Ossian Smyth (Dún Laoghaire, Green Party) | Oireachtas source

The key objective of the inflation-supply chain delay co-operation framework introduced in May 2022 is to safeguard public projects that were already under construction or tendered in advance of the exceptional inflation in the price of construction materials, fuel and electricity since the onset of the Russian invasion of Ukraine. While there is evidence to suggest the rate of inflation has moderated significantly, prices remain elevated at present.

The framework applies to the standard form of public works contract. It facilitates both parties to engage with one another to address the impacts of exceptional inflation and supply chain disruption and operates on an ex gratiabasis. The framework sets down the approaches and the parameters within which parties to the contract may calculate additional costs attributable to material and fuel price fluctuations on an ongoing basis using price indices published by the Central Statistics Office, CSO. 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, while providing value for money for the taxpayer.

The feedback being received by my Department indicates that parties are engaging and that agreements have been entered into for a substantial number of projects. This has facilitated the progression of works and has avoided substantial delays to completion by bringing a greater level of certainty to contractors as to the extent of their exposure to inflation in material and energy costs. While payments covering the cost of inflation are made monthly, the total additional cost attributed to inflation for each project will not be known until it is completed and the measures introduced are intended to operate until completion, or where they are no longer required. Increases due to inflation only arise where the CSO indices specified in the framework on the date that the monthly interim payment is calculated are greater than those same indices at the point at which the tender for the project was submitted. Cost recovery for inflation is only available on payments made from January 2022. Any increase that is determined as attributed to inflation may be shared between the parties, with the State bearing up to 70% of the additional cost. Any additional costs that are identified are to be met from within the capital ceiling allocations for each approving authority.

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