I welcome Mr. Paul Keogh, Royal Institute of Architects of Ireland; Mr. Murt Coleman, Institution of Engineers of Ireland; Mr. John Lombard, Association of Consulting Engineers of Ireland; and Mr. Mark McCauley, Building Materials Federation and IBEC. I also welcome Mr. Tom Parlon, director general, Construction Industry Federation, back to a forum in which he played his part. I thank the delegates for their attendance. I draw their attention to the fact that, by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. If they are directed by it to cease giving evidence in relation to a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or an entity by name or in such a way as to make him, her or it identifiable. 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 by name or in such a way as to make him or her identifiable. That is the normal caveat that has changed a little since Mr. Parlon, a former Minister of State, was a Member of the Oireachtas. We now have the Defamation Act, as amended. Mr. Keogh will be the first to address the committee and we look forward to his opening statement.
Infrastructural Investment: Discussion
Mr. Paul Keogh
I thank the committee for the invitation to present our report. The Building a Better Ireland manifesto, copies of which members have been presented with, is an update of the longer Construction Industry Council, CIC, 2009 report, Jobs and Infrastructure: A Plan for National Recovery. The current document reiterates the recommendations on investment in infrastructure, the environment and employment to support the Government's smart economy framework for economic renewal. The report has been compiled with input from architects, engineers, surveyors and contractors. The CIC has up to 45,000 members from all sectors. The report tries to conduct an analysis of the level of infrastructure required across all sectors, from heavy engineering infrastructure to remedial works and retrofitting of houses, schools and public buildings. The report was issued at a time of grave concern in the industry over the loss of employment and the impact of same, including the loss of valuable skills that were built up over a generation. At its launch in June, it attracted quite a lot of public interest. It was launched jointly with IBEC, ICTU and the joint chambers of commerce.
We welcome the level of certainty provided by this week's announcement on the capital programme, involving €5.5 billion for next year and €39.5 billion over the next five years. We emphasise that the legacy of infrastructural deficit and the projected 2010-20 population growth mean that maintaining, if not increasing, investment in infrastructure will have a significant economic and social importance.
Regarding the delay in key construction projects and the planning time required to deliver them, my members tell me that work on an average school building, from the architect's appointment to the project's start on site, can take anywhere from five to eight years. My practice is working on a school project that started in 1999, but it is only now at construction stage. As such, it is important that improvements and efficiencies be introduced into the planning and public procurement systems. While we have the Government commitment to invest in infrastructure, the roll-out of projects must be delivered efficiently.
In terms of the smart economy, the Taoiseach recently marketed Ireland as the best place in Europe. We try to brand the country as an internationally recognised hub for research and innovation. If we are to attract inward investment and employment to drive high-tech industries, it is essential that we have first class infrastructure. As the Taoiseach stated, it is important that investment be made to ensure Ireland is in poll position when the global recovery begins. In addition to creating essential infrastructure, one must reduce employment in construction, a matter we will discuss in more detail later. Investment would stimulate recovery in the wider economy. The CIC's key message to the Government is that now is the time to demonstrate political will and invest in the future to lead Ireland from recession to recovery.
The CIC document and the report of the Irish Academy of Engineering, Critical Infrastructure: Infrastructure for an island population of 8 million, try to summarise the considerable extent of the infrastructural deficits in transport, energy, communications, water and waste. The investment announced by the Government this week is only the tip of the iceberg in terms of remedying these deficits. At its simplest, the floating capital and human capital that drive today's industries do not invest in places that do not provide first class infrastructure and high quality living environments.
I refer to the issue of unemployment in the industry. In 2007 the construction sector employed total of 400,000 direct and indirect jobs, albeit at an unsustainable level. That has now been reduced to approximately 150,000 jobs. Without urgent action to move the projects we refer to forward, that will drop further in the next 12 months. This will bring the industry back to the level it was at in the mid-1990s. We have a genuine concern that the consequences of this collapse in employment are having an impact on every area of Irish life. This applies not only to the building trades and professions like architecture but to the loss of valuable skills and human capital built up over 20 years, the widespread failure of building, engineering and professional services companies and a major decline in overall economic activity in the country. We must emphasise the social and economic impact of this loss of employment.
I also question the wisdom of the ESRI report that the State should not prioritise investment in infrastructure. The infrastructure is needed. These are sustainable public infrastructure projects which the country needs at every level, from retrofitting schools to building projects such as the western rail corridor and the Atlantic corridor. These projects are essential and a stimulus brought about by their delivery will bring the economy from recession to recovery in the next decade.
At a statistical level, the CIC estimates that every €1 billion invested in infrastructure creates 10,000 jobs. The cost to Government on that investment is €490 million when one takes into account the amount of tax and VAT paid. Conversely, every €1 billion cut from the programme costs the Government €510 million in lost tax receipts, increased welfare payments and other costs. We seriously question the recommendation from the ESRI that the State should not prioritise investment in infrastructure. We are talking about sustainable infrastructure.
I received a letter from the parents of an unemployed architecture graduate saying that although he was a talented young student and had done well in his exams, he could not get paid or unpaid work and they asked what the RIAI could do for him. We have invested much in education and training and we have the most talented, hard-working, qualified generation we have ever had in this country, yet there is massive unemployment across the professions. We question the analysis of the ESRI. There is a fantastic window of opportunity to take people from the unemployment register and get them involved in building the projects identified in the report. We met the Minister for Enterprise, Trade and Innovation, Deputy Batt O'Keeffe, and emphasised the importance of an internship programme where the State would take people off the dole and put them in gainful employment. One example is the compilation of an asset register. In the case of many schools, leisure facilities and public buildings, there are no plans in existence and no register of what condition the buildings are in. Unemployed architects, surveyors and engineers could be used for this purpose through a social employment scheme. The Minister was sympathetic to this idea and will bring forward proposals.
Regarding public procurement, it takes a long time to get even a small project from inception to site. Some public bodies tell us it takes six months to get an engineer or an architect appointed, even to a small job, because of the bureaucracy in the public procurement system. We are scheduled to have further meetings with the Departments of Finance and Education and Skills to bring proposals to them to bring out the efficiencies in the system. Notwithstanding the fact that the Government has made a financial commitment, we need efficiencies if the projects are to be delivered on time.
The issue of planning has been used as a reason for projects not being brought to site. The CIC report has clear and strong recommendations for improvements in the planning system to deliver the efficiencies about which we are speaking. Last week, the RIAI and the Irish Planning Institute met and yesterday we met the Minister of State, Deputy Cuffe. In the coming months, we hope to have proposals on how the planning system can be made more efficient to facilitate the roll-out of these projects.
While we welcome the Government's commitment announced this week, we feel it is the minimum which is required. We recommend more investment and investigation of alternative funding methods such as pension fund investments. We need the projects. The industry is in such a state now that there is a rare opportunity to plan and build projects and provide the infrastructure and the quality environment we need if we are to deliver on the smart economy.
I want to explore the issue raised by the ESRI. From my understanding, Mr. Keogh slightly misquoted it. It is not stating that infrastructural priorities should not be addressed. It is stating that the employment content of infrastructure is not sufficient to justify investment. Its argument is that if €100,000 is spent on investment projects it will support someone in a job for one year whereas for much less one could have a reskilling programme to move someone skilled in the building sector into an area where he or she could become self-sustaining in a sector with better prospects. That is the essence of the ESRI's argument as I read it. Against the background of scarce public money, how do we rank our priorities? The ESRI came down in favour of reskilling, which can give very high returns. Building investment has other aspects but if one looks at it as just a job creation programme, it is a veryexpensive way.
