Tenders for capital projects at 1999 levels

 

PROCUREMENT AND TENDERING:TENDER PRICES for capital projects have fallen by an average of 30 per cent since the peak of the market and are now back at early 1999 levels or possibly lower, according to the Government’s report on infrastructure expenditure.

The potential impact from the reduction in capital expenditure by the State will be tempered in real terms because of the greater value that is now achievable, according to the report.

The fall in the cost of infrastructural projects combined with improvements in public sector procurement procedures, such as fixed-price contracts, means value for money is more achievable than it was during the boom years.

Government departments are already benefiting from these changed market conditions and have reported to the Department of Finance the magnitude of the savings being made.

“In some sectors – generally involving larger scale capital projects – there will be a lag in achieving reductions as a substantial proportion of resources was contractually committed at a time when prices were at or closer to their peak. In other areas however, smaller projects and shorter time horizons will permit more prompt realisation of savings,” the report states.

The report cites data from the Society of Chartered Surveyors that shows tender prices from the second half of 2009 were at the same level as those in early 1999.

The report envisages a continued role for public private partnerships (PPPs) in the provision of new infrastructure.

There are more than 30 PPP projects that are operational or in construction, each with a capital value of more than €20 million. They are in the transport, education and environmental services sectors.

It is proposed that two major public transport schemes for Dublin, Metro North and Dart Underground, will be procured as PPPs.

Use of the PPP arrangement is also being envisaged for the provision of courthouses, and for the National Concert Hall.

A spokesman for the department said the annual cost of contracted PPP projects this year will be approximately €132.5 million.