask any member participating via MS Teams to confirm prior to making his or her contribution to the meeting that he or she is on the grounds of the Leinster House campus.

Members and all those in attendance in the committee room are asked to exercise personal responsibility in protecting themselves and others from the risk of contracting Covid-19.

I invite Ms Brogan, on behalf of the Department of Transport, to make her opening statement.

Ms Ethna Brogan

I thank the Chairman and members of the committee for the invitation to meet them today to discuss transport infrastructure delivery in the context of the inflationary pressures and supply chain constraints facing the construction industry at present. I am joined by my colleagues, Mr. Dominic Mullaney, our principal adviser on roads who deals with regional and local roads matters, and Mr. Andrew Ebrill, principal officer with responsibility for national roads and active travel in the Department.

As members will be aware, the Office of Government Procurement, OGP, which operates as an office of the Department of Public Expenditure and Reform, is responsible for implementing national policy on public procurement, particularly with respect to construction procurement. Policy on public works contracts, which are the form of contract used in transport projects and more broadly across the public capital programme, is a matter for the Department of Public Expenditure and Reform. For this reason, I do not propose to address the specific issue of reform of those contracts as it is not within our Department’s remit. However, we are 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.

We are liaising closely with the Department of Public Expenditure and Reform and have brought any emerging issues in the transport sector to its attention. I understand that Department is currently examining the position regarding the impact of construction inflation on public works contracts and is considering a number of options to address the difficulties that are emerging. Ultimately, any decision in this regard will be a matter for the Minister for Public Expenditure and Reform.

The transport projects to be developed over the next ten years are set down in the national development plan, NDP, which was approved by Government last October. The NDP provides funding of €35 billion for transport infrastructure over the next ten years. Delivery of the transport elements of the NDP will support many of the national strategic outcomes, NSOs, in the national planning framework, particularly NSO 1, compact growth; NSO 2, enhanced regional accessibility; NSO 3, strengthened rural economies and communities; NSO 4, sustainable mobility; NSO 6, high-quality international connectivity; and NSO 8, transition to a low carbon and climate resilient society. We will be investing in active travel, bus, rail and road projects across the country to deliver these outcomes.

Turning to national roads, funding under the NDP will facilitate continued protection and renewal of our existing national roads infrastructure, including motorways, in line with Government policy. The NDP foresees an Exchequer allocation of approximately €2.9 billion for the protection and renewal of existing national roads over the ten-year period to 2030, in addition to approximately €1 billion on public private partnerships, or PPPs, allocated fairly evenly across the decade. Approximately €5.1 billion of Exchequer funds are earmarked for new national road projects across the lifetime of the NDP to 2030.

In terms of new national roads projects, in keeping with the programme for Government, a ratio of 2:1 is to be maintained between new public transport investment and new road investment. This means that while there will be expansion in public transport options to facilitate a broader range of choice for citizens, investment in key road projects will also be progressed.

Focusing on 2022, Transport Infrastructure Ireland, TII, was allocated approximately €733 million from the Exchequer for national roads capital funding for 2022, broken down as follows: €254 million for the protection and renewal of the existing national road network; €118 million for committed PPP contracts; €331 million for new road projects; and €30 million from within the Department’s capital envelope allocated to TII for protection and renewal in December 2021, helping to augment TII’s spending in 2022.

In line with the NDP and Government policy, TII allocated this national roads funding for 2022 in a manner which seeks to achieve the following outcomes, in addition to safety: protection and renewal of the existing national road network; progressing major projects at or near construction; progressing major projects which are pre-construction but well advanced in the development pipeline; and prioritising the remaining funding for major projects which provide for local bypasses and compact growth in Ireland’s towns and villages.

Turning to regional and local roads, as members will know, the regional and local road network provides vital connectivity in rural Ireland. It is essential in supporting economic and community links throughout the country and is relied on by buses, cyclists, commercial vehicles and private cars. The NDP will enable a spend of €5.35 billion on the protection and renewal of this network over the period to 2030.

Targeted improvement schemes will also be funded, including projects to take traffic out of town centres and to facilitate improvements to the public realm and the adoption of more sustainable transport modes. A sum of €677 million has been earmarked for that. Approximately €600 million has been allocated to regional and local roads in 2022, the vast majority of which, approximately 90%, relates to protection and renewal. A robust and safe regional and local road network will be vital to support expanded and improved bus services and to connect dispersed communities with their local villages and services.

The NDP commits unprecedented funding to local authorities throughout the country to deliver high-quality active travel infrastructure to enable more people to make the switch to active travel. Approximately €290 million is being invested this year in walking and cycling infrastructure throughout Ireland along with another €60 million on greenways. We see delivery start to happen across the country and can expect to see it ramped up in the years ahead.

As for bus and rail, we will also see major public transport projects progressed and delivered over the period of the NDP, including BusConnects, the DART+ programme, MetroLink and substantial investment in suburban and intercity rail projects.

The funding provided for transport in the NDP aims to support the delivery of numerous projects across all modes. The Department is committed to ensuring delivery of this ambitious programme to the maximum extent possible to contribute to the national strategic outcomes in the national planning framework. We recognise the very real difficulties emerging on the construction front, which may have an impact on delivery. Many of those difficulties, as the committee will know, are driven by global events. We will continue to work cross-departmentally to address those in the period ahead. I am happy to take any questions Members may have.

I welcome the officials who have come before the committee and thank them for their ongoing engagement over the past two years since the general election. The bypass issue was a bit of hot topic for me. To start out on a positive note, it is good to see the progress that has been made on Dunkettle and on the Macroom-Ballyvourney bypass. It is transformative for connectivity in the south west. It is also important we are having this discussion. As we know, there is significant pressure on construction-related inflation, which has been very problematic for the Government. Today is a good opportunity for us to ask the Department a number of questions.

Funding certainty for capital infrastructure projects became a hot topic throughout last year and into 2022. My first question is about the ongoing work being done on the NDP. When it comes to key road infrastructure projects in particular, how are we looking for the year ahead? We will see the completion of major schemes, particularly in Cork, where the majority of the major construction of road infrastructure in the State is going on. However, is the N25 upgrade to Castlemartyr and Killeagh, for example, and funding certainty for that and for other major roads schemes, a concern to the Department?

Ms Ethna Brogan

As for the general picture in 2022, we are quite pressed for funding this year, as Deputy O'Connor will know, and were so even before the inflationary pressures started to have an impact. We were not able to progress all the roads we had hoped to progress this year with funding. There are six schemes for which we were not in a position to allocate funding. We have said previously that-----

I apologise for interrupting Ms Brogan. Will she list those six schemes so we are aware of them? For the full understanding of this, it would be important.

Ms Ethna Brogan

They are the N2 from Clontibret to the Border with Northern Ireland; the N25 from Waterford to Glenmore; the N25 from Carrigtwohill to Midleton; the N52 from Tullamore to Kilbeggan; the N59 from Clifden to Maam Cross; and the Dublin Port south access road.

Is it the case that construction-related inflation has caused issues for those projects or is it just the lack of provision in the budget?

Ms Ethna Brogan

It is the overall envelope we have this year for national roads projects.

Here is the killer question. What is the figure the Department will need to carry out those works? For all of us here, they are all of concern. I will be parochial and refer to my constituency. Ms Brogan has referred to one project from Carrigtwohill to Midleton. What can the committee do to assist the Department in getting a full understanding of the finance it will need to carry out these works? I am sure the Chair and the committee would be amenable to talking to the Department of Public Expenditure and Reform to try to achieve the budget required to carry out these works.

Ms Ethna Brogan

The Revised Estimates, as the Deputy will know, are now settled for 2022, so we have a ceiling and no additional funding is being made available. In deciding on the projects to proceed, we had prioritised on the basis I have set out in my opening statement, starting with those that were under construction, followed by those that were near construction and then, further down the pipeline, bypasses etc. The funding is settled for this year. Unless more funding becomes available, we will not be able to progress those projects.

May I ask a question? I will leave plenty of time. The 2:1 ratio appears to apply just to new projects.

Ms Ethna Brogan

It does.

It does not apply to existing projects.

Ms Ethna Brogan

That is correct.

That is a significant point of clarity. Second, regarding the 2:1 ratio being brought in, is it six or seven projects?

Ms Ethna Brogan

Six projects.

How would those six projects be impacted by that change? Are the six Ms Brogan is talking about new projects or existing projects?

Ms Ethna Brogan

I think they are all new projects.

The question then is how they have been impacted by the new 2:1 ratio that has been implemented.

Ms Ethna Brogan

I do not think that was relevant in this context. The constraint we face this year is the overall capital envelope available to us.

I will hand back to Deputy O'Connor.

The work undertaken by TII is quite positive. Mr. Peter Walsh and I have had our issues, a lot of them in the public domain, in these Houses in particular. TII has had very few issues with cost overruns. The projects undertaken have come in on budget. From the committee's point of view, today is really a listening exercise to hear from the Department what we can do to help to attract the additional capital the Department will need. The expenditure for 2022 is confirmed, and that is fine, but looking ahead to 2023, we will shortly enter another budgetary cycle, and it is important for us to get a good read of what we are able to do to assist when it comes to the provision of road infrastructure in particular.

Notwithstanding that, when it comes to rail infrastructure and the various metropolitan area transport strategies that have been put in place, the expenditure on those projects is very significant, especially when it comes to what is required in Cork and in Limerick. I will let Deputy O'Donnell address the latter, but I understand about €1.4 billion is needed in Cork, which is a very significant sum of money. What we have seen is an allocation of €184.7 million from the European Commission through the Covid relief funds, but where is the rest of the funding? When will it be allocated to allow the progression of the Cork metropolitan train strategy as part of the Cork metropolitan area transport, CMAT, plan? We are looking at the electrification of the lines, the tripling of capacity on them, the doubling of the frequency of the trains and the construction of, I think, four separate new platforms throughout east and north Cork and in Kent Station in Cork city. When it comes to funding certainty for those projects, does the Department yet have a vision or plan or anything to which it could refer to give us a steer as to what the expected completion timeline is for those works? The international economy is in a very shaky position. Borrowing is at an all-time low at the moment but I do not think that will be sustained into the next two or three years, so that situation will change, but I put that question about rail infrastructure in Cork to the witnesses.

Ms Ethna Brogan

As for the overall profile for the ten years, certainly on the roads side, the ceilings are set out to 2025. We are very pressured in the first half of the decade in that the funding starts to ramp up in the latter part of the decade. On the-----

Why is that?

Ms Ethna Brogan

It is just general availability of capital funding across government. The ceilings were agreed in the NDP.

However, the ceilings for climate targets are far more severe in the second five years of the decade than for the first five years. It appears that when we need the funding it is not there, but when the funding is there the question is whether the projects will even qualify under the targets. I am just posing that question.

Ms Ethna Brogan

Yes, and there is a lead-in period as well in terms of ramping up capacity. Now that we have the funding certainty provided by the NDP in the profile over the ten years, we can put the capacity and resources in to aid delivery across our delivery agencies and the local authorities.

When it comes to the securing of funds, the Department of Transport presents its plans to the Department of Public Expenditure and Reform and it has to consider what finances are available.

Ms Ethna Brogan


Has the Department a percentile in terms of how many of its projects are secured over the next four and five years? What can it complete? That is a fair question that can be answered. What can the Department undertake in the next four or five years in its existing plan without funding certainty becoming an issue? Ms Brogan has listed the six schemes that are not problematic, but what new projects will it be in a position to undertake? I am not referring to Dunkettle or the Macroom-Ballyvourney section, but other new capital projects that the sod has not been turned on yet. Where is the Department going to next?

Ms Ethna Brogan

The 2022 allocation booklet that was circulated to the committee by Mr. Walsh when he appeared before it details all the schemes that are being provided with funding. That is the pipeline for the next few years. As initial design is progressed on others further back in the pipeline, they will move along the project pipeline process and into more advanced planning and construction at a later stage. We hope to continue in 2023 with the list of the schemes that were progressed in 2022, and if additional funding becomes available we hope to be able to fund those that were not funded this year as well.

I wish to make a general point, and it is important to say it. I compliment the capital works in aviation that have been done in 2022 and last year. It was astonishing what the Department, working with the Dublin Airport Authority, DAA, was able to achieve with the new runway being built in Cork Airport in record time and on budget. It is fantastic to see that. I compliment the staff at Cork Airport. Senator Buttimer and I have worked in tandem with them. I also compliment Mr. Dalton Philips, the DAA and the team in Dublin Airport. We were out there recently. It shows that we can build capital infrastructure in the State without problems, because I believe we do ourselves down too much in Irish politics when it comes to capital investment in transport infrastructure. We need to broaden our horizons a little and look at things such as high-speed rail and other opportunities that could make a real and serious impact on the economy and on society. The forecast is good when it comes to how projects are being managed, particularly with the Department of Transport. I am usually critical but I want to compliment that today. I also acknowledge Mr. Ebrill's attendance today. He has been very helpful as well, and I thank him for that.

Ms Ethna Brogan

We will provide a note on the scheduling of the rail projects. I just do not have the details to hand today.

I appreciate that.

Deputy O'Rourke has facilitated Senator Horkan contributing earlier, as the Senator has another engagement.

I thank Deputy O'Rourke. I thank Ms Brogan for attending with her team today. In a way, this meeting arises from the meeting we had with Transport Infrastructure Ireland about the problem it is encountering with the public works contracts. I can understand Ms Brogan's position but it is regrettable that we do not have officials here from the Department of Public Expenditure and Reform to talk about the public works contracts and the problems they are causing. However, we can meet them on another day.

We will follow up. It will come out of today's meeting that we will have to have them before us. It is a natural sequence.

I will tease out a few other questions with Ms Brogan because she is not in a position to deal with the public works contract in its essence and the problems the construction industry and, indeed, TII are encountering with the nature of it as it is currently formatted. Some of my questions relate to the jobs that are being put out to tender. We heard from the TII already, but the Department's spend is much greater than the TII spend. It has rail spend, aviation spend, spend on active travel and so forth that do not go through TII but go through the National Transport Authority, NTA, and various other mechanisms. Is the Department finding an absence of tenderers being willing to present and is it finding price inflation coming in? Clearly, an allocation has been given to the Department, but prices are rising and there is even a challenge with labour shortages and getting people to say they are available. I see somebody nodding, so that is a positive.

The challenge is that we have labour shortages and that is fuelling a certain element of price inflation in the labour market. There is also the energy crisis, materials and so forth that are all affected by the cost of energy in many cases and for other reasons such as supply and demand. We are talking about a €9 billion road allocation in the next ten years, with €5.1 billion for roads, €2.9 billion for road protection and €1 billion for PPP. That is just the road section. Obviously, then, there is the 2:1 ratio. Does the 2:1 ratio exclude the €2.9 billion? The €5.1 billion in roads new spend and the €1 billion in PPP new spend would suggest approximately €6.1 billion on roads. Would roughly €12.2 billion be a reasonable metric in public transport?

Ms Ethna Brogan

Yes, it sounds reasonable; it is in the ballpark.

However, that excludes aviation and other areas. I am wondering what bang for our buck the State will get, relative to what we thought we were going to get, based on all this price inflation. I know there are commercial sensitivities, but I am talking about the global picture. If prices have gone up by 20% or 30%, are we saying with regard to a certain amount of projects we thought we were going to get that we just will not have the money to do all the things we thought we could do previously because of the price increases? Has there been any analysis of that?

Ms Ethna Brogan

That is taking place at present. The supply chain difficulties have been present for some time, but the inflationary pressures have presented and have ramped up in the last couple of months, particularly since the events in Ukraine started to unfold. If costs continue to rise, there is a risk that we are not going to be able to deliver to the extent that we thought we might. I will not make a reference to any particular projects. As the Senator knows, TII and the local authorities are the contracting bodies. The Department does not contract for any of these projects.