How is Mr. Keogh advising the Government to rank its projects? I notice the Government sold its plan by stating employment aspects drove its consideration. However, in its document it states the areas where least impact is made on employment are water and public transport, with only eight jobs per €1 million. By contrast, spending on health and regional roads gives 50% more bang for one's buck in terms of jobs content. This brings me to what I find totally unsatisfactory about the document. Anyone in the real world knows that one does not invest for job content. One must invest for a long-term return on the investment for society. This document provides no information on the rate of return of any project, no information on the costing of any project, no information on the better value for money of the project that can now be got compared with a few years ago, and no information on the projects included originally, the projects that have been dropped and the projects that have been retained.
What surprises me is that Mr. Keogh seems to be giving the document the thumbs up as if it were a good basis for prioritising our spending. I am also amazed by the fact that the document does not look at the choices. If we have to make cuts, and we do have to, where do we strike a balance between cutting investment for the future and cutting the build-up of administrative costs in current spending? That is the first question.
If we look back at recent budgets, we will see that there have been five cuts in the capital programme in the past two and a half years. Every time the budget has gone for capital cuts. Surely it is up to organisations such as the RIAI to do the analysis and decide whether a course of action is wise. I honestly do not see any serious analysis in what has been produced. They have gone for rule-of-thumb ratios between jobs and spending and so on. That will not cut any ice. Our backs are to the wall now and we must consider what projects will actually contribute to the restoration of our competitiveness and good outcomes for our economy.
I find this document very disappointing, but I find the witnesses' appraisal of it equally bizarre in that they have not attempted to specify projects that will provide strong economic returns to the economy and are now worth investing in. They may say we should accept this on faith, as our betters have done all the analysis and have not told us what was done. However, that is the culture that led to the bank guarantee, which lost us only €32 billion, while this is proposing that we spend €39 billion. We must ensure the €39 billion is well spent. That is what I find unsatisfactory about this debate and the witnesses' presentation.
The document is totally worthless as an analytical tool if we are all concerned about making the best decisions. Even the evaluation strikes me as bizarre. There is a rating system whose application is not explained. Two points are awarded for a project providing a good rate of return, but if a project is inconsistent with the national spatial strategy and involves current as well as capital spending, two points are deducted twice. Thus, a good project will be sunk completely if it fails on even one of those counts. What sort of world are people living in if they think that makes economic sense? The spatial strategy has been blown asunder at this stage. It is not a real document any more. To wipe out good projects because they are not consistent with the views of some scribbler who wrote the strategy in 2003, when the world was a completely different place, is inappropriate.
We need a much more grown-up debate about the choices we must make rather than the sort of flippant talk that, encouraged by the Government, is passing for analysis. I worry about the thinking behind these major decisions we are making on behalf of our society. It is €39 billion we do not have. Every penny of it will be borrowed. Our credit rating is already damaged. Our cost-of-credit rate is not so bad today; it is only 2.4% higher than the German rate. However, that is a fragile flower and we must make these decisions based on hard evidence. I am disappointed with this document and the standard of debate that is taking place in the public sphere about decisions of major importance.
Mr. Paul Keogh
I take Deputy Bruton's point about the ESRI. The ESRI has always recommended over the years that we need investment in infrastructure, but the headline that went out to the public was that it did not recommend infrastructural investment for its own sake. Rather, the priorities should be education and training. For the record, the document to which the Deputy is referring is the Government's own document which was released last week. The document we are referring to is the CIC manifesto which was published in June, predating the Government's budget allocation. It also summarises a report that was issued to the Government last year.
In terms of specific projects, the Deputy may, for example, go to the education section of the CIC document, which points out — this was reiterated in the Government document published this week — that about 150 new primary schools will be required within the next five to six years. These are for children who are being born now or for those not yet born. We say this investment is essential. One can turn to the health section of our document. We know the HSE has targeted efficiencies in the primary care system, targeting 500 new primary care centres. We understand only 200 of those have been completed to date. That is just the tip of the iceberg. What we have tried to do across every section in our document, which is not the Government's document, is to begin the basis of an analysis of the infrastructure required. Mr. Parlon might wish to add to that.
Mr. Tom Parlon
There was an implied criticism of Deputy Bruton's party's jobs policy in the ESRI document. The message I took from it was that building infrastructure projects for the sake of creating jobs did not make sense. Clearly, however, where there is a clear infrastructure deficit, for example, in our schools, as Mr. Keogh pointed out, in particular in our primary schools where massive numbers of people are still being taught in overcrowded prefabs for which there is a substantial annual rent, one would not have to be an economist or even have done honours mathematics to figure out the economics of that. It does not make sense in the current climate, where construction costs are down by up to 30%, not to employ local contractors to build a proper school in an area and avoid an annual payment.
Has Mr. Parlon carried out an analysis of the schools' building programme to show the extent to which vacant properties or prefabs exist in order that he might be able to stand over a set of proposals? That is certainly not in this document.
Mr. Tom Parlon
The Deputy refers not to our document but to the Government's document. If one takes the example of water services, there has been a recent review of beach quality in Ireland. We have made some progress but many of our beaches are still being polluted because of very poor water and sewerage services and it is likewise with water quality. We know about all the issues in Dublin and that there are plans afoot to bring water via my own county to Dublin city. There is major scope for investment in alternative green energy, which gives a very good return, as does retrofitting of the million or so houses built up to ten years ago when we did not have high energy efficiency standards. That is very much a matter of common sense.
What I took from the ESRI report was that it was about building and investing in much needed infrastructure. There is a general appreciation that we still have a very substantial infrastructure deficit.
Regarding reskilling, in terms of the jobs figures used in the Government's document referred to by the Deputy, the bulk of the jobs mentioned will not be new but will replace others. This week the Taoiseach opened the Shannon Tunnel, a major multi-million euro project that employed thousands of people over a five-year period. Unfortunately, all those workers are ready now to sign on or are about to leave the country unless there is a new project. Mr. Coleman, a member of our delegation who is representing his own civil engineering firm, told me he is about to lay off people who have been with him for a long period because he does not have the work. Although the announcement in the document this week gives us some promise, for a company that does not have the work it is a bit like live horse and get grass. That is not sufficient to be able to continue and employ fairly expensive people. It is valuable, however.
One can use simple mathematics. As was stated earlier, by investing €1 billion one is already providing €490 million in tax revenue for the Exchequer so the actual infrastructure produced by that investment comes at half the price. I believe that is a very good return. Previously, the ESRI stated that our old infrastructure gave an 18% per annum return on investment. In this day and age no one can say that. We might all have lived in a strange period five or six years ago when we thought we might get an 18% return on an investment. However, that still stands with our roads considering the time saved and so on. Despite the fact that our main urban centres are all connected, including Belfast as of today, if one wants to drive from Cork to Limerick or from Portlaoise to Tullamore, it is not such an easy operation. We still need the sort of investment that will give a further return. The Government's report points strongly to the potential for further inward investment. Our infrastructure is being examined critically by potential inward investors. Unless we get our act together with regard to energy efficiency, road and public transport infrastructure or our building infrastructure, difficulties will arise. The big companies that choose to come here seek a certain standard of office now and we must continue to strive to reach that. The mathematics is very simple and we can provide it. However, providing new schools instead of very poor prefabs which are still being paid for on annually is an issue. One need not——
If that is Mr. Parlon's point why does he not refer to the €4.2 billion cut in the education programme? This published document refers to a €1.2 billion cut in the education and science programme. A further €4.2 billion has been knocked off the transport programme. These are massive cuts over three years from 2011 to 2014. If these are the decisions the Government is offering to us and if its priority is to cut these dramatically, has the CIF done any analysis in that regard? Is it a wise decision by the Government to cut the proposed €9.2 billion allocation in transport to €5 billion and to cut the proposed €3 billion in education to €1.7 billion? These are the questions we must ask ourselves now. Has the Government got it right?
