Health, housing and education – the three pillars of strength for any economy but at what cost?

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27 October 2020

4 min read

With the strictest lockdown level in Europe, Ireland’s construction sector has been calling out for the government to sustain activity – it was a critical decision to keep construction open during the pandemic.  

From the budget it is clear our leaders now know that together, COVID and Brexit will have a dramatic impact on Ireland’s ability to keep our head above water. Therefore, the injection of significant funds for our infrastructure targets is welcomed by all and long overdue in many cases.

Never before has the role of the Quantity Surveyor been more important – from controlling costs to handling COVID claims, and taking a responsible approach to procuring our construction supply chains for what is set to be large levels of construction output in the backdrop of restrictions and the inherent challenges with delivery.

Cost and stability are going to be one of the key factors that procuring bodies, the developers and investors will have to consider. It is a time for real leadership within the Quantity Surveying profession, where we take hold of the challenges and guide clients, architects and contractors through the process of construction smoothly and securely.

Avoidance of wholescale default and liquidations within the property and construction industry is important so not to replicate the post 2008 situation. Ensuring our professional teams are de-risking projects for clients and funders, and maintaining pace is key to keeping the industry oxygenated.  Therefore, here are our recommendations for both the public and private expenditure roadmap ahead.

1. Mitigate risk at every level, where cash is king, and costs are controlled.

Make sure you put in place risk mitigation plans to protect your projects and your business. In our experience cost of materials are rising fast, labour is scarce, and equipment is hard to get. Traditionally clients passed all the cost risk to the contractors, however, this is challenging in the current environment. Contractors are less willing and need higher premiums to absorb that risk. Clients and contractors should make good solid plans, share risk and agree sensible strategies to review progress during the project, with clear perimeters on how to deal with matters arising. In particular, the risk profile in public procurement needs to be reviewed and appropriate risk transfer must be implemented – risk transfer in one direction only is not working and will not work going forward if the ambitious infrastructure targets are to be achieved.

2. Ensure you procure stable contractors and consultants in your supply chain.

As procurement experts we know from our experience that c. 20% of projects fail or suffer serious issues because they did not have the right protection in place or have not done the right due diligence. Your selection criteria must contain a good balance of price, quality and suitability criteria. We know selecting the lowest tender is not necessarily the best decision for a project and, more often than not, lowest tender equals higher ultimate cost to the client. This is a key consideration in the current situation, where some contractors are pursuing a process of filling their order books no matter the cost. This is then feeding into the supply chain and placing excessive pressure on an already stretched sector to follow the lead of the main contracting organisations despite the ongoing upward pressure on base costs and overheads.

3. Quality and price – at what cost?

Whilst the viability of building new projects, particularly housing is causing some problems, let’s build quality for new homes, schools and hospitals that don’t have to cost the earth. Let’s take the lessons learned from the past and implement those into project strategies going forward. Following the Priory Hall matter, the government seriously reviewed building regulations, let’s review them again to ensure they are fit for purpose and look at ways to fast track bottlenecks.

We must look at the success of Strategic Housing Development (SHD) plans and replicate that for smaller schemes. Through SHDs government gave larger schemes priority, and it was a good decision as we now have lots of examples. Maybe now is the time to consider fast tracking small and medium size residential schemes? There needs to be a mechanism to encourage development of these schemes, in particular where viability can be on a knife edge and planning delays and changes can make schemes undeliverable.

Design quality and performance must take precedent. More haste less speed and lower price can result in significant claims – from poor performance to buildings being demolished because the quality of construction deemed buildings unsafe.

We also need to consider trends in both working and residential accommodation. Working from home (WFH) has become the new way of working and residential developments must recognise and adapt to this need.  The ongoing concerns being voiced about Co-Living developments, for example do not seem to recognise how such schemes can encourage and develop appropriate social interaction opportunities during these WFH phases. The obvious mental health benefits that such interaction brings is only really starting to be realised and appreciated. So let’s also think ahead.

Out of the greatest challenges the world has faced together comes great hope and opportunity. This budget is a very clear support from the government to ensure our nation in Ireland maintains a healthy economy in a pandemic. We have great companies in Ireland with healthier balance sheets than in 2008 and those that have robust risk management plans will be in a good place to meet the demands of our infrastructure needs. It is time to keep our people safe and our economy alive and this budget has the ingredients to support that through construction.