Builders may challenge State's fixed-cost contracts

The Construction Industry Federation will decide on Tuesday if it will go ahead with a challenge in the European courts to the Government's fixed-cost contracts for road building and other infrastructure projects.

In February, the Government introduced contracts that set the cost of public building projects, in a move to halt big overruns experienced in funding these developments.

However, the Construction Industry Federation (CIF) opposed the move at the time, claiming the new agreements would force its members to assume all of the risk associated with infrastructure building.

The organisation subsequently said it would challenge the move in the European Court of Justice on competition grounds.

On Tuesday, the CIF national executive will meet to consider a motion from its Cork branch calling on the organisation to take the case to Europe.

The federation believes the contracts will force construction firms to overprice their bids to take into account any unforeseen risks.

It says they could also squeeze medium and smaller-sized operators out of State-funded projects, as they would be unwilling to take on work at set prices with no knowledge of the potential problems.

The CIF argues many of the overruns in big projects result from factors beyond either party's control, such as the cost of land. It also points out that many cost increases have resulted in State bodies changing the original plans for large projects.

Speaking at the federation's annual conference in Dublin yesterday, its president, Hank Fogarty, said that the "principles of risk recognition, risk sharing and risk management, and more importantly the principle of partnership, have been abandoned in favour of the principle of risk transfer at any cost".

The CIF wants the Government to use engineering construction contracts (ECCs), which involve the contractor at an early stage in the design, and allow the client and building firm to work on identifying potential risks, and agree a mechanism for sharing likely costs.

Steve Roswell, former director of procurement at the UK's Highway Agency, told the conference yesterday that the British government changed to the ECC model after using fixed-cost contracts, as these delivered unsatisfactory results, or led to frequent disputes between the parties.