Public Works Contract Forms - Recent Revisions

January 2014 changes are now implemented.

These are to reflect the safety, health and welfare at work (construction regulations) 2013.

The changes are available on the construction procurement reform site in the news section.

Adjudication and the Construction Contracts Act 2013 - a few more anomalies perhaps?

As I've only a partial legal background (in the form of PGrad's in Law courses) the following is purely an observational take on Justice Clarke's informal discussion in the IEI yesterday evening.

In the main the discussion was related to Constitutionality, which by it's nature is a complex but very interesting part of the Law. It is also safe to say that this area of Law is best left to the experts but I'll give a blast at my take on it anyhow, in my own observational manner.

The first note I took is the way the Irish Constitution works placed alongside the UK is incomparable. We have a written one they don't. This then requires the adjudication process or the process of the adjudication itself to be a stronger requirement in Ireland. The process must fundamentally be a fair process. Fairness is crucial.

Two main area's of controversy are viewed.

1. What is fair process in the eyes of the court and how will the courts approach this issue if someone cries hardship and unfairness of the adjudication process?
2. The speed required (28 days).

Fair process:

Examples - a recent challenge to the NAMA legislation was a success. It was unfair for the lads in NAMA to grab the performing loans even though the legislation gave them that power.

The adjudication process is seen perhaps more of an inquisitorial nature rather than a litigious one and this then could be compared to the current emigration process's. 

The advice emanating is that all information and particularly any significant information that the adjudicator has within the adjudication process must be shared equally between the parties. 

Also Adjudicators take note that you will have a Constitutional duty placed upon you under the Act.

Speed:
No easy answer on this requirement. The only comparison that is possible is the examiner process which allows a maximum of 100 days. Some examiner-ships have missed the deadline having not had enough time for all the hearings and what not and ultimately liquidation was instigated, i.e. recently the O'Brien Sandwich's examiner-ship.

In summary the process itself doesn't require us to follow rules of evidence, fairness is all that is necessary. Also for fairness to be seen and in order to get to the facts of some cases, cross examinations will be necessary. This again will place added time pressures.

Other issues raised apart from the Constitutional aspects are that there still isn't available a specialist court to speedily enforce a decision and also that no rules of court have been drafted for such an instrument.

One also feels that the poor old draft code of practice got a good bashing over the last few days for it's repetitive nature and other such anomalies (i suppose that's what drafts are for). The Society of Chartered Surveyors (SCS) views re-affirmed what has been stated in the lectures and group think-ins over the last while, i'm sure they won't mind me offering the link to their document.

To finalize for now, my thoughts are that one got the feeling over the last few days that if the Judges were allowed to say something on this Act in a cut chase fashion they would be saying something along the lines of "us Judges are the law makers, we make the laws, ye lads are the builders, ye build stuff, let us do our job and ye do yers".

Construction Contracts Act 2013

Apologies once again to all followers to this blog for my demonstration as the laziest blogger of all time. I will definitely make it a new years resolution to beat my number of posts of last year.

Anyhow, just in from the Adjudication Society conference this morning where widespread discussion on the possible new Adjudication coming into our industry.

As far back as 2011 we were a bit negative here towards some aspects and some of the mechanisms of this new Construction Bill (in the draft format it was in at the time) and after today's overview I would say that this negativity has only increased.

Many holes were picked through the Act by the expert and experience speakers:

Some of these are summarized from my notes as follows:

1. Unclear if 'paid when certified' will be a loophole that can be exploited and the Act is silent on this,
2. The terminology is not linked to contract 'speak', i.e. the term 'Payment Claim' is new,
3. Payment Claim Notice is silent on time,
4. Act mentions 'subject matter' of a claim, fruitful exploitation for lawyers here as this could be anything?
5. With holding notice by the payer - this will generate additional administration for payers,

On top of all this the final after lunch talk given by a highly eminent Judge was damning to say least. His focus was mainly on section 6 of the Act. 

S.6 part 9 states that 'initiative' is to be used by an adjudicator. This wording is weak as far as the Judge is concerned and the wording here should have been drafted better. The Judge also did not like the temporary binding nature of the Act as set out in S.6 part 10. In fact the Judge went as far as to state that 'bad law' could be pleaded by a party in order to thwart the whole process.

I hope to revert back to this whole subject in more detail later. Like everyone else this is all new and thus more information gathering is necessary.

I also understand that another Judge will be giving a view on this tomorrow evening in Engineer's Ireland which will be interesting.

Time will tell how this Act will be implemented, if implemented at all!

Construction Contracts Bill

There has been a lot of talk emanating from the CIF, the Irish Concrete Federation and also some TD's and Senators in relation to the new construction contracts bill. This talk is along the lines that if this bill was currently in place then some recent problems on sites would not occur.

Random statements are coming into the public domain without any real substance or backup to justify why this pending piece of legislation would somehow magically save sub-contractors.

The latest on this is to do with the Brian McCarthy Ltd Pepsi site in Cork where sub-contractors are owed money and are threatening to blockade the site.

Any new legislation that will improve matters is certainly helpful but for people to be effectively saying that the new Bill will stop main contractors going bust and stop any non-payments going down the supply chain is simply untrue.