It provides the funding.

Ms Ethna Brogan

Yes, we are the funding authority and we provide the funding.

I assume the Department would not provide the funding unless it signed off on a project.

Ms Ethna Brogan


Ultimately, it is the final arbiter of whether projects go ahead.

Ms Ethna Brogan

TII and the local authorities engage with the tenderers and it is fair to say-----

I am sorry to cut across, but I presume they will come back to the Department if they were going to build a road for €6 million and the price is now coming in at €11 million.

Ms Ethna Brogan


The Department hears this at some point, sooner or later, and then decides whether it is going to allocate €11 million or it is not worth it at that price.

Ms Ethna Brogan

We are not at that stage yet. We are at the stage where we certainly are aware of pressures on contractors where projects are in construction or have just been recently tendered. The inflationary pressures that we all are aware of across the economy are starting to impact on a company's ability to continue with projects-----

Who is telling you this, Ms Brogan?

Ms Ethna Brogan

TII, and I believe it explained it to the committee as well. However, those pressures are quite recent.

I do not wish to pick on a particular operator, but there have been companies that have not been able to continue in existence. It may not be totally related to this, but this must have played a part.

Ms Ethna Brogan

I would not be able to comment on any particular case.

If a company tendered for a project and suddenly all its costs go up and it loses the ability to recoup those costs, the likelihood of it being able to continue to deliver that project is, effectively, gone. In terms of inflationary pressures, labour shortages and the costs of everything going up, has the Department worked out whether the increases are 20% or 30%? I know the Department is doing the analysis but are there any preliminary data for us to understand the pressures that exist?

Ms Ethna Brogan

No, not at the moment. As I said, it is very recent-----

When might it be available?

Ms Ethna Brogan

We are looking at it at present. We are trying to examine the information we are getting from the industry and we are trying to feed it into the Department of Public Expenditure and Reform as well, to give the Department that wider view across the economy.

When might that work be completed?

Ms Ethna Brogan

I cannot give a definitive timeline.

Are we talking three weeks, three months or two years?

Ms Ethna Brogan

It is an emerging problem so each week, new pressures emerge. We will certainly continue to engage with the industry on it. I know the committee will be hearing from the industry directly afterwards, which will be helpful to us as well in the context of-----

Is there an end date for the body of work the Department is doing? I know it is an ongoing situation but if a team of people is investigating, when is it likely to report back to Ms Brogan, the Secretary General or the Minister? Is it the end of June or the end of December?

Ms Ethna Brogan

We are feeding the information we are getting from the industry into the Department of Public Expenditure and Reform. I understand that this Department is looking at options to deal with inflationary pressures in the context of public works contracts.

Can Ms Brogan tell us about any measures the Department is taking? It is looking at measures but what measures is it looking at? Obviously, people are looking at infrastructural and roads projects but they are also looking at rail and active travel projects and greenways and are saying that if the pot of money was €30 billion or €20 billion and inflation has gone up 50%, a lot of these projects will not delivered on time or will not be delivered at all. When will we know what will not make the cut?

Ms Ethna Brogan

The picture will start to become clear over the next month or so.

When she has some of those indicators, Ms Brogan might feed that back to us as soon as possible. There is no point in promising people things that are completely undeliverable. If everybody knows you cannot get the materials or staff and the stuff is costing far more than it was originally going to cost, something has to give and we need to be able to understand what is going to give first and so on. I thank the witnesses for their efforts.

I was a bit late but I have picked up on the thrust of what was said. I apologise if I go back over old ground. The two major questions are how far the commitment in the national development plan - the funding envelope - will go in light of the emerging trend of inflation. What is Ms Brogan's assessment of that? Is that ongoing? Is this what Ms Brogan is saying we will have that in the next few months?

Ms Ethna Brogan

It is ongoing. It is difficult to say at the moment because the goal posts keep moving. Every week, there is a new development. We know what that is in terms of the overall capital envelope that is available to us. We know what we had planned to deliver with that €35 billion overall for transport but that picture will keep developing over the next few weeks and months.

What does the Department do to assess that? Does it engage with the sector or consultants?

Ms Ethna Brogan

The Deputy will appreciate that there are projects across public transport, sustainable mobility and national, regional and local roads that are at different stages in the project life cycle. Planning will continue. We will only get a clear picture when we get to the contracting stage and where tenders are being received.

What is Ms Brogan's estimate of the type of inflation that is happening and that is projected into the future or does she have an estimate?

Ms Ethna Brogan

No, we would be guided by the Department of Public Expenditure and Reform on that.

It is a very significant concern. We heard from TII. It is related to the former piece. It concerns the viability of existing and committed projects based on the type of contracts that were entered into in light of this emerging trend in inflation. What is the Department hearing or seeing with regard to that? Ms Brogan does not have to give specific examples but we have specific examples in terms of businesses that have had to fold. There is also a rumour mill that exists. We will hear from the industry later on. It will clearly tell us on the public record that it has serious concerns about the deliverability of existing projects. What is the Department hearing?

Ms Ethna Brogan

I do not really want to speculate.

I am not asking Ms Brogan to speculate. I am just asking her to tell us what the Department is hearing.

Ms Ethna Brogan

We are hearing about supply chain difficulties leading to timeframes being pushed out with increasing material and labour costs and in some cases, deliverability of projects for the original prices that were tendered is becoming untenable. There are only a small number of projects at that stage.

I am just trying to get a sense of the scale of concern. Ms Brogan said it involves a small number of projects but it has the potential to have significant implications. Have certain projects been stalled? Have certain projects gone to tender and have reduced numbers of people applied for them? Have people had to pull out of commitments on certain tenders? Is it manifesting in that way yet?

Ms Ethna Brogan

It is beginning to manifest in that way but I cannot go into any specifics.

I understand Ms Brogan's position in terms of what she can and cannot say. We have a sense and are hearing - not necessarily from the Department explicitly - but from a range of stakeholders that there are serious concerns. If there were serious concerns and if there was a serious problem here, what would be an appropriate response from the Departments involved - the Departments of Transport and Public Expenditure and Reform? The Department of Transport has heard from TII, which suggests there needs to be a move in terms of the alignment of stakeholders, planning, regulation and public contracts. Let us project forward a couple of years and talk about a worst case scenario where multiple businesses are going to the wall and multiple projects on which the Department and the Government wish to deliver and that communities wish to see delivered are being delayed or are not happening. How do we avoid that in the context of what we are hearing from stakeholders and the crunch in terms of inflation? What sort of response do we need from Departments and Government?

Ms Ethna Brogan

We do not want to see any businesses going to the wall. The Government will certainly be moving to address these pressures. I am not in a position to say how this will be done. Clearly, that would be a matter for Government.

It is a matter for the Government to address. I suggest that it involve a real engagement with the relevant stakeholders and a responsive reaction in terms of the Government moving the levers it has as quickly as possible because we do not want to see businesses go to the wall because of the nature of the constraints we have applied to them or, more important, projects not being delivered or being delayed to an inordinate degree.

I thank the witnesses for attending and for the presentation. This is an important meeting and I echo the remarks of Senator Horkan that we should have the Department of Public Expenditure and Reform before the committee as a matter of urgency as part of an ongoing discussion on the reform of public works contracts.

Deputy O’Rourke spoke about difficulties that are beginning to manifest and I am aware that Ms Brogan is constrained as regards what she can and cannot tell us about projects. Speaking in a specific as opposed to a general manner, the national development plan is the shop window of infrastructure projects and is akin to the all-Ireland hurling final in respect of public works. Project visualisation and delivery are critical. Can we take it that the national development plan projects will be delivered on time for the many communities that are dependent on and waiting in anticipation of the projects committed to in their areas?

Ms Ethna Brogan

I thank the Senator for his question. I can only speak for the transport elements of the national development plan but we are continuing in the delivery vein and we will try to address all of the challenges that are emerging in the weeks and months ahead. We are very committed to delivery and our delivery agencies are as equally committed. All the planning and development work is continuing while we try to deal with these difficulties that are emerging.

I do not wish to sound pedantic but what does that actually mean in real terms for the projects under Ms Brogan's remit? Deputy O’Connor spoke about CMATS, for example. I commend the allocation and resourcing of a specific office in Cork and Mr. AJ Cronin on his proactivity in that regard. Where lies that project? Ms Brogan told Deputy O’Connor that she did not have the plans. I am not saying this about Ms Brogan, nor do I wish to be personal, but we can have all of the glossy brochures we like but this is about project visualisation and delivery. We have difficulties and Mr. Parlon in his remarks to us later - members have read his opening statement - will highlight different issues. What does Ms Brogan's statement just now actually mean?

Ms Ethna Brogan

We have to have plans and those plans are backed up now by the funding commitment in the NDP. For the first time in a long time, we have comprehensive transport planning strategies. The strategy for the Dublin area is being reviewed at the moment. We also have strategies for the regional cities. For the first time, we have that funding commitment in the NDP to underpin delivery of those plans. While the Senator may refer to these as glossy, I believe we are in a good position and a much better position than we were in previous years when we had plans but no funding certainty. The alignment of the NDP with the transport plans for the greater Dublin area and regional cities should enable us to deliver more efficiently a more comprehensive network that suits the needs of citizens across all modes, particularly the sustainable mobility modes.

What is the implication on the delivery of construction projects in the context of inflation and the whole issue the Construction Industry Federation, CIF, will speak about in the efficient functioning of public projects and their delivery in line with Government expectations in respect of hyperinflation, price inflation, skill shortages and risk transfer? What are Ms Brogan’s thoughts on the whole issue around that?

Ms Ethna Brogan

What particular element of those issues does the Senator wish me to address?

I am asking about the whole issue around public works contracts and the impact on those of hyperinflation and price inflation. We are going to be told later on that there has been a considerable rise in the different costs of products and in delivering projects. Delivery on time, per schedule and within budget will be difficult, as has been referred to.

Ms Ethna Brogan

As I said in my response to Senator Horkan, we are engaging with the Department of Public Expenditure and Reform at present. We are relaying to it the difficulties that are being relayed to us by Transport Infrastructure Ireland and the industry. We are feeding those details into that Department, particularly in regard to the public works contracts. Ultimately, any decision on the format or on changes to those contracts will be a matter for the Minister for Public Expenditure and Reform.

Are the Minister and his officials proactively involved in this process or is it being done at arm's length, so to speak?

Ms Ethna Brogan

I understand they are actively engaged on this matter.

Does Ms Brogan see this engagement as having a positive outcome?

Ms Ethna Brogan

I obviously cannot speculate on what the outcome of those considerations will be.

As part of its preparation for today’s meeting, the committee received a document entitled, Public Tendering Practices and their Impact on Delivering Value in the Construction Sector. A worrying issue for me and other members of the committee is that since 2009 the number of members of the Civil Engineering Contractors Association has fallen from 138 to 77. Another recent development, to cite the foreword to the report by Mr. John G. Murphy, the association president, refers to many of these contractors "disproportionately increasing their turnover in foreign markets.” Does Ms Brogan believe this will have an impact on the national development plan?

Ms Ethna Brogan

It is possible and we are happy to engage with industry and hear its concerns both in the transport sector and right across the public capital programme where these issues are emerging.

I thank Ms Brogan for her presentation, presence and responses to my questions. I ask her to send me a copy of the CMATS response being sent to Deputy O’Connor. I wish Ms Brogan every success in what is a flagship Department, as alluded to by the Chairman, in respect of sustainable travel. We have a roads network which we need to address in respect of the issue of active travel. I hope Ms Brogan will use her influence to ensure those involved in BusConnects and the CMATS project in Cork engage with landowners and residents as we make this important modal shift.

My other concern, to which I may refer again, is with regard to the allocation of funding addressed in Ms Brogan’s presentation. I will make a further contribution, with the leave of the Chairman, on that issue later.

As Deputy Carey is still not available, I call Deputy Ó Murchú.

I am happy to let Senator Buttimer finish his contribution, if he wishes to do so.

Does Senator Buttimer have further comments to make? Did I inadvertently cut across him?

No, I am happy to allow Deputy Ó Murchú to proceed. I will make a further comment on funding when I contribute again later.

Senator Buttimer should conclude his contribution now, as Deputy Ó Murchú is giving way.

Ms Brogan’s presentation was very interesting. I have a general question on the roads projects. She referred to six projects that were not going to proceed. Is that correct?

Ms Ethna Brogan

This comment referred to projects that we have not provided a funding allocation to this year because of the constraints on our 2022 budget.

The N25 from Carrigtwohill to Midleton was mentioned, as was the N2 from Clontibret to the Border.

Ms Ethna Brogan


Regarding funding, as mentioned in the Department's opening statement, the figure referred to was €733 million. The issue we have now with cost inflation will have a knock-on impact on that capital funding envelope. Am I right about that?

Ms Ethna Brogan

The capital funding envelope is set-----

At €733 million.

Ms Ethna Brogan


Of that €733 million, given the cost of materials going up and the issue of hyperinflation, and the Chair referred to existing projects earlier, has the Department factored the difficulties that will be encountered in this context into the information presented to the committee regarding the funding envelopes for the national roads network?

Regarding the six projects mentioned that did not proceed, if they were to proceed, based on the requisite allocations, how much of an additional funding requirement would that be? Following on from Senator Buttimer’s question, what is the impact of the current inflationary measures on the delivery of the specific projects to which the €331 million has been allocated?

Ms Ethna Brogan

Regarding the six projects that will not proceed, those are based, as I said, on the ceiling we have in 2022.

No, how much funding was involved for those six projects?

Ms Ethna Brogan

I ask Mr. Ebrill to address this question.

I refer to the funding it would have been necessary to allocate to allow those projects to proceed with the volume of work that would have been done in 2022.

Mr. Andrew Ebrill

I do not have the precise figures, but it was less than €10 million across the six projects. The context is-----

Based on that, Mr. Ebrill is telling me these six projects did not proceed because €10 million was not available.

Mr. Andrew Ebrill

We did not have the funds to proceed with those projects, so-----

I will contextualise this. I am not in any way giving an opinion. Funding of €360 million, or perhaps slightly less, has been made available for active travel projects in 2022. We have six road projects here that did not proceed because of a funding requirement of €10 million.

Mr. Andrew Ebrill


That is hard for an ordinary person to appreciate.

Correct. I am sorry Chair, that is why-----

I will hand back to Senator Buttimer. I did not wish to or mean to-----

No, the Chair actually said what I was alluding to. For the sake of €10 million, we have stopped six projects. What percentage is that of the Department’s budget? This does not make sense, to be honest, and that is why I am glad the Chair said what he said. I am not picking a row now, but €10 million is not a huge amount of money in the overarching budget of the Department.

Ms Ethna Brogan

I wish to be clear that those projects are not stopped. We just do not have the funds this year to allocate to a continuation of the work on those projects this year. They will, however, be back under consideration in the context of funding in 2023.

Whatever way this is analysed, the context here is €10 million as a percentage of the overall budget of €331 million for new projects. Is anyone good at maths? Is that 0.3%? It is a tiny percentage of the overall budget, and yet this has caused a great deal of anxiety. Even without the calculator, my maths are still intact. The percentage works out at about 0.3% of the overall budget. It is less than 1%. It is not a material amount in an overall context, but it is highly material funding to individual projects. I hand back again to Senator Buttimer.

I thank the Chair, but I would like to hear the response to his question. I will then come in again.

