Good morning,
It is a pleasure to address the membership of the Construction Industry Federation and acknowledge the pivotal role that your industry continues to play in the delivery of housing, hospitals, schools, and other essential infrastructure under the National Development Plan.
I want to thank Joe Conway and Hubert Fitzpatrick for the invitation to speak to you all today, and also to thank the CIF and its representatives for their ongoing engagement with myself and my officials. This engagement is valuable to me as the Minister overseeing both public procurement and the National Development Plan.
The Government’s €165 billion investment through the National Development Plan is already providing vital infrastructure. However, more needs to be done to boost delivery particularly in areas like housing, health and climate.
Before I discuss that further, I’d like to set out the current economic context.
Economic Context
Over the last few years we have faced three economic shocks in Brexit, Covid-19 and now war in Europe. All of these shocks have brought their own unique challenges. During the pandemic, €37 billion in public expenditure supports were made available to protect lives, support incomes and employment, and safeguard businesses.
Our economy has rebounded strongly following a series of negative supply-side shocks and it is now operating at full capacity. Modified Domestic Demand – the best measure of the economy – is forecast to grow by 2.5% next year, reflecting the underlying strength of our economy.
It is especially notable that economic growth in recent months has been employment-rich. Over 2.6 million people are now working in Ireland, an increase of 3.5 per cent or just over 80,000 on Q2 2022. Indeed, our unemployment rate is at historic lows, at just 4.1 per cent in August 2023; down from 4.4 per cent in August 2022. While I know that low rate may present challenges for your industry in recruitment, it does reflect the buoyancy in the domestic economy. Census 2022 confirmed that just over 5.1 million people now live in Ireland, and Project Ireland 2040 anticipates an additional 1 million people by 2040.
The improvement in domestic, and to a lesser extent global, economic conditions, and an easing in uncertainty are expected to impact positively on private investment, with aggregate investment further supported by record levels of public capital.
In line with the NDP, an additional €900 million will be made available in Budget 2024, bringing total capital expenditure in 2024 to just over €12.8 billion. This will continue the progress and delivery of infrastructure investment and is a critical component in supporting Ireland’s growth and in delivering better, fit for purpose public services.
In order to progress additional projects, a further allocation of €2.25 billion from windfall receipts will be made available over the period 2024 to 2026. This will facilitate the progression of important projects in key sectors such as education and health and enable more rapid development of key Programme for Government commitments.
It is vital that to deliver these important projects, we harness the skills and capacity of the construction sector to support Ireland’s future economic growth and an increased population.
NDP Delivery
The renaming of my Department earlier this year, to specifically include delivery of the National Development Plan, has brought about a greater emphasis and mandate for the delivery of the NDP. In light of this new role, a review of the support structures and levers available across Government to maximise delivery of projects was undertaken, as well as engagement with stakeholders and Government colleagues.
In March, I secured government approval for a package of measures aimed at enhancing project delivery in the NDP including:
- Significant changes to reduce the administrative burden in delivering major capital projects;
- Capacity reviews of departments and agencies with significant delivery programmes to be carried out, where appropriate, to ensure that adequate resources for project delivery are in place; and
- Additional reforms to the Capital Works Management Framework
To provide transparency and accountability on the impact of these changes, I now report directly to Cabinet on NDP delivery on a quarterly basis.
In addition, I am now chairing the newly reconstituted Project Ireland 2040 Delivery Board which includes key Secretaries General, along with five external members of the Board. Recent meetings of the Board have discussed boosting skills capacity from the Department of Further and Higher Education, and an update from the Department of Transport on major project investment in the transport network.
Prospects 2023/2024 report
The construction sector requires a clear line of sight of major projects planned under the NDP. That is why I published the Prospects 2023/2024 report last week. The report highlights 50 of the largest individual projects that make up Project Ireland 2040, providing further visibility on the sequencing of Ireland’s priority infrastructure projects over the coming years. This will assist firms to plan commercial bids for these major infrastructure projects.
I said at the launch of the report that it is vital for our social, economic and climate ambitions that we succeed in the timely delivery of these projects. That is why we continue to encourage the construction and built environment sector, along with the public sector, to operate as effectively and efficiently as possible in order to bring these projects to fruition.
