Fife Council: warning over spiralling costs impacting on major projects

Fife Council has 20 developments worth over £5m underway - and costs have spiralled.

Councillors at the finance, economy and corporate services scrutiny committee were told that while the worst turbulence was over, the picture remained challenging.

Alan Paul, had of property services said: “The capital plan is and will continue to be under pressure. It’s almost inevitable that we’ll be able to buy less going forward because costs are only going one way.”

Last March there was an estimated £17.875m overspend for 2022.

Specific overspend totals were not discussed as part of the report on Thursday.

Councillors were told the cost of construction materials had soared “through the roof” while supply chains collapsed - a situation not unique to Fife.

“Although costs have stabilised, material costs remain volatile, skilled labour availability remains tight, and the market continues to be very nervous,” Mr Paul told councillors.

The conflict in Ukraine, soaring energy costs, 10% national inflation, “eye watering” national interest rate hikes, and a labour and skills shortage are all to blame.

“We’re used to tender costs being eliabl] for potentially up to three months,” Mr Paul explained.

“Over the last year, at the peak of construction challenges, we were looking at tender prices being reliable for a matter of 2 to 3 hours. That was the level of volatility.”

Although the turbulence has subsided since, prices are only trending one direction - upwards.

Skilled worker and labour availability is a key issue for Fife Council and for construction as an industry.

“We don’t have enough of those people. Not only do we not have enough of these people but we also don’t have people skilled in the technology and techniques that will be needed going forward,” Mr Paul said.

The consequence is “reduced tender returns, compromising competitive tension and decline in subcontractor build quality.”

“It all drives up cost, it’s as simple as that,” he said.