BUILDING contractors are in danger of putting themselves out of business as competition forces them to submit very cheap tenders, the newly elected president of the Construction Industry Federation (CIF), Mr Kevin Kelly, has warned.
Mr Kelly said leading contractors must stop submitting below cost tenders when trying to win public contracts. He said companies were operating on completely unrealistic profit margins.
If they did not take steps to strengthen their balance sheets now, there was a very real danger they would go out of business in the next recession, he said.
Mr Kelly, managing director of John Sisk & Son Ltd, said he had carried out an analysis of the top 34 contractors in the country. He found the average pre tax profit was 1.54 per cent on a total turnover of £665 million.
The norm should be 10 per cent, he pointed out.
He said his analysis, which included civil engineering firms, had confirmed his worst fears.
"Assuming a conservative tax charge of 20 per cent, this leaves earnings of 1.25 per cent or a total of £8.25 million for all leading contractors in our industry," he said. He said this did not take account of any dividends that might be paid.
Mr Kelly said a committee was currently examining the whole issue of regulating the industry. He said there should be a "pre qualifying system when tendering for public contracts". This would require. contractors to outline their financial resources and detail whether they were capable of completing the contract.
He also called on the Government to try to expedite several projects which have been approved by the EU, but have been delayed for various reasons. These include the Southern Cross Route in Dublin, the Ringsend Treatment Works, the Arklow bypass and the waste water treatment plant in Cork.
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