Capital projects affected by rising costs and labour shortages

Minister for Finance Paschal Donohoe has signalled possible changes to the start dates of major capital projects because of rising costs and labour shortages.

At the Budget Oversight Committee, he said a much faster than expected rise in the number of large scale capital projects by the private sector was causing, leading to competition for skilled construction workers.

“As we move through 2019 this will have to be a factor in capital project decisions we make in 2019 and 2020”, Mr Donohoe said.

He singled out a shortage of electrical engineers in particular, saying “the electrical engineers we need to build primary care centres are also in demand for data centre projects in the private sector”.

He also said a faster than expected roll out of large scale capital projects across the European Union was further squeezing the number of available skilled contractors, which in turn was putting upward pressure on costs.

“One issue we are reflecting on now is whether we need to move the decision point for projects above a certain level to later in the decision process, because we are seeing higher tender prices than expected, and that is having an impact on public budget.”

The Department of Public Expenditure and Reform is undertaking a review of Public Expenditure Guidelines – the internal rules governing how and when money is spent on capital projects.

This could have implications for the start of large capital projects such as the Dublin Metro.

Mr Donohoe said: “We have a number of highly skilled, complex projects we have to deliver and we are seeing within the private sector a growing appetite for delivering complex projects.

“We are not just competing with the Irish private sector for engineers but with the private sector across Europe. The people we need to deliver projects here are looking at attractive projects across Europe and private projects here”.

“Across Europe we are going to see big projects responding back to the challenge of climate change, and the people needed to deliver them are the same ones we need to deliver projects here, and that is happening at a much faster pace than we saw in 2018.”

The remarks come after blistering criticism by TDs of the cost overruns in the construction of the National Children’s Hospital.

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