Construction costs rising for State due to recovery – Heydon

Major State projects are facing higher construction costs as they are in direct competition with growing private sector infrastructure spending, a Fine Gael TD has warned.

Deputy Martin Heydon, Fine Gael TD for Kildare South, said he was alerted by Finance Minister Paschal Donohoe, that future capital project decisions will have to take account of whether tenders can compete competitively with privately funded projects.

“When it comes to employing or contracting skilled tradespeople, we often find the State is competing for the same skilled workers as the private sector.

“They are in high demand across the sector and as a natural consequence, costs for such services subsequently rise, and this has to be taken into account in project costings. These skilled professionals are in short supply and Government efforts to increase apprenticeship take-up are also key in this regard,” Deputy Heydon said.

“The number of large scale private developments underway across the country, while very welcome, can also have their own unintended knock on effects. Intel is a case in point where they are planning a major 110,000sq/m expansion of their manufacturing base in Kildare. A total of 3,000 construction workers would be required if it gets the green light to proceed,” Deputy Heydon said.

At a recent sitting of the Budgetary Oversight Committee (16 Jan 2019) while answering questions from Deputy Heydon, Minister Donohoe said, ‘The capital expenditure that we have embarked on will have a number of second round effects within the economy because it will act as a multiplier and a boost as investment increases…One of the increasing challenges that we are facing from an investment point of view, and one that is changing even more quickly than I had anticipated, is the growing number of large capital projects that we are competing with the private sector to make happen’.

‘Even in 2018, there was an acceleration in the number of large projects that the private sector wanted to deliver. This is something that, as we move through 2019 and become clear on where we stand with Brexit, will have to be a factor in our capital project decisions in 2019 and 2020. The growing feedback that I have been given is that, for example, the electrical engineers whom we need to be involved in building our primary care centres and national children’s hospital are the same ones for whom there is a growing demand in the building of data centres and other new facilities,’ Minister Donohoe said.

Deputy Heydon said that when all of these factors are combined, “the State is experiencing a far more variable degree of changes in tender pricing and sound estimates than would have previously been anticipated. As a result, the public finances, brought back from the brink by Fine Gael in Government, could experience unforeseen costings due to an in-demand building and manufacturing sector.”