It would be best if the CIF and other's would advise sub-contractors to simply arrange a contractual link to the client on such projects by way of a collateral agreement. This is the simple solution rather than moaning and groaning about a Bill that may not even work or function correctly. For example, if conciliator here were a plastering subbie for a project for Pespi then the wise thing to do would be to ensure that if the Main Contractor goes belly up I can run to Pepsi to get money due, it is not that difficult to get this agreement in place at the outset.


Links to recent developments as follows;

Irish Examiner

Irish Construction

CIF News Pepsi

CIF News Kilfinane

p.s. Rather than been guilty of random statements myself  I will do another blog separately on the Construction Bill in the near future outlining it's potential flaws. Link below to something I blogged on the topic a few years back.....

Conciliators previous discussion on the Bill

Another Victim of the Industry

According to the Irish Examiner Newspaper Brian McCarthy Contractors Ltd became the latest victim of the building crash after confirming that it has ceased trading.

In place for the past 36 years this builder employed over 220 during the boom and the decision to cease trading will result in the loss of the 20 direct jobs that remained at the firm. 

A spokesman for the company confirmed a receiver was appointed and stated: “It is a sad time. We have long-serving employees who have been very loyal. It will be as orderly a wind-down as possible.” 

The spokesman said that the company decided to close “due to the unavailability of profitable work”. 

He said: “It was not viable to continue and there was insufficient workload to cover overheads. It was an extremely difficult decision to cease trading, but it was also a prudent commercial decision as it was not feasible to continue.” 

The spokesman said that the Government awarding contracts to below-cost tenders for public works “made it very difficult to continue”. 

The spokesman said: “We have a pessimistic view of the market in Ireland. The public sector is the main market for contracts and the new form of government contract is so loaded against the contractor, it would have been bordering on reckless trading if we had tried to enter into these contracts.” 

The company said that the last 18 months “have been quite stressful when you are doing everything possible to generate new sources of work".

Road Projects for 2012

It looks like 3 road projects are certain for 2012. These are, the N11 Arklow - Rathnew, Newlands Cross and the Ballaghaderreen bypass.

The N11 is the section between Arklow and Rathnew. Newlands Cross is the final set of traffic lights on the M7 heading east. Ballaghaderreen will be a 14km standard single carriageway project carried out on a design and build basis. Pre-Qualification tenders for the Ballaghaderreen Project are advertised and are due in on the 9th Jan '12.

In relation to the Motorway Projects the Minister for Transport, Mr Varadkar said: "I am delighted to be able to announce the upgrading of Newlands Cross, and of the N11 between Rathnew and Arklow. Both projects will make a real difference to the travelling public and to businesses. Each one covers a critical section of road, and is among a handful of stretches which were never resolved during the boom years.

"Thanks to this new arrangement, the work can finally be initiated.

"It’s particularly welcome to be able to remove the last traffic light between Dundalk and Cork, on one of Ireland’s most important and busiest national routes. The construction process will also create employment for hundreds of people.”

Given the timeframe experienced on the procurement of these types of projects in the past and as they are design and build projects one presumes it will be late 2012 rather than mid 2012 before a sod is turned on these jobs?

Public Works Contracts - Important Changes

A number of amendments have been made at the end of July 2011 to the PW-CF's.

These include the following:

• The definition of ‘lands made available’ has changed;
• A requirement for records included;
• Changes to Programme Contingency;
• Disputing an ER’s decision has a finite period;
• Tighter provisions included in regard to time to submit final statement in order to comply with original intention;
• Employer liability and insurance provisions revised;

A new clause 1.10 has been added in relation to 'background information'-

"1.10 Background Information

1.10.1 In this sub-clause 1.10 Background Information means any information made available on, before or after the Contract Date to the Contractor or to anyone on the Contractor’s behalf by the Employer or by anyone acting on the Employer’s behalf in connection with the Contractor’s tender for the Contract, which information is not included in this Contract. Background Information also includes any information stated to be ‘Background Information’.

1.10.2 The Contractor acknowledges and agrees as follows:

(1) The Employer has no liability whatsoever to the Contractor in contract, tort, under statute, or on any other basis whatsoever (including negligence and breach of statutory or other duty) in connection with Background Information.

(2) The Employer has not made and does not make any warranty, representation, or undertaking in connection with Background Information.

(3) The Employer has not authorised anyone to make any warranty, representation, or undertaking on the Employer's behalf in connection with Background Information.

(4) Without limiting anything in this sub-clause 1.10, the Contractor irrevocably and forever waives any liability that the Employer may have to the Contractor in connection with Background Information regardless of any of the following circumstances, and the Contractor acknowledges that the Employer makes no warranty, representation, or undertaking in regard to those circumstances:

a) whether or not the Background Information is correct

b) whether or not Background Information is complete

c) whether or not any testing, investigation, surveys, or other work to prepare Background Information was done negligently or in breach of statutory or other duties

d) whether or not those who carried out any testing, investigation, surveys, or other work to prepare Background Information were properly selected or supervised

e) whether or not Background Information was suitable for the purposes for which the Contractor or anyone on the Contractor's behalf might use it

f) whether or not any errors or omissions in Background Information are major or numerous or both

g) whether or not Background Information represents all the information available to the Employer

h) whether or not any works described in Background Information are done as described in Background Information or at all

i) whether or not the Employer had or has other information that might render Background Information misleading

j) the manner in which Background Information was made available

k) whether or not the Contractor had adequate opportunity to carry out any testing, investigations, surveys, or other work or otherwise to verify Background Information.

