Mattie McGrath warns material cost crisis threatens construction

I want to thank Deputy Hilly Ray, who I am standing in for today, Michael Hilly Ray, and he has asked me to raise this issue. Teachook contractors are finding it increasingly difficult to stand over tender prices for periods of up to two years, which many projects run to, because of the rising cost of materials. In the last year, Teachook, the construction materials prices have increased every month and have increased by 26.7%, which is a shocking amount, according to the Central Statistics Office, and the most recent wholesale price index. This represents a truly staggering statistic. The material charges have started to ease, however, the cost of materials will probably continue well into 2022. The price of rough timber, meanwhile, has gone up by over 80%, the cost of plaster is up by 20%, and steel has doubled. Several local authorities have highlighted the effect this has on house-building. Construction cost inflation is impacting on tender prices, and contractors are finding it increasingly difficult to price and even to procure prices themselves for suppliers for that period. Anybody who gets a price today, even for a house or a house extension or whatever, the builder's suppliers will only give you three days, maybe a week at most, and it is not that they are wanting to help you, it is because the prices are going up on a weekly basis. Teachook, I am asking you, the crisis in this sector is risking jeopardising major initiatives such as the home building and the national infrastructure projects as well. This is completely untenable for the construction industry to take on all the risks for the exceptional price inflation under current state building contracts. This impacts on all contractors and subbies down the line. When a builder finds out, whether it is a school project or whatever, it is within the tender price, it could be two years old, it could be a year and a half, because there are delays with the department and everything else, from tender time to getting the job. And then they are ending up in a crisis situation and can't complete the job, maybe, in spite of their best efforts and their good builders and can't pay their subbies, knock-on effect, can't pay their suppliers. It is a huge issue, as well as having impacts on the construction economy as well. The rising material costs and labour costs could be a potent competition going forward and would have a huge impact on how we are going to deal with post-pandemic recovery. The materials crisis means that there is an urgent need to overhaul how the industry procurers and managers supply itself, and they will look at that. And I know the Governor promised, but I have not seen anything, or the construction agency, I have not seen any real quotient plans that are offered or changed. So, higher energy costs, higher energy prices, gas, coal and diesel, and the carbon tax, have put huge impacts on site clearance and all the industrial machinery and lorries hauling cement and gravel and other aggregates to the site. So, it is a spiralling cost. These are good builders, as we know, that have worked as maybe they want, and maybe they are small builders, and then up to 10, up to 20, up to 50. And they cannot just survive, the cost of labour, the cost of insurance, the cost of materials, as I said. But above all, I am asking you, what are you, as your Government, going to do to alleviate this and ease the pressure on this very worthwhile sector that needs to be respected? First of all, I want to pay a tribute to the sector. I think it has responded very well since we reopened society and sectors of the economy since springtime. The construction sector has really rebounded, to be fair to it. From October to October, we are looking at about 31,000 housing commencements, which is a significant piece of work in terms of getting house building back on track to the kind of levels that we need to deal with the housing crisis and the situation facing many, many people. You correctly point to cost inflation in respect to construction, mainly because of global supply chain issues resulting from COVID-19, which have been a big problem across Europe and across the globe. Some data back to that blockage in the Suez Canal, you might recall. Then you add Brexit to it. Brexit has not been helpful either in terms of some supply chains. So there has been inflation. It has affected and impacted public sector contracts. We have had some situations where people who won tenders did not take them up on the basis that the costs have now overreached what they could afford, what they bid. So the Minister for public expenditure is introducing changes and they are being put in place now for new tenders. The fixed price period is being reduced by six months to 24 months. Material price variation can be accommodated subject to certain limits and guidance is being issued for current contracts. So the Minister for public sector contracts. So the Minister acknowledges the issues that you have raised. He has brought this to the attention of government some weeks ago. some weeks ago. And the measures are now being introduced to try and ease the situation, create additional flexibility to accommodate the new realities arising out of the supply chain issues that have affected the industry and the increase in costs. The view from ECB and others is that this is not long-term, that this shouldn't be long-term and that things will come back to an even keel certainly towards the end of Q1 of 2022, but that remains to be seen. There can never be any certainties in life, particularly in the middle of a pandemic. But we are very conscious of the issues, Deputy. And the Minister has moved on the tender front to recognise the realities of the situation and to ensure that construction projects that we want to get ahead have the capacity to get ahead, be it schools, housing across the board, because there's a significant piece of infrastructure work that we require to be done. We have very large capital programmes. We want value for money, so we want to be responsive to the current situation also. Thank you, Patricia. You can paint the picture of a perfect storm. We saw this coming in 12 months, and your government must have, and your advisers that you have must have seen it, because it is crippling. And the huge delay with people working from home and getting the tenders out, and getting documents back to schools, and getting back to builders and all, that is delayed as well. So, in good faith, contractors are tindering, and we need these contractors now to engage the new apprentices that we are taking in to Turles and elsewhere, which are badly needed in the construction industry. But if we have these builders, if they can't stay above water level, they are in trouble, and they get no mercy from revenue, and less from the banks. So, we need to look and deal with this seriously, and we will come late to the table. This storm has been brewing, and the hurricane now. And, you know, we have no radar left about it, but people are going to the wall. Projects can't be finished. Knock on and fix them, and subcontractors, suppliers, all local, because most of these people spend money locally, in their own 25-mile radius, and they have track records in supplying the building and delivering on time, based on projects. They want to do that again, but we must have more, I don't know, what figure you quoted for the reduction of the fixed price tenders? I didn't quite get it. Was it down to 24 months? That is way too long. Did you say from 30 down to 24? You can't have a fixed tender for 24 months. You couldn't do it. You can hardly do it now for eight weeks, because it is so serious, the prices are going up by the week. I do acknowledge the Deputy's experience in the contracting world and that, but I think the Minister has responded to the issues. They will now permit mutual cost recovery for material price changes of over 15%, so therefore, where costs rise by over 15%, the contractor can recover this. So, measures have been taken in response to this issue, and the balance always has to be struck between value for money, protecting the taxpayer, and getting a fair deal for the taxpayer. But also, we take the point of ensuring that people have a viable situation in terms of tendering, in terms of getting work done and getting projects completed. I think that is clearly important also. Next question. Go in on your website www.ashar.com orders. What? Would you like on the website at www.ashar.com B surtout for1000 asks? Have a good start at www.ashar.com zuviemotsitsmote! Res clicks to whether. What is going to be your intuition? Do you 그것 with what will they achieve in the realm? Yay! Hi! Hi! What about the matter to the currents of this system? How are the先 beings? Who has when they Kabaji and looking for this? Good name!