Mr. Tom Parlon
First of all——
This is simply bland stuff about——
Mr. Paul Keogh
The answer to that question is in the document on the education and skills programme. Ireland's investment in infrastructure at 4.7% of gross domestic product compares poorly with the OECD average of 6.2%. Our expenditure on construction of 750 sq. m or 800 sq. m compares very poorly with €1,800 per sq. m. in Government office buildings. The last paragraph of the document states that Ireland is facing a crisis in the schools building programme and an urgent increase in public capital investment is required not only for new construction but also to bring the existing stock up to current educational and environmental standards.
The document further outlines six points which we make in terms of the schools building programme. I mentioned in my introduction that there is an urgent need to audit all the existing primary and secondary schools nationally and to identify deficiencies in terms of educational best practice, statutory regulations and building energy standards.
Last year, as part of my professional work I visited several Christian Brothers schools in Cork and Dublin. It was quite shocking to see the standard of educational infrastructure. There were no plans of the buildings available. There was no energy rating information which we maintain is required. We must implement a national schools building plan to bring the entire stock up to 21st century standards by 2015. We should consider alternative procurement methods and Mr. Parlon has referred to this. We need ways to ensure we are not simply using sticking plaster solutions and such that when a crisis develops in a particular locality, we do not end up importing prefabs from China with the result that children are educated in educationally substandard environments.
The RIAI is in discussions with the technical directors in the Department of Education and Science to determine how we can increase efficiencies to bring the educational stock up to standard. The CIC document is useful in terms of setting the beginning and the agenda for a proper asset register and a proper infrastructure plan. As Deputy Bruton has suggested, this is required.
I refer to the comment on the need for efficiencies in the planning system. It seems when builders and developers refer to efficiencies in the planning system, they are referring to the need to speed it up, possibly to the exclusion of democratic input and input from ordinary citizens. Will the delegation flesh out its ideas? I realise it has referred to launching something next week but for the purposes of this meeting can it provide some idea of its views in this regard?
I refer to what happened in the Balbriggan area in my part of north Dublin. Speeding up planning there was not what was needed, rather it was a slowing down of development. Mr. Parlon referred to linking development to the need for water and sewerage infrastructure. Beaches in Balbriggan and Skerries have recently failed to meet minimum European Union standards, and part of the problem in that regard was that people moved into houses without the infrastructure being in place, which was bad planning. It is a major problem if there are attempts to speed up planning without getting the basics right and sticking to the knitting.
A delegate referred to 400,000 jobs in the construction sector, between direct and indirect employment, which has dropped to 150,000 jobs in recent times. The document states that a further 120,000 jobs will be lost in the next two years. The maths of that would suggest that we could be down to 30,000 jobs within two years. A delegate referred to the absence of political commitment. Would that be the case even with what has happened this week in terms of the announcement of the cuts in the capital programme? Is the delegation still as pessimistic in terms of what the situation might be in a couple of years?
In regard to the €1 billion to deliver 10,000 jobs and the net cost to the State being €490 million, has the delegation factored into that figure the cost of borrowing? I am interested in their comments on that.
When architects and engineers become unemployed there is a greater sense of urgency or there is a sense that it is a bigger problem and that it only becomes a crisis at that stage. Many builders, labourers and block layers have been unemployed before now but it is only when it hits the likes of engineers and architects that the Royal Institute of the Architects of Ireland takes as serious a view on the matter as it should.
At the height of the boom, the industry was pushing builders, block layers and brick layers into self-employment. In many cases such people did not have the capacity or capability to function as self-employed people. The net result of that today is that many people are looking for social welfare payments and cannot get them. I am interested in the delegates' comments on whether it was right, in the circumstances, to push such people into self-employment when clearly they did not have the capacity to be self-employed.
Mr. Paul Keogh
I will deal with the questions on planning and Mr. Coleman might deal with the questions on unemployment.
Mr. Murt Coleman
Having been at the coalface and having worked for a civil engineering contractor, unemployment is a serious issue for me. I am letting people go tomorrow and have let people go in the past. I would like to latch on to one of the comments Deputy Bruton made on certainty and the issue of the Government's commitment to investment this week. I and every other contractor need certainty about the pipeline of events. We cannot plan. I have a schedule to let people go between now and Christmas. I am selling my assets to try to keep people in employment and were it not for the fact that I am aligned to a plc, which is very good to keep us in business, my business would be gone. Colleagues that worked with me for years, including skilled workers, operatives, engineers and foremen, would be gone. We need certainty.
From talking to county managers throughout the country, I have found that 30% of the costs of many local authority projects have to be funded by local authorities. They do not have the money. There is serious scepticism about this. There is no certainty. It is about maintaining jobs. Our industry is in a state of collapse; there is no question about that. In excess of 200,000 people are unemployed and no one shouted "Stop".
Senator Ryan has put the onus back on us. I find that difficult. It is not our problem. Every country needs infrastructure. It is like the arteries in one's body, which is not efficient if they do not work. When America was being developed, it built railroads and roads and even the Panama Canal just not to go around South America; it accessed the country and made it efficient. We need infrastructure and we need to maintain infrastructure. That is just a general comment about the ESRI report. I do not think we should make any apology about that, the country needs infrastructure as it has a deficit of infrastructure. For me, it is about maintaining jobs to stop the haemorrhage of people leaving the country. We need certainty about this report — that is one of the scepticisms about it. In regard to the projects that are earmarked we need to know when they will come on stream. Also there are many postponed projects. I can think of projects that went to tender at least 20 months ago. However, we do not know if they are included in the commitment to investment. Deputy Bruton is right. We need certainty about this to maintain employment.
Mr. Paul Keogh
I want to come back to Senator Ryan's comment on planning but, perhaps, Mr. Mark McCauley from the Building Materials Federation would care to comment.
Mr. Mark McCauley
I thank the committee for meeting us today. Certainly, my colleagues and I in IBEC would welcome the spending plans. I agree with Deputy Bruton that much of what is contained in the document defies analysis and we need to see specifics. In these straitened economic times, as a proportion of GDP, the commitment to spend €5.5 billion per annum over the coming years is certainly acceptable and indeed some economists would argue that it is excessive. The country needs infrastructure, it needs schools for our children, our citizens deserve clean water, safety from flooding and a good public transport system. Following on from the boom years there are still deficits that need to be addressed. We are not looking for infrastructure for the sake of jobs alone or something that resembles the 19th century when public works such as the great Mourne Wall and various other things were built just to create jobs. These things must generate a return. I agree with Deputy Bruton it is absolutely paramount that we hit the correct priorities.
In terms of speeding up the planning, I agree with Senator Ryan that on occasions in the past, planning has not been addressed correctly. It needs to be done right, the right projects need to be built and built in the right way. We would welcome a statement from the Government of its intention to improve its own building stock, its office buildings and its housing stock in terms of energy efficiency where certain things were lacking in the past. Those initiatives relate to the quality of life of Government employees and private citizens. In the past not all the homes in the country were built to standards that would be deemed acceptable today. We would welcome initiatives such as the home energy saving scheme which allows private citizens to improve the energy efficiency of their homes. Obviously, many of these initiatives have a positive return in environmental terms also.
