Mairead Farrell (Galway West, Sinn Fein)
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78. To ask the Minister for Public Expenditure and Reform the status of the national development plan; the impact of cost inflation on same; the projects which might now need to go back out for tender; and if he will make a statement on the matter. [21488/22]

Mairead Farrell (Galway West, Sinn Fein)
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An chéad cheist maidir leis an national development plan, NDP, and the impact of the cost of inflation on the plan, as well as the projects which might need to go back out for tender and the Minister's views on this.

Michael McGrath (Cork South Central, Fianna Fail)
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The €165 billion national development plan to 2030, published last year, sets out the Government’s overarching investment framework and broad direction for investment priorities for this decade. The NDP also sets out the actions that are being taken to strengthen delivery, maximise value for money and ensure to the greatest extent possible that projects are delivered on time, on budget and with the benefits targeted at the outset.

As Minister for Public Expenditure and Reform, I am responsible for setting the overall capital allocations across Departments and monitoring monthly expenditure at a departmental level. My Department is also responsible for maintaining the national frameworks within which Departments operate to ensure appropriate accounting for and value for money in public expenditure such as the public spending code. Management and delivery of individual investment projects within the allocations agreed under the NDP and within the national frameworks is a core responsibility of every Accounting Officer and Minister.

Regarding the context for the delivery of the projects funded by the NDP allocations, my Department continually monitors construction sector trends, including inflation. As the Deputy is aware, there have been significant and sustained increases in the prices of a broad range of commonly used materials in the construction sector throughout 2021, in the aftermath of the pandemic and as a result of the Russian invasion of Ukraine. If these developments persist for a prolonged period, they would represent a risk to delivery of the ambitious public investment programme set out in the NDP. In response to this risk, I introduced a series of measures. In November 2021, the Office of Government Procurement, OGP, issued procurement guidance to assist public bodies in managing the challenges they face concluding live tenders. In January this year, the OGP introduced measures applying to new public works contracts, including a reduction in the fixed-price period and a mutual cost recovery within the fixed price period for material price changes in excess of 15%. I can make some further points in the follow-up responses.

Mairead Farrell (Galway West, Sinn Fein)
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Tá sé sin suimiúil. Yesterday, the Minister might have seen that the Joint Committee on Transport and Communications heard serious concerns from representative bodies of construction companies. They spoke of the need to reform public works contracts for the construction of transport infrastructure. They said many contractors were having to pull out due to the inflation in the cost of building materials and other issues the Minister outlined. The contracts they enter into are often fixed price. Someone may have entered into a contract years ago and is now locked into a price, having based the estimates for material on prices from two years ago. We know that much has happened in the last two years and that there has been a sharp rise in inflation. Has the Minister considered the introduction of variation clauses in new or existing contracts? Does he have any views on that?

Michael McGrath (Cork South Central, Fianna Fail)
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We have made changes for new tenders and new contracts, allowing for indexation of the tender price prior to the awarding of the contract. New contracts provide for mutual cost recovery to allow for recovery by the contractor of inflation above a certain percentage. I acknowledge that the level of inflation being experienced in construction is placing real pressure on contractors conducting live contracts because of the fixed-price nature. I have asked my officials in the Office of Government Procurement and the national investment office to examine the issue in detail. They have consulted the major capital spending Departments and bodies. I am engaging actively with them. I need to strike a balance. I must ensure that taking up public works contracts remains a viable proposition for contractors. I accept that principle. On the other hand, I have a duty to taxpayers to ensure that our large capital budget this year goes as far as it possibly can in the delivery of the NDP. The issue is under active consideration. I recognise the pressures and will bring some proposals shortly.

Mairead Farrell (Galway West, Sinn Fein)
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It will be interesting to see those proposals. The Minister is right that, at the end of the day, we have an infrastructural deficit and we want to deliver as many capital projects as we can with the resources that we have. It is unfortunate that inflation has increased so much and that this could impact on delivery. I have a question about the capital project tracker for the NDP. Will the Minister look at that? Will additional information be provided, especially if projects have to go to tender again, which would cause further delays? Will there be additional information if there is an upward revision of prices? We all want to see these capital projects delivered, but inflation is a concern.

Michael McGrath (Cork South Central, Fianna Fail)
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We have a capital carry-forward this year of over €800 million. That gives us some extