CIF may complain to EU over contracts

The Construction Industry Federation (CIF) is preparing to make a legal complaint to the European Commission against new Government contracts that fix the cost of big infrastructure projects, according to well-placed sources in the sector.

The body has not yet made a formal decision, but the sources said that a complaint to the commission's competition body was very likely.

The Government introduced fixed-price contracts last month in the face of significant opposition from the construction sector. As the State prepares for a significant increase in infrastructure spending under the new National Development Plan, the new contracts were designed as a response to political concern about large cost overruns on parts of the last plan.

The Government will fix the price of contracts to avoid any exposure to overrun costs. This represents a departure from the previous system, under which it was liable for any cost increases. Under new contracts, responsibility for meeting overrun costs will fall to construction companies.

"We're concerned that the contracts may be inherently uncompetitive and may have the effect of restricting competition to larger contractors and thus disadvantaging smaller contractors," said a CIF spokesman. "The CIF has made no formal complaint to the EU and the matter has not been discussed by the executive body of the CIF, which is the ultimate decision-making body within the federation."

Senior construction industry sources believe the federation's legal scrutiny of the contracts is well advanced and provides the basis for a valid complaint to the European Commission on competition grounds.

The requirement to bear overrun costs will inevitably lead to the failure of smaller construction companies or rule them out of larger tenders, they claim. In addition, they claim this form of contract was unique to Ireland and fell outside the bounds of contracts issued under accepted international criteria. As such, they could have the effect of excluding international companies from Irish tenders.

They say every individual civil engineering project is unique and the true scope of each project cannot be determined until site work begins. In the past, the Government paid for changes to the scope of projects.