SI.9 to Cost €168m in 2014 | Non-Residential Sector

by Bregs Blog admin team

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SI.9 to Cost €168m in 2014 |  Non-Residential Sector

Based on current information for non-residential projects,  SI.9 could cost the economy €168m per annum. To put it another way thats a 9.7% surcharge on every shop, warehouse, office, production facility completed, school, hospital bed for which the consumer has no tangible benefit.

Towards the end of February 2014 we did an overview of the possible cost of SI.9. In a recent post we tabled a revised cost estimate of €532m per annum for residential projects. We have drawn on recent information from the industry, current market rates for construction and the additional workload estimated by construction professional bodies and specialists. Given recent input regarding implementation the following costs excludes the minority non qualifying works in accordance with Building Control Management System (BCMS) data to date. Information suggest most small non-residential projects qualify under SI.9.

SI.9 ANNUAL COST FOR PRIVATE NON-RESIDENTIAL PROJECTS (€606m qualifying)

  • Increased costs for private non-residential (€606m @ 7%)=   €42.4m
  • Cost to private non-residential- delays(€606m @ 4%) *=         €24m
  • SUBTOTAL  PRIVATE NON RESIDENTIAL =                      €66.4m

SI.9 ANNUAL COST FOR SOCIAL INFRASTRUCTURE PROJECTS (€753m qualifying)

  • Increased costs for social infrastructure (€753m @ 7%)=         €52.7m
  • Cost to social infrastructure projects- delays (€753m @ 2%)=  €15m
  • SUBTOTAL  SOCIAL INFRASTRUCTURE=                            €67.7m

Previously we completely discounted qualifying buidings and structures that come under SI.9 associated with Infrastructure.

SI.9 ANNUAL COST FOR PRODUCTIVE INFRASTRUCTURE PROJECTS (€374m qualifying)

  • Increased costs for productive infrastructure (€374m @ 7%)=  €26.2m
  • Cost to productive infrastructure- delays (€374m @ 2%)=        €7.5m
  • SUBTOTAL  PRODUCTIVE INFRASTRUCTURE                    €33.7m

The above figures, when added to the costs to residential, suggest a cost to the economy every year of €700m for SI.9. Do the benefits of SI.9 outweigh the costs?

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Assumptions in compiling the above figures:

  • Commencement figures verified with the Building Control Management System (BCMS) to date indicate completions will be at best similar to 2012 (optimistic)- this is dependent on current levels improving significantly.
  • Figures are based on 2012 construction outputs from Forfas report (table 2.12 (p16) Value and volume of construction output, 2012-2012E; Source: DKM Economic Consultants analysis for Forfás, 2012). See link below.
  • We have discounted non-residential and social infrastructure sector outputs by 10% (we assume €1.359bn qualifies under SI.9 ) to take into account minor works that are exempt from SI.9 as registered on the BCMS to date.
  • We have not factored in any projects abandoned and postponed  due to SI.9, or capital budgets not spent. This will have a significant impact.
  • A minimum 3 week delay is assumed on all projects due to increased administration and paperwork, lack of Local Authority resources, invalidations at completion and commencement etc. Delays for non residential projects have further turnover/ trading costs for SME’s, offices, manufacturing etc. in addition to 3-5 week delay noted above and we have factored in 4% for this figure.
  • We have excluded extra costs for all sub-certifier roles, ancillary certifiers and sub-contractors, other insurance costs etc.
  • SI.9 cost: Professional sources indicate 2-3% for certifier roles (DC, AC, Ancillary Certifiers), 3-5% for defensive specifications; total average increase of 7% on capital cost.
  • Non residential projects comprise Industry (324m), commercial (207m), agricultural (90m), tourism (31m), worship (21m); subtotal is 673m. We are discounting output by 10% to exclude minor works where SI.9 does not apply along with simple repair and maintenance works to give €606m as qualifying under SI.9.
  • Social infrastructure includes education (€492m), health (€266m), public buildings (€79m), other social (€63m), totaling €900m. For this exercise we have excluded other social (assumed exempt public sector projects) and reducing the net total by 10% to allow for projects exempt from SI.9, and simple repairs and maintenance work. This gives €753m which qualifies under SI.9.
  • Productive infrastructure is all qualifying new buildings associated with this sector: roads, water services, airports/seaports, energy, transport, communications. In line with total new-build costs in the Forfas report we have discounted this heavily down from a total spend of €2.878bn to €415m. This figure is further discounted to assume 10% projects do not come under SI.9 giving a qualifying total of €374m. This number when added to previous figures corresponds to a cumulative total of €4.3bn quoted in the Forfas report for total new build output excl R&M construction.
  • The above estimates are non-exhaustive and are based on a number of assumptions. As more exact figures become available we will refine costs further.

Link to Forfas report here:

Extract off Forfas report table 2.12 p 16

forfas report table 2.12 p16
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