Mr. Andrew Ebrill

An absolute budget of €331 million is available for new projects and no more. Therefore, we allocated that budget in line with the prioritisation exercise, which included not stopping projects under construction, such as the Macroom bypass or the Dunkettle interchange. It involved prioritising other projects, such as bypass projects, for example, in line with ministerial priorities. We were able to proceed with and to progress about 30 NDP projects this year on that basis. Six projects could not be progressed this year, but as Ms Brogan said, they are not stopped and they will be examined later this year for next year’s part of the normal annual assessment process.

Okay. I understand the response from Mr. Ebrill in respect of the six projects. This comes back to my fundamental comment, however, and it is one I know many members will be sick of me saying, that the national development plan is the flagship policy. This meeting is about the reform of public works contracts. In that context, I would like to hear what the Department has done in respect of initiating reform of public works contracts. I ask that given the issues we are encountering. We will also hear about them later from the representatives of the Construction Industry Federation, CIF.

I have a major concern in this regard. From a political perspective, we will be in the shop window if we do not have project visualisation and delivery. We will go before the people in a situation where project X has not been delivered and we will pay the political price. This comes down to that too in many ways. Regarding reform of public works contracts, where are we with that process and what are the implications for ongoing projects, including those six projects we mentioned and others? Is there an import in respect of the whole issue of the modal shift we have heard about regarding active travel? What are the implications on the active travel segment of the Department’s endeavours in respect of the issue of public works contracts?

Ms Ethna Brogan

As I said, I am not in a position to address specifically the matter of the reform of public works contracts. That is not within the policy remit of our Department.

As a matter of interest, does Ms Brogan think it should be, or where should it rest? I know I am presenting her with an academic type of question.

In that context, we had representatives from Transport Infrastructure Ireland, TII, with us before Easter. We find that to be a measured type of body. Its representatives came in here and basically told us that the NDP was on fire and under serious threat. They did not do that lightly. We have invited representatives from the Department of Public Expenditure and Reform to appear before the committee, and we expect them to attend because this matter is of such magnitude. I happen to be a Deputy for Limerick city. When Roadbridge went to the wall a short time ago, 630 people lost their jobs. We speak to people throughout the country. The national development plan in respect of road projects is under serious threat. I would like to hear a sense of this urgency reflected in the Department of Transport.

We are arguing here about six projects that did not go ahead for the sake of €10 million, and we had to delve in and forage out this information. This issue has taken up pages of space in the media. It has caused untold anxiety for people. Side by side with that aspect, €260 million is allocated to active travel. Those are great projects and no one is questioning their value for money. For me, this is about asking questions about value for money. I want to see active travel and such projects. Equally, though, I need to see road projects getting under way as well. I am not ideologically driven. I want to see both those endeavours happening in tandem.

The problem we have here is that there is a current public works contract. In the case of all contracts put in place prior to 1 January 2022, inflation must be above 50% to enable contractors to make additional claims, and that can only happen after 30 months of a contract. Since 1 January 2022, the rate for inflation has decreased and it must now be above 15%, but contractors still cannot claim for 24 months. The witnesses are from the line Department with responsibility for the funding of road and transport projects.

With inflation rampant and with the cost of fuels, are the contracts causing the Department concern? While TII did not do this lightly, it came to this committee with a very strong message that there is a serious problem with the way contracts have been awarded historically and it worries that more firms will not be able to function. My understanding is there are four main civil building contractors in the Irish market at the moment, and many of them, like Roadbridge, have gone.

The question is how important the national development plan is for the Department of Transport on the roads side. Is what is happening at the moment causing the Department serious concern? Is the Department having active discussions with the Department of Public Expenditure and Reform to ensure public service contracts can be amended and are flexible to deal with external factors like the Ukraine war and other issues, given there was rampant inflation prior to that? Is that causing the Department concern? That is why we are here today.

Ms Ethna Brogan

Of course it is causing us concern. It is a rapidly evolving situation and we are actively engaged with the Department of Public Expenditure and Reform on the matter.

Does Ms Brogan believe the public works contract needs to be amended, whether temporarily or otherwise, to ensure it takes account of the huge inflation? The 15% sounds great but they cannot put in a claim for 24 months. If someone has a contract and was up and running before 1 January, they cannot put in a claim until they are above 50% inflation and they cannot do that for 30 months. As a layman and as an accountant, that appears to me to be unworkable in the current climate. I do not want to see the national development plan going down because we have a contract that is a straitjacket for contractors in the current environment. It might have worked in a low inflation environment but, in the current environment, I have serious concerns that we are about to get into a situation where there will be a car crash with the national development plan. As a committee Chair and as a Deputy for Limerick city and Munster, I cannot allow that to go unnoticed. We want to see urgency in this regard. Is the Department looking for the current public works contract to be amended?

Ms Ethna Brogan

We are relaying the information we are getting from the industry about the difficulties the contracts are causing due to the inflationary pressures that are being experienced across the economy. We have relayed those concerns and we are engaging actively with the Department of Public Expenditure and Reform on it. As I said, ultimately, national procurement policy is a matter for the Minister for Public Expenditure and Reform.

There is an element of pass the parcel going on here at the moment. As a committee, we will not allow that to happen. This public works contract is too serious. I am not certain of the full details on Roadbridge but, from what we hear, the sector is under serious strain with regard to the contracts.

A March 2022 statistic from the Civil Engineering Contractors Association has caused me serious alarm. Respondents were asked if they had ever submitted a bid price for a public tender at or below cost. The results showed that 56% of the respondents - the contractors - have submitted at or below cost. The main reason they have submitted under these conditions are business continuity, lack of a future pipeline and chasing cash flow - chasing the dragon - and I think many of them have been doing that. When Covid came, they were not able to maintain cash flow because contracts stopped and they could not physically get the money in and, eventually, that was going to catch up with them. In addition, due to deficiencies in the contract documentation, there was a lack of opportunity during tendering to engage with clients for clarification.

If they started prior to 1 January, they have to wait for 30 months to be able to engage with TII and they must have above 50% inflation. Since 1 January, it is 15% but they cannot engage with the Department for 24 months, or two years into the contract. That means the contracts themselves may not be sustainable, and I have to question whether they are or whether they can ensure success on the framework tender. We are getting that all of the time from the contractors. There are four main Irish contractors left. I do not want a situation where, in a short time, we may have no Irish contractors able to bid for roads projects. That is the critical thing for me. They are providing huge employment. There has to be realism between the Department of Transport and the Department of Public Expenditure and Reform. If the current framework is going to have a consequence of making these firms insolvent, we have a problem.

With regard to the Coonagh to Knockalisheen road in Limerick city, we spent months arguing with the Minister for Transport. If it had been allowed to go ahead the way it should have, it would probably be built by now. It is 30% complete and is idle for the people of Moyross and the north side of the city. It will have to go out to re-tender, and the company that was building it was Roadbridge. This is very serious.

I call Senator Buttimer to conclude.

I am happy to conclude there.

In that case, I will call Deputy Ó Murchú. I am passionate on this. I am an accountant by training. The figures do not add up at the moment on the public works contract, particularly for major roads projects. It does not add up. Deputy Cathal Crowe will be aware that, with the situation of Roadbridge locally, we have had to re-tender.

The comments of the Chairman are backed up by the documentation we received in the context of the report I spoke about in terms of public tendering and the one the Chairman has quoted from. That is why it is important we have further meetings on this. I ask Ms Brogan to give me, if not today then by email, the concluding dates for Dunkettle and Macroom. I thank her again for being here today.

Ms Brogan will follow up with correspondence to Senator Buttimer.

Ms Ethna Brogan


I call Deputy Ó Murchú.

I thank Ms Brogan and the other witnesses. I apologise as I had a number of other engagements that meant I was late. I think I have got a significant understanding of how the interaction has gone and I could probably guess some of that on the basis of Ms Brogan’s opening statement. In fairness, the Chairman has stated the difficulties that were put clearly in front of us, especially by TII, in regard to public works contracts, and I am not going to rehash that as it is obviously a system that will not work. It is a fact we have not got to the point of having a system that is fit for purpose to deliver the national development plan at this time.

One of the questions I want to put concerns the fact this is not the first time the State will have entered into contracts during inflationary periods and, therefore, I am not sure any of us understand the inability to get a fit-for-purpose system in play. I am guessing from what Ms Brogan said previously the Department is engaging with the Department of Public Expenditure and Reform in regard to the contracting system and, at the same time, it is interacting with other stakeholders, be they contractors, the industry or whoever else. I would like Ms Brogan to go into some detail in that regard, but if she is not going to, she is not going to, and there is no point rehashing that and going over old ground.

On another issue, we had the Minister, Deputy Ryan, and others before the committee and they spoke about planning. We know the Attorney General is doing a piece of work in that regard because there are obvious difficulties with our planning system. On some of that, there is tinkering, for want of a better term, and maybe major tinkering needs to be done. However, beyond that, it is a fact we need to resource certain areas, whether the judicial system, An Bord Pleanála or otherwise. The Minister, Deputy Ryan, has used the term that it is almost the survival of the fittest in regard to planning applications. While we need due diligence done, for the companies that are contracting, one of the issues is that it can be two years down the line.

There is always a danger with a fixed contract but in an inflationary period such as this people just could not enter one unless there was a huge allowance. We have had contracts such as this before. What is the hold-up? I would like as much detail as possible on the Department's interaction. I would also like wider information on planning, particularly the Department's interaction with the Attorney General and whoever else is looking at the anomalies and difficulties that exist.

Ms Ethna Brogan

In a general sense we have received feedback from TII, as has the Deputy, on the contracts in place and contracts about to be awarded and what it hears from tenderers. We have also had feedback from the local authority system. We are acutely aware of the difficulties. Different types of difficulties are emerging. We are engaging with the Department of Public Expenditure and Reform on this. I cannot really go much further than this at the moment.

I get that. Does Ms Brogan have any notion-----

Ms Ethna Brogan

With regard to engagement-----

I would also like information on the timeline, if Ms Brogan can give information on when she thinks-----

Ms Ethna Brogan

I expect there will be some decision on this, as I said in reply to Senator Horkan, probably within the next month or so. I understand it is being actively considered by the Department of Public Expenditure and Reform.

The Deputy asked about the level of engagement we have had. We are engaged with TII. We have also had some engagement with the industry. I will ask Mr. Mullaney to detail some of these engagements and what we are hearing about pressures in contracts.

Mr. Dominic Mullaney

To clarify, we have had approximately four meetings with the Irish Asphalt Pavement Producers Association. It represents the smaller contractors that do paving works throughout the country. It has put forward suggestions. Bitumen is a petroleum-based product. It is greatly affected by the cost of a barrel of oil. It has put forward suggestions which we have forwarded to the Department of Public Expenditure and Reform. It is due to get back to us.

The contract system has been in place since 2006. It probably has not been tested by inflation.

It probably operates quite effectively in a low inflationary environment but in the current high inflationary environment, it is not fit for purpose.

Mr. Dominic Mullaney

The guiding principle behind it was a fixed-price lump sum. This was very much the motivation. The Government has options. It could look at support for the industry through an ex gratia payment. It could look at changing the contract itself. There is no one-size-fits-all solution for the contracts themselves. There are the smaller contractors I have spoken about. At present there are six different forms of contract. Four of them are for projects greater than €5 million. A fifth is for projects between €500,000 and €5 million. The other is for projects of less than €500,000. They all have slightly different arrangements.

Bespoke solutions are required.

Mr. Dominic Mullaney

There might be different solutions for different sectors.

They have one common denominator. They are all being affected by hyperinflation.

Mr. Dominic Mullaney

They are absolutely agreed on that.

That is the kernel of the problem at present.

Mr. Dominic Mullaney

They are absolutely agreed on that and they have conveyed this to us. We have certainly spoken to them. As Ms Brogan said, the Department of Public Expenditure and Reform will have to come to a conclusion. It may look at alternative forms of contract or it may look at adjusting this form of contract with regard to the inflation clause. This is an option. To introduce a completely new form of contract takes time. There would be a lead-in period . It might not be fast enough to deal with the current crisis. It is very much-----

I know these are changed circumstances but the State engaged in contracting during previous inflationary periods. I assume some of best practices used then could be used now.

Mr. Dominic Mullaney

We could go right back but then it was a different form of contract and the inflation clause was different. Inflation was provided for and it allowed contractors to get increases. What the Chair quoted is correct. The old contracts covered inflation greater than 50% and contractors had to wait 30 months. In the new contracts it has changed to inflation greater than 15% with a 24-month wait. In fairness to the Department of Public Expenditure and Reform, it introduced another measure at the same time. There is an applicability factor that allows the consumer price index to be applied from the time the tender is sent in to the time the contract is awarded. This is a saving grace. If it increases people do get the benefit of it.

The problem is that it is a double-edged sword. Many of the contractors are chasing cash flow to survive. That is what people do. In many cases even if they are not making a profit they can survive for a period. It is called "liquidity". In essence, they are probably insolvent. At the same time, they cannot make claims for inflationary rents. The bulk are existing contracts and this means the companies cannot make claims until inflation is above 50%, which it is at present, but they still have to meet the 30-month time limit. It is impractical. The new contracts cover 15% inflation but the companies have to wait two years. For a claim made on 1 January 2022 a company will be waiting until at least 1 January 2024. The bottom line is that many of them will have gone under before then. People are working, paying people wages, paying suppliers and paying for diesel and materials. Creditors will not wait 24 or 30 months to be paid. They want to be paid tomorrow. If they are not paid tomorrow, they will not supply the materials. If they do not supply the materials, the roads cannot be built. It is the basic commerce of how to build a road. I am worried that if the changes are not made quickly we are in danger. I do not want another Roadbridge. The quality of its work was second to none. Apart from the roads it constructed, it was a huge employer. There has to be a sense of realism about what is happening. There needs to be a sense of urgency in reacting to it now. We are in a wartime situation. Roads and the national development plan are fundamental to how the Government reacts.

The witnesses have told me what they will not answer and the engagement with the Department of Public Expenditure and Reform needs to happen as soon as possible. I asked about planning and what engagement the Department has in the ongoing processes to deal with some of the planning anomalies that are creating difficulties, particularly with regard to major infrastructural projects.

Ms Ethna Brogan

A review is under way. A cross-departmental group has been formed. As a Department, we are engaged in that group.

I imagine it is a major level of engagement. The witnesses will probably not go into the details.

Ms Ethna Brogan

It would not be appropriate to speak about the work of the group at this point.

We need to engage to ensure this happens. The most important thing is to ensure the timeline is as short as possible and that we get a system that is fit for purpose and works.

I join others in welcoming Ms Brogan, Mr. Mullaney and Mr. Ebrill to the committee. I apologise as today is exceptionally busy and there have been many overlapping meetings. I read the opening statement and I have followed most of the debate from my office. I want to pick up from where Deputy Ó Murchú left off. The planning process for roads is very frustrating. In Dublin city there is a professional planning objection company, namely, The Swans and the Snails Limited.

It has held up some really key projects in County Clare. It is amoral that an objector can be so far removed from the good and the bad of a project that the objector would see fit to object to something. I would never in a month of Sundays think it would be appropriate for me to object to a proposal on the opposite side of the country. The Department is participating in interdepartmental negotiations. Has the issue of vexatious and distant objections arisen? Does the Department propose to place a cap or restriction on who can object, where they should live and how approximate they should be to a project so that projects are not vexatiously and unnecessarily held up?

Ms Ethna Brogan

As I said in response to Deputy Ó Murchú, there is a group looking at planning in a general sense cross-departmentally and, therefore, planning as it falls under the remit of the Department of Housing, Local Government and Heritage, which is the lead Department, and the Department of Transport feeds into it.

