Mr. John Kinnane:

I will deal with the issues raised in regard to the construction contracts and the changes introduced. The changes the Minister for Public Expenditure and Reform announced yesterday were the second set of changes announced this year. On 7 January, in order to address the inflationary pressures we saw through the latter part of 2021, changes were introduced that applied to new contracts moving forward. Under the contracts for public works that were in place prior to 7 January, there were stringent requirements in the cost of recovery during the fixed-price period. Very high levels of inflation were required before a contractor could recover costs.

In recognition of the fact that we were in a period of high price volatility, changes were introduced in January that applied to new contracts. Since then, with the war in Ukraine, the situation has deteriorated. Some issues were highlighted and a number of contracting authorities and Departments raised these with the Office of Government Procurement, OGP, and the Department of Public Expenditure and Reform. They included difficulties with existing contracts and issues as a result of the high increases in fuel costs, which were impacting on contracts for roads that require a large amount of machinery. Bitumen was also an issue there. Following this engagement, the Minister decided to make further changes. These changes addressed contracts that were already in place in January.

At the time of the January changes, it was anticipated that we might see a moderation in inflation and that contracts which were already in place would be able to manage within the existing contractual arrangements.

The changes introduced yesterday now allow for retrospective recovery of price increases on materials with respect to payments made since 1 January for projects delivered under the old forms of contract dated prior to 7 January 2022. Contractors will be able to recover price increases above the position of the relevant index at the point that they submitted their tender. This applies until the completion of the project. There is also retrospective recovery of price increases associated with energy and fuel with respect to payments since 1 January for projects being delivered under forms of contracts dated prior to 7 January. Contractors will be able to recover price increases above the position of the relevant index at a defined date. This will also apply until the completion of the project.

The forms of contract dated from 7 January already contain measures to recover inflation on materials over defined thresholds. However, recovery of energy and fuel prices will now also be permitted as part of the measures introduced by the Minister yesterday.

Bearing in mind the supply chain disruption which contractors are facing, relief is also being provided in the form of an extension of the date for completion for the contract where there is disruption to the supply of materials linked to the war or to the pandemic for all public works contracts. The measures set out by the Minister represent a balanced and proportionate response that looks to protect the delivery of the national development plan in a manner that also protects the Exchequer.