(5) The Contractor has included in the Contract Sum for the risks that the Contractor has agreed to bear under this sub-clause 1.10"

I'm not fully sure why this new clause is deemed necessary? If the client is bearing no liability for the correctness of the background information then any uncharted or miss-charted services are remediable under the contract in any event.

Another change is that the contract form is attempting to contract out or nullify the contra proferentem rule with the addition of the following sub-clause:

"1.2.4 No rule of legal interpretation applies to the disadvantage of a party on the basis that the party provided the Contract or any of it that a term of the Contract is for the party's benefit."

The doctrine of contra proferentem would possibly come into play in relation to this actual condition itself - this is certainly one for the lawyers and barristers which brings us nicely on to the new Form of Tender and the new Arbitration Act 2010, Section 21.

"We also agree that should a dispute arise under any contract formed by acceptance of this Tender that is referred to Arbitration, to the extent permitted by law, under the Arbitration Act 2010 and a sealed offer has not been made or where a sealed offer has been made and the Contractor's award is greater than the sealed offer, then each party will bear it's own costs in relation to the arbitration proceedings".

Of course it also states in a footnote that if the award is less than or equal to the sealed offer then the Contractor is liable for the costs of both parties.

Unfortunately this is a change to the law by virtue of the Arbitration Act 2010 and it has effectively removed any incentive that the employer had to resolve the dispute before it went to arbitration by making a realistic sealed offer to the Contractor. Now employers can hold off, delay or thwart proceedings on the basis that the worst case scenario for them is a share of the costs, barring extra ordinary circumstances.

The Contract sets out new time provisions on the Employer side which is helpful, prior to this there were no clear or concise time provisions towards the route to dispute resolution. This new clause clearly defines this and encourages the Employers Representative to Act in a Concise Manner:

"10.5.3 If the Employer’s Representative fails to take any of the actions in sub-clause 10.5.1 within the time stated, the Employer’s Representative will be taken to have made a determination under sub-clause 10.5.1(3) that there be no adjustment to the Contract Sum, no use of programme contingency referred to in sub-clause 9.4, and no extension to any Date for Substantial Completion. The determination will be taken to have been made on the last day of the time provided for in sub-clause 10.5.1.

10.5.4 A determination of the Employer’s Representative notified to the Contractor and the Employer under sub-clause 10.5.1(3) or 10.5.2 shall be final and binding on the parties unless, within 28 days after receiving notice of determination (or, if sub-clause 10.5.3 applies, within 28 days after the determination is taken to have been made), the Contractor or the Employer gives notice to the other under sub-clause 13.1.1 disputing the determination and referring the dispute to conciliation.

10.5.5 Notice of an agreement under sub-clause 10.5.1(2) shall be final and binding on the parties unless, within 28 days after receiving the notice, either:

(1) the Contractor both (a) notifies the Employer’s Representative and the Employer that the Contractor disagrees that the notice correctly records agreed terms and (b) gives notice to the Employer under sub-clause 13.1.1 referring the dispute to conciliation or

(2) the Employer both (a) notifies the Employer’s Representative and the Contractor that the Employer does not agree with the terms notified by the Employer's Representative and

(b) gives notice to the Contractor under sub-clause 13.1.1 referring the dispute to conciliation"

The general synopsis on this is the Employer has 20 days to make his determination (like old engineers decision under the IEI form) and this is final and binding unless it is disputed within the 28 day time frame set out.

Finally a most important change is clause 11.5 - final account. This has now become a condition precedent.

If no final statement is given within the time required, the Employer shall be released from all liability to the Contractor under or in connection with the Contract.

All of these changes can be viewed on line and it is remarkable that the Department of Public Expenditure and Reform have only noted these changes as been minor amendments on the news part of the website.

That's That Then

No major new road projects are scheduled to commence in 2012 to 2014.

Maybe an email to the Department of Transport should be considered to ask them for thier definition of 'major'?

http://www.transport.ie/pressRelease.aspx?Id=383

CONSTRUCTION CONTRACTS BILL

The new government re-convened today. An item of interest from our industry that will be back on the table for discussion is the proposed Construction Contracts Bill.

The explanatory note on this bill (link attached) is as follows: http://www.oireachtas.ie/viewdoc.asp?fn=/documents/bills28/bills/2010/2110/b2110s.pdf

The main purpose of this Bill is to provide for a mechanism whereby prior notice of an intention to withhold sums from payments otherwise due must be given. Otherwise, payments must be made in full and/or the payee may suspend the provision of works and/or services under the construction contract until payment is made in full. This provision is proposed in ease of persons along the chain in the construction sector who may suffer unduly where an entity under a superior contract would find itself withholding payment unilaterally without cause. This would bear unfairly upon the payee or others dependent upon the payee.

The 'explanatory' note further goes on to say....

Ideally this measure would be linked to wider provision in respect of construction contracts including a more rapid and effective means of dispute settlement. However, that could be considered at a later point in time.

In layman's terms what I believe the Bill is attempting to do and is supposed to be set up to do is to protect the ordinary joe small subbie from the big time bully main contractor.

