Proposed Government efforts to reduce overspending on public contracts may result in higher costs, job losses and more delays, the Construction Industry Federation (CIF) warned today.
Proposed Government efforts to reduce overspending on public contracts may result in higher costs, job losses and more delays, the Construction Industry Federation (CIF) warned today.
Figures released by the CIF today indicate that the value of construction output to the economy in 2005 will exceed €28 billion or 24 per cent of GDP.
Although employment in the industry is now in excess of 300,000, the CIF claims Government proposals to introduce new forms of contracts could drive small-to-medium sized contractors out of business resulting in serious job losses.
According to a report from the Dáil Committee on Public Accounts earlier this year, State-run infrastructural projects, which had originally been estimated to cost €7 billion, finally cost €15.8 billion.
The Department of Finance, and the Government Construction Contracts Committee, have developed draft new forms of contract to replace those presently used by the State for building and civil engineering projects.
In its autumn briefing published today, the CIF said the introduction of new contracts will result in delays as Government departments and public agencies will have to take time to familiarise themselves with their operation.
The Federation also said that as the new contracts are untried and untested they are certain to result in lengthy and protracted legal dispute, as the true meaning of words, phrases, and clauses is ascertained by the courts.
It added that it was concerned that the introduction of what it describes as "unbalanced risk allocation" will result in greater costs as some companies may charge expensively for risks about which they are uncertain, and the risk of bankruptcy for contractors and subcontractors, due to under-estimation of new risks, could result in job losses and loss of revenue.
It warns the Government approach will expose the interests of the State and the construction industry alike to uncertainty and unnecessary risk They claim it will delay implementation of capital investment projects and it may not deliver the price certainty being sought by Government.
The Federation also claimed the improvements in cost and delivery could be achieved by amendments to the existing standard Forms of Contract which the CIF says are used throughout the world.
However, it said such contracts will not lead to better value for money but will add to the cost of infrastructure projects.
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