At least 42 Irish construction companies have gone into liquidation or examinership since the start of this year, prompting a trade body to warn parliamentarians of an insolvency crisis that could hit public projects.
The Construction Industry Federation, and other sources blamed the crisis on the price inflexibility of government contracts colliding with rising costs.
Industry figures claim this collision has depressed profit margins to well below the European average.
The revelation came after Irish company Sammon Group went into liquidation last week owed €8m by Carillion for work on a schools public-private partnership.
Newspaper Sunday Independent revealed the number of business failures after seeing email correspondence between “industry insiders” and insolvency experts, which described the trends as “worrying”.
They blamed onerous public sector form of contract that has pushed firms into making lower bids for work, plus the fallout from the collapse of Carillion, for what one source described as “a growing epidemic” of liquidations and receiverships.
Construction Industry Federation (CIF) director general Tom Parlon has written to all members of the Dáil Éireann, Ireland’s parliament, to “alert you to an issue threatening construction jobs and the completion of public-sector construction projects in school-building, hospitals, road upgrades, social housing, and renovation of public buildings”.
“The inflexibility of Government contracts in the face of substantial increases in input costs mean construction companies may now be forced out of business or to abandon ongoing public-sector projects. The Government contract forces all the risk and costs of unforeseeable issues onto the construction company,” said the letter.
Companies were “locked into delivering projects at this price regardless of any cost increase in the intervening period” and “several construction companies currently involved in public sector contracts now face examinership or abandoning live public-sector projects,” he wrote.
Meanwhile, a survey by one of Ireland’s biggest contractors revealed margins averaging 1-1.5% across the Irish industry compared to an EU sector norm of 5%.
A CIF spokesman said the survey suggested margins were now “dangerously low”.
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Margins of 1 to 1.5 % are ridiculous and any Contractor evaluating a fixed price contract ( private or public) at those margins will obviously fail under the financial risk.
I wonder if the sub contractors involved with Carillion have any recourse or indemnity insurance to cover their position.
It seems ludicrous that any government agency owing the prime contractor monies which in turn is due for work undertaken or completed can be free of any liability with the collapse of the chain of service companies in Ireland & elsewhere.
It is suggested that an overarching government agency takes control of urgent direct payments for work completed to save both companies & jobs.
If the culture of paying exorbitant wages to skilled tradesmen continues, then a bubble is being created once again. The greed is there for all to see.