We already have provisions in the industry for this; these are called Forms of Sub-Contract. Obviously the provisions in these standard sub-contract forms are not deemed strong enough to protect the subbies ? The benefit of having an Act like this is that one cannot contract out of government policy or the law so the terms of the Act form the terms of the Contract which in turn will involve adjudication. Some of the committee stage amendments require further tweaking but all in all I would say this is beneficial for the industry and ensures that smaller subbies are paid fairly and reasonably.

Sub-Contractors would be advised to delete any arbitration clauses from their forms of sub-contract and agree to use adjudication per this new Bill as a form of dispute resolution for all disputes.

I would also have liked to see collateral agreements be made mandatory for sub-contracts over a certain value where the main contract is a state funded project. These contracts are deemed under this Act as not been 'Construction Contracts'

"Construction contracts: exceptions, etc.

2*.—(1) A contract is not a construction contract–

(a) if one or more than one of the parties to the contract is a state contracting entity and the value of the contract is not more than €50,000,

Mandatory collateral agreements for say sub-contracts over 50k in value on state funded projects would help to avoid situations that occurred on the Pierce Construction Schools Projects as the subbies would have a direct contractual link to the funder / state.http://www.rte.ie/news/2011/0304/schools.html

More on this later.........

Message to the Irish Department of Finance

The feedback I'm getting from consultant colleagues in relation to the hoops they have to go through to certify money in interim accounts is interesting. Basically the Engineers working on behalf of the Local Authorities must have every item accounted for when only producing an Interim Certificate. This sounds ridiculous to a certain degree. For example the other day I could not get a 'sum on account' certified on an interim certificate for Engineer's phone calls (payable under the contract and I estimated a reasonable gross value on the job to date at€500.00). The Interim Certificate or Payment wouldn't be made until such time as the phone bills were produced. Fair enough policy when you think about it......

This attention to detail is not the fault of the Engineer but was due to the audit's going on within the DOF ever since the GCCC forms were produced (over 3 years now). In the old days sums on account would be paid for such an item. In general we would gather the phone bills on a quarterly basis for submission or even wait until final account stage and then submit the full documentation.

This leads me to a Message / Question to the Department of Finance:
Why the hell didn't you guys take as much care with everything else you were supposedly in control of over the last 5 years?

It's a pity the other ills that fell on this Country weren't kept in check in such a similar fashion as our Construction Industry.

Oh wait a minute .........Then again it doesn't surprise me why such focus was on the Construction Industry (Public Sector Area of the Market) as we were the ones getting bad press for the last 10 years or so (project overruns, wrong initial cost projections...... blah de blah).

This Government was led more by what the papers and media were saying rather than what the country's real citizens and real honest to goodness workforce were saying. As long as the Fianna Fail machine was keeping the press happy they were happy and nothing else really mattered.

New Procurement Guidlines for SME's Now Available

AT LAST SOME GUIDANCE NOTES ON THIS - AS FOLLOWS: Further Relevant links will be uploaded at a later stage.


DECLARATION/SELF CERTIFICATION/SUBMIT-ON-REQUEST, ETC – Suitability Criteria

Introduction
The small and medium enterprise (SME) sector is significant to the economy and public procurement can be a valuable source of business for SMEs. It is particularly important that small and medium sized businesses are not hindered in competing for contracts that they could perform effectively. In this context guidance[1] is now issuing which aims to have contracting authorities structure and run their competitive processes for public contracts in a manner that facilitates increased participation by SMEs, while they continue to ensure that all public sector purchasing is carried out in a manner that is legal, transparent, and secures optimal value for money for the taxpayer. The guidance is not designed to favour the SME sector over other sectors but rather to provide SMEs with a level playing field in competing for public contracts. This is in line with EU policy on increased SME participation in public procurement.[2]

Under the Capital Works Management Framework, there is a maximum of sixteen main criteria to be assessed in determining the suitability of a contractor for the award of a public works contract. In addition, there are up to seven sub-criteria for each of the four different roles relating to health and safety that a contractor may have to fulfil on a project. The criteria chosen for each project should be picked from the menu of the above referenced criteria and sub-criteria. In order to reduce bureaucracy and simplify the tendering process, applicants are no longer to be asked to supply detailed evidence of capacity (e.g. bank references, audit accounts, company turnover, company balance sheets, professional indemnity insurance etc.) at suitability stage (open or restricted). Instead they are to self-certify[3], provide third party certification certificates3 and use self-declaration certificates3 to confirm compliance with minimum standards for the relevant criteria in the suitability questionnaire. The only evidence that may be requested for qualitative assessment is that indicated in the table below. The details that the certificates/ declarations cover can be verified at tender evaluation stage (open) or after short-listing[4] (in a restricted procedure). The key consideration in relation to suitability criteria, particularly turnover, is that the level chosen should be justified and proportionate to the needs of the contract.
[1] Department of Finance Circular 10/10, together with “Guidance for Public Contracting Authorities: Facilitating the Participation of SMEs in Public Procurement”, and this Guidance Note 2.3.1.2. The first two of these documents are available on http://www.etenders.gov.ie/guides/guides_list.aspx?Type=2 document 26.

[2] “European Code of best practices facilitating access by SMEs to public procurement contracts”, Brussels: 2008. Available on-line at:
http://ec.europa.eu/internal_market/publicprocurement/docs/sme_code_of_best_practices_en.pdf

[3] As indicated in this document.

