Mr. Micheál O'Connor:

My name is Micheál O'Connor and I am president of Society of Chartered Surveyors Ireland. I am joined by my colleague, Mr. Edward McAuley. We thank the committee for the opportunity to make a presentation to it.

People may ask why the Government should invest further in the construction sector and a number of very important points must be made in that regard. The construction sector is now halfway through its sixth year of recession. This year's level of output will not exceed €7.5 billion. The latter figure is down from a peak of €38 billion. The construction sector is one of the leading indicators of real, sustained economic recovery. Continued investment in infrastructure is crucial to economic growth and to establishing the correct environment for economic recovery. The CSO has forecast that between 2011 and 2021, an additional 143,000 households will be formed in Ireland. This will happen as Ireland returns to positive inward migration. Public investment in infrastructure in order to support this increased demand is required, not only to maintain the quality of our existing infrastructure but also to anticipate new demands created by the new economy.

There must be continued investment in education and training, as Ireland must maintain an excellent standard in respect of both professionals and its skilled workforce, which is key to growth in the future. Public capital investment has fallen from 18% in 2008 to just 6% today. While the industry does not expect the Government to finance the construction and property sector alone, more needs to be done by the Government by way of direct investment and by creating the right environment for private investment. Furthermore, the optimum size of the construction sector should be 15% of gross national product, GNP, which at current levels should reflect a sector output of €18 billion, which is equivalent to 156,000 directly-employed people. At present, however, the construction sector has an output of just €7.5 billion and employs 98,000 people. Therefore, were the sector to return to optimum levels, this would create employment for approximately 58,000 people directly and a further 24,000 indirectly. Consequently, there is huge opportunity in this regard for employment creation.

The National Competitiveness Council supports continued investment in infrastructure and noted that developing and maintaining an export-friendly environment by utilising world-class technology and infrastructure to create and deliver goods and services efficiently to customers is important for competitiveness. Broadband, for example, is a key ingredient in this respect and it is worrying that Ireland has one of the lowest broadband connection rates in the OECD. One recommendation in our submission was for the publication of a multi-annual pipeline of public and semi-State capital projects, overseen and evaluated by improved governance of the construction sector, an improved planning system and streamlined procurement processes, including the creation of a chief construction adviser. A key consideration in this regard is not accepting below-cost tenders on public projects, as this only leads to the potential of a shadow economy, further insolvencies or potential disputes for costs in which contractors seek to recover below-tendered costs.

We also seek the development of building information modelling on public projects and recommend the review of the public procurement sector and public contracts. Again, this is highly important in the context of maintaining small and indigenous firms, which are finding it extremely difficult at present to compete in the public sector due to cost barriers, namely, the cost of tendering and the cost of pre-qualification.

As for improved governance and streamlined planning, the likes of Priory Hall is in nobody's interests and enforcement of the building control regulations is crucial. Building control authorities need to be adequately resourced to ensure timely registration of completion certificates and to foster a more effective inspection and enforcement regime, possibly through a ring fencing of a portion of the property tax. Furthermore, funding institutions have a role in ensuring that developments funded by them are compliant.

We in the Society of Chartered Surveyors believe now is the right time to invest. While the society's tender price index reflects that tender prices are on the increase, 3% higher than this time last year, they still have fallen approximately 33% from the peak. Furthermore, the IDA has warned of a lack of modern office space in the order of 70,000 sq. ft. to 120,000 sq. ft., which is required by multinationals. The IDA also noted that the right type of office accommodation is a significant factor for multinationals making investment decisions in Ireland. One solution is to fast-track the building of suitable office accommodation on "shovel-ready" sites around the key cities. The society also recommends the speeding up of the release and building of some of NAMA's commercial property portfolio of office stock on the market. In addition, the refurbishment of older office stock should be incentivised to encourage private and institutional owners to invest in upgrading the stock to modern standards and while building costs have fallen, a reduction in VAT rate to, for example, 5% on retrofitting office stock could improve office standards in a cost-effective and efficient way and could detract from the shadow economy. The society believes the implementation of the construction enterprise clearing house, as recommended by Forfás, is also important and welcomes the property asset management delivery plan recently launched by the Minister of State, Deputy Brian Hayes.

Another recommendation was the delivery of alternative funding for public works, coupled with measures to support improved bank financing of private construction. The society recommends that the Government maintains pressure on Irish pillar banks to support the private sector in improving the quality of new and existing buildings through appropriate funding measures. It also supports the recently-published Forfás report, which contained several key initiatives, some of which offered international opportunities for Ireland's skilled workforce. The society welcomes this proposal, as well as the focus on upskilling in the industry, which is absolutely crucial. The report also recommends access to finance for construction projects through the European Investment Bank and to create sustainable investment opportunities for significant deposit accounts. In addition, it would be highly welcome were the Property Services Regulatory Authority to create a commercial lease database to create much-needed property data. Similarly, there should be a review of the public works contracts to create more fair and reasonable terms and conditions.