Construction Sector Group and Subgroup
The Construction Sector Group (CSG) is a wider group that brings together key industry stakeholders and Government Departments and Agencies. The work of the CSG Sub-group is progressing positively, in particular the actions on Innovation and Digital Adoption in the sector being led by PJ Rudden and his subgroup of the CSG.
I am aware of the work that the CSG Sub-Group has spearheaded in terms of adoption of Modern Methods of Construction (MMC), including three reports by the Construction Industry Federation (CIF).
These reports contain important recommendations for the industry to flourish in terms of skills, standards and governance. By transitioning from traditional on-site construction to a more manufacturing based model where off-site prefabrication will be key to improving productivity in the sector. Work is currently ongoing by the public and private sector to analyse the present and future needs for the adoption of Modern Methods of Construction, and the barriers to MMC in Ireland’s construction sector.
The Construction Technology Centre, known as Construct Innovate, is an industry led centre for all, providing a platform for communication between companies, academia and Government. Led by a consortium of University of Galway and partners, and funded by Enterprise Ireland, the Centre helps early stage and established companies to access innovation where they have not before.
Changes to Public Works Contract and CWMF in July 2023
Although acute pressures on supply chains and inflation costs have eased, prices are not expected to return to 2020 levels. In July 2023, I announced further measures to address uncertainty and risk in the delivery of Public Works Contracts. This follows a series of measures introduced by my Department over the last 18 months to address the challenges that the construction industry has faced over the last two years in terms of material price inflation, supply chain disruption and the reduced availability of professional indemnity insurance.
These measures balance the concerns of industry and the needs of Departments and agencies to deliver public infrastructure on a value-for-money basis. The objective of these changes is to improve the risk/reward balance of public works contracts through the introduction of caps on liability and reform of the price variation mechanisms.
Further reforms to the Capital Works Management Framework are also planned, which are focussed on improving the quality of information produced during a project’s lifecycle with the aim of improving decision-making and project outcomes from the perspective of time, cost and quality.
As part of these changes, commencing in January 2024, Building Information Modelling (BIM) requirements will be introduced into the CWMF on a phased basis, commencing with the technical professional consultancy services engaged on projects with an anticipated capital value in excess of €100m. Over the next four years these requirements will be extended into the scope for both consultants and contractors engaged on all public works projects.
Building our Skills Capacity
The Government recognises that without more construction workers we will not be able to deliver on our ambitions to build more infrastructure, deliver increasing numbers of homes and tackle our climate challenges.
That is why, the Government continues to invest and support the delivery of apprenticeships throughout the country.
As of end August 2023, there are over 5,600 apprentices registered in the construction sector. The total population of construction apprentices at the end of August was over 16,400. An additional 2,400 apprentices were in training in construction-related apprenticeships in areas such as electrical and engineering.
Improvements have been made to enable the granting of more work permits. As of August 2023, there were over 20,700 work permits granted. This will enable the industry to attract more workers from outside Ireland which is necessary given that the economy is at full employment. In addition, the Apprenticeship Employer Grant of €2,000 annually per apprentice was introduced in 2022 to further support more construction workers to enter the workforce.
Sustainability/ Green Measures and the construction industry
I want to acknowledge the progress that the construction industry has made in terms of supporting the Government’s retrofitting targets. The SEAI published a recent report giving details of the more than 22,000 home energy upgrades supported through Government funded SEAI grant schemes in the first half of 2023. This represents a 150 per cent increase on the same period last year, and suggests activity is on track to meet or surpass the 37,000 upgrades target for 2023.
Closing
In conclusion, we all share the ambitions contained in the National Development Plan, the Housing for All Plan and the Climate Action Plan and we all want to deliver on those ambitions. The Government is committed to supporting the construction industry to adapt new ways of working which not only deliver efficiencies in terms of output and time savings, but also result in savings in terms of costs.
I am confident that the industry will continue to demonstrate its resilience in terms of meeting the challenges ahead and I am equally confident the industry will deliver the infrastructure projects the country needs in the decades to come.
ENDS