[4] Contracting authorities should consider increasing the number of candidates that they short-list to safeguard against a number subsequently not being able meet the commitment made in the declarations when checked resulting in those candidates being dropped from the competition before tenders are invited.

DECLARATION/SELF CERTIFICATION/SUBMIT-ON-REQUEST, ETC – Suitability Criteria,

The use of “restricted” tendering procedures, which require potential tenderers to show that they meet certain requirements (viz. pre-qualification) before they are invited to submit tenders, is often cited as a barrier to SME participation, especially if contracting authorities set unnecessarily high capacity levels. In order to address such concerns about pre-qualification criteria, the restricted procedure for tendering competitions should no longer be used for advertised contracts for works and related services with an estimated value up to €250,000. This means that the open procedure of competitive tendering will be the norm for advertised contracts up to this level.

Note: The revised arrangements in this document are effective from 13 August 2010

In order to facilitate self certification, third party certification and the use of declaration certificates, the blue areas below (refer to DOF website for tables) indicates where these can be provided. The areas in green show where information in relation to scale and complexity can be requested at a later date. For the green areas, contracting authorities should consider selecting, as the norm, the ’Submit on Request’ option on the Suitability Questionnaire. Furthermore, in order to address concerns about overly restrictive pre-qualification procedures, there is now a requirement to advertise contracts in an open procedure for works up to €250,000[1] (excluding design-and-build contracts – where an independent design consultant is engaged).

Facilitating SME's in Public Procurement - is it too little too late?

The department of finance issued a circular back in August in relation to new guidance for the procurement of public works.

These new guidelines are aimed at facilitating Small and Medium Enterprises (SME's) and ensuring that the public works market remains open to these companies.

Is the publication of this circular too little too late?

The basic changes of the new guidance and the changes pertinent to the construction sector can really be synopsised in 2 paragraphs as follows:

1 - The 'dual' stage / pre-qualification procedure for projects valued below €250,000 is now history.

Prior to this change the local authorities and other contracting authorities were using the two stage system or 'dual stage' where companies had to first make a shortlist. These shortlists are usually no more than 10 candiates and more often than not they are limited to just 5 candidates (particularly where the NRA were involved), whom then get to price the actual work.

The drawing up of these shortlists of contractors for each individual project, are derived from the first stage of the 'dual' stage by means of a pre-qualification questionnaire competition, or a beauty contest. These documents created a huge additional workload for small family run operators who in the current climate weren't geared up to undertake the completion of these PQQ's. In my own experience I have carried out some of these PQQ applications and this involves multitudes of paperwork for projects that would be for example €500k, and this was just to get the chance to price the work.

2 - The vast amount of paperwork will now no longer be requested until the pricing stage is completed, i.e. the winning bidder or bidder who is coming under consideration for the project will be asked for their insurance, tax clearance, bond undertaking, company structure etc only after the price is submitted and they are deemed the most economically advantageous.

One would imagine that these new guidance issues are as a result of lobbying by ISME, IBEC the CIF and various other groups working on behalf of SME's.

Is it too little too late or is it a case of any change to the current process is a step in the right direction?

Personally I believe it is a bit of both, i.e. they could have stretched the threshold to €500k or even €750k, however in this climate I'm sure any change where SME's will be allowed enter the market is a good one.

Sometimes its best to weigh up whether a change like this will work and function the way it should by way of everyday examples:

The DOF has stated (in this circular) that the SME sector is a very important business sector for the economy and that they are not hindered from competing for Contracts.

Example: Joe Bloggs Civil Contractor has done small culvert type bridges and many other structural concrete works down the years as a small sub-contractor to one or two of the 'mega' motorway contractors. He can't pre-qual to the pricing stage for a medium type standard bridge due to alleged lack of experience and also because he won't gain enough marks in the PQQ system ahead of the 'mega' lads he has worked for in the past. How does Joe ever build a bridge or how does Joe every compete in the market if it will be closed to those who have only built bridges in the past? Will this new system allow Joe as an experienced SME get into the bridge construction market? It is highly unlikely as one doubts there will be a bridge in this new process valued below the €250k threshold, whereas if the threshold was €750k at least Joe has a chance. Even if there was a bridge project at the €250k value then the parameters set down by awarding authorities on a larger bridge project (where Joe would have to pre-qualify) would in fact hinder Joe.

This is where an opportunity has been missed by the National Procurement Service and the Department of Finance.

Another flaw is the evaluation of the projects. Who values the projects and states whether they are within the threshold or not? Is it the awarding authorities? If so what is their basis of calculating if a job falls within the threshold or not?

This blogger also notes that the National Procurement Service was set up in 2009, another quango set up slap bang in the middle of a recession? Where the hell was this outfit during the boom when we had work to procure?

The DOF circular paragraph 6 is interesting reading. Its almost as if the DOF are only now letting the local authorities know that there is an agency in place to help them with procurement matters!!

Finally, if this NPS is around then what are the National Public Procurement Policy Unit (NPPPU) working at these days? I do know they run the excellent etenders website which I note is been copied by local authorities / public authorities in cities and countries around Europe presently, so well done to them on that front but could they not also manage to carry out the role of the National Procurement Service also?

Here is the link to the relatively new circular discussed above:

http://www.constructionprocurement.gov.ie/CWMFDocs/Circulars/Circ1010.pdf

Recession in Ireland is Over

http://www.irishtimes.com/newspaper/breaking/2010/0630/breaking24.html

Technically anyhow, Irish Times article attached above.