Does the Department of Transport have views on whether an objector should live near a project?

Ms Ethna Brogan

Clearly, there are some concerns. Those type of objectors have had impacts on projects and that is not just in terms of Department of Justice projects but is a wider planning issue that I am sure will be considered in the context of the group.

Mr. Mullaney is an adviser on investment policy and roads in the Department. Is it good investment policy and practice to commit to building half of a road yet omit the remaining half?

Mr. Dominic Mullaney

We do not generally do that. We might do a road in phases for a particular reason. Even if a road is built in phases it would be the intention to follow up with the second phase.

In all the years in which Mr. Mullaney has worked in the Department if a road is phased, with which many of us are accustomed, would phase 1 be delivered and then phase 2, etc. until the A to Z of it has been completed? Is that the general practice?

Mr. Dominic Mullaney

If it is part of an overall plan, yes.

Yesterday, the Chairman and I participated in an online briefing in the mid-west where Oireachtas Members and councillors were briefed on the Limerick Shannon Metropolitan Area Transport Strategy that will carry the mid-west region all the way to 2040. We heard at the presentation, and it was news to all of us and many of us were floored by the revelation, that the Minister for Transport has used a ministerial order to pull the entire phase 2 of the Limerick northern distributor road because he does not believe it should happen, which he said in this room a few weeks ago. I do not expect Mr. Mullaney to have all of the answers.

Phase 1 is happening from Coonagh, County Limerick to Knockalisheen and Meelick, which is where I am from. I will speak about Roadbridge in a minute. There is a roundabout in Meelick where a distributor road begins and ends but there is no sign of anything more happening. The Minister wants the distributor road to stop at a roundabout and then go on to minor rural roads so the road is going nowhere.

Yesterday, I made this point during the presentation. I am sure that some people present have watched an old cartoon character called Wile E. Coyote and there was always a road on the edge of town that he would run on but then drop off because the road was unfinished. That is how the Minister wants to leave the Limerick northern distributor road. I will be honest and say that many people in my community continue to have major grievances with how the road is being routed and with such details but all of that should be dealt with in the planning and design domains. It should not be possible for the Minister to take a samurai sword to a project and declare that it will not happen in his lifetime, in this Government's lifetime and will not happen between now and 2040. I will not ask Mr. Mullaney my curveball question and do not expect a response from him. Like everyone in public life, I believe that if a project is done on a phased basis that delivers phase 1 and moves on to the next phase but slow as the process might be people would at least go through the statutory phases and not use a guillotine.

I will mention the Roadbridge issue and acknowledge that the officials cannot comment specifically on the matter. I will talk in specifics and hope they can talk in general. There are 600 employees in counties Clare and Limerick, which I am sure that the Chairman mentioned a few moments ago. I have met some of the employees and know that €40 million is owed to subcontractors. At least employees have a structure and can approach the Department of Social Welfare to avail of safety nets, although that is not an ideal situation by any stretch of the imagination. There is nothing for subcontractors and some of them have removed their machinery from the site so they can retain assets of some value and do not see their financial livelihood crumble.

I urge the Deputy to be careful.

Yes, I understand. It is very important that this committee speaks on behalf the workers today. It is also very important that we should speak about how these contracts are constructed. I was told by an employee of one of these large contractors that if they remained on a contract that the fuel burn of heavy machinery on the road would cost €5 million more than the tender price, which is unsustainable. Today, we will talk about materials, steel and aggregates but the fuel alone to fulfil a major project could cost an additional €5 million.

One stretch of this project is located in the vicinity the Country Club Bar in Caherdavin, which is located on the border of counties Clare and Limerick, and it has traffic cones and a little battery operated traffic lights system. For the life of me and the people who live there we cannot imagine that another contractor will commence work in the next few months and we do not know what is happening.

Can we have an update?

There is gravel, traffic lights and traffic cones. Can the officials give us hope by telling us that something will happen in the interim to ameliorate the situation?

Mr. Dominic Mullaney

On the first point, it is fair to say that the Coonagh to Knockalisheen project, although when it came to us it was quite a number of years ago and it had gone through the planning process, came as a stand-alone scheme, had its own benefit cost ratio, BCR, and was justified in that right. The project followed on from the Limerick regeneration plan and it was very much in that context that the scheme was funded. It is only in recent times that we have received documentation where the scheme was then being referred to as the northern distributor road phase 1. It was never presented to us originally in that format.

In terms of the contract and what is happening, they are in fact going to do some emergency works, in particular on the bridge over the railway and certain other emergency works, which they hope to do very quickly. At the moment it will probably be a negotiated tender. I mean that they will go to a small number of tenders to do this and it is not the rest of the job by any means. As they prepare plans they must measure what is there and create a new contract for the rest.

I have spoken to representatives of Limerick City and County Council. Am I correct that a negotiated tender is needed to deal with the bridge, as in immediate emergency works, and side by side with that a new tender will be sought to finish the remainder of the road in phase 1?

Mr. Dominic Mullaney

That is exactly right, yes.

Does the Department agree with that?

Mr. Dominic Mullaney

Yes. In terms of the negotiated tender, they will try to deal with any other safety stuff, if any.

I thank Mr. Mullaney for his replies.

In conclusion, I was a councillor before I became a Deputy and the Chairman is a former councillor. Over the years we attended similar briefings, as Oireachtas representatives and councillors, and I never ever heard the Limerick northern distributor road be treated as just being a discrete infrastructure project from Coonagh to Knockalisheen. It was always a bandit corridor that brought one north to the city through south-east Clare and was to be done in phases. I do not what parlance that the Minister has introduced but certainly in the region and locality the project was always to be done in phases. It may not have been to everyone's taste or liking but there were processes to deal with route design and all the other issues that people had and now it appears that the project has been guillotined by the Minister, which is wrong. I do not know whether he will be in public life in 2040 but the people around the area will need certainty regarding infrastructure and by his action this scheme has been pulled from them overnight.

Deputy Canney is next. Even though he is not a member of this committee I will allow him to ask a question.

I appreciate that as I know other committee members wish to contribute. I have watched the discussion of the public works contract on screen. From a roads, transportation and civil engineering point of view, and as I was a quantity surveyor who worked in the industry and lectured on procurement, I have received a lot of feedback that the civil engineering contractors in this country are turning their backs on us because they can go to England and get a fair new engineering contract, NEC, as the risks are shared and there is a greater opportunity to have a viable proposition. I do not know how the Department is getting on with tenders at the moment.

Does the Department have any works out for tender at the moment? My understanding is that building contractors and civil engineering contractors are refusing to price contracts because they cannot price the risk.

I have a very simple question for the officials. Earlier the Chairman and others asked how we fix the problem with public works contracts. I suggest this problem can be fixed by one simple amendment to the existing public works contracts. The amendment can be put in because it can be agreed between both parties. Therefore, if the contracting authorities and the contractors agree to insert a price variation clause in the contract, it will solve this problem not forever but until we get to more stable ground again.

There are two aspects to the public works contracts. We have the existing contracts, which are assigned and people are in a quandary. Some contractors are recklessly trading at the moment because they are trading at a loss and they know it. I understood that the Office of Government Procurement and the Department of Public Expenditure and Reform had issued a direction on how to deal with variations for other contracts that have been tendered. As late as three days ago, a contracting authority's quantity surveyors looked for clarification from the builder as to where this direction has come from because they do not have sight of it. Did the Department of Transport get any direction from the Department of Public Expenditure and Reform regarding contracts that are tendered for but not yet signed? What model is being used to deal with variations? Did the officials get any direction on that?

The Chairman spoke about the road between Limerick and Cork. The outer city bypass for Galway is in a quandary because of planning and other issues, and it has now been referred to Europe. As far as I am concerned, we have spent millions of euro doing nothing on that.

There was talk earlier about phases. This issue will be close to Deputy Crowe's heart. Phase 1 of the western rail corridor was done; phases 2 and 3 were never done. Appraisals are now being done on them again. More money has been spent on appraisals than on doing work.

I would like to flesh out that point about potential variations. The Deputy spoke about projects that have been contracted for but not signed

My understanding is that for contracts that have been tendered for but for which a contract has not been signed, a clause will be inserted whereby increases in the costs in excess of 15% will be recovered.

Is that 15%?

Is that for new contracts?

It is for new contracts. From what I have heard, no direction has been issued on that. Therefore, contracting authorities are not signing up to this.

That has been our understanding since 1 January.

My second point was about how the existing contracts can be dealt with. They can be dealt with by a simple agreement between the contracting authority and the contractor - both parties to the contract - that they would vary the contract to allow this clause to be put in. It is simple.

Going back to what Mr. Mullaney said, it may not be necessary to bring in a completely new contract but just do a variation within the existing contract.

Before we return to Mr. Mullaney, if a new contract is required, we will be here talking about it in two years' time, if we are here.


These contracts came in in 2007 and they were being talked about for about five years before that. They were initiated because of all the talk about how long Dublin port tunnel was taking and how much of an overrun there was. We brought in this sledgehammer to crack a small nut. We put all the risk on the contractor, which was fine at the time.

It probably worked in a low inflationary environment.

I call Deputy Mullaney. I am sorry, I mean Mr. Mullaney. I was giving you a dual role there. I suspect you have no interest in getting involved in one of them anyway, having probably put many Deputies under your charge. We will go back to Deputy Canney's point. Another witness is due to appear before the committee and we need to conclude.

Mr. Dominic Mullaney

On 7 January, we got notification from the Office of Government Procurement, OGP, which is part of the Department of Public Expenditure and Reform, advising about the new tender arrangements. TII and all other relevant parties would have also got it. Obviously, if we had had any contracts in that situation, we would have checked them for it. The point was it was to apply to contracts that were being put in place from 18 January. It does not apply retrospectively. In the Deputy's second part, he suggested that if there was an agreed clause, then something similar or a variation of it could apply.

However, there is an inherent flaw at the moment with the new contracts in terms of timing. I accept that 15% is fine, but we need to wait 24 months before it can be used. Within that 24 months, the contractors probably will not tender because they think the risk is too high. The ones who already have it are caught in an inflationary spiral affecting their cash flow. If they are prior to 1 January, they have to have a 50% increase in inflation and they have to wait 30 months. The problem is that the system is not keeping pace with the changes in the external business environment for these contractors. Mr. Mullaney is confirming to Deputy Canney that it has been in place since 18 January. The Deputy has obviously had contact with contractors and contracting authorities who have not been informed of this change. Is that correct?

I would say it is not in the area of civil engineering; it is in the area of construction.

Mr. Dominic Mullaney

I think the contracts we would be dealing with would be in the area of civil engineering.

I would imagine that if a directive has been issued, all public contracting authorities should have a copy of it. However, it seems it has not filtered down from-----

That is something to be communicated. Would that come from the Office of Government Procurement, the Department of Transport or both?

Mr. Dominic Mullaney

We would seek to ensure it on any contract we prepare, and TII would do the same.

Will Mr. Mullaney follow up on Deputy Canney's point?

Mr. Dominic Mullaney

We can certainly follow up on that.

If I could get sight of whatever direction Mr. Mullaney was given, it might explain a lot and I could explain it to other people.

Will Mr. Mullaney correspond directly with Deputy Canney on that?

Mr. Dominic Mullaney


I thank Ms Brogan, Mr. Ebrill and Mr. Mullaney for appearing before the committee. This is very serious. There are four main civil engineering players in the Irish market at the moment. We are not too sure they are here and we are not too sure they contract. We do not want contracts stopping in mid-stream. What is happening at the moment cannot be allowed to continue. We need to see some form of flexibility in the existing public works contracts that takes account of the external inflationary pressures through no fault of the contractors. We will come back to the officials on it. Representatives of the Construction Industry Federation, CIF, will be appearing before the committee. We will be contacting the Department of Public Expenditure and Reform directly to ask representatives of the Office of Government Procurement to appear before the committee.

I thank Ms Brogan, Mr. Ebrill and Mr. Mullaney from the Department of Transport for assisting the committee today. We will now take a short break ahead of this afternoon's second session with Mr. Tom Parlon and his colleagues from CIF.

Just before we do that, I call Deputy Cathal Crowe. He dealt with Roadbridge. Perhaps he might clarify the point he made on subcontractors.

I want to withdraw,if possible, my comments relating to subcontractors and plant machinery. I thank the Chairman.

Sitting suspended at 3.20 p.m. and resumed at 3.30 p.m.

We are now back in public session and will resume our consideration of the need for the reform of public works contracts for the construction of transport infrastructure. I welcome Mr. Tom Parlon, director general and Mr. Paul Sheridan, director of the Construction Industry Federation, CIF. They are both very welcome and I thank them for their patience. I now invite Mr. Parlon to make his opening statement on behalf of CIF.

Mr. Tom Parlon

On behalf of the Construction Industry Federation, CIF, I thank the members for the opportunity to come before the committee and address this extremely important matter that will have a major implications for the delivery of construction projects for the foreseeable future. I am accompanied by my colleague Mr. Paul Sheridan, who is the director of main contracting.

This is what we are really talking about. The issues we are highlighting represent the difference between an industry functioning efficiently and one becoming logjammed. It is the difference between public projects being delivered in line with Government expectations or one where many contractors are unable to tender due to price volatility. The CIF has been warning about the issues around the public works contracts for quite some time, and the problems we are talking about today are not new. What is new is how those problems are now manifesting.

The level of hyperinflation that has seen construction material costs skyrocket in recent weeks has made clear to everyone the scale of the flaws that have been built into the public works contracts. The situation in Ukraine may be what has brought these matters into focus but there is no doubt the current system has long been unable to manage the impact of inflation, supply chain disruption and other industry-recognised risks. This was obvious to anyone following the industry on the back of Brexit and the pandemic. It should not have taken the impact of a war for badly needed reforms to take place.

Pricing inflation is one of the most challenging risks impacting contractors. There is an unwarranted assumption that contractors are better placed to manage this form of uncapped risk - and it is effectively uncapped - for the duration of the project due to their relationships with suppliers. Unfortunately, that is just not credible. No contractor in the world is able to avoid price rises when we are witnessing hyperinflation of this scale. For example, in recent weeks we have seen the price of rolled steel rising by 66%; a 50% jump in rebar prices, going from €900 per tonne to €1,350; cables comprising mainly copper up by 31% to €8,642 per tonne; and delivery times being doubled for air conditioning units, electronic controls and lighting equipment.

These examples are just the tip of the iceberg. The reality is most construction materials are now seeing significant jumps in price, and that is why is it so concerning that public clients often approach risk management by transferring as much of that risk as possible to contractors and the supply chain. Driven by a lack of technical understanding, this leads to plans that fail to forecast the full nature of risks, and that will have a material impact on a project's time and cost. It is not just the industry that can see these problems. The Government and the Office for Government Procurement recognise the issues and have committed to reform.

Interestingly, in 2019 the Office for Government Procurement stated that, under the public works contract, risk transfer is not operating satisfactorily because the market is not pricing risk and formal dispute mechanisms were being triggered early arising from the notification requirements built into the contract. It also indicated there is a poor definition of works requirements due to the poorly resourced design teams. These flaws have been affecting the industry and the delivery of public projects for quite some time. Not only is the flaw built into the process but public clients are taking full advantage of these weaknesses. The transactional operating model they have adopted drives price assumptions and the allocation of risk before contractors and the supply chain even get involved. That means public works contracts present open-ended risk to the contractor, which they have no ability to measure and cost thanks to a competitive lowest tender process.

