Monday 23 September 2019

Builders blame department as firms go bust

Finance Minister Paschal Donohue
Finance Minister Paschal Donohue

Fearghal O'Connor

A process to redesign the Government's medium-term procurement process for infrastructure has begun, but Finance Minister Paschal Donohoe has rejected calls to order a review of existing contracts. That's despite industry claims that the contracts are forcing building firms into insolvency.

As recently reported in the Sunday Independent, a growing number of building firms face financial failure because they bid too low to win public sector building jobs for schools, housing and transport. A department spokeswoman said the Office of Government Procurement had begun engagement on a medium-term strategy that "may result in further amendments to the suite of public works contracts". But Donohoe had not asked the OGP to review the current public contracts, she said.

By the end of May, more than 40 building companies had already gone bust since the beginning of 2018. There has also been an almost 50pc rise in the last year of firms leaving the Construction Industry Federation (CIF) due to liquidations and insolvencies, it is understood.

The latest firm to run into problems due to loss-making public contracts, 65-year-old Northern Irish firm McAleer & Teague, will only avoid liquidation by undergoing an examinership process that sees it withdraw from contracts to build new schools in Ballymun in Dublin and Dunleer, Co Louth, documents show.

CIF director general Tom Parlon said the solutions to the problem with government contracts that favour the lowest bidder were "well understood", but he believed the department was against change. This, he said, was putting the future of portions of the industry at risk: "It encourages people to cut corners, do poor workmanship and put their own viability in jeopardy," he said.

But in an email to former OPW Minister of State Sean Canney, Donohoe said it was "troubling to hear of the negative impact" of rising wages.

"I imagine there may be [sic] also be a number of projects in the private sector that are similarly impacted but construction clients in the private sector are, perhaps more able to step outside their contract conditions to resolve such matters than those to which public procurement rules apply," he wrote.

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