I haven't had much time to publish lately due to this bloody recession with chasing work and chasing money but at least I still have a job (for now).

I would estimate that it will be at least another 18 months before the construction industry picks up.

At least the figures today will boost market confidence and boost the service sector and people will be less frugal and perhaps consumer spending might pick up again.

This should lead to more jobs. More than likely any jobs will be re-employment ones and I can't see house building in the private sector commencing again for another 12 months at least.

Any positive news is welcome however and if this leads to job creation and an decrease in the unemployment pay role and an increase in the tax take this should have the knock on effect of stimulating public sector infrastructure spending.

More anon.

NAMA - Good Indo Article

This article in today's Irish Independent synopsises the 'major' players and properties involved in a simple and clear format.

http://www.independent.ie/business/commercial-property/hot-property-linked-to-toxic-loans-2118154.html


FOGRA:

My guess on the 'haircut' wasn't too far away:

http://constructionconciliation.blogspot.com/2009/09/final-quarter-2009-what-is-outlook-for.html

Are the Public Servants Holding Constructors to Ramsom in Eire?

Greetings colleagues. I haven't published for a while but I make no apologies for this.

Chasing work has kept me busy. Similar to many people in Ireland in our Industry I've a house to pay for and a family to keep. Work is very very scarce indeed.

As a matter of fact for the first time in 12 years as a permanent employee for a long established Civil Engineering Contractor I now fear for my job security and I'm even gearing myself up to get plan 'B' into operation which will most likely involve freelance work.

Freelance work would not pose any fear for me as during the boom years I managed to squeeze in a Post Graduate Contract Law Course and a Post Graduate Arbitration Course. However having a steady job and job security was very comforting and regardless of the Public Sector pay cuts and their pension levies they still have the comfort and security of knowing that they have a job to go to every Monday morning.emm(?)

The current situation in the Civil Engineering market is diabolical to say the least. Sources tell me that some Public Sector Area's are failing to release Contract Documents where funding is in place. If this is true then it is an almighty scandal as the chain affects of not issuing necessary infrastructure work is catastrophic as this will only lead to further job losses in the industry.

I do know for a fact that my company has completed pre-qual after pre-qual in the period May 2009 until mid-February 2010 and for the large majority of these pre-qual competitions not even the pre-qual result was published.

This is crippling small and medium Civil Contractors around the Country and in the long term only add to the Public Spending Bill by virtue of the fact that another 40,000 construction personnel are expected to be unemployed for 2010.

If the government start acting now and the Public Servants are made to start releasing tenders immediately then some of these jobs would be saved and important infrastructure works would commence.

Some such project examples are as follows:
Lough Forbes Water Treatment Works - First advertised in May 2009
The Metals Dun Laoighaire - First advertised in May 2009
Grange Bridge in Kilkenny - First advertised in May 2009
Ballymahon and Granard Water Treatment - June 2009
River Fergus Flood Alleviation - September 2009
Belcamp Lands Remediation - January 2010
Embankment Road Extension Tallaght - February 2010

All of the above are 2 stage select tenders (pre-qualification competition first) yet all but one of these projects has yet to reach the second stage; the pricing stage. Why is this?

In the meantime the other projects that were advertised in the back end of 2009 and so far this year have been few and far between, so one wonders where the so call 'Capital Spend' promised in the last budget is going?

My guess is that the government are holding off until the NAMA transfers have commenced properly or else perhaps some Public Sectors are acting in a similar fashion to our friends in the Passport office. Maybe funds are in place for Contracts but the Public Servants are on some sort of work to rule and not bothering to issue the tender documents?

FOGRA:
I noticed in the Sunday Business post at the weekend that the Department of Finance are reviewing the PPP model and now deem it bad value for money.

This blogger and many more amongst us and even people with a level Pass C leaving certificate maths would realise this. The Government pumping the circa € 110,000,000 subvention into the Kilkock - Kinegad bypass motorway PPP back in the day was a complete disgrace.

This amount of cash, at the time, would have built 15 to 20 km of motorway on its own without having the necessity for a toll.

Anyhow, as soon as this Blogger hears more on the DOF review I will post some thoughts and comments. However, it would appear to be a more than likely a Fianna Fail PR move in order to ditch the Metro for a few years without upsetting the Greens too much.

You know what ... all of the above reminds me of something familiar.......................
http://constructionconciliation.blogspot.com/2009/07/irish-government-needs-to-stimulate.html

Public Works Contracts for Minor Civil and Building Works (IRELAND) - Important Amendment

Remarkably for personnel in the Construction Industry a new version of this Form of Contract was published on 4 November 2009 last - follow this link or copy and paste it for the downloadable version...

http://www.constructionprocurement.gov.ie/CWMFDocs/PW-CF/PW-CF5_Contract.pdf


What is so remarkable about this new publication is that it appears to have taken place completely under the radar of Contractors. Colleagues of mine say that I was the first to inform / notice this new issue. I only noticed it lately on receipt of a tender.

On a very quick perusal so far the most significant change / amendment to the August 2007 version of the Form of Contract is the amended Sub-Clause 10.6.4 (extract below with the change / amendment highlighted in bold).

