Not long after construction work should start on a major affordable-housing development at Oscar Traynor Road in Coolock, the developer will be able to renegotiate the price agreed with the council for the homes, under the terms of the contract.
The council expects the developer Glenveagh to start building the homes towards the end of 2023, said Dublin City Council Senior Architect Martin Donlon, in a recent presentation to the council’s housing committee.
The prices agreed with the developer Glenveagh are set until 2024, he said.
It’s a similar story at O’Devaney Gardens in Stoneybatter too. Work has not yet begun on the homes but the prices agreed with the developer Bartra are only locked in until 2024, said Donlon.
“It’s kind of unsettling,” said Fine Gael Councillor Naoise Ó Muirí. “What is going to happen?”
It isn’t clear exactly what is in the contracts because they aren’t public.
Dublin City Council hasn’t responded to queries submitted on 8 June, including when in 2024 the renegotiation can take place and whether it relates to the entire development or just the parts not yet commenced.
Bartra and Glenveagh didn’t respond to queries sent Friday.
Labour Councillor Dermot Lacey, who chairs the council’s housing committee, said he thinks that any re-negotiation on price could only be in line with construction-cost inflation. “I can’t see how anything else would be acceptable.”
The Department of Public Expenditure has issued guidance for public bodies on how to handle construction inflation so that public projects can proceed.
At a meeting of the council’s housing committee on 8 June, Donlon gave an update on two of the city’s major developments of affordable housing.
The developer Glenveagh is working on plans for 853 homes at Oscar Traynor Road. Of those, 40 percent are to be social housing, 40 percent cost-rental housing and the remaining 20 percent to be affordable purchase, said Donlon.
Glenveagh hopes to submit an application for planning permission by November this year, he said. If they manage that then planning could be granted by July 2023, he said.
The developer Bartra got planning permission last month for 1,047 homes at O’Devaney Gardens.
Bartra hopes to start construction between July and September this year, said Donlon.
That means the first phase of 379 homes should be completed around the middle of 2024, he said.
Ó Muirí, the Fine Gael councillor, asked what had delayed the O’Devaney Gardens development in getting to this stage.
Donlon said the delays caused by Covid-19 are well documented and “planning, once it was submitted, the excessive timeframe it took to actually obtain successful planning”.
He didn’t mention that after the council signed off on an agreement to transfer the land to Barta, the developer redesigned the scheme, adding hundreds more homes.
Bartra then judicially reviewed a condition of that permission and finally got the planning approved in May 2022.
Creeping Construction Costs
Councillors welcomed the progress towards the council delivering social and affordable homes on both sites.
Ó Muirí asked if the council was protected at the Oscar Traynor Road site from the ramp-up of costs due to construction inflation. “The fact that these were 2019 prices was a substantial virtue as I recall it,” he said.
Said Donlon: “Under the terms of the development agreement those are 2019 tender prices. They can only be revisited circa 2024.”
In 2024, both developers could potentially renegotiate the agreements, he said.
“In the context of construction cost inflation and the department circular and acknowledgement of the hyperinflation of the last number of years in the order of 30 percent, that is a possibility,” he said.
The department guidance says “both parties will share the burden” of inflation and “where costs are identified it is proposed that parties will share these costs with the State bearing 70% of the additional costs”.
Around the Corner
Ó Muirí said by phone on Tuesday that he was very surprised to learn that the price is only locked in until 2024.
Councillors recently held negotiations about the Oscar Traynor Road site and officials never mentioned that the prices could be renegotiated. “A key part of getting it over the line was the 2019 prices,” he says.
At a meeting of the council’s North Central Area Committee in September 2020, Labour Councillor Alison Gilliland, currently the Lord Mayor, asked about the possibility of price increases.
Paul Dunne, chief quantity surveyor with Dublin City Council, said that the price was fixed until 2024.
He said the first phase would be completed and handed over by March 2023, and that the entire project should be completed by November 2024.
Gilliland asked what would happen if there were delays. Dunne said the risk lies with the developer, “because we have a fixed price for the apartments, the entire development for everything”.
Any extra costs depend on who is responsible for delays, he said.
“Generally speaking when construction contracts overrun it is the back part that is affected by overruns, rather than the entirety of the contract,” he said.
So if there is an overrun, it won’t affect the whole contract, he said, but just the latter part of it.
Independent Councillor John Lyons, by phone on Friday, said “2024 is only around the corner”.
He received reassurance from senior staff at Glenveagh that nothing would change in terms of the price agreed as well as the height and density at Oscar Traynor Road, he said.
Still, he is concerned about the delays and the possible impact of those on price, he said. “Oscar Traynor Road is dragging on as well,” he said. “It seems to be very slow.”
Speaking at the council housing committee meeting on 8 June, independent Councillor Cieran Perry asked how this would impact the O’Devaney Gardens development.
The first phase of the development is expected to be completed in 2024, Perry said. Does that mean that the prices for the rest of the development can be renegotiated? he asked.
Donlon said that it does. The contract, “like any contract, provides for construction inflation, which there has been”.
Renegotiation of the deals hasn’t been discussed, he said. But by 2024 the prices agreed will be five years out of date.
“My understanding is that it is a normal contract,” said Lacey, the Labour councillor, by phone on Tuesday. All contracts have clauses in case of inflation, he says.
If costs increase in line with inflation that is acceptable as long as no other aspect of the agreement is re-opened, he says.
Speaking at the meeting, Claire McManus, spokesperson for the Royal Institute of Architects of Ireland, said that a lot of public projects are stalling at the moment because the government contracts have no flexibility.
By contrast, private companies will renegotiate to get the job done, she said.
If public bodies try to hold contractors to agreed prices, the building work just won’t happen, she said. “The work just cannot be done for the prices that were agreed so I’d urge a bit of caution.”
[CORRECTION: This article was updated on 8 November 2022 to correct when Bartra got the final planning permission granted for the scheme. Apologies for the error.]