It is very difficult to estimate the cost per job or exactly how much spending is needed to create a certain number of jobs. The Government's analysis suggests that different types of projects have different returns in terms of jobs. However, what infrastructure spending will do in the short to medium term is deliver jobs now and protect jobs in 2011 and 2012. Whereas the ESRI is correct in stating we need to plan for the future, we need to plan for our smart economy and we need to re-educate and retrain people. That is a slightly longer term process and given that the economy is haemorrhaging jobs it is equally important that we protect employment in the years ahead.
Mr. Paul Keogh
I will move on to Senator Ryan's comment about the planning system. I mentioned, although it may have been passed over, that the RIAI and the Irish Planning Institute met last month to examine the specific recommendations in the 2009 report on improvement to the planning system. For example, it was suggested in the 2000 Act that every planning authority should have a standard form. Different forms continue to be used throughout the country. That is a ridiculous inefficiency.
Issues arise about invalidation. People may lodge planning applications for something as small as an extension to their house and weeks later it is sent back to them as being invalid because they may not have put the north point on one drawing. As the Irish Planning Institute said, is that missing the north point or missing the point?
The purpose of a planning notice is simply to notify the public that a development is proposed, but in the case of some local authorities one more or less has to describe every aspect of the development one is proposing in terms of its height, what every room consists of and the materials with which it is to be built. Also, as we know well, an application can be sent back after five weeks because the applicant has not described the colour of the brick or something like that.
There is an issue about pre-planning consultations. I had an experience recently in terms of a public housing project to be funded by the Department of the Environment, Heritage and Local Government. A planning official told us at feasibility stage that the project looked okay and that we could go ahead. However, at the formal consultation stage, before the part aid process was initiated, we were told by the planning official that there were reservations about this scheme in terms of A, B and C. Those are the type of inefficiencies which hold up projects and if we are to deliver the infrastructure, the schools, the health care, the housing or whatever it may be, we must eliminate these inefficiencies from the system.
The two institutes have met, and yesterday we met with the Minister of State, Deputy Cuffe, who asked us to come back with joint recommendations which will be put to Government and, it is hoped, implemented as regulations under the 2009 Act.
The Senator also referred to the fact that because architects or engineers were now suffering the cold winds of recession, as the Tánaiste said, this issue was being taken more seriously. I would question that. We would make the point that if the architects, the planners and the engineers are not now working on the design of these projects, whether it be roads, schools or health care projects, we will not see them being delivered. If the Senator came to me and asked me to start work today on a design of a school, it would be five, six or seven years before that school would go to site. What use is that to the children who will be born in the next few years? I will ask John Lombard from the Association of Consulting Engineers of Ireland, ACI, to expand on that point.
Mr. John Lombard
Senator Ryan mentioned that when we notice that the work has come to a sudden halt the professionals suddenly find their voice and ask what is happening. Since 2007 we have been looking ahead at what was or was not coming down the tracks, so to speak, because we found that we had to tighten employment in practices in general. We have had a tranche of cuts of 10% and then 20% in staff numbers in the past two to two and a half years. That is being done on a quarterly basis now and due to lack of work, practices like architects, surveyors and engineers are down to core people and founders of practices just to survive in the current position.
Since 2007 we have been proactive in recognising the downturn that was coming. We met the Taoiseach and the various Ministers, including the Minister of State at the Department of Finance, Deputy Martin Mansergh, and the Minister for Transport, Deputy Dempsey. We told every sector within Government that there was a major downturn on the way as regards work on pipeline business. That has resulted in redundancies for architects and engineers, which currently is at 70% in the building sector within the professions. In the civil engineering sector, because of lack of work on pipelines coming through, redundancies are at 30% and that figure is projected to rise unless problems are addressed.
We welcome what was mentioned in the programme on Monday but the number of projects is limited in terms of the wider aspects of practices and expertise that has been built up in the past ten years. We have had a brain drain of professional people. It is not a question of our trying to look after ourselves. We have been accused previously of not providing leadership in the country and of not having a louder voice regarding what needs to be done. We have been doing that for the past three years and we take this matter very seriously, and not only in terms of our members. We often work on the other side, on the design stage with contractors to move forward in a partnering arrangement. We have been active for the past three years and have not only reacted in the past two to four weeks to what has been happening in terms of the level of redundancies in the construction industry.
As the president of the RIAI said, it takes a lead-in time of a year and a half to two years for the planning and design stage of a project — for the pipeline projects to go to tender. The tendering process can take three to six months. In terms of the input required at the design and planning stage, Mr. Paul Keogh said it has been his experience that it takes six or seven years for this in the case of school projects. In other areas we can try to fast-track the civil engineering or other aspects of the building project. That is the time it takes for such projects. There are people with expertise in many areas available at present. They have no work. The new announcement will lead to some practice developing. There is something coming down the track, but in the meantime the gap must be bridged or we will lose expertise.
I welcome the presentation. Mr. Paul Keogh mentioned a social employment scheme or a scheme of voluntary work for people who worked previously — members of the institute. How will that work in practice? Has he had consultation with the trade unions on that, as they would probably resist it — perhaps not in words but in actions — as I suspect they would resist any prospect that their members' jobs might be taken.
Reference was made in the CIC presentation to an infrastructural bond. Given that we have the national solidarity bond, is an infrastructural bond realistic and, if introduced, how would it work?
Tendering and procurement processes are an important aspect of any development and it is important that they are open and transparent. Having spoken to people not only in the construction industry but across various sectors, I gather that the procurement and tendering processes are a major obstacle to work proceeding on developments. I would be interested to hear the delegates' comments on that. Have they any recommendations in that regard? What feedback have they got from Ministers in terms of trying to reduce the obstacle posed by the tendering and procurement processes?
Mr. Paul Keogh
Will I take that question?
Yes.
Mr. Paul Keogh
With regard to the social employment proposal, there were two aspects to it. At a Law Society dinner I heard the Minister, Deputy Ahern, say that, subject to the approval of the Croke Park agreement, the Government was proposing an internship programme in public offices for lawyers and he also specifically mentioned architects, engineers and surveyors. Local authorities and Departments would take on people. In many cases these would be work experience programmes. The position that applies to our members also applies to engineers. When architects have completed five years in college, they are required to complete an extra two years of practical training before they can sit their final, part three exams. There is a crisis in these professions due to the employment situation. Qualified architects and engineers cannot get such practical experience. The RIAI has a programme with the Office of Public Works to deliver on that. The proposal is that it could be rolled out across other Departments and local authorities.
When we met the Minister, Deputy Batt O'Keeffe, he was receptive to a proposal that an unemployed graduate or young architect could be taken on in the private sector and that the individual would retain his or her dole money and would be given a small stipend on top of that. This would involve people in socially useful projects. As has been identified, the compilation of an asset register of buildings is required at the very least. All school, health and leisure buildings should be inspected. Why do we not initiate such programmes? Only last week the Minister, Deputy Batt O'Keeffe, asked us to come back to him with specific proposals as to how that might be done. Others might have more to say about that but I understand the gateway for an initiative like that was cleared in the Croke Park agreement.
Perhaps Mr. Keogh will come back to this committee with those proposals because it is interesting. Will he outline the ideas he will give to the Minister for Social Protection, Deputy Ó Cuív, to the Chairman?
Mr. Paul Keogh
We will definitely do that.
In terms of procurement, the CIC meets on an ongoing basis with the Department of Finance. In terms of anarchy in the procurement system, there was advice recently that some public tenders breached EU procurement regulations, that they were anti-competitive and that they prioritised age over quality. There were complaints.
