Construction thrown contracts lifeline as material costs spiral

Finance Minister Conor Murphy pictured yesterday with Mark Spence (right), managing director of the CEF, and John Tracey, managing director of Tracey Brothers. Picture: Michael Cooper
Gary McDonald Business Editor

THE north's construction sector has been thrown a vital lifeline after Stormont finance minister Conor Murphy outlined proposals to provide a new layer of protection for firms working on public contracts.

With the price of key materials spiralling by around 40 per cent (in the case of timber, the hike was a whopping 375 per cent between April 2020 and April this year), it was severely impacting on project delivery.

In some cases companies which had priced jobs months or years earlier, based on the cost of materials at that time, risked losing a fortune, not being able to fulfil their contractual obligations, or making staff redundant to cut overheads.

But Mr Murphy has moved to propose a number of support measures to help government contractors with the rising costs of raw materials, with the review running until the end of September.

“Covid-19 has had a huge impact on the availability of construction materials, with global demand, product shortages and delivery delays leading to market volatility and increased prices,” he said.

“Government contractors are experiencing escalating costs and delays in getting materials which they could not have foreseen when they tendered for government work, and I want to do all in my power to ensure there is no risk to the completion of important projects.”

The Executive has agreed proposals from his department to make provision to manage delays in supplies and to include mechanisms in existing and new contracts to make allowances for inflationary prices.

“This will provide vital support to our construction industry which will play a key role in our economic recovery while also ensuring important government projects such as schools, hospitals and infrastructure projects are delivered.”

The move has been welcomed by the north's building industry umbrella body the Construction Employers Federation (CEF).

Its managing director Mark Spence said “This is a vital lifeline for contractors, who for many months have been shouldering the escalating burden of unforeseen global price increases and material shortages whilst ensuring public works continue to be delivered.

“We particularly welcome the recommendation for all new government contracts to provide protection from such external factors in the future.”

He added: “Construction employers are essential partners to the Executive in delivering every aspect of public services and have continued to do so throughout the pandemic.

“These proposals start to address the previous imbalance of risk in taking on government contracts and can assist in ensuring continued delivery of public investment in infrastructure.

“We very much hope these proposals give a strong basis for many of the current challenges facing our membership to be proactively dealt with.”

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