10.6.4 The Employer’s Representative may conclusively direct that additional or substituted work required as a result of a Compensation Event be determined (in full or in part) on the basis of the cost of performing the additional or substituted work, compared with the Contractor’s cost
without the Compensation Event, determined as follows:
(1) the number of hours worked or to be worked by each category of work person stated in the Schedule, part 2D, and engaged on the work to which the Compensation Event relates, on or off the Site, multiplied in each case by the tendered hourly rate for that category stated in the Schedule, part 2D (But if any of the tendered hourly rates are less than 75% of the relevant rate in the construction industry registered employment agreement current on the Designated Date, they will be read instead as 75% of the relevant rate in that agreement) and
(2) the cost of materials used in that work, taking into account discounts and excluding VAT, plus the percentage adjustment tendered by the Contractor and stated in the Schedule, part 2D (But if the percentage adjustment tendered is negative or blank it will be read as 0%) and
(3) the cost of plant reasonably used for that work, whether hired or owned by the
Contractor, at the rates in the document listed in the Schedule, part 1K (as that
document may be modified according to the Schedule, part 1K) plus or minus the
percentage adjustment tendered by the Contractor and included in the Schedule, part
2D (But if the percentage adjustment tendered is a deduction of more than 100% it will be read as a deduction of 100% or if the entry is blank it will be read as 0%). If the document listed in the Schedule does not give a rate for a plant item, a market rental rate shall be used, plus or minus the percentage adjustment.

The 'old' sub-clause 10.6.4 relied totally on the tendered rates filled out in the schedule to the Form of Tender. The obvious problem with this was that tendering contractors were leaving the schedules blank (which they were allowed to do) in order to minimise their overall tender total and thus give them better chance of winning a particular contract. Assuming that schedules on hourly rates were left blank at tender stage would have appeared to be a technical breach of clause 5.3 "Pay and Conditions of Employment" or the "GAMA clause" as it has become known. This is the clause where Contractors are bound by both Law and the Contract to pay the agreed rates of pay per current industry employment agreements. Perhaps the amended clause 10.6.4 now tackles this anomaly.

One thnig it does tackle and where it sheds some light for Contractors is that the sub-clause forms part of the Valuation of Change Orders or Adjustments to the Contract Sum Clause 10.6 (as a Result of Change Orders).

The hurdles or steps to take in evaluation of Change Orders are Similar to the Old IEI or ICE form of Contract where 3 cascading rules are followed, these are,
1 - Pricing Document (BOQ) Tender Rates used for evaluation for Work Similar to that in the tender BOQ and in similar conditions to that work Priced in the Original Tender.
2 - Works that are not of a similar nature or not carried out in similar conditions then tender rates are used as a basis of evaluation.
3 - If 1 or 2 cannot lead to the evaluation of the change order then the Employers Representative makes a 'fair valuation'.

So the next step is then 10.6.4 (we don't know how an employers rep is supposed to make a fair valuation?) - where hours and rates are utilized and thus a Contractor's worst case scenario is to suffer a 25% loss on his labour costs (assuming the schedules are not filled in at correct employment agreement rates by the contractor in his org tender). If a Contractor has the schedule completed correctly (i.e. at his labour cost rates) and a dispute occurs during a project regarding the valuation of change orders then one would assume that the Contractor at worst will recover his cost based on the test of sub-clause 10.6.4?

One flaw with this amended clause is that where a Contractor hasn't the registered rates compiled in the schedule of his tender then the Employers Rep will have to calculate what 75% of the registered rate is, how will he / she carry out this task?, i.e. a Contractors Cost isn't just the Nett rate per the published registered agreement but the obvious on-costs such as employers PRSI, levies, insurances etc that have to be factored onto the registered agreed hourly rate. This perhaps is a discussion for another day as well as any other changes that may be included in the November 2009 version of this Form of Contract.

Polish A2 highway, Chinese Consortium

Two large sections of the A2 motorway project in Poland were recently awarded to COVEC Ltd.


Other European Contractors have raised concerns at the award of these projects as COVEC is essentially state owned and thus can rely on funds from their home state. European Contractors deem that this point leads to unfair competition. It is illegal for EU contractors to rely on state aid but the EU / EU commission cannot do anything about, and, appear powerless to do anything about companies outside the EU relying on state aid. Another gripe EU Contractors have is the issue of EU Contractors been unable to gain access to the Chinese Construction market.


COVEC is a wholly-owned subsidiary of China Railway Group Limited (CREC), a state-owned construction contractor.

The Sound of Tumbleweed..........

"October and the leaves are stripped bear of all they wear what do I care, October and Kingdoms rise and Kingdoms Fall but you go on" ........................U2 October.

By the way that's the whole song up there, probably Bono's shortest. This October for anyone involved in the Irish Civil Engineering Industry hasn't been a short one. In fact it's a month that combined with this coming November will be dragging and dragging. The reason for this apparent prolonged Autumn is due to the customary (or recent customary) slow down on release of tenders coming up to budget time. I say recent because now it is quiet the opposite to those boom years of the mid noughties. During those good ole days and at this time of year the civil construction industry via the public sector would have large enough capacity of tender releases. The reason for this was that during the month's coming up to budget time many Local Authorities would've actually had a surplus of cash and they would be getting rid of this annual surplus in order to get the same matching funding the following year. Oh how times have changed.