We said at the Joint Oireachtas Committee on the Environment, Heritage and Local Government that too much work was going to the North, in particular in the northern counties. Recently, there was a tender for professional services in County Monaghan which was won by a joint British-Irish consortium which seemed to exclude local firms.
Current procurement in professional services seems to be really prejudiced against emerging practices and smaller firms. A young emerging firm of architects, for example, cannot possibly design a school, a fire station or a health care building unless it has already designed one yet we pride ourselves on saying this is an innovative economy. However, no premium is put on innovation. It is experience for experience's sake.
The largest public procurement body in terms of professional services is probably the Department of Education and Skills because of the investment planned over the coming years. The Department is aware of the inefficiencies, as is the Department of Finance. Over the next month, we will prepare for presentations to both Departments in the autumn.
There is a willingness to open the door and bring in those kinds of efficiencies. The Deputy is right that it is a major problem. One hears it on the doorstep from small and medium sized professional services firms which genuinely feel excluded. The same applies to contractors. The last public tender we advertised was for a €5 million school project. I think we had more than 50 submissions from contractors. That requires each contractor to produce a lever arch file full of documentation. It requires us to go through it very thoroughly because of the remedies directive. If somebody is unfairly excluded, he or she can bring a case to the European Court of Justice under the remedies directive and scupper the whole project. Of those 50 submissions, 49 get thrown in the bin. There must be a better way to move projects forward.
In terms of this committee, this is a really serious issue because, notwithstanding Deputy Bruton's comments, these inefficiencies in planning and procurement will very much hold back the delivery of the public capital programme unless we can sort them out.
I welcome the deputation, in particular my good friend and former colleague, Mr. Tom Parlon, who is always in fighting order. I like the Building a Better Ireland manifesto. We all agree there is an infrastructural deficit in the country. At the end of the day, and to use a rural term, money makes the mare go. It is all about money. Where will the money be found?
I fully agree there is an infrastructural deficit and that there are problems in many parts of the country in terms of development. Given the state of the economy, where will we get the extra funding to drive the economy the way the deputation wants to drive it?
Mr. Parlon made a point about the savings that could be made, the value to the economy and so on but at the end of the day, there is a capital requirement to be put in place. That is the issue. He knows it takes €64 billion or €65 billion to run this economy, and the state it is in. We are seeing a downturn in the economy. On many of the projects that have been finished or completed in the past, I was told by someone who rang me this morning, and who was at the Galway races yesterday and came back via the tunnel last night, that no one was using the tunnel. The person was just making the point; was it for value for money given the crisis in the economy? That was merely a point of gossip.
We can look at what is happening in the American economy with its infrastructure, and at the position of Cement Roadstone Holdings, which is the big driver of the construction industry across the world. According to some of the financial newspapers today, the position in America is not great for that organisation.
I want to know the delegation's view on NAMA with its surplus projects, its land bank, all of its housing and all of its business parks which could be transformed into schools or more homes. We must look at this area if we are to be realistic because this has cost the economy a great deal and it is a crisis.
We were talking before the delegation came in here this morning and Deputy Bruton, who is a friend of mine, made a point about the shops. We developed an economy here in the past number of years for a population of 12 million people where we had only 4 million. We built business parks and no one said, "Stop". I was one of those who questioned it all. We built shopping centres and all sorts of things, and we finished up where we are. There are shopping centres in the country that will never be opened. We hear in the newspapers that we are in crisis. There is quite a backlog of stuff that must be addressed before we can really look at anything else. Then we read in yesterday's newspaper about a €77 million loss for Iarnród Éireann. I do not want to be a prophet of doom and gloom, but I represent the Government here and that is my view on that. While we still have 1.8 million people in the workforce and, roughly, 14% unemployed as compared with the 1980s when there were 800,000 only in the workforce and 20% unemployed, we have come a long way in that period of time. The only future for the country I see is in developing and driving on the smart economy. Mr. McCauley made reference to it.
Side by side with that, the delegation made a point about national schools. I would build all the national schools that are required in this country in one year. There are not that many needed, despite what the delegation stated. On the east coast there may be a need for more national schools but in many parts of the country national schools with prefabs are arising from ribbon development and the baby boom. The delegation is hyping it up a bit.
What we need in this country is a fourth level college. We do not have a fourth level college and we have students at fourth level who are piggy-backing on third level. That is urgently needed in this country. Every country has a fourth level college and we need that if we are talking about a smart economy. That must be one of the roads ahead for us.
I agree with everything the delegation stated but I must take into account the state of the economy and where I will get the money. I cannot borrow any more. I have a banking crisis on my doorstep and a bank perhaps needing more capital. We do not know the extent of another bank's problem. There is quite a bit of work to be done.
Everything they stated is perfect. I would love to agree with it and go with it, and I would say we would have a new Ireland arising from that, but I must take into account the situation that is there on the day. That is where the problem is.
Mr. Tom Parlon
I want to response to my good friend, Deputy Edward O'Keeffe. We all appreciate the difficulties that have arisen now. The Government's capital investment programme was meant to involve spending of €9.2 billion for next year. In October 2008, it was reduced to €8.2 billion and then, in April 2009, it was proposed that a further €1 billion be cut off. We all are looking forward to the budget in terms of the cuts it must make, and there is €1 billion to come out of that capital programme.
This forum represents the entire industry. While there are professional bodies here, my own and Mr. McCauley's IBEC, representing the suppliers, are where the big volume of ordinary operatives work. Our big concern before the announcement this week was that the soft option politically — I do not mean that in any derogatory sense — would be to cut the capital expenditure programme more. There must be a balance.
On the €5.5 billion we are now promised, the big worry we have is that for the past 18 months none of these projects came out. There was a total stall and nothing was happening. As has been referred to, whether one is an architect, an engineer, a planner or a designer, these have not been working lately and the companies have been letting their staff go. That pipeline has been stalled for the past 18 months and with the best will in the world, it will be extremely difficult to deliver the €5.5 billion worth of projects next year that are planned.
I can understand the reaction of somebody who drove through the tunnel. Certainly, Dublin is very quiet this week. Most people I have met this week said that they thought I would be in Galway. Anyone I have met in the Houses has said that they thought I would be on holiday.
I thought Mr. Parlon would be here.
Mr. Tom Parlon
That is the general public perception.
It is not exciting enough for Deputy Ned O'Keeffe.
Is it a sign of the times?
Mr. Tom Parlon
Things are somewhat quiet. People are either going on holiday or remaining at home.
Croke Park was redeveloped during a very depressed economic period and when the Cusack Stand was demolished, there were those who believe the ground, when completed, would never be filled. Now, however, it is a great stadium in which national and international matches are held. It will again be full on Saturday and Sunday next.
The Shannon tunnel is going to provide a massive boost to the mid-west region and will be extremely useful to those who wish to commute to Shannon Airport, etc. I am sure it will also provide a boost to Limerick city because it will remove the traffic congestion that exists there.
We appreciate that in difficult times there is a need to ensure value for money. We accept that the proposed €5.5 billion spend on infrastructure, etc., represents a reasonable investment. In terms of value for money, that amount will buy 30% more than would have been the case two years ago. This is down to the nature of the procurement system. The industry we represent was worth €36 billion in 2006. It appears that next year it will be worth between €8 billion and €9 billion. That is a massive reduction. We are losing people from the workforce. These individuals are either going on the dole or emigrating.
People sometimes make the same inferences about those who have built up traditional businesses as they would in respect of those in political life. The bulk of the membership of the CIF is comprised of small family firms that have been in business for generations. These companies are family-owned and it is usual for "the boss" to work on building sites. Many of these companies are going out of business.
