Minister McGrath's keynote address to the Construction Industry Federation Annual Conference 2021

Check Against Delivery

I am delighted to speak to you today, and I’d like to thank your President Frank Kelly and your Director General Tom Parlon for affording me this opportunity.

As the representative body for the Construction Industry in Ireland, you are key stakeholders in the delivery of the ambitious investment plans the government has for the country.

Before I move on to discuss these plans, I would like to start by acknowledging that this has been an extremely difficult time for everyone connected to the construction sector. The widespread closure of building sites last year and again earlier this year resulted in very significant job losses and income reductions for many thousands of employees and business owners.

I commend you for your adherence to the public health measures despite the immense pressure this placed on you. Your support and your leadership was crucial to our national effort to protect public health and I thank you for that. I pleased that a strong rebound in construction is now underway.

It is my firm belief that the basis of the recovery was sown in the decisive actions taken to stabilise the economy since the onset of the pandemic.

Across 2020 and 2021, Government will have made available over €31 billion for direct expenditure measures with approximately €15 billion this year to support our people, businesses and key public services deal with the impacts of Covid-19.

Budget 2022 itself will be presented in just under two weeks and, while not pre-empting announcements that will be made on the day, I can confirm that we will not remove Covid supports in an abrupt manner.

The agreed Budget framework for 2022 sets out a provision for further Covid related expenditure of up to €6.8 billion next year out of an overall expenditure ceiling of €88.2 billion. This will be hugely important in bolstering the economic upturn which thankfully is now underway, with construction very much at the centre of the recovery.

On Monday next, I and the Leaders in Government will be launching the revised National Development Plan, a key pillar of Project Ireland 2040 . It will set out the details of investment in key Government priorities out to 2030 such as housing and transport with climate ambitions weaved throughout the strategic objectives.

A key goal of the NDP is to ensure there is certainty for our citizens, businesses and specifically the construction sector as to the Government’s plan for capital investment over the coming 10 years. This will give assurance to businesses in your sector that demand from the State will continue to increase over the coming years and allow you to plan for this future growth.

The Government are committing to an overall investment of €165 billion in the years from 2021 to 2030, and the details of how this will be prioritised will be contained in the renewed NDP. It represents an increase of €49 billion in direct exchequer funding on the current plan and is the culmination of intensive work across government Departments in recent months. At 5% of GNI*, the public capital investment level compares very favourably to the average level of investment across the EU.

An updated Capital Projects and Programmes Tracker will also be published on Monday. This will provide even more information and timelines around the Government’s investment priorities in the coming years. In addition, an interactive map will also be published providing local level detail of projects and I would encourage you to familiarise yourself with the details when they are published.

In order to successfully deliver on the ambitious objectives of the plan, we are under no illusions that a number of reforms will need to be implemented alongside the provision of additional resources.

I will touch briefly on some specific areas which will be of critical importance to deliver the NDP: Planning, Innovation, Skills, Procurement, Support Services and Governance which hopefully we can explore further during the panel discussion.

Planning

This week, the Government decided that following on from the commitment in Housing for All to undertake a comprehensive review and consolidation of planning legislation, we will establish a special project to consolidate and revise the State’s body of planning laws. We are backing up this decision with substantial additional funding to undertake this project.

The Planning and Development Act currently runs to 437 sections and 7 schedules. It has been amended hundreds of times since enactment and, apart from the confusion resulting from these piecemeal amendments, there are many inconsistencies, a number of provisions which are not compliant with EU law and deficiencies as a regulatory structure.

The complex nature of the structure makes it is very difficult for developers and those responsible for the implementation and enforcement of the law to successfully navigate it.

It fuels the proliferation of judicial reviews in planning matters as potential inconsistencies in the Act are judicially tested by opponents of a proposed development. I acknowledge all of this imposes huge regulatory costs and creates significant legal difficulties and delays.

This is a very significant review of planning laws and will be carried out with a view to regularising them, improving coherence and removing the overall stability of the system. Above all else, it will bring a level of consistency and certainty in the application of the planning system.

Innovation

As well as legislative reform we also recognise that increasing innovation in the construction sector is paramount. Successive iterations of the Build Report , published by my Department, have shown that in international terms, productivity in the Irish construction industry is lagging behind many countries. This is a huge challenge. But working together it is a challenge we can overcome.

As a Government, we have enacted policies to support and expand the industry. The Construction Sector Group is a vital forum for collaboration between the sector and Government.

