Mr. Dominic Doheny:

I thank the Chairman for the opportunity to address the committee. As was already said, I am president of the Construction Industry Federation. I live in Tullamore where I am an active member of the chamber of commerce. I am past-president of the Midlands Gateway Chamber and the co-owner of a development construction company in Tullamore. The construction industry is a critical part of the Irish economy. All other sectors, including technology, finance, legal services and the public sector, depend on our industry for the accommodation and infrastructure the economy and society require.

When the construction industry works, Ireland works. The medium-term prospects for the construction industry are generally positive following the introduction of the national development plan which outlined more than €116 billion in investment over the coming decade. There was an increase of 18.1% in the value of production in quarter 1 of 2018. The value of construction output reached approximately €20 billion or just under 7% of GDP in 2017 and most of this was produced by SME companies.

The construction industry is highly competitive and labour intensive. Competition for work is based on a number of factors, the two most prominent being labour and materials. Labour costs can account for more than 40% of a tender. Therefore, stability with regard to labour costs and an environment where contractors can tender on a level playing pitch are of paramount importance to our industry.

The construction industry is recovering from the most severe recession in the history of the State. It is essential that a framework exists that will ensure that Irish contractors employing Irish workers can tender on a level playing pitch. Equally, it is essential that workers in the industry are paid a fair wage. This, in turn, will ensure that we attract bright, young workers into the sector.

There are a number of other challenges facing the industry with regard to the demand for skills and the threat of building inflation. Following a decade of flat costs, a recent development has been the upward trend in building costs and tender price inflation, with the latter running at 6.3% per annum. The construction industry is experiencing a tightening in the supply of skilled labour, a natural outcome of almost a decade during which the number of new graduates and apprentices with construction related qualifications dramatically reduced. The CIF is focused on ensuring that construction becomes a sustainable, long-term career option. In the longer term, Ireland will benefit from filling skill gaps with students, apprentices and technicians developed through the Irish educational system. In 2019, we will deliver a major awareness campaign to try to attract young people, including females, into our industry. I call on the committee to support this campaign which we hope to roll out next year.

Another area that we have to address is public procurement. There has been much coverage of the school building issue in recent weeks. Without referring to the specific case, issues such as this terrible case are generally a manifestation of the failing of the public sector procurement system. Under the Irish public sector procurement system, contracts are awarded to the lowest price bidder in the vast majority of cases. This means that contracting authorities cannot award the contract to the best contractor with the best track record or the best plan to meet the design created by the Department. This issue must be addressed or we will continue to see failures in delivery of public sector projects. Given the importance of this specific issue, the CIF is holding a procurement seminar on Thursday next in Tullamore, where we expect to have almost 100 people in attendance.

The CIF also recommends that the committee consider the role of fairer procurement in terms of capital expenditure by the State with regard to safeguarding and developing Irish construction small and medium enterprises. Our current procurement regime deals with everything but value for money for the client. It is excessively focused on lowest price. The price-quality ratio is important in public procurement. As in any mature economy, it recognises that we should move towards the whole life-cycle cost of the infrastructural asset.

Our position is fully captured in the sustainable procurement programme that we are currently pursuing with Government. At present, construction as a sector is characterised by low profitability and productivity compared with other sectors in the economy. With low margins, it is not possible to compete to deliver cheaper solutions. This is where technology and fairer procurement will play an increasingly crucial role, not only helping us build smarter new infrastructure but also improving how our current operational assets perform by focusing on the whole life of the asset. We need only look at the assistance our friends in agriculture and their SMEs obtain, specifically through their State agency, Teagasc.

From Ireland's perspective, the timing of the implementation of the national development plan, NDP, and the national planning framework, NPF, is essential to meet the critical physical and social infrastructure and the needs of a growing country, especially in areas such as transport, housing, health and education. The industry, therefore, welcomes the fact that the Department of Public Expenditure and Reform has established a Project Ireland 2040 delivery board with senior representatives from all of the infrastructure investment Departments to oversee the implementation of the plan and ensure fluid project management. SME businesses in construction and investors, designers and providers need certainty of the forward work programme, something which the new NDP should provide. The capital projects tracker, which is under development, should lead to a liquid pipeline of infrastructure opportunities.

Another positive development to emerge from the new NPF-NDP is the establishment of the construction sector group, which will work to ensure a regular dialogue between Government and the construction industry. It is widely acknowledged that a healthy, sustainable, competitive and well-functioning construction industry which offers good long-term quality employment and construction output is essential to the development of the goals of the NPF and the delivery of the priority projects outlined in the NDP. Policy actions in the areas of skills development and research and development should aim to accompany the national strategic outcomes identified in the NDP.