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.