NI Construction Group issues “Actions for Recovery” paper
01/07/2020
After the Construction Industry Forum of Northern Ireland (CIFNI) met the Finance Minister in June, RSUA through the Northern Ireland Construction Group (NICG) called for action and have now followed up with a paper to inform discussions with the Department of Finance, a copy of which is provided below.
Northern Ireland Construction Group – Construction Industry Actions for Recovery
- Fully utilise Financial Transactions Capital
Issue: We understand that of the £851m of Financial Transactions Capital (FTC) provided to the NI Executive between its inception and the end of the 2019/20 financial year, approximately 50%, that’s over £400m has been returned to Treasury and lost to NI.
Action: £195m of FTC is in the 2020/21 budget. Clearly identify how this money will be allocated and what plans are in place to ensure none of it is returned to Treasury at the end of the financial year.
When needed: Identification of how FTC will be spent and plan of action to be published by 31 July 2020.
- Simplify Procurement of Buildings
Issue: More complex procurement approaches increase bid costs, create grey areas for pricing, can be slower and increase risk in procurement.
Action: For building projects in the next 12 months procure all design teams to deliver full design with a bill of quantities.
When needed: Initiate this policy from 1 July 2020 on all projects involving CPD and seek implementation across all Government Departments via the NI Executive or Procurement Board by 3 August 2020.
- Reduce Procurement Waste
Issue: ITTs for unfunded projects being brought to market resulting in an unethical waste of resources for both public and private sectors.
Action: Implement a blanket policy stating that ITT’s should NOT be brought to market in the absence of secured funding.
When needed: 31 July 2020.
- Reduce Professional Indemnity Insurance requirements
Issue: Premiums for Professional Indemnity Insurance are spiraling upward. This is placing a major strain on businesses in the construction sector at an already difficult time.
Action: Reduce the level of PII required.
When needed: Implement reduce PII policy by 3 August 2020.
- Report on NI investment fund
Issue: Does anyone know what is happening with the Northern Ireland Investment Fund?
Action: Provide the construction sector with a report on the performance of the NI Investment Fund and put rigorous monitoring of performance in place.
When needed: Report to construction sector by 10 July 2020 including plan for ongoing publication of progress.
- Consider alternative routes to ensuring all capital funding is spent
Issue: Spending all capital funds in 2020/21 could be challenging due to the delays caused by COVID-19. New thinking is required to ensure there is no underspend of capital whilst ensuring the expenditure provides long term economic, environmental and social benefits.
Action: Consider using capital funding in 2020/21 to:
– buy historic buildings at risk and undertaking immediate protective works
– buy sites in city/town centres which are strategically important for revitalising the area. (Undertake decontamination on sites if required)
– Deliver Capital expenditure through existing Framework / Term Maintenance Contracts. e.g. Rural Roads resurfacing and reconstruction, water and sewerage infrastructure development and maintenance, schools, the health estate and social housing.
– Prioritise delivery of employment generating construction schemes e.g. housebuilding, retrofit in buildings, environmental improvements, renewable energy scheme, retrofit energy efficiency schemes.
When needed: Consider feasibility of this approach and discuss with industry in September 2020.
Currently the industry is not clear what funds from 20/21 have been allocated to the various areas of construction spend. We are also conscious that clients will not have been able to spend at the normal rate in the first part of this financial year.
We seek clarity from all Government Construction Clients on funding for construction projects in 20/21:
- How much has been spent to the end of May or June?
- How much is left for the rest of year?
- How that has been allocated in terms of areas of work or projects?
We welcome the recent government commitment to longer term funding cycles in future budgets. We note that to secure confidence from the construction sector there is a clear need to link funding and budget allocation, to a dedicated, transparent procurement pipeline with committed programmes for development and expenditure. The procurement pipeline should be varied i.e. from small to large projects so that all parts of the industry can benefit.
- Prevent race to the bottom
In recessionary times bidders have been known to go to any lengths to secure work, including submitting unsustainable prices. We seek the immediate introduction by all Government Construction Clients of measures to prevent the race to the bottom with regard to pricing across all parts of the construction supply chain. Different measures are likely to be appropriate for the design stages and construction stages. Methods to consider including the client setting the fees at a healthy level and bidders competing on quality alone, the use of the narrow average, the adjusted lower average or the average of the lowest three.
When reinstating the use of the Narrow Average for construction professional services, put in place the additional measures proposed at Task Group 2 in December 2019 to further mitigate against the risk of legal challenge.
- Clear decision making
The current arrangement within the public sector in NI seems to favour a focus on Process rather than Results. From our experience Civil Service, and Departments within the Executive, appear to be process driven with a view to risk mitigation rather than focused on the benefits of pushing ahead. This has led to problems implementing quality within the decision making in the tender process. When challenges arise, there can be a default of going back to first past the post.
Delays in getting projects to market. We understand there are multiple reasons for this, but often there is an element of risk mitigation (civil servants don’t want to make the calls, and ministers can be wary about political fallout).
We understand that in RoI investment in public sector infrastructure appears to be continuing, even with the issues around getting a new government in place after the election. And in GB industry’s experience is that clients are focused on pushing ahead with projects, dealing with any challenges outside of the construction process. Hence a focus on results rather than process.
What is required is quick, clear, firm decision making based on societal and industry needs. And accepting that whilst this may carry a marginally higher risk profile for government, it’s better for all moving forward. Given the urgent need to generate growth and stimulate the local Economy we recommend the establishment of a small Infrastructure Delivery Group to co-ordinate action between Government Construction Clients / Local Councils / Housing Associations. We would also suggest that an urgent assessment is made to ensure the decision-making process for delivery of Housebuilding such as land registry, conveyancing services and local planning is fully operational and making timely decisions.
- Ensure appropriate risk allocation
Asking contractors and consultants to price in risk of unknowns and unknowables was shown during the last recession to be a bad idea. We seek agreement from the Government Construction Clients that during these unprecedented times that bidders will not be asked to provide a fixed price for elements which are unknown or unknowable. Mechanisms should be put in place to deal with these elements after appointment. All tenders issued over next 6 months must be explicit in terms of dealing with costs of Covid–19. No bidder will be asked to enter into any contract without clear contractual provision for the variable costs of compliance with CLC guidance on Covid-19 operating procedures as may vary from time to time. CPD must by 6 July develop and issue standard clauses for handling contractual claims under PGN 01/20 and PGN 02/20.
In terms of bids submitted pre-Covid not yet awarded, no bidder should be asked to enter into any public sector contract on the basis of a price submitted pre-Covid, without agreement from the awarding body to review both programme and costs for the impacts of Covid-19 on the basis of an agreed mechanism.
- Ensure monthly payments for all
Cashflow is particularly important to all construction businesses at the moment. We seek agreement from all Government Construction Clients to put in place contractual measures that ensure monthly payments to contractors and consultants (with no retentions) and ensure payment throughout the supply chain.
