Debate on works contracts likely to flare again with increase in State spending

It is looking like a debate on public works contracts cannot be far off, if it has not already begun. Once again, it is a problem with its roots in the insanity that seized the construction and property markets ahead of the bursting of their joint bubble six years or so ago.

The Republic spent billions on developments, most notably roads, but also such things as schools and waste water treatment plants during that decade. However there was a furious controversy over the fact that projects only appeared to be delivered after long delays and budget over-runs.

The solution came in the form of new contracts introduced by the Fianna Fáil-Green coalition that came to power in 2007. Their terms shifted the burden of most of the risk for unforeseen problems and setbacks onto the main contractor, something that is unusual in other countries.

The construction industry as a whole said that they would cause problems, were contrary to the partnership approach supposedly adopted by the Government and would possibly deter companies from bidding for State-funded work. However, the new contracts came in shortly before the financial crisis put a virtual stop to big-ticket, publicly-paid-for contracts, so at least some of those theories were not really tested.

That looks set to change. The State and its agencies are likely to step up spending on construction on a variety of fronts, just as the private sector does the same.

Theo Cullinane, chief executive of BAM Group Ireland, which has a lot of State work on its books, this week said that the difficulties that the public contracts create make working for the private sector more attractive. He is not likely to be the last industry figure to criticise these contracts in coming months.

The difficulty for the Government will be how to deal with the problem without looking like it is caving into a construction industry whose close relationship with previous administrations, many people believe, played a key role in perpetrating the crisis from which we may be about to emerge.