It is now completely the opposite and the figures speak from themselves; For the whole month of October 2009 in the Republic of Ireland so far only 5 fairly straightforward Civil Engineering Public sector projects were advertised for tender in the open market. Take this combined with the approximate total of 8 in the whole of September; then you know where this topic is heading.

Lets consider then for arguments sake and with a knowledgable quantity surveyors hat on, that the value of these projects was / will be approximately, on average, somewhere in the region of €1mil per project - that's €13m worth of supply coming into the civil engineering sector market for a capacity / demand that was of the order of €5 to €6 billion per-annum. Getting back to Bono, "Kingdoms rise and Kingdoms fall"; surely we mustn't let the Kingdom collapse and disappear altogether?

One also has to note the many 'dud' or 'shelved' projects advertised during the year via the 'two stage' tendering process. This two stage process (adopted from EU public procurement legislation) involves the first batch of tendering candidates to be whittled down to a select bunch of say 8 to 12 contractors (in this climate the first bunch has known to be up to and over 40 candidates). This 1st stage is "assessed" on a marking / technical capability system and a pass/fail system which is supposed to be objective but for anyone who has read one of these actual pre-qualification criteria documents and questionnaire documents then they will see how subjective they actually are.

On some of these pre-qualification type tender projects even when the stage reaches past the whittled down process to the actual pricing of the contracts one has noted that many of these projects have disappeared into oblivion and documents have never left the design offices for this 2nd stage, the actual pricing stage. One presumes these were shelved for reasons on unavailability of funding. Has anyone in the Government Departments considered the wasted funding and resources spent by each contractor in preparing these questionnaires and going through the first stage?

Back in July I noted that their wasn't a sod to be turned in the Country and that we need a stimulus package in the next budget to get some form of Industry and work in the Country. Since then my research has led me to the CIC (Construction Industry Council) who have already lobbied the Government last march on this subject in an excellent report ---http://www.scs.ie/press_submissions/submissions_files/29-04-09-CIC-Submission-to-Government.pdf.

However, if the well is already dry and no funds are available then we need to look outside the Government for a boost. Maybe these guys will help? http://www.spiritofireland.org/mission.php

More about Spirit of Ireland in a later blog; as a young Bono has said "kingdoms fall, but you go on" - hopefully the people in the Spirit of Ireland will go on and the 'no brainer' obvious potential projects they have their sights set upon will be up and running soon which will help to stimulate the civil infrastructure sector and in turn create thousands of badly needed jobs rather than waiting on Government and Government Departments to get off their holes and come up with a viable plan to do something about the state we are now in.

Final Quarter 2009 - What is the Outlook for 2010?

We are well into the Final Quarter 2009 and to reflect on the year so far one can say it has been a bloodbath in the Construction Sector in Ireland.

Almost on a weekly basis we hear of colleagues and friends on a 3 day week or laid off altogether.

Unfortunately the outlook will be worse for 2010, particularly in the Civil Sector.

With the pending budget one suspects that cycle lanes and water supply / metering projects will be the only game in town. Add this to the fact that most large scale projects are coming to completion, such as the N3, Limerick Tunnel, remainder of the N7 works, M50 completion and so on; this leaves us with a Civil Engineering Contracting sector desperately in need of an injection of funds.

Sammy Wilson in the North has added almost a £1mil per day expenditure in this sector which is benefiting contractors across the border.

Commercial projects in the ROI fell on the latest Construction PMI index and Civil Engineering fell even further and this trend in the Civils Sector will only continue if the Government doesn't stem the tide and release some medium to large scale tenders.

Many of us in the industry can't wait to see the back of 2009; hopefully 2010 will fast forward quickly enough and we may see some uplift in each sector of the overall economy.

If the current positive forecasts from the UK, Europe and the US come to fruition then perhaps some increase in Direct Foreign Investment may lead to improvement elsewhere in our economy which will in turn help the Construction Industry. Some positive feedback from possible growth area's appear to be in the global insurance sector and the 'green' energy market and the signs are improving that Ireland is a good base for such industries. This, at least, is some good news on the horizon.

Hopefully the Government will target their own cutbacks in-house (like every other business in the country were, and still are, forced to do) by way of cutting out the waste in the civil service and the over staffed agencies and quango's that were formed during the boom rather than taking the easy option by way of targeting and taxing the working men and women of the country and those unfortunate to be job seeking.

Time will tell on all these issues.

Fogra:

NAMA prediction tomorrow - discounted value at 35 to 40% on the property loans (or so they will tell us).

Alive Alive O........Oh?

So Dublin ranks as number 3 in the list of Europe's best paid cities. Zurich and Geneva are number 1 and 2 respectively. This is cold comfort for all the construction workers on the dole queue's.

Dublin is also one of the least taxed cities according to the same Forbes report. They state that taxes only eat into 15% of workers take home pay. This would appear inaccurate as far as this blogger is concerned and one would question who they carried their survey out on?

At least Dublin / Ireland doesn't rank as one of the dearest places to hire people, this falls to Denmark and Liechtenstein.

The Top Ten best paid cities in Europe are;

1.Zurich 2.Geneva 3.Dublin 4.Luxembourg 5.Copenhagen 6.Oslo 7.Helsinki 8.Munich 9.Frankfurt 10.Brussels.

London has fallen from no.2 to no.21.