It is well documented that margins in the construction industry are tight. As the committee has seen in our supplementary materials, the CIF recently commissioned a report on public tendering practices and their impact on delivering value. That report, conducted by Idiro Analytics, found that the average margin for public contracts was 3.8%. When materials costs are soaring at the rates we have already outlined, that margin does not stand a chance. The CIF believes allocating and managing risk is one of the biggest contributing factors that prevents firms from making the sustainable margins needed to invest in their businesses and the wider sector. Poor risk allocation between clients and contractors prevents construction projects from being procured and delivered successfully.

When challenges arise in public projects, this means the commercial agreements leave little room or budget for putting things right. These challenges are further exacerbated by the focus public procurers in Ireland place on the lowest price tenders. That outlook means risk does not get adequately priced. The simple solution here is for more emphasis to be placed on quality in the award of tenders, backed by the use of quality and price ratios.

If Ireland adopted international standard forms of contract, such as the new engineering contract, NEC, or the International Federation of Consulting Engineers, FIDIC, contract, all these issues could be addressed. These contracts are built to encourage collaboration and the equitable allocation of price variation risk. Contracts of this nature make more sense for the Government, the industry and the taxpayer. By capping the level of risk applied to contractors, it enhances project outcomes, avoids delays or disputes and delivers better value for the taxpayer. Implementing such a system will also help kick the habit of squeezing costs to save money in the short term. More intelligent procurement, putting contractors on a stable footing and unlocking investment throughout the supply chain will speed up the transformation of the industry that business, government and the public wants to see. These outcomes are diametrically contrasted to the scenarios delivered through the current public works contracts in Ireland. As an illustration of how out of step we are with international standards, it is worth noting that international contractors will not price work in Ireland based on the public works contracts.

Better risk management will lead to many more projects being delivered on time and to budget, creating fewer disagreements ending in legal action and greater trust between businesses. It is the industry’s view that this reform process represents a badly needed opportunity. For that opportunity to be grasped, significant changes will need to be made to the public works contracts. Specifically, we believe the contracts and process should be changed to adopt the more modern, flexible approach contained in the NEC or FIDIC contracts, promote early and continuing engagement and a collaborative environment between clients and contractors, and provide a clear and complete project description where risks are identified and explained. The process should also minimise the use of price-only criteria and encourage accurate, fair and clear use of multi-criteria awards. We should promote multistage procurement processes and identify and penalise below-cost bidding or abnormally low tenders.

Until these changes are implemented, the current public works contracts will continue to create an adversarial environment that is prejudicial to good project management and wasteful of taxpayers' money. Nobody is happy with the current system and this is the Government's chance to create one that really works. I thank the committee.

I thank the witnesses for the statement. I do not know if they watched the earlier proceedings, when we spoke with departmental officials. What we as a committee tried to impress upon them was a degree of urgency with the matter, and we have some work to do with other Departments.

Representatives of Transport Infrastructure Ireland met the committee before Easter and they pointed to a number of issues as they saw it. It was helpful for us to hear them. They spoke about the need to align stakeholders and address planning and regulation. They spoke from the perspective of delivering projects. The main question they raised was the need to address fundamental problems with public contracts.

I will ask a couple of questions and I am sure others will pick up along the same theme. How are these problems manifesting with projects that are ongoing and what impact will be seen for projects in the pipeline? What does the Government, including the Department of Public Expenditure and Reform and senior Ministers, need to do to straighten this out?

Within that ask, what are the most urgent things they can do?

Mr. Tom Parlon

We have repeatedly raised the issues with the Minister. Mr. Sheridan has a path worn to the Office of Government Procurement. There is good engagement. The Minister acknowledged that there is a serious problem and asked the Office of Government Procurement to bring forward some options. I spoke with the Secretary General with the Department of Public Expenditure and Reform this week. He said there would be a further meeting with the Minister this week and the Department hoped to bring forward some proposals. He spoke about how complicated and politically sensitive an issue this is. I appreciate that is the situation.

However, contractors who signed up to a project based on prices 18 months ago have much bigger problems. A couple of large well-known firms have gone out of business. A number of large UK firms that were operating here, such as Balfour Beatty, have left the country mainly because of public works contracts.

What do the witnesses regard as large contractors? Which Irish contractors remain in the Irish market?

Mr. Tom Parlon

Those currently operating projects are still here. One of the companies that went out of business had signed a contract for a substantial road project, but had not begun it. I understand that the increase in the price of diesel was a factor. Large excavators that are used to haul a lot of stuff out and in use a lot of diesel The increase in the price of diesel over the past three or four months has caused a 10% increase in the overall cost of a contract. That situation is untenable.

The report we commissioned shows that contractors are only putting about 2.2% aside for risk. Clearly, if people are taking on an inflation rate of 15% or 20%, they are losing a lot of money. Businesses could very well go broke if their cash flow runs out. Other business may decide that a project is no longer tenable. People have a responsibility to not trade recklessly and may decide to cease working on a contract. We know from past experience-----

How many Irish contractors are active in the Irish market at the moment and are up and running with contracts?

Mr. Tom Parlon

They are all working.

Could Mr. Parlon name them for us?

Mr. Paul Sheridan

As part of our submission we provided information on the number of contractors that have left the market. I understand the number of companies has reduced from 138 to 77. The type of contractors that would be in a position to deliver on some of the major infrastructural projects associated with transport in the NDP is decreasing. They are also in an internationalised market. Other clients in the UK and Europe are more competitive in the terms and conditions of their contracts, like the NEC. Therefore, they are looking at an open-ended risk on the Irish public works contracts and deciding that they will not tender. What is exacerbating the situation is, as Mr. Parlon said, the inflation risk. It is too difficult to go into a fixed-price contract. We are seeing a thinning out of the industry, unfortunately.

Representatives from the Department came before the committee. It was difficult to read between the lines. They have a line they need to hold. I got no sense that a duck was paddling under the water and there was a level of urgency regarding this. They spoke about ongoing assessments and engagement. I ask the witnesses to give us a sense of the type of risk that is at stake here, in terms of a timeline within which something needs to move. Does this involve months or years?

Mr. Tom Parlon

I hope that we are talking about a month. All of the work has been done. Recommendations have been made. There will, of course, be implications in terms of making a change. The Minister is on the record as saying that about €12 billion is available for the expenditure on the NDP this year. We did not spend the full amount last year or the previous year for different reasons. He has said we cannot go beyond that and the industry is not expecting him to.

Given the current level of inflation, we will get less bang for our buck. Projects will cost more. At the moment, the Government has said that contractors, which are largely individual family firms, signed contracts and it is tough luck as they have to deliver.

Are businesses considering variation clauses, new contracts or a new system or code?

Mr. Tom Parlon

Mr. Sheridan is the expert on contracts. A price variation clause is normal. In every other jurisdiction there is a price variation clause. For some reason, which I think was political at the time, it was decided that all future contracts would be a fixed-price lump sum and prices would no longer go through the roof. We then of course had periods of very low inflation, a recession and all of that. This is an extraordinary time. The fact that we have extraordinary inflation and no capacity does not make sense.

Mr. Paul Sheridan

Price increases are one risk, but a broad range of risks may arise on any construction project that started three years ago, is only going on site now and requires another two years to complete. We all know that events can happen. We want a contract that can react to that in a collaborative way. The idea of risk mechanisms is to protect the contractor's business and the project, as well as to deliver value for the client. The NEC-type contracts handle risk in a much better and fairer way. In such a system we collaborate more, manage it better and the client only pays for what is actually delivered. It takes competitive tendering on risk out of the process.

Does the input risk go to the employer, away from the contractor?

Mr. Paul Sheridan

It works in a very similar manner to a normal process. We tender based on how much it will cost to deliver the project. As events happen, companies examine the situation and ask how they can minimise the cost. If the cost is less or more, there is a split because they recognise that some things are out of everybody's control.

It means all of the risk of cost is not with the contractor.

Mr. Paul Sheridan

No, the idea is that it spreads the risk in a fair manner.

On that, is that a suggestion that we could move to the NEC model for future or existing contracts, or both? How do we deal with that if we cannot do so?

Mr. Paul Sheridan

For future contracts, adopting the NEC or FIDIC-type model can be done for new contracts. Obviously, there is privacy of contract. However, the Government has shown innovation in terms of dealing with the Covid situation and introducing mechanisms to deal with that. I understand it may be considering other such mechanisms to deal with existing contracts in respect of inflation, but it would be difficult to adopt an NEC for an existing contract.

It might be a case of making amendments to existing contracts to allow a price variation clause.

Mr. Paul Sheridan

Putting the thing in place is not complicated, but letting the guys sit in a room together and work out what is fair, through a transparent mechanism, is what we are asking for. Those types of clauses exist.

The old contracts referred to 50% inflation and required a 30-month wait. Since 1 January, the figure is 15% for inflation if companies wait 24 months. The witnesses might comment on that timeframe. Whatever will work now must be pretty straightforward because changes need to be introduced now and work straightaway. It will take a long time to get a framework for new contracts up and running.

Can the witnesses distil down for us what they would like to see in a variation? Mr. Parlon made reference to the 10% increase in the price of diesel. We are all hearing about that. Can he drill down and tell us what he would like to see in practical terms?

Mr. Paul Sheridan

I would like a straightforward formula and process around making a legitimate cost recovery claim for material cost increases that everybody understands.

Should businesses be able to make that application straightaway within 24 months? How would Mr. Parlon deal with that?

Mr. Paul Sheridan

There would be a future or past contract. We could figure out a mechanism for retrospective action. We want a formula based on real construction material commodities at the moment.

You introduce a formula that everybody can understand. It is indexed according to real material costs------

Would the witnesses be okay with a sunset clause on this, given we are in a wartime situation? Is it something they would see having long-term application?

Mr. Paul Sheridan

If you are talking about a sunset clause in terms of retrospective, we obviously recognise-----

No, I am talking about something brought in for a period to deal with the Ukrainian issue. Mr. Parlon made reference to other issues. It lanced the boil. It was always there but we are in an acute situation at the moment.

Mr. Paul Sheridan

I do not think inflation will disappear from the planet after the Ukraine, so we need a mechanism that is fair. That is the misunderstanding about price inflation clauses. They are designed to ensure the client only pays for actual cost increases instead of having to pay a premium upfront. They are designed to protect the client as much as the business of the contractor.

Mr. Tom Parlon

They would work in a deflation situation as well.

I accept that.

I thank the witnesses.

I welcome the witnesses and thank them for being here. If Mr. Parlon were to give us a task from today's meeting, what would it be, based on his meeting with us and the presentation we received earlier from the Department of Transport?

Will the Senator repeat that?

Given our two meetings today, I ask Mr. Parlon, if he were to give the committee a task based on what we have heard from the present witnesses and from the Department of Transport, what would it be?

Mr. Tom Parlon

I will ask Mr. Sheridan to respond.

Mr. Paul Sheridan

We need a sense of urgency about the proposals coming from the Department of Public Expenditure and Reform to deal with retrospective issues on contracts and something going forward to allow contractors to have a little bit of certainty around the risk they are taking on and to allow the pricing of Government contracts to continue. We also have to look at the broader contract. The NDP will have to deliver a lot of infrastructure and we will need contractors who want to get into that space. We need to look at NEC contracts as a viable option.

Could Mr. Sheridan distil the last two chunks of his presentation down for us? In simple language, what does it mean for the committee to go to the Department of Public Expenditure and Reform? Does he believe that Department, from the Minister down, is seriously engaged, passively engaged or not engaged at all?

Mr. Tom Parlon

I think it is seriously engaged. The Minister has had a full meeting with us, acknowledged there is a problem there, asked his officials---

How recent was that?

Mr. Tom Parlon

It was within the past three weeks. He gave the impression this would take a couple of weeks. We deal with the Office of Government Procurement regularly. I would say there is a resource issue there. It is a complicated issue.

Is that in terms of staff personnel, working from home or otherwise?

Is it a physical resource issue, a skills resource issue or both?

Mr. Tom Parlon

I would say physical, numbers. This should be a priority and maybe that is typical of the Department of Public Expenditure and Reform. That Department's concern is about-----

Does Mr. Parlon know how many people work in the Office of Government Procurement?

Mr. Paul Sheridan

We do not know the exact numbers but we know it is a small, tight team that is specialised. Unfortunately-----

Are we talking four or five?

Mr. Paul Sheridan

Potentially, but I could not stand over that number. The problem is it tends to get mixed up with general procurement, whereas construction is more about risk management. It probably needs to be geared up a bit more.

Senator Jerry Buttimer: Mr. Parlon referenced a resource issue but surely the pandemic of the last two years has taught us we have an issue with public works contracts and that a specific team needed to be put in place to enhance the delivery of projects and strengthen the procurement process.

Mr. Tom Parlon

What the current contract has driven, what our contractors have an issue with and what the survey we did showed is that contractors are tendering almost at zero margin. The lowest price wins and it does not matter if the last contract you did was a superb job and everyone said it was brilliant, you were efficient and the quality of work was wonderful, while contractor B did the opposite. When it comes to the next contract, it is about the price.

In a low inflation environment, is it fair to say the existing contract was fit for purpose?

Mr. Paul Sheridan

The economic environment disguised the problem. Every other country in Europe used effective price variation mechanisms. They may have decided on different ways to use them, depending on how short the contract was. On complex transportation projects, you have to look at the longer-term picture so you need these mechanisms in there.

Would the witnesses regard Ireland as an outlier in the type of road construction contract we have under the public works framework?

Mr. Paul Sheridan

We appear to be the only country in the world using this type of contract. I think they got it from an Australian state which no longer uses it. We are unique in the world. In the UK and the EU, it is primarily NEC or FIDIC. In the UK, public works contracts are generally done under NEC3. It is a much fairer way of dealing with risk and of taking that competitive nature out of pricing risk on contracts.

I assume the witnesses have been back to the Office of Government Procurement on many occasions looking for a change. How long have they been actively looking for a risk-based model between the contractors and the agency who contracts them, such as the TIIs of this world?

Mr. Paul Sheridan

The last submission we made was in 2016. Prior to that, we had a submission in 2012 and had been heavily involved in the consultation process in 2007, when they were initially released.

Did the witnesses support the fixed-price model at that time?

Mr. Paul Sheridan

No. We fought hard against the introduction of these unique contracts. We thought some amendments to existing forms of GDLA would have done the job and allowed the industry to continue. Unfortunately, that is not the case.

Looking at the last four years, we have to acknowledge that Brexit, Covid and everything have impacted on the ability of the OGP to deliver on what it has set out to do. Why would the Government want to reinvent a unique contract when there are standard international forms that will allow it to attract international companies? If we want to deliver a metro or anything like that, we have to bring in this expensive equipment that international contractors use and our local contractors generally do not. They go into joint venture, then they come in and help deliver that. Unfortunately, Article 4 of the current public works contract, which any layperson can read, states you are responsible for everything, whether foreseen or unforeseen, excluding your price. Your are supposed to get a price for that in six weeks.

Mr. Parlon's reference in his opening statement to the issue concerning the Office of Government Procurement from 2019 about risk transfer because the market was not pricing risk, as well as Mr. Sheridan's contribution, are interesting to us. We are in a perfect storm, but it has led to an opportunity for reform and realignment of the process. The case study at the back of Mr. Parlon's presentation to us gives an example of the gravity of the situation. This and the earlier meeting are important and we have work to do.

Have the witnesses been before the finance committee yet, or engaged with it?

Mr. Tom Parlon

No. In our pre-budget submissions, even though it is not a budget issue, every year when we sit down with the Minister for Finance and his officials in pre-budget, the public works contract comes up as an issue. It has been a bone of contention for a long time. Who expected we would have 20% and 30% inflation?

For CIF members, given the current contracts framework, what is the risk of further civil contractors like Roadbridge going to the wall?