As Senator Mary White stated, the people to whom I refer do not have the capacity to sign on and claim the dole. Everyone got carried away in recent years. The blocklayers — or"brickies" as the Senator described them — were creaming it off when things were good. They were represented by a belligerent union, delayed work on particular sites, etc. They got somewhat carried away and became private operators or established private businesses. Now, however, they are suffering. If one of our members has the contract for a project, the work relating to which will only last three months, six months or whatever, he cannot obtain the services of a blocklayer whom he previously employed but who is now on the dole. The latter will inform him that it took a long period to sort out his jobseeker's benefit and that he is now fairly secure. He might not say so but he may be doing nixers on the side. It is difficult to encourage people to come off the dole to work on projects of three or four months' duration. That is a sad reflection on the system that obtains. Everyone is aware of the difficulties this system has had in coping with the increased numbers of people who are claiming the dole.
Deputy Ned O'Keeffe referred to the backlog and also to shopping centres, malls, etc. The latter were built by private enterprise. Many of those who built them are suffering and have either already gone into NAMA or are on their way in. That is going to be an issue for NAMA. The latter has been in the news recently for taking on the loans of the top ten developers. It is now in the process of taking on the next tranche. Business plans have been presented and are being appraised. Large numbers of professionals are obtaining very good feels for preparing these plans, etc. NAMA has not actually decided what it is going to do. We understand, however, that it is going to commence making decisions in September. It is imperative that NAMA begins to do the job with which it has been charged, namely, being an asset management agency. It must start making difficult decisions.
There is no doubt that operations of many of the larger firms that go into NAMA will be substantially reduced in scale. These firms will be forced to sell their assets. I accept that NAMA has the advantage of having bought in loans at an average of 50% of their previous worth. That should place it in a fairly decent position. However, it must now engage in active management. There was a period during which the banks would not make decisions because NAMA was about to take responsibility for certain of their loans. Now NAMA is in a limbo period and is waiting to get its act together, etc. It is imperative that NAMA should begin to do its work.
Senator Mary White also referred to the smart economy, which is difficult to define.
It involves everyone working in a smarter way. That is all. It is not a mystery.
Mr. Tom Parlon
It also relates to giving children a better start in decent primary schools. It further relates to trying to attract foreign direct investment — which remains extremely important — and ensuring that we have the proper facilities in place. For example, people landing at Dublin Airport should be able to use a public transport system that will take them directly to the city centre. In addition, those who want to drive out to the provinces in their cars should be able to do so on decent roads and those seeking accommodation in Dublin or wherever should be able to find it without any difficulty. All of this is important and I am of the view that there is plenty of scope for the type of investment that will bring about good returns.
Will Mr. Parlon comment on the fourth level college? At present, we are piggy-backing on third level colleges in this regard.
Mr. Tom Parlon
I agree with the Deputy. There is substantial investment in third level at the minute in terms of upgrading facilities but it is a consequence of the difficult economic situation that so many of our graduates are continuing in college and those facilities are becoming overcrowded. I agree with the Deputy's proposal on the fourth level college.
Mr. Paul Keogh
With regard to the Deputy's question on the absence of funding, in the main report in 2009 – which I trust the committee has but perhaps we should issue more copies – there was a section, which was developed with Goodbody Corporate Finance, looking at innovative funding solutions for public infrastructure. Essentially that was a proposal that moneys currently invested in Irish pension funds and equities abroad would be redirected into infrastructure and public works. Approximately €80 billion is invested abroad. We are working on this and I know from our contacts with colleagues in Holland and Norway, for example, that they use pension fund investment in infrastructure as a normal way of doing it. People have said it may not be the best and there may be difficulties or road blocks but, on the plus side, it is seen that there is a real social dividend and instead of one's pension being invested abroad in some equities one does not know about, here it would be invested in health care, schools, housing and whatever it may be and, therefore, one could see the social dividend where one's investment goes. It is also seen that if it were invested, it would be like gilts or government bonds. It is a guaranteed return. The State pays 5% on its borrowings but one could look at one's pension earning that guaranteed return over time and, most important, this would keep capital, which we seriously need, to be invested in Ireland rather than abroad.
That was put in the 2009 report and two discussion papers were presented to the Department of Finance in 2008 and January 2009. We are living in terrible times and the Department has perhaps been otherwise engaged but it is definitely still on the table and it is something the ACEI will come back to with the Department again.
The smart economy has not been explained adequately. It is not only about IT but about everybody doing everything they do every day smarter, and working together. It is a simple concept and if people applied this there would be a big change in the country. Mr. Keogh referred to the time wasted by companies having to tender. I worked in the schools section of the OPW and I know what he is talking about regarding the lead time needed.
Many people do not realise that 46% of those unemployed were engaged in the construction industry and are not employable in other jobs. The PRSI exemption is limited in what it can achieve. What retraining is being provided to these people? What jobs can they be retrained for? This cohort is a huge factor in the unemployment figures.
I apologise that I was not present earlier but the investment programme launched by the Government earlier this week is worthy. What are the views of Mr. Parlon and Mr. Keogh on it? We have a fantastic road infrastructure and it makes us feel good about the country. What would Mr. Parlon do with Sandyford Industrial Estate? It is depressing to look at all the empty buildings and empty housing estates. If Mr. Parlon were still a Minister, what would he do? He said we must prepare in advance and have drawings etc. ready. What would he do as Minister if he did not have the money to spend? I empathise with Mr. Parlon and the industry and wish I could do more for them, because I know how serious the situation is. However, what would he do as a politician if he was faced with the situation faced by the Government?
Mr. Tom Parlon
The first thing I would do would be to try to ascertain the actual problem. A number of reports have been published recently. On "Morning Ireland" this morning, I heard Mr. Kitchin discuss his new report which puts much of the blame on planners for part of our problem. In fairness, the interviewer tried to move him on and pointed out that was historical and asked what could be done from here on. Within the next month or so, the Department of the Environment, Heritage and Local Government, through the local authorities, will have an exact count of the number of empty units in the country and will know where they are. I expect there will be a substantial number of vacant apartments in Dublin city, although many of the unsold apartments have been leased. Any member or former member of my organisation who had a block of apartments and was under pressure from his bank sought to lease them rather than sell them because there was no market for selling them. Therefore, the final count will probably show up a figure that is substantially less than the figure I would have from my information, where a figure of 300,000 was being used. This morning Mr. Kitchin used a figure of 100,000 excess units and said that one in six units was vacant. Generally, throughout the world and taking holiday homes into account, there is always a substantial number of vacant houses. Mr. Kitchin also mentioned 200 ghost estates. I would have an issue with that in terms of what is a ghost estate. However, the first thing I would want to do would be to establish the number of vacant units.
In my rural parish I was approached by somebody working in the private area lately. He said he was working with the local authority and had discovered there was one empty house in the parish. He asked whether there was a family that would qualify for that house because the local authority was interested in buying the house. Approaches have been made and a price has been agreed. Is that not a practical way of resolving a situation where housing lists are increasing due to various social factors? It is beginning to dawn on people who have invested in apartments that they will not realise anything like the cost of those apartments. The only potential way of retrieving something on their investment is to try and get them sold off. Therefore, I expect some sort of linking between local authorities and owners.
