Ms Orla Hegarty:

Two questions were asked and I will deal with the second one first on master planning, strategic development zones and economies of scale. Some of these are getting into planning issues. Strategic development zones are a way of unlocking land. The comment I made on it was in the context of the Land Development Agency and other policies on the development of larger sites in Dublin such as O'Devaney Gardens and Oscar Traynor Road, where the procurement policy has been to do a very large, very high risk deal with one developer. This takes an extraordinarily long time and is high risk since one is putting all the eggs in one basket with regard to quality, price and whether it is a success. Unbundling the sites into smaller lots spreads the risk and brings in competition. More important, it is not only competition of people trying to get the work finished quickly on their lot and getting another lot. This model has been used successfully on the Continent.

It also gives competition in the labour market and that will tend to favour better employment conditions. What has not been talked about here in some of the procurement policies is that they tend to favour poor employment practices because, by favouring lowest price and giving work to the lowest price all of the time, it tends to damage employment terms and apprenticeships and training and lead to bogus self-employment and those kind of issues.

Generally, in terms of the larger sites, the important thing to remember is we do not really have big builders. We have a few big development companies but we have lots of small builders. In fact, somebody as a large entity getting a large contract is merely managing hundreds of smaller contracts. The construction industry is made up of sub-contractors and sub-sub-contractors. Effectively, the procurement process for each project is individual. It is a supply chain that is built on-the-fly with people as they are available and having more people up the chain and a larger entity is really adding another layer. It may not be bringing value to the proposition at all. Traditionally, house builders brought a lot of value. They were people who were skilled and experienced in the construction industry. I refer to the pre-crash house builders who brought a lot of value to the process because they had a lot of relationships with sub-contractors and suppliers and they were doing multiple deals across multiple projects. That was how they engineered the value and the profitability into their business. We are increasingly seeing people who have a management structure and maybe are bringing finance, but do not have that value to bring across managing a supply chain, and they themselves are, in fact, tendering out to the market.

There is a lot - it is difficult to describe it now - in there in procurement policy. I suppose it goes to the earlier question from Deputy Ó Broin as well on procurement. Construction is inherently risky and the procurement process is effectively complex. In order to manage that, we have so-called "traditional procurement" whereby there is a contract in place that manages that risk and it tries to balance the risk on both sides so that the contractor has certainty of being paid for the work they do, that unexpected things will get paid for if they arise and that the person who is the commissioning body at the top of the chain has certainty that they will deliver and that they have the tools to enforce good quality and various other mechanisms. Construction contracts, traditionally, are complex with a lot of levers for those changing conditions.

We effectively in the public sector now have less sophisticated contracts - that has been so in the past 15 years - where they attempt to transfer risk early on. We say to the contractor that the contractor should make allowance for all of these things that might happen and price it in at the beginning, and if it arises, we do not want to look at variations or additional cost, and it is the contractor's problem. The difficulty is the conditions in the past 15 years have probably masked the danger in that. We have had a period of fairly flat inflation in construction, labour and materials and we have had adequate capacity in the industry to keep expanding in the past few years so that people were available to do the work. In terms of people who took on contracts then, they had certainty that they could find people to do the work and they had certainty about the future price of materials and, therefore, they could to some extent price in that risk. We now find ourselves in conditions where it is different. The industry is at capacity in a lot of areas, the risks have increased and we do not have a contract mechanism that is sophisticated enough to manage a lot of that. We also have centralised controls in terms of approval of costs. The purse strings are held in the Department of Housing, Local Government and Heritage and in a lot of cases that is what one might call micro-managed to some extent in that people have to spend an inordinate amount of time getting approval and going back looking for a certainty that just is not out there. A delay of-----