Mr. Tom Parlon

With regard to any contracts not already signed, I do not believe any of our members will sign a contract under the current conditions. There is no price security. You cannot fix a price, no matter what you are ordering. If you order ready mix, all the concrete suppliers around the country have put a notice out that from 1 May everything is up 10%.

There is no guarantee. If you were to sign a contract now and ring your local concrete supplier, he might say that in a month's time he may have to put out another notice.

Do you have concerns for the viability of CIF members working on existing contracts?

Mr. Tom Parlon

Absolutely. They have been on to us repeatedly. On a €20 million project they could be down €2 million at the moment. That is not marginal; it could bring a company under. They are holding out for a response from the OGP and the Department of Public Expenditure and Reform.

Mr. Paul Sheridan

Their balance sheets have been highly damaged, which is limiting their ability to look into the future and to stay in business. The likelihood of going insolvent is increasing by the day. I have never seen a market like it. I sit down to discuss with members how they are supposed to deal with tenders they are in and, when letters of acceptance come in, how they will deal with that. They are looking at going into contracts that are potentially down 5% or 10% from the outset. It is a very difficult-----

What margins were they looking at in those contracts originally? Two per cent?

Mr. Paul Sheridan

As we said, the average margin for public contracts was 3.8%, but the majority of contractors, when the numbers are looked into, are usually floating at around 2% or 3%.

They have had a turn of 5% into the negative.

Mr. Paul Sheridan

Yes, it is gone from the outset, so it is very difficult, but yes, it is increasing, and there are guys who have been with the institute for a long time, are very good operators and have good relationships, and I have never before heard them say they are pulling out.

Does the CIF believe that any of the roads contracts at the moment are making money?

Mr. Paul Sheridan

I would say any contractor who has entered into a contract since January 2021 is highly unlikely to come out of that contract with a healthy profit to allow it to invest in more talent, equipment and innovation, and that is the problem.

Are such contractors surviving on cash flow?

Mr. Paul Sheridan

Yes, cash flow and overdrafts, I imagine.

Mr. Tom Parlon

These Houses, of which I have some experience, can be a great place for rumours. Unfortunately, the industry is now rife with rumours, most of them unfounded, thanks be to God, but every other day I hear of a new firm that is under pressure-----

We hear the same.

Mr. Tom Parlon

Of course.

The CIF probably has far more knowledge of that than the committee has.

Mr. Tom Parlon

It is a very uncertain time.

Senator Buttimer, do you wish to conclude?

I am happy, Chairman. Well, I am not happy. I go back to my earlier conversation piece about the documentation we got today and Mr. Sheridan's remarks about the CIF members. The decline in the Civil Engineering Contractors Association membership, the tendering process and the number who are not tendering, and the development of contractors disproportionately increasing their turnover in foreign markets is all worrying. As I said, it is a perfect storm. The construction sector, to be fair to it, has been hit with multiple belts, and that is something we must examine. I hope there will be proactive engagement on the part of the Department of Public Expenditure and Reform, which should be Minister-led because the line Minister is the person in charge, as opposed to passing the matter from A to B to C. I hope that, as a result of today's meeting, we will have the Department of Public Expenditure and Reform in before the committee. I thank Mr. Sheridan and Mr. Parlon for being here.

Mr. Tom Parlon

Urgency is the-----

It is a matter of urgency. As well as the Office of Government Procurement, we will ask the Minister, Deputy Michael McGrath, to appear before the committee. The committee is not tied directly to one line Department; however, the biggest segment of the NDP is roads, which falls very much under our remit.

How many people are employed in the sector? Has the CIF had an opportunity to look at that? How many jobs do you believe are involved, Mr. Sheridan?

Mr. Paul Sheridan

Approximately 155,000 people are employed by the construction industry at present.

Mr. Tom Parlon

That is the entire industry.

Directly and indirectly?

Mr. Tom Parlon

No. That is directly.

I welcome Mr. Parlon and Mr. Sheridan. I come from a construction background. The history of the public works contracts we have, for the benefit of the committee, is that they were introduced in 2007. Negotiations had been ongoing at the time, but the then Minister for Finance guillotined the whole process and brought in these contracts and forced them onto the industry. For the first seven or eight years the risk was masked by a recession.

And low inflation.

And no inflation. Basically, contractors were not pricing the risk. Then, however, as inflation began to take off a little, they were able to gauge and to price the risk. What has happened in the past six months, however, is such that nobody knows what will happen tomorrow, never mind next week or in 30 months' time. That is where we are. As I said earlier, the contracts were brought in at a time when the Dublin Port tunnel was being built and there were rumours that it was going over budget, it was going to collapse, water was coming into it and it would never be finished. There was a knee-jerk reaction to change the contracts. I think Mr. Sheridan said the GDLA form of contract was fine, although it needed to be tweaked a bit at that time.

Another thing that is missing from this whole process is that there is an onus on the building contractor whose balance sheet has been affected to provide a contract guarantee bond for every contract it goes onto. That is based on the strength of its balance sheet, so an insurance company will not take it on unless it does that. We are cutting ourselves off at the pass before we get there. That is a very important aspect to this as well.

When I talk about the construction industry, I am talking about the guy who is building a house or a house extension, not the big guys. I am talking about the guys who have to go home in the evening and worry whether they will have money at the end of the week to pay the wages or whether that money will pay for the bit of plant they have at the end of the month. They might have a load-all or whatever else. These guys are getting caught the same as the big guys in proportion.

I know of a guy who is building a house at the moment and who has the Polycor stone on it. It is a two-storey house. He has blockwork going from there. He is already €20,000 over budget on the project and has not got to the finishing stages of it at all yet. Because it is a private house, he will have to talk to the client and they will negotiate how they will deal with that. The private sector is functional in that there is an open book when it comes to this. The client will sit down and look at specifications, savings and whatever else to make the project work, and that will help everybody.

What is wrong here is that we have been caught out by what has happened between Covid, Ukraine and the hyperinflation we have seen. I have been talking to the Minister, Deputy Michael McGrath, about this and I know he is consulting with all the various Departments, but my biggest worry about this is that, as far as I understand, the Office of Public Works cannot now compete in respect of the tender for works. It cannot get contractors to tender for works because they will not tender in this market as they would be tendering blind. The words "reckless trading" were used, and that is exactly what this is. People will be recklessly trading if they continue the way they are.

I have a very simple solution in respect of both the existing contracts - and Mr. Sheridan can correct me if I am wrong here - and the contracts that have been tendered for but not signed. It is very simple to amend these contracts to include a clause for price variation with a mechanism within that as to how that is dealt with. It could be written out in half a day. If the price comes down, the client benefits; if the price goes up, the client will pay in proportion. That is how the NEC and FIDIC operate. That would be for the emergency situation we have now. Any clause can be inserted into a contract when there is an agreement between the contracting authority and the contractor. A clause can be put into the contract to do that. I think I am right on that. Basically, the immediate emergency and the crisis we have now can be resolved very quickly. There will be a cost to it, but what will the cost be if we do not do something about it? This is where we will find that civil engineering contractors will turn their backs on Ireland and bring their plant over to England, where they can get work and have peace of mind knowing they will get a fair deal. Right now we have stagnation because I think contractors are holding back on progressing works, even on site, because they cannot get the materials, because of the cost of it or whatever else. Looking at the presentation the CIF made, in particular on the margins at which contractors are working, they are working at very thin margins, and to achieve those margins they have to work hard. Since the public works contracts came in, I would describe them as having developed a war zone within the construction industry, where the clients' representatives are in a battle with the contractors from start to finish.

What is not known is how much money has been spent by contractors and contracting authorities on buying in expertise in arbitration, conciliation, claims and all those types of things. That has to be paid for by somebody. We have to come back from this and try to get a more collaborative approach. That is what these contracts do.

I am making a statement rather than asking questions because I have been speaking to our guests. My last point is that the small contractor building a one-off council house is as important to me as the big-----

The Deputy mentioned a figure of €20,000. What percentage of the overall contract price is that?

The price of construction of a house has risen by approximately 30% in the past year. People will build a house, especially if it is a private house, to get into it. They will put in a septic tank and a hardcore driveway and move into the house.

The basics.

That is fine. It is what I did when I got married. I refer to the national development plan in the context of not having contractors who are eager to price the work. It always comes back to price. There is another mechanism for dealing with tenders in the context of the lowest price, namely, the most economically advantageous tender. That should be developed better to allow for account to be taken of previous work, performance, experience and all that. As Mr. Parlon stated, you play the game and win it but you might not be selected on the team for the next game because your price is not right. That is a frustration for contractors who are trying to do things right and well. I fear that when there are tight margins and people are trying to save money, safety could be forfeited to try to save a business. That is the last thing we want to happen in the construction industry.

I have two quick questions. Is Deputy Canney correct that some members of the CIF are not tendering in the Irish market but, rather, going to the UK and elsewhere? Are the current public works contracts always based on the lowest tender?

Mr. Paul Sheridan

The answer to the Chairman's first question is "Yes". That is happening. The answer to his second question is "No". I think what Deputy Canney mentioned is that it needs to be improved so that there is more emphasis-----

I am asking about the current situation. Is it always based on-----

Mr. Paul Sheridan

There are contracts that were purely awarded on the basis of price. That is the perception. There are other contracts that have a blend but that blend is often split 70:30, with 30% being on quality rather than it being the other way around.

There is a blend allowed under the contact------

Mr. Paul Sheridan

It is allowed. The legislation allows for quality-awarded contracts. The challenge is in the implementation and consistency.

It also comes down to the percentages that are allocated. For instance, if 70% relates to the lowest price, the rest of them do not really matter. There should be a balance between quality, safety, past performance and programme of delivery. That should have a better emphasis in the overall evaluation.

That would contribute to having a sector that is sustainable in the long term.

Our guests have met the Office of Government Procurement and the Minister. They anticipate that a formal response will be issued in the next two weeks.

Mr. Tom Parlon

I hope it will be issued in the next two weeks.

For how long can members of the CIF hold out? What is the timeframe in this regard?

Mr. Tom Parlon

I refer to Deputy Canney's remarks in respect of this having caused an adversarial relationship in the context of the client. An industry has grown up around the legal aspect of this and finding loopholes. Unfortunately, contractors have been reliant on variations and claims to try to get over the line. That comes at the cost of having smart people to read contracts and find loopholes. It is not the way to go.

For how much longer can the sector hold out without change-----

Mr. Tom Parlon

We hear rumours about various companies but that is the last thing they will reveal. One cannot phone a company and say one has heard it is having big cash flow problems because that will only-----

The supplier will suddenly be ringing up to say the contractor will not get the next load unless it pays up now.

Mr. Tom Parlon

Exactly. In the current climate, that is a big issue in the context of suppliers. I rang a supplier in respect of getting a load of ready-mixed concrete next Saturday because I will be at home and my sons will be working. The supplier told me it had not delivered a load of ready-mixed concrete on a Saturday since Christmas. There is no demand for it and the supplier cannot get drivers. There is a new scenario out there and suppliers are not going to take a risk. The levels of credit have been tightened up massively. One can understand that, given the extra costs that exist.

May I ask a question on that issue? My apologies to Deputy Canney for interrupting. On Mr. Parlon's point relating to banks, how have banks facilitated, helped or hindered in the whole process? I ask that as an aside.

Mr. Tom Parlon

Our contractors are not largely dependent on banks for cash flow. It is designed into the contract on the assumption that one gets paid as one proceeds.

Is this bulge now manifesting itself in overdraft facilities?

Mr. Paul Sheridan

That is the point. It is a very different model. We are talking about contractors that are building infrastructure. They rely on the revenue they get from the contract to keep afloat.

Are our guests getting feedback in respect of banks? For instance, Roadbridge was put into receivership by Bank of Ireland. That is in the public domain. Are our guests aware of any pinch points at the moment where banks have become the funders of major road construction companies and that is bringing pressure that was not there previously and could result in some of these companies coming under further pressure?

To add to that, the supplier and the bank's relationship with the supplier is also part of that equation.

Yes, it also relates to suppliers.

Mr. Paul Sheridan

As Mr. Parlon stated, unfortunately, due to the nature of the industry and the fact that one has to tender based on a pre-qualification and show one's finances, contractors tend to keep their cards close to their chests in terms of the financial position. That has to be understood. As such, we would never be told X, Y or Z, so we cannot tell it to the committee. All I can say is that having put my finger in to test the temperature of the market at the moment, I have never come across any market like it since probably 2009 or 2010.

In what way?

Mr. Paul Sheridan

In terms of the damage being done to balance sheets and the ability of contractors to continue to absorb these costs. There are a lot of Mexican stand-offs at the moment, especially in the context of public contracts, because nobody is willing to or can sit down and talk through it. We know that many of the contracting authorities recognise the problem and would like to do something but cannot do so because-----

Is that manifesting in contractors now not working five days a week but, rather, operating for three or four days a week? That is what is happening with Roadbridge. Supplies were not coming in.

Mr. Paul Sheridan

That is the danger of supply chain disruption. Lead times may double overnight or one may suddenly be told one is not getting the supply.

With regard to my remarks in respect of Roadbridge, I point out there were rumours to that effect. I do not want to-----

Mr. Paul Sheridan

When the supply chain breaks down, it can cause problems on site because there are delays. If that disruption is due to war, Brexit or Covid, it is outside the control of the contractor. We have been asking the Department of Public Expenditure and Reform to ensure that a contractor will not get liquidated and have damages applied to it because of something that is completely outside its control. It is a perfect example of a risk. War is not included in the public works contract but it is included in every other international contract, as well as the old one and private sector contracts in Ireland. That is an example-----

Have our guests considered reform of the public works contract such that the funding on a contract would be ring-fenced in respect of suppliers on that contract rather than funding coming in on an existing contract being used to pay suppliers on a previous contract? Have they considered that area? It might give added security for suppliers.

Mr. Paul Sheridan

Any mechanisms that can protect the supply chain should be considered but the contract itself is designed to create a direct link between the contracting authority and the main contractor. There may be certain types of contractors or subcontractors that have some form of contractual relationship through reserve specialists but, generally, the Construction Contracts Act acts as a mechanism to protect the supply chain.

I thank Mr. Parlon and Mr. Sheridan. On some level, this issue has already been addressed. It was stated that there are two things we are dealing with, that is, the present running of contracts and the need for amendments. From what our guests are saying, it does not seem that there is a major difficulty there. Where two people are obviously in agreement and it is legally put together, then so be it. What they are talking about, however, is what seems to be best practice internationally, namely, FIDIC and NEC contracts.

In fairness, TII had made a major play in regard to it. I am going to ask about one specific point. Price aside, what it had spoken about was the necessity or usefulness. I believe it was outlined that, with FIDIC, one would sit down with a contractor very early to get into the ins and outs of the contracts and identify whether obstacles might appear. It gave a couple of examples of being able to deal with issues and getting them off the table. That would be necessary and deal with the issue in part. We all accept there needs to be a genuinely significant provision, not just regarding the lowest cost. Whether to deal with the issue of variable costs must be considered, but the ability to deliver is important because what is happening is absolutely ridiculous. Some of the disaster situations have arisen because of contracts based on the lowest tender price. What has happened afterwards has happened, and prices have definitely not stayed at the levels at the time of tender.

Reference has been made to coming up with a solution in around a month. The CIF has said it has discussed this many times with those concerned and all the rest of it. Is the hold-up fair enough, or is it something that could be moved on faster?

Mr. Paul Sheridan

Does the Deputy want me to deal with the mechanisms to deal with inflation first?