Many of our members visited Haiti recently and were involved in building infrastructure and basic housing units for people living in tents. The lack of housing there is a major problem. We feel there is a major problem here because we have excess housing, yet we have a social problem where extra housing is needed. It is a fairly simple problem to address if everybody faces up to reality. The people who own the housing units must face the reality that they will have to accept substantially less than they expected for them. The Government, on the other hand, must find funding. I am aware that the Minister of State with responsibility for housing has proposed a lease scheme. I have heard him mention his frustration at the situation, when having come up with some genuine attempts to solve the social housing problem, each time he made an announcement, either the national media or the Opposition accused him of providing another bailout for his fat cat developer friends, leading him to wonder how he will ever find a solution to the problem.
There is scope for that problem to be resolved. We have a substantial number of people seeking social housing and we have a substantial number of units available. Unfortunately, they are not all directly matched. The largest problem — in Dublin city — can be resolved quite easily as can that in the greater Dublin area. However, there are excess units in some provincial towns where, unfortunately, there is no demand either for social or general housing. It will take longer to resolve that. When the figures are established, the overhang in Dublin and the greater Dublin area will be minuscule. Then, if people have any confidence in the market and begin to buy or seek homes, the overhang would be taken up soon.
Mr. Paul Keogh
Senator White asked important questions. The housing inspectors in the Department of the Environment, Heritage and Local Government are working on an asset register to establish the number of vacant units in County Laois and the results of that are due out this month. This comes back to the point I made earlier in response to Deputy Chris Andrews. We have the graduates — engineers, architects and surveyors — who could be involved in establishing the number of vacant units around the country, their condition and what is required to bring them up to standard. I had a meeting with the Minister of State, Deputy Cuffe, yesterday at which we discussed this. Apparently the expectation is that Dublin will recover much quicker than, in particular, the Border-midlands area and that there may even be a shortage of housing in Dublin in the next two years. It will be a case of whether this will be the right type of housing and whether people will want to live in apartments but this is the forecast on a statistical and numbers level.
Yesterday I received a very encouraging letter from the affordable homes partnership which will become the sustainable communities agency. The RIAI has initiated a competition called the 3TWENTY10 research competition to ask the entire architectural profession to come forward with proposals as to what would be done, not just with ghost estates but with vacant hotels and office blocks. For example, in Scotland, the Community Land Partnership allows for any local community or village community to register an interest in any piece of property. This is to do with the historic situation in Scotland of absentee landlords. In Rotterdam I was shown around vacant houses where new communities could buy vacant units for the equivalent of one pound, on condition that they would bring something into the community. It might be about using vacant houses for incubation business use. The RIAI has initiated this competition to deal with the problem of ghost estates, vacant office blocks and hotels. This competition will be part-funded by the Government policy on architecture. I received a letter yesterday from the sustainable communities agency stating that it also wishes to support the competition. The first tranche of the results of that competition will be public at the end of September when the RIAI holds its conference and they will be formally published later in the year. There will be, therefore, ideas coming forward.
I wish to make a contribution at this point. We all know what the problem has been over the past number of years. We were starting from a low base and we took off but we cannot allow what happened to recur. Equally, we cannot throw out the baby with the bath water. We must recognise that the construction industry remains a fundamental contributor to our economic growth and prosperity. However, like all contributors, we, as legislators, must ensure its contribution is directed at specific targets that are required. There is no point in building for the sake of building. We must provide infrastructure, buildings and houses where these are needed and which ultimately will contribute to our economic and social viability. This would be an important starting point.
Deputy Bruton is correct. There does not appear to be any comprehensive independent review to support a financial framework in the document which was released. This means it is laced in ambiguity. There is no reference to cost effectiveness or to value for money and there is no reference to prioritisation of projects. Some projects are needed more than others. We can make the argument at political level but the prioritisation of projects is very important, particularly labour-intensive projects. Please God, we will recover in five or seven years' time and the situation will turn around. What is needed now are jobs, many of them in the construction sector, for people at professional levels and particularly for general operatives, tradespeople, semi-skilled people, plumbers and plasterers, as well as for architects, engineers and technicians. We must prioritise the projects to create jobs for those people. There is no sense talking about a €39 billion programme if some of the projects are long-fingered or where the programme is so ambiguous that a Minister can argue tomorrow that the project will be definitely included, notwithstanding that it will cost €300 million or €400 million and that it will need to be approved by Government. Mr. Parlon, as a former Minister of State, is well aware of how this works. We are not all fools in here. The Government cannot take us for fools either. That would mean it is trying to fool the people. There should be a prioritisation programme to which the professional bodies and associations should make a significant contribution.
There is better value to be obtained. We believe that tenders are now 30% cheaper than a decade ago. Even with a drop of 30%, that is about €12 billion in the overall programme and will bring it up to about €51 billion versus €75 billion promised originally. There is still a gap of €24 billion but everyone knows we need to trim our sails according to the economic conditions. We are getting better value for money on tenders. What is the position with fixed-price contracts? Previously, contracts allowed for all types of variation, which contributed significantly to the difficulties in terms of the high level of expenditure being incurred. I accept there are unanticipated difficulties in situations such as large areas requiring quarrying or pile driving. We all understand such issues. Nevertheless, in the past there was a significant variation in contracts where a lot of money was expended. The public was aghast at the final level of expenditure compared to the original estimate. Will fixed-price contracts become the norm from now?
Public sector procurement procedures leave much to be desired. There are no two ways about that. My colleague, Deputy Quinn — an architect in his former existence — made a submission on a prototype school. It is nonsense for the Department of Education and Skills to have ten or 12 phases in school building projects. One is put through the first hoop ten times and then one has to jump through the second hoop and various other stages. That is nothing more than a purposeful effort to delay projects. Deputy Quinn proposed a prototype for an eight-teacher school incorporating community facilities, as schools should be more than just an educational facility and should provide a community facility as well. It would be worthwhile considering his proposal. He is a professional who knows his stuff. That would get rid of the current nonsense. An eight-teacher school in Ballyfermot should also work in my local village of Ballynacargy. Why do school designs need to be different? Additional costs are incurred because each time the contract goes back to the Department the board of management or parents' council must get advice from an architect or other professional about changes required. That added significantly added to the cost, which is disgraceful. I have argued this point for a long time.
On the tardiness of Government to get projects started and rolled out, we do not know when some projects will come on-stream. Reference was made to certainty. There is sufficient leeway that one does not know when things will happen. All we know at present is that another €1 billion will be cut from the capital programme for next year. Approximately three new road projects will start in the next five to six years. That is understandable as many roads have been brought up to a better standard. I would like to see more money being spent on public transport, especially on rail. It should be a priority to link the two major towns of Athlone and Mullingar. That would make eminent sense. In the future, how much reliance will be placed on public private partnerships by the witnesses? What role will they have to play? Will they be widely used?
A significant number of projects in the Transport 21 programme have been long-fingered. I disagree with Deputy O'Keeffe's point about schools. There is a need for hundreds of schools across the country. Many schools are old and need replacement. Recent EUROSTAT figures indicate that the birth rate is increasing in this country. Let us get real; we have had enough of pipe dreams and nonsense. We should know where we are going in this context. If the birth rate is increasing we will have further pressures on school places. That has been the experience already and it is likely that it will recur. School building is one area that must be addressed. It does not make sense to say that one could build a school in a year. They are labour intensive and they require the full gamut of professional expertise. Plumbers, electricians and others are required. We need a great deal of investment in the area. Some prefabricated buildings cost €60,000 to €80,000 a year to rent. What went on is economic lunacy. It is difficult to understand how we allowed that to develop in the era of greatest growth and wealth. I do not know whether there was growth or not, but there was such growth according to all the great economists, many of whom are now running for cover.
