Reform of public works contracts urgently needed, Oireachtas committee told

The rollout of road projects under the National Development Plan (NDP) is facing "significant and systemic" threats, and reform of the system of public works contracts should be considered to reduce the risk, the Oireachtas transport committee has heard.

Peter Walsh, Transport Infrastructure Ireland's (TII) chief executive, said rising inflation has created the "most pressing" circumstance for such reform. He said TII was advocating an "equitable" approach to the issue in the civil engineering sector.

Mr Walsh said setbacks to a number of major road projects pointed to a need for the State to consider setting three “enablers” for delivery of NDP infrastructure projects.

These would be an “alignment” of stakeholders who often have different interests in relation to projects; adequate resources to ensure speedy decisions by planning regulators and by the courts in judicial review planning challenges; and reform of public work contracts.

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Roadbridge Ltd, which went into receivership last month, was the contractor for the N5 Ballaghaderreen to Scramoge project, with Roscommon County Council the employer and TII the funder, he said.

Challenges

Work on that has stopped and the project will be delayed while options are explored, he said. Given there are three judicial review challenges to planning approval for the Galway ring road scheme, Mr Walsh expected this would also be significantly delayed.

Committee chairman Kieran O’Donnell TD said he and fellow members regarded reform of public works contracts as urgent and would hold further hearings on that and other matters raised.

On the issue of public works contacts, he said those lump sum fixed price contracts are used on all public works projects, and contractors here have “long-standing objections” to them. This contract type is expensive to tender for and the risk transfer is “extremely onerous” for the contractor, he said.

The lowest-price award criteria and very high level of risk transfer within the contract have combined to achieve very good value for the taxpayer, but with the consequence of a much-reduced number of contractors in the Irish market, he said.

Mr Walsh said that while it is not uncommon for contractors to own inflationary risk, it is widely considered “not sustainable” for contractors to continue to absorb price escalation at the rate the market is currently experiencing.

Due to rising fuel, materials and labour prices, experienced aftr the pandemic and since the beginning of the war in Ukraine, there are significant financial pressures on contractors working on projects being funded by TII, but limited relief is available to them under the public works contracts, the committee heard.

Detrimental impact

He said there are now “clear signs” the public works contracts system is having a detrimental impact on the market’s appetite and ability to deliver.

Mr Walsh said that in TII’s experience when it comes to implementing infrastructure mandated by the NDP, there is often a lack of alignment between the interests of stakeholders, including other public bodies, and the interests of the bodies responsible for delivering the projects.

The State should consider establishing suitable fora for stakeholders, chaired by senior professionals, to achieve alignment supporting the delivery of necessary infrastructure, he said.

The planning process is “highly complex and time-consuming”, he said, with planning approval subject to “extraordinary” delays of years rather than months due to judicial review challenges.

The State should ensure that public bodies with statutory and regulatory approval functions are adequately resourced so they can perform their functions within reasonable time periods, Mr Walsh said.

TII also suggested that the State ensures an adequate level of judicial resources so challenges can be decided within months not years.