Mr. Paul Sheridan

We have been highlighting this since our correspondence back in August 2021. We outlined solutions and what we believed would work. We repeated them in February in another letter, and we met the Minister. We believe there are mechanisms and do not believe it could take so long to introduce them. Unfortunately, policy development and cash flow do not mix. What is happening is that it is taking time to decide on the policy we want to implement. We can understand the need to protect the taxpayer and industry and create a sense of fairness, but it is now critical to have a sense of urgency.

Ultimately, we are talking about contracts or systems that are up and running and will be used for years. If I understand the matter correctly, it is a case of sharing the possible pain that can come from the increases. Does Mr. Sheridan know what I mean? Protections will be written in, particularly from the point of view of the taxpayer.

Mr. Paul Sheridan

That is an important point. The industry is not looking for a 100% recovery. Those concerned would normally have considered risk around this in their contracts. What they are looking for is a mechanism to recover some of the costs and share the burden. Everybody has to be realistic here; nobody saw the risks. The State, as an employer, never saw the risks coming. That is the reason for mechanisms and contracts allowing people to sit down, collaborate and reduce the cost of any fixes, but that cannot be done at the moment because the contract does not allow it. It tends to drive the recovery of costs into a dispute mechanism, which is what Deputy Canney was referring to, and suddenly one is into conciliators, arbitrators and lawyers. Unfortunately, the public works contract has a clause that denies the right of the contractor to take any specific issue directly to the courts or draw on court jurisprudence. We do not actually have a legal opinion on any of the contracts, which is not the case with NEC and FIDIC contracts, regarding which international law underpins what is said.

The position we are in now was put well by Mr. Parlon in that the arrangement is utterly dysfunctional and people are just going through contracts line by line to get opt-outs or trying to use variations as a means of staying in the game. The longer this goes on, the worse the situation will be. The reason we are having this conversation is that we want projects to be delivered. We all accept we are in a different space owing to inflation, and we all know the reasons for it. I accept that some of the issues were masked previously because we basically had zero inflation for a considerable period. Sometimes the State can regard obstacles as greater than they are. What sorts of contracts did we have previously? This State, like every other, has had a history of high inflation. That was taken into account. I assume it was on the basis of separating materials from the actual works done and the percentage built in, but-----

Mr. Paul Sheridan

What we used to have was a Government Departments and local authorities, GDLA, contract or an Institute of Engineers Ireland, IEI, contract — an engineering contract. The two of them were got rid of. They contained mechanisms to allow a contractor and employer to sit down and figure out or negotiate a solution first. Unfortunately, notification and follow-up are now required within a certain period. The contractor is told it must state when it thinks there is going to be a problem. It has to. The problem may not materialise but the mechanism creates an attritional model of working rather than one whereby the relevant parties can sit down and state what has actually happened. Many of the impacts of events on a contract take time to manifest and understand. There is a timing issue. The GDLA and other old contracts would have allowed the contracting party to ask for the bills on seeing the full effects. It could point to its own bills and to what is not right-----

The current position involves an inflation rate of 15% and a wait of 24 months. What if we did away with the 24 months, worked on the basis of the inflation rate of 15%, and had the arrangement apply to contracts from before 1 January-----

Mr. Paul Sheridan

The GDLAs.

-----and dispensed with the 50% and brought that back to 15%. Regarding all contacts, you could go in over 15%, but working on the basis of everything else that is within the existing framework. Would that work?

Mr. Paul Sheridan

The 15% is actually too high. It is not picking up some of the spikes on a monthly basis. That is a real problem and what we are hearing from our members. In the context of the hyperinflation being dropped, you are allowed to claim only for an excess above the figure.

No, I am wondering about what would happen if one worked on the basis of what is in place now, the 15% for the new contracts, dispensed with the requirement concerning a period of 24 months into the contract and brought it back to real time. Would it work if there were no change and we said we are now doing away with the 24-month period and applying the arrangement to all contracts, whether they have been in place since 1 January or prior to it?

Mr. Paul Sheridan

If there were a number — it does not have to be 15% because we would say that is too high — and a mechanism to work through a proven cost method, that would be one option-----

Currently, if one has more than 15% and goes in under claims, does the claims system itself work, or is that very cumbersome?

Mr. Paul Sheridan

It is very confusing. It is cumbersome and confusing because it is the proven cost method, and there are all sorts of definitions of "price". It is very cumbersome. The preference would be to use something like a formula that is in the NEC. In this context, everybody would sit down and the numbers would be plugged in. Mathematics would identify the number that would represent commodities, and that is what would be allowed. One would not get all of that, but only a certain amount, because one would have to have taken some account of the situation. That is the simple mechanism that is used-----

Has the CIF got to a point with the OGP where there is an agreement in principle that a revised mechanism will be put in place? Has it got to a point where it is working on the detail on the inflation percentage? What is the CIF's position on that?

Mr. Paul Sheridan

We are still in the dark as to what exactly the mechanism will look like. Our members are asking what is coming and what they should go for, but we are very unclear on what exactly will be approved at policy level.

Who has CIF engaged with on this at governmental level?

Mr. Paul Sheridan

We met the Minister for Public Expenditure and Reform, Deputy Michael McGrath, at the end of March. My primary contact is a principal officer within the OGP. We have good engagement. I have explained the issues and the officer has explained the issues and technical challenges that have to be addressed. Therefore, there is dialogue.

Is it directly with the OGP?

Mr. Paul Sheridan

Yes. We have a very good relationship.

CIF has nothing back in relation to-----

Mr. Paul Sheridan

No. The OGP cannot release anything until the Department of Public Expenditure and Reform approves it. Our understanding is that the senior officials within the Department have the proposals from the OGP and are considering which ones they will implement.

In that case, there is an agreement in principle with the OGP that there is a need to bring in the price variation. It has made certain proposals to the Department. Who in the Department have the proposals gone to?

Mr. Paul Sheridan

We understand they went to the Secretary General of the Department of Public Expenditure and Reform.

When were they submitted?

Mr. Paul Sheridan

We met the officials on 29 March, I believe, and I understand that the proposals were submitted the following Thursday.

When the CIF representatives met the Minister, Deputy Michael McGrath, had the proposals been submitted to the Secretary General by the OGP?

Mr. Paul Sheridan

When we met him, the indication was that the submission had not yet been received. At the meeting, he asked the OGP to make the submission within a week.

Mr. Tom Parlon

We spoke to the Secretary General just this week. On the agenda of our construction sector group, which he chairs, it was the main item.

Mr. Tom Parlon

It is obviously the elephant in the room at the moment.

How did the latest discussions go?

Mr. Tom Parlon

It is more or less the case that he is liaising with the Minister and that they will come forward with a proposal.

There is no question that there are cost implications. The implication which I made strongly to him is that it is unfair to put all the cost implications upon the contractor and the industry.

What Mr. Parlon is saying is that very few contractors are going to look at any of these contracts into the future until this is fixed.

Mr. Tom Parlon


Whatever about the dysfunctionality regarding who is already in play, we are talking about nothing happening until this is resolved. Can the witnesses give a breakdown and elaborate on the best-case scenario in what they are looking at? There is the NEC and FIDIC. Which is their preference? Can they give any specifics regarding what they think would work, percentage-wise and so forth, and some detail on that pre-planning piece, for want of a better term, that seems to happen and that made a considerable amount of sense to me?

Mr. Paul Sheridan

As many of our members would have experienced working in the UK, the NEC is probably the best option for a contract. Again, it would be very good for attracting new talent into the industry because it would be internationalised. It would be good for growing out business in the export sector. That is important. The formula itself has to be stress tested and we have to see what way it pulls out the numbers. Right now, the 15% is way too high. Normally, one would see approximately 2% to 5%, perhaps.

How would the shared responsibility or the onus work?

Mr. Paul Sheridan

Take the example of a NEC3 contract. One tenders normally, one prices it and shows the value at which one can deliver that project. Once that is delivered, one has a budget one works to. The delivery becomes a target cost, so one tries to deliver it below that. If it comes in below that, the employer gets the benefit and so does the contractor. It is split. It depends on what is put in the contract, but usually it is 50:50. Then if there is a situation where the contract starts to go above, the client goes through a very strict auditing process. It is not a case of sitting down and doing a deal. One has to prove through an auditing process what the final cost is. What happens then is that there is a split as well, so the State is only paying for the actual cost, it is well managed and it does not have to absorb everything, nor does the contractor.

That is literally offering up the receipts.

Mr. Paul Sheridan

Essentially, that is the way it is done. It is through an auditing process. It is very difficult to fudge the system.

How specific are these contracts? I imagine there are broken down costs and one is giving a general indication of the separation between costs and everything else.

Mr. Paul Sheridan

Generally, one would price a bill of quantities, if it is part of the contract. That will set out the materials and the various things that are needed. There will also be design specifications, work and drawings. The contractor has to go through everything and then has to look at what has been allocated in terms of design and the subcontractors. It is a very complex situation. It is getting more complex with technology.

What would you deem to be, on average, construction inflation costs for roads?

Mr. Paul Sheridan

This is the difficulty. Each civil project has its own inherent character. It depends on how much steel is in it, how much blacktop is in it, how much excavation is in it and how much fuel and plant are in it.

It is probably going to be 30% on average.

Mr. Paul Sheridan

We can only talk about the cost increases on the value of materials and fuel. How they manifest themselves on a project is the problem. That is why we need the mechanism.

Looking at the Exchequer costs, if it was making approximately 3.8% margin and it is now going down to 2% and there is inflation in costs, which I put at 30% to 40%, one is looking at contracts being priced at very small margins. We are probably looking at 30% to 40% and almost a quid pro quo from the increase in costs to the increase in the contract price. Is that a fair comment?

Mr. Paul Sheridan

It is very difficult to put a number on it because each contract-----

However, the margins are so tight. The cost to the Exchequer has to be recognised. It is going to be quid pro quo. Whatever is the increase in inflation in costs is more or less going to manifest itself and increase the cost to the Exchequer in the public contracts-----

Mr. Paul Sheridan

It will not be an insignificant cost to try to deal with the thing, but the idea is to trial a mechanism that somehow gives some form of recovery for the industry so it can repair-----

It would not be a full increase in the costs because that would be divided between the contractor-----

Mr. Paul Sheridan

Most reasonable contractors will understand that what has happened is out of the control of both parties to the contract.

If the inflation rate was 30%, we are probably looking at a 15% increase for the Exchequer if it was 50:50.

Mr. Paul Sheridan

That is too simple an approach to take; that is why we need the mechanism.

The principle of what I am saying is not unreasonable.

Mr. Paul Sheridan

Yes, the principle, but the numbers are obviously-----

One has to separate out the work and labour versus the costs.

Mr. Paul Sheridan

Exactly. It is complex. The formula will only identify increases in relevant materials.

Does the NEC have a facility relating to that pre-consultation part between client and contractor? It seems to make a lot of sense from the point of view of catching mistakes, obstacles or difficulties down the line.

Mr. Paul Sheridan

Yes, there is a suite of NEC contracts. What the Deputy is referring to is called an early contractor involvement. That can be done. One can do that currently under the construction works management framework. We have always said that the sooner one can discuss risk and what the issues are upfront, one will obviously get a better understanding of the information. That is what risk is - does one have enough information to allow the contract to take that risk? One will only find that out if one allows early contractor involvement.

It makes complete sense. The witnesses have spoken to who they need to speak to, and their speech as to what is needed is in the public domain. It is just the sooner, the better. It is absolutely necessary.

For almost every person who has appeared before the committee in the last while there are two issues, tendering and the planning process. With regard to fixed-cost tendering, the fact is it can be two years down the line to go through. I understand that due diligence needs to be done, but the system must be resourced. We know the Attorney General is carrying out a review. With regard to the difficulties the CIF has encountered, and we have heard from multiple groups ranging from National Broadband Ireland, NBI, to TII, what are the particular issues? What engagements is CIF having at present in respect of the Attorney General's review?

Mr. Tom Parlon

Obviously, it cannot come quick enough.

I understand that.

Mr. Tom Parlon

It depends on how far it is going to go. Planning is a disaster, which is about as good a term one can use in terms of the delays and the different issues. I came across a couple in the last few days who made a planning application for a house extension. It is in the country. They are two professionals and very intensely focused. They went to the nth degree to have everything right and it was sent back as incomplete. It was such a pernickety issue, but for them it was their big project. They have spent their time getting it right and this could add substantial cost. To my mind, it was a ridiculous reason to call it incomplete.

Regardless of whether a project is big or small, it is the time, the delays and the judicial reviews on top of all that and the uncertainty that goes with it. When we were walking here we walked past a particular area where there is a big new development. There are a number of houses being gathered together for development and we were just wondering how long it had taken so far to gather it together and eventually then have to go through the planning process. There is very little sympathy for developers, but when one tries to put one's feet in their shoes and sees-----

We all understand that there must be consultation. Sometimes the best thing to do is to carry out pre-consultation with communities for bigger projects. However, the fact is that there is a problem in the system. There are a large number of people who may be looking at big projects and think they are covering everything from a planning point of view, but they cannot be sure that they can deliver or certainly cannot be sure about the timeline. What are the CIF's big requests with regard to moving that on? What engagements has it had?

Mr. Tom Parlon

Every individual has a right to object. We have no problem with that. There are vexatious objectors and there are people who are using the system just to delay. I came across a commercial business recently in an industrial park that is seeking to extend its manufacturing business, and an objection has been put in. The cause of it was an issue that the objector had with a customer of the particular manufacturing project. He had sufficient power, without having to put any money down, to hold this up and extend it. That is an element I hope the Attorney General will be able to find and get rid of from the system.

Deputy Cathal Crowe is next.

Thank you. I welcome Mr. Parlon and Mr. Sheridan to the meeting. There were overlapping meetings for me today. I have been following most of this meeting and have read the CIF's opening statement but I apologise for arriving a little late.

I do not know if our guests watched "The Great House Revival" on television on Sunday night with the architect, Mr. Hugh Wallace. It is about the renovation of beautiful, old but clapped-out houses.

Mr. Tom Parlon

I did not see it because I was watching the replay of the Clare hurling match on Sunday evening.

Very good. The entire series was filmed during Covid. Basically, a house renovation begins and halfway through the programme, after the ad break, Mr. Wallace says that they ran into trouble because costs spiralled out of all control. Every week they seem to resolve it because the contractor and the family split the costs. It resolves itself and then in the second part, the project gets built and completed. As we were preparing for today's meeting, it struck me that the private individual has a mechanism there, either through a quantity surveyor or directly with the contractor, to resolve issues. They can agree to split the difference, or whatever, and then on they go. While some builders have been burned on certain projects, by and large there has been a baseline of decency that has got a lot of people through difficulties. That mechanism, unfortunately, does not exist in large capital projects where the State is involved.

In its opening statement, the CIF suggested the State consider two different hybrid contract mechanisms, known as FIDIC and NEC, which are accepted internationally. I have a number of questions on that but I apologise in advance if other members have already put them to our witnesses. I am interested in the idea of building an inflationary aspect into contracts. Forgive my ignorance on this but we have all seen what has happened with the national children's hospital. Does that not become the upper ceiling for a project? Is there not a risk here for the State and the taxpayer that an inflation mechanism actually becomes the completion cost? If people believe there is a certain amount of leeway in project costs, does that not become the upper cost in terms of the liability and exposure of the taxpayer?

Mr. Paul Sheridan

I will take that question from a technical perspective. The idea of an inflationary mechanism is to protect both the client and the contractor because it makes sure that the client is only paying for actual costs through a transparent, simple formula. That is what it does and it is very different from other events that might happen on a site. There might, for example, be something wrong with the design or the ground when the contractor finally gets on site and that generates different issues. On inflation, a simple clause is used to protect the client and deliver the project. If there is deflation, the client can benefit from that too. That is what inflationary mechanisms are designed to do. They provide a way of sitting down, discussing and agreeing something.