I believe that we cannot cut back on the school building programme, and that it would be economically wise to try to get us out of this mess through replacing prefabricated buildings across the country. There is a school in my area in Curraghmore which has eight or nine prefabricated buildings. Everybody agrees the project is ready to go, but it is stuck because somebody will not sign a bit of paper. That would be a big project because it is a 12-teacher school and would employ many people in its construction. One wonders who carries out the cost benefit analysis in respect of continuing to pay money for prefabricated buildings that have a fixed life. The only thing that we can do with such a building when it reaches its life span is to replace it with another one. That was widespread during the time of our apparent prosperity. Now that there is to be 35% more competitive tendering, it would be the height of folly to row back on something that will pay us back in the longer term in 20 or 25 years time, when hopefully we are going well again and have learned our lessons.
If we have €5.5 billion next year, the best that can be done is to retain the declining number of jobs in the industry. This will not lead to one extra job, according to the experts here. That is a worry. I am spokesperson on enterprise, trade and employment, and what worried me was that 35-40% of those in the figures were under 25. That number is increasing and they are going beyond the 12 month period, to be classified as long-term unemployed. That is a worrying feature and people will start losing their skills. We proposed a €1.15 billion jobs fund about nine months ago. It is not a panacea, but every contribution should be examined and evaluated accordingly, not just dismissed. Our proposals dealt with apprenticeships, retraining, reskilling, graduate placement programmes and internships. It is important that we do not lose the skills base out there and that we allow people to qualify. We have apprentices who had been in phase six or phase seven of their programmes, yet who lost their jobs and did not manage to qualify. That is a loss because we have spent a considerable amount of money educating those people to a certain level. We cannot afford to lose them, but we are losing them to other countries who are gaining the benefit.
Mr. John Lombard
There have been PPP approaches on five school models over the last three years, including those in Clones, Tubbercurry and Shannon, as well as with the School of Music in Cork. They were delivered very efficiently and within budget. The problem at the moment is with finance for contractors like my colleague from Engineers Ireland, who is the managing director of a major civil engineering and contracting business that is propped up by a PLC. There is no confidence anymore to get people to invest in these things through the PPP approach. Perhaps we should revisit that with a view to fast-tracking the process by looking at the possibility of tendering for five or ten schools together within a county. There is some movement on public private partnerships in regard to civil engineering. For example, the roads project at Newlands Cross is due to go to tender next year, but funding is again a difficulty. I have not seen the model proposed by Deputy Quinn but it sounds like a good idea in the overall sense.
The cost of professional fees to architects, designers, engineers and so on is generally only 1% to 1.5% of the overall capital expenditure for a project. It is the spin-off workers, including plumbers, plasterers and so on, who are most affected by the current difficulties and cannot see any way forward. Senator White spoke about reskilling. We are all trying to do that and to broaden it out, with some of that having to take place abroad. The difficulty is in encouraging young graduates to engage in reskilling for a further two or three years. There is no hope for workers in the construction industry and for professionals such as architects, engineers and surveyors if we do not re-invest at the minimum level to keep things moving forward.
Mr. Murt Coleman
The Chairman has reflected many of our own views and concerns, which we are delighted to hear. On fixed-price contracts, the reality is that any contractor would love to negotiate a fixed-price contract. We have had new conditions of contract for Government contracts imposed on us, about which we are not happy, and that has had the effect, to some degree, of fixing the prices of contracts. Admittedly, there is a process whereby change orders can be administered, and that is fair enough because nobody is psychic. One cannot envisage what is under one's feet if one does not see it. However, that assigns a grave risk on the contractor — the risk for the whole contract.
The Chairman is correct about tendering. However, there is a pre-qualifying stage which is just as onerous as tendering. In some cases there may be as many as 40 contractors at the pre-qualifying stage before the thick folder of names is reduced down to five. There are massive costs involved in that and a substantial time commitment, with tremendous pressure on contractors even to get as far as the tendering stage.
We must focus on the current reality, which is that the commitment of €5.5 billion is a cause for concern. If we are to maintain jobs and devise a strategy for the future we must have certainty as to the details of that investment programme. The problem is that there is no certainty. We are seeking investment from the Government and there has been an undertaking to deliver some of that. However, it should not go unnoticed that we have put forward our own proposals, including a proposal for an infrastructural bond scheme. We hope the Government will examine that proposal and be willing to negotiate with us. Further investment can be worked out.
Mr. Paul Keogh
I thank the committee for giving us so much of its time this morning. We have received a very good hearing and heard some very useful contributions. We will act on the requests that were flagged. The document attempts, within the scope of the resources that were available in a short time, to begin to identify within each sector where investment priorities should be directed. We will come back to the committee on the points raised, particularly the specific recommendations for improvement to the planning system and the public procurement process, and the proposals for employment options for unemployed professionals and construction workers. On behalf of all my colleagues, I thank the members for their assistance.
I wish to make a final point. The Taoiseach has indicated his intention to introduce efficiencies in the procurement process. I have spoken to the Minister, Deputy Batt O'Keeffe, about the printing industry, for example.
At present, 18% of public procurement in Ireland goes abroad, whereas the equivalent figure in France is only 0.6% and the European Union average is 1.6%. Departments in Ireland are not employing our own people and thereby providing jobs. A major issue exists in respect of Departments not being up to scratch.
Mr. Paul Keogh
This issue may have been raised just before Senator Mary White joined the meeting.
While I am not a member of this joint committee, I want to hear——
Mr. Paul Keogh
This issue has been raised. Moreover, it was also raised at the previous meeting with the joint committee.
Mr. Tom Parlon
Due to the present situation and because our industry was worth €36 billion, I refer to all the people who were employed and to the excess resources and expertise that now exist. We built some of the best projects here and in respect of motorways, we now can build a motorway more efficiently than practically anywhere in the world. Some Irish firms have won substantial projects in eastern Europe lately and in Poland in particular. Our member firms are out seeking work elsewhere as Irish incorporated firms. The remit of this joint committee obviously pertains to enterprise trade and I met a Nigerian delegation this morning before appearing here. I acknowledge that many people have prejudices against Nigeria because of past experiences and so on. However, it is a massive country with a substantial balance sheet and a major need for investment. Consequently, an issue I wish to raise with the Chairman at a later stage is how the joint committee can assist some of the Construction Industry Federation's member firms to acquire some direct links with governments there. The concern is that as a number of firms have been stung here, it would not go down well with people to go to Nigeria only to be caught again. On the other hand, opportunities certainly exist there and it has the kind of post-colonial set-up that we also inherited and within which Irish firms can work. While I will take up this matter again with the Chairman, it would keep together some of the expertise in respect of project management and other professional groups by putting them to work outside Ireland until things pick up again.
I thank colleagues and the witnesses for their attendance and for assisting the joint committee in its deliberations. I was encouraged by the debate today in which positive proposals for specific and well thought out investments have been outlined, as have various areas for improvement. It is important to share such proposals and to be frank, update and forthright with one another. I thank Mr. Paul Keogh, Mr. Murt Coleman, Mr. John Lombard, Mr. Mark McCauley and Mr. Tom Parlon for their attendance and for spending a considerable time before the joint committee.
This gives a lie to the view held by some people that the committees are not operating and the delegates at least will be able to debunk that myth. I am sure Mr. Parlon already knew this did not happen from his days as an Oireachtas Member and that tools were not downed simply because the Dáil was not sitting. Mr. Parlon indicated some weeks ago that he sought an opportunity to make a presentation to the joint committee and we were glad to facilitate him in that regard.
I wish everyone a happy few weeks off and hope that everyone enjoys their holidays. We will return to work in this committee in early September. I again thank everyone for their attendance.