Actions arising from the group are and will continue to contribute to a more dynamic and sustainable construction industry and a Sub-Group is in place to deliver on priority actions such as expanding the CIF’s construction research forum and supporting the industry to develop modern methods of construction. We plan to do this through the establishment of a construction technology centre with the support of Enterprise Ireland.

The Build Digital Project, being led by my Department, will also increase digital adoption across the Irish construction sector through the sharing of information, supporting education and offering guidance. In particular for the priority of housing provision, improved digital adoption can assist in the speed of delivery and reduce the cost of completing projects while enhancing the quality and maintenance of output.

Skills

Another key factor in delivering on the targets in the revised NDP will be the supply of appropriate skilled labour. The Action Plan for Apprenticeship launched in April sets out a five year strategy to deliver 10,000 new apprentice registrations per year by 2025.

It provides a roadmap for a single apprenticeship system. It also create a new National Apprenticeship Office to drive reforms and establishes a new grant for employers, with an additional grant for areas of identified national skills needs or targeted recruitment of underrepresented groups.

Procurement

An issue of increasing concern to both Government and the Construction sector are material price increases which are impacting on public works tenders. A combination of Brexit, the worldwide trend to increased infrastructure spending, and continuing supply chain impacts due to the impact of Covid are putting upward pressure on the cost of delivery of investment projects.

These increases are affecting both live contracts and tenders as contractors are exposed to such increases under public contracts for the first 30 months. In some instances, successful bidders have felt the need to bow out of projects as they believe they cannot deliver them in the current cost environment. It is an issue I am monitoring very closely and have asked my officials in the Office of Government Procurement to consider actions that can be undertaken in response, and they will revert to me with recommendations shortly.

Separately, feedback on a series of proposals from the Office of Government Procurement has been received, with a view to ensuring that otherwise capable businesses are not excluded from public contract opportunities as a result of high levels of Professional Indemnity Insurance being sought by contracting authorities. I intend to make progress on this issue also.

Support Services

I want to acknowledge that the Housing targets we have set cannot be delivered without the appropriate supporting services.

Government investment in water services, primarily through Irish Water, will underpin the delivery of our Housing for All plan. We know significant investment is required in public water and waste water infrastructure over many investment cycles to meet demands and we have committed to investing €4.5bn between 2021 and 2025 in domestic water services.

In addition, Irish Water prepared waste water treatment capacity registers on a national basis for the first time in 2020. These were issued to each Local Authority to support their preparation of city and county Development Plans.

Separately a new Croí Cónaithe Fund will provide serviced sites for new homes and to support refurbishment of vacant homes in regional towns and villages.

Governance

I am acutely aware of public concern regarding cost overruns on high profile projects. We are taking a number of actions to tackle this.

As Minister for Public Expenditure and Reform, I am placing a stronger emphasis than ever before upon achieving value for money, managing risks, and taking advantage of technology and innovation.

The recent update to the Public Spending Code specifically strengthens the existing guidance to better reflect the realities of project delivery with a particular focus on financial appraisal, cost estimation and risk management.

By end-year, we will have a new governance and assurance process for major projects. This will involve two external reviews of major projects at key points in the project lifecycle, by independent experts in infrastructure delivery.

In addition, I am establishing a Major Projects Advisory Group that will review both the business cases received by my Department and also the independent reviews of these cases under the new external assurance process. They will also advise on the operation of the Public Spending Code.

In addition, I am enhancing the expertise on the Project Ireland 2040 Delivery Board by appointing up to 5 new external experts in infrastructure project and programme delivery to the Board. These external experts will bring a different viewpoint on the delivery of the National Development Plan , the governance structures in place and consideration of risks to successful major project implementation.

I am determined that rather than resulting in delays in the completion of projects, these reforms will help to avoid early mistakes that could prove costly down the line and will improve the overall efficiency of delivering vital infrastructure projects.

Conclusion

In conclusion, a modern, productive and commercially viable construction sector will be the key enabler to delivering our public policy goals. Capturing the full potential of the sector will require a concerted effort from all stakeholders, including Government, to drive the innovation and reform agenda.

The Government commitment to ambitious levels of public investment is clear and will be evident in the renewed NDP as part of Project Ireland 2040. We are determined to work with the industry to deliver on our goals to deliver the type of Ireland that Project Ireland 2040 envisions.

We cannot predict all future challenges but we do know that innovation, new ideas and ways of doing things, will be an indispensable tool in overcoming these and in actively contributing to the delivery of the NDP.

I look forward to working collaboratively with you on our shared objectives.

ENDS