We have a lot to chew over here. I am glad the CIF is engaging with the Department of Public Expenditure and Reform but it concerns me that it is has been months since both parties met. We are talking about big projects at this committee but my main concern is how this is impacting across housing and smaller scale projects throughout the country. We are not supposed to get into that too much today, however. When was the CIF's last engagement with the Department and when is its next engagement scheduled? It seems to be a bit haphazard at the moment.

Mr. Tom Parlon

On housing, about 50% of the entire output we are trying to achieve this year is going to be State funded through local authorities, approved housing bodies and so on. With every one of those contracts, the same issues are arising. They were fixed-price contracts and they have been exposed to all of the inflationary challenges that are there. That has to be putting those particular projects in jeopardy. There is no question about it; they cannot be immune from what is happening.

In terms of the private sector, thankfully for the industry there is a lot of private sector work out there. There are a lot of big FDI projects and other types of projects. In those cases the same difficulties arise but, as with the programme to which the Deputy referred, people can sit down and discuss issues. Contractors can tell the clients they have come up against a problem, that the steel component of the project is costing an extra €1 million, for example, and that they cannot cover it, it was not expected and so on. The clients might decide they cannot afford to have the project delayed or deferred or to have the contractor walk away. They will engage two professional quantity surveyors. Quantity surveying is quite an exact science. They will agree that the steel price is X amount and that is what they will have to do. There is scope and flexibility to do that whereas, as Mr. Sheridan said, that flexibility does not exist under public works contracts at the moment.

The next question is a big "if" and the witnesses might not want to answer it. I am being company-specific here and I know there may be liquidity information to which none of us is privy. Could one of these more flexible contracts, had it been in place for the northern distributor road in the Limerick-Clare area, have saved Roadbridge from going wallop last month?

Mr. Tom Parlon

I do not know. I am sure it would have helped the company's situation but I do not know.

The other point I would add, and I would have said it earlier when the departmental representatives were here, is that while we are talking today about the cost of materials such as aggregates, steel and so on, fuel is also an issue. Roadbridge employees, who are able to speak freely now having been unshackled from the company, told me that if they had remained on contract, they heard that the fuel burn for the machinery on that project alone could have amounted to €5 million on top of everything else that was priced in. That is something that has not been mentioned much today but it is very current and the situation in that regard is fluctuating as well.

That particular contract was tendered for two or more years before it started. That is a big issue as well.

Mr. Tom Parlon

It should be pointed out that on some civil engineering projects, the diesel cost increase alone has accounted for a 10% increase in overall costs.

That is huge, especially when we are talking about projects costing tens of millions of euro.

Mr. Tom Parlon

It is huge, yes. We all know that to pull in and fill up a car at the pump costs an extra €20 or €30 but filling trucks and diggers that are only doing five miles to the gallon is just frightening.

It would be no harm for the committee to communicate that to the Department. It is very important. This is the Joint Committee on Transport and Communications, after all. We have spoken about fuel costs previously but to hear Mr. Parlon quantify it at up to 10% in the context of projects costing tens of millions of euro is extremely worrying.

A few weeks ago, during questions on promised legislation in the Chamber, I said to the Taoiseach that inflation is a Europe-wide problem, particularly as it relates to building costs. All of the figures the CIF has produced today on fluctuating prices in steel and aggregates and so on, are similar to those in the UK, France, Spain and across Europe as a whole. It is not until one gets to Asia that one sees some degree of price stability because the supply chain of materials largely begins over there. I put it to the Taoiseach that the European bloc of nations was able to sort out the supply chains for vaccines and PPE very successfully. Does the CIF believe that supply chains could be improved if there was the wherewithal within states, and with multiple states, to get these materials back into the west of Europe and back over to Ireland? Should there be state interventions?

Mr. Tom Parlon

I am not so sure. That tide is pretty powerful and I do not think that either state intervention or EU intervention can hold it back. The steel plant in Mariupol, where the last of the Ukrainians are holed up, is one of the biggest in the world. It is a plant of a colossal scale but it will be a long time before it is supplying steel again. Finding other supply chains now is going to take a lot of time. I am sure there are other steel manufacturers around the world that are ramping up output and so on but it takes a lot of energy to produce steel as well.

It is worth exploring though. We did not really understand supply chains until Covid came along. We have seen how it worked in terms of PPE and vaccines. Bulgaria will see 60% of its gas shut off today but the European bloc has rallied overnight and secured alternative supplies. It is not within the gift of this committee, the Irish Government or the Houses of the Oireachtas but the European bloc, when it has wanted to over the past 18 months, has been able to sort out pretty rich supply chains and co-ordinate transport across Europe.

I will conclude by speaking about subcontractors. A subcontractor in my home county has told me that when the current job he is on is finished he will mothball his machine for a few months because every time he goes on site he is exposed to the financial unknown, which could be crippling. He reckons he has enough money made and banked to ease off a little bit, have an enjoyable summer, tip around his own farm and get back into contracts in the autumn. He said it with a smile and he is looking forward to that but I was thinking, if this is going to be the collective attitude, we are in big trouble. My question on that relates to Roadbridge and the other contractor collapses that probably will happen if nothing else changes. In those situations, the person who is most exposed is the subcontractor.

The employee who has been on the payroll has the State and has many safety nets. They are not ideal, but safety nets come around and if we wrap them up, we support them. There is nothing for the contractors. One of our colleagues earlier spoke about a subcontractor who was exposed to the tune of €2 million, which nearly decimated him. Is there anything in the contracts Mr. Parlon mentioned in his opening statement that caters high up or low down for subcontractors or will they always be scavenging around the contract just trying to take their cut from it?

Mr. Paul Sheridan

The most important legislation to protect the supply chain is the Construction Contracts Act. A contractor operating as a going concern, has a legal obligation to pay for the work being done within 30 days. It is set out in legislation. There is a mechanism to challenge any disruption to that cash flow. The CIF was very much involved in it and supports it. That is there to protect the supply side. Mr. Parlon can comment on this. If a major contractor has gone out of business, obviously that creates a significant problem for the supply chain which is very difficult to control unless the client steps in and says, "Right that person is gone as a contractual entity. How can I create some kind of relationship to try to support these subcontractors that are still going concerns but have a major black hole in their balance sheet?" That is very much down to the client and how they want to resolve it.

Is the CIF impressed with or concerned about how many projects the Government has given the green light to? We are Deputies. I constantly go on social media pointing out that this is great. However, I hear people back home asking whether, although all these projects are being announced, the country has the capacity to build them. It is one thing for politicians to announce them, but they need to get built. Given the material and labour costs and with the number of projects coming down the track, which shows great ambition in this country, is the CIF concerned we may not have the workforce to complete it all? I ask that question in a positive sense. I hope the answer will not be too negative. It is important to hear from the horse's mouth today.

Mr. Tom Parlon

The industry is in a reasonably good place. The biggest issue for contractors is always having work. If a contractor has work, how profitable it may be is secondary. However, if they do not have work, they are in disarray. There is considerable work available on housing in particular. The Ukrainian refugee crisis will exacerbate that further.

Does the industry have the capacity to deliver?

Mr. Tom Parlon

A number of different elements are being looked at. There is an old saying that you should never let a good crisis go to waste. Some issues with planning and other chicanery holding up development can be looked at now with a view to speeding it up.

Along with some of our members I have been involved with modular housing. Construction is evolving all the time. It has been slow to move along and we are probably behind other sectors in adopting technology. Offsite production and modern methods of construction are the way to go. Individuals have made significant investment in modular systems in providing homes, factories, hospitals or even the very sophisticated networks for the IT and pharmaceutical industries. Instead of 15 electricians working inside the room putting the stuff together, it is being put together in external plants and then brought in. There is great scope there.

The national development plan is worth €165 billion over ten years. We have been talking to all the stakeholders. It is fairly backloaded. The amount of stuff that is coming out in the next few years is modest enough. Of course, politicians like to be cutting ribbons and announcing great news.

Mr. Parlon did so in his time.

Mr. Tom Parlon

It is modest enough. If we all live and get through the current crisis, there will be large expenditure in four or five years. I do not believe the industry will have any problem in coping with the amount of infrastructure-----

Will there be shortages of people to do the work?

Mr. Tom Parlon

It is tight, but technology is changing. One does not see many shovels on a site now. It is smart working. A considerable amount of work is done offsite. I have been on a few sites where they have changed their system and moved to modern methods of construction.

However, is there not a problem for the 18- or 19-year-old who wants to get into construction or one of the trades? Their parents are likely to suggest that is well and good but they should try college first. When he or she comes out of college, they are no longer the hands-on tradesman with the callouses and welts with a lump hammer and a shovel doing the work; they are the foreman or the quantity surveyor. While it is very important that we have them, we are focusing on the high end of the construction trade without the labouring beneath.

I ask the Chairman to give me latitude for one minute to ask a supplementary question. I hope the CIF has a position on planning and I would like to hear it. Some very strategic projects in the mid-west have been held up by objectors in Dublin. As someone living in Clare, I would never in a month of Sundays see fit to object to something in Dublin or far removed from where I live because it does not impact me. What is the CIF position on that? Have its representatives articulated that to the Department?

Mr. Tom Parlon

We absolutely have. Our house builders are sitting on a special working group feeding into that committee. As I mentioned earlier, while certainly we should not take away the rights of people to object, I hope people who have a vexatious objection without any skin in the game will be curtailed very substantially. Likewise, people can access the courts through judicial reviews without any expense or any skin in the game and can hold up mega projects. Unfortunately delays cost builders and developers substantially.

Currently for €20 I can object and hold up a €20 million project. There is something wrong with that.

In fairness, Mr. Parlon has been straight about the difficulties with costs, inflation, tendering and planning. I think he meant it in the best sense when he said we should never waste a crisis. Obviously, we have a housing crisis and have had it for some time. We have the particular humanitarian Ukrainian crisis which is also a housing crisis here. Regarding never wasting a crisis, hopefully this is where we can make up for some of the State's failings. Mr. Parlon talked about modular housing. Obviously, the CIF has done considerable due diligence on supply chains and all the rest of it. What can be done and what can be done faster? How can we deal with it? The pandemic showed us the State can do some heavy lifting when it needs to and when the pressure is on. We are in a crisis situation. While we are not in the same situation that people in Mariupol are, this needs more time, planning, wartime financing etc.

Perhaps Mr. Parlon might be able to deal with that crisis in the next two minutes.

Mr. Tom Parlon

The Irish Red Cross has contacted me to discuss the potential of some big empty buildings. I am familiar with Baggot Street and I have lived in that area. I am told that Baggot Street hospital has hundreds of rooms. It is right in the city centre. I know of a particular builder who is familiar with it and who offered to prepare it for occupation pro bono. It is just one example that we know of.

The Government has put the OPW in charge of modular housing. The industry can produce over 100 units per week without interfering with other things. In order to build an extra 10,000 houses for Ukrainian refugees, people would need to be pulled off sites for our national housing. It is a combination of everything.

That is 500 a month.

Mr. Tom Parlon

There is massive goodwill in the industry. If there is goodwill and enthusiasm for something, it might be possible for extra hours to be worked. I know one of the issues relates to restrictions on sites currently. That is for good reason.

I ask Mr. Parlon to expand on that. Apart from, obviously, the Ukrainian refugees coming in and so forth, what about generally ramping up house building, including affordable housing, for the Irish population? Where does that stand? What are the challenges to get to the targets we need to reach?

What can be done better?

Mr. Tom Parlon

There are many different problems and delays. I think I heard our housing director say yesterday that we are on target to build approximately 25,000 houses this year. If there is no compensation for the extra 10%, 15% or 20% inflation and we are wondering how we are going to get through it, that will certainly-----

Based on our available building skill sets, what is the limit of our capacity to construct?

We must remember, in the context of the Ukrainian crisis, that we will have to construct quite a large number of units very quickly. What is our capacity?

Mr. Tom Parlon

Most new houses are now built with timber frame kits. Luckily, there is a lot of growth in that capacity and it is off-site construction as well. The kits can be turned out readily, but then we need brickies because generally the frames are surrounded by a brick wall. That is probably one of the biggest difficulties. I was talking last night socially to somebody, who said that he has two guys building a wall for him. One guy is 69 and the other is 72. They were the only two guys-----

They must the oldest brickies in Ireland.

Mr. Tom Parlon

They are doing a private job for him but they were the only people he could get. He is based along the Border and would have access to labour, North and South. That is an impediment. The supply chain may become a bit of an impediment as well.

Let us take a figure of 25,000. Do we have the capacity to go to that?

Mr. Tom Parlon

Last year we did 20,000 houses and we were closed down for more than three months of the year. On that basis, we have great capacity. We have been given various figures about extra commencements and so on. Personally, I do not consider 35,000 to be a big challenge. I think the industry is well fit to do that.

Could you see the industry going to 40,000?

Mr. Tom Parlon

It is elastic enough, if there is work here now. On the other hand, I am told that private projects are being stalled. Individuals are saying they are not going to do an extension at the moment because they do not know what it is going to cost or because it is going to cost €10,000 or €12,000 more than expected. That is allowing the workforce that might have been concentrating on that type of work to get involved in the larger scale housebuilding. It is a fluid situation but we are well fit to hit the 30,000 target without any big problems.

You said 35,000 earlier.

Mr. Tom Parlon

Sorry, 35,000.

Mr. Paul Sheridan

On the construction industry's capacity in a broader sense, it is a problem-solving industry. When the industry sees a pipeline of work coming, no matter what type of work is involved, it will find a way to deliver it but it has to have that visibility. That is why we need the tracker. That is why we need to see when projects are going to hit site and to know that money is being put into the design and feasibility studies so that there is a continuous pipeline. Then there will be investment in attracting people, attracting more talent and so on.

The biggest issue we emphasise with all of our meetings with Government agencies on public works contracts, capacity and the NDP is around the export capacity of our own domestic construction industry and the importance of attracting people to build Irish infrastructure rather than UK infrastructure. Construction companies will not do that because they are balancing their books and it is too risky here. A number of our biggest members will not do public works here at all because it destroys their culture. They do not operate like that and they do business elsewhere. If the State could get some of those really good guys who are building for the biggest investors and companies across the world back into Ireland, that would solve the capacity issues.

The State needs to deal with the tendering piece and then make sure it has the plans that will allow for the throughput. The CIF is saying there is sufficient elasticity to make it happen.

Mr. Paul Sheridan


Thank you very much. We will be following up with the Department of Public Expenditure and Reform and the Minister, Deputy McGrath. This meeting came about because TII was before us just before Easter and rang alarm bells. TII did not do that lightly because it is not that type of organisation. This committee had to take on board what TII said and examine it further. We will now follow up with the Department and the Minister. I thank Mr. Parlon and Mr. Sheridan for coming before us. We have broadened our remit somewhat but road projects are vital. If the witnesses wish to raise any other issues with this committee, they can write to us. We look forward to further engagement with them.

Mr. Tom Parlon

I thank the Chairman and committee members for their engagement. We appreciate it very much and will keep the committee informed of any relevant developments.

It is in everyone's interest that we have a sustainable construction sector. Mr. Parlon referenced the taxpayer and it is taxpayers' money we are talking about in the context of public works. We must have a sustainable construction sector. The last point Mr. Sheridan made was that extra capacity could be brought on stream by getting contractors back onto Irish soil rather than abroad.

The joint committee adjourned at 5.05 p.m. until 1.30 p.m. on Wednesday, 4 May 2022.