Private Sector Should Follow Govt Example On Bonds

Private clients should follow the bond guidelines announced by the Government for public sector work according to the Construction Industry Federation (CIF).

The CIF were speaking after Minister of State Brian Hayes announced measures to reduce the high costs facing construction companies.

Bonds are financial securities taken out for construction projects. They provide cover to protect against any additional costs that might arise in completing a project up to a particular value. Securing bonds was becoming an increasing problem for construction companies based on the decreased value in the construction industry.

The Government has committed to bringing in reduced bond requirements for public contracts. The new stipulations require bonds of 12.5% of the contract sum for contracts valued below €10 million and bonds of 10% of the contract sum for contracts valued above €10 million.


The CIF believes that the private sector needs to follow these guidelines.

"There has been an increasing number of delays creeping into the construction process as the downturn has bitten our sector," according to CIF Director General Tom Parlon. "One of the severe problems we have seen has been the bonding requirements that have been placed on the industry. At a time when the sector has seen a dramatic drop in activity, there has been a marked decrease in the availability of bonds and steep increase in their cost.

"This is a major additional burden for construction companies to carry, particularly when they are not operating from as strong a platform as they were in years gone by. It is leading to delays in the awarding of contracts. It was also reducing the number of construction companies that could compete for work as the bonding requirements were ruling a lot of companies out.

"The Government has realized that the bonding requirements were costing them money and delaying much needed capital infrastructure. To address this problem they have taken swift action and brought in much more amenable bond requirements for public contracts. This will help the roll out of capital infrastructure, cut down on project delays and reduce costs to the Exchequer.

"The private sector could enjoy the same benefits if they were to use the Government bond rates as a guideline. Taking this approach will ensure more efficiency in the delivery of construction projects and will open up their project tenders to greater competition."

(CD/MH)