Commenting on the launch of this new financial service, Minister McGrath said: “While the changes introduced in January have brought greater stability to contracting arrangements, through ongoing engagement there has been sustained feedback from Government Departments and their Agencies that successful delivery of priority projects included in the NDP is jeopardised by construction inflation. More recently, Departments have reported specific issues with fuel costs and supply chain disruption, including reduced competition for public works contracts and challenges relating to completing projects underway during 2021. The changes implemented in January have provided a degree of mitigation on materials price increases (for contracts awarded with a revision date of 7th January 2022).
“I recognise the problems that these exceptional material cost increases, fuel costs, and supply chain disruption continue to have on public projects and those charged with their delivery at present. I am conscious of the difficulties being experienced by public bodies in progressing their projects and the ability to deliver the wider NDP whilst at the same time I need to maximise value for money for the taxpayer. It is vital that public works contracts remain a viable proposition for contractors with whom we partner in the delivery of the NDP.
“It is for these reasons, I am introducing further measures in addition to the ones put in place in January. I consider that these actions are necessary and proportionate in the context of the significant risk that global exceptional inflation poses to the delivery of much needed public facilities in the NDP. The measures available under the Framework strike an important balance between the additional costs incurred by the State to support Contractors engaged on public projects and the State’s ability to deliver the NDP, whilst providing value for money for the taxpayer.”
Speaking following the Government announcement, Tom Parlon, Director General of the CIF said, “We welcome the measures announced today by the Minister, which are focused on addressing the inflationary impact of the Ukraine conflict on construction materials and fuel. They represent a positive step. However, it is disappointing that these measures will only be applied to all projects from the 1st January 2022 onwards and will not address the exceptional period of inflation since January 21.
“The current situation has highlighted the necessity for essential reforms of the public works contract and the ability of contractors to accept the transfer of risk beyond their control. The CIF and its members have continually called for more collaborative contracts, which manage risk in a more balanced and sustainable way.
“We will be keenly examining the proposed Inflation Framework Agreement, which we understand will allow engagement between public clients and their contractors, address supply chain disruptions and delays and introduce recovery mechanisms for cost increases in construction materials and fuel on a 70:30 basis. However it is clear further significant steps will be needed if we are to establish a public tendering system in line with international standards,” he concluded.