Oireachtas Joint and Select Committees

Wednesday, 11 May 2022

Committee on Budgetary Oversight

Recent Cost-of-Living Measures: Discussion

Mr. John Kinnane:

The measures introduced yesterday apply in particular to a group of contracts not covered by the changes introduced in January this year. The new form of contract introduced in January allowed for greater cost recovery. For contracts already in place, there was no cost recovery as long as they were within the fixed-price period. The change introduced yesterday provides that there can be indexation based on CSO indices for payments from January onwards for those existing contracts. There is a retrospective element, given the payments that were made from January to date.

There is an estimate that there is a cost of €30 million to €40 million for the retrospective element of this, so the scale of what was introduced yesterday would not impact significantly on the delivery of projects or capital envelopes.

The other change applies to all contracts, both the existing contracts and the post-January contracts. It is to allow for specific issues relating to fuel costs which were not covered by the January changes. This was impacting on certain roads contracts, in particular, where obviously the price of bitumen was increasing but the price of diesel required for the machinery was also increasing. There is also the change introduced which relates to the time. Given that supply chains are being disrupted because of the war in Ukraine, contractors who do not meet contractual time targets due to the supply chain disruption, where it is proven it is because of the situation in Ukraine, are not subject to liquidated damages.

Given the scale of the capital envelope that is available for this year, the retrospective element arising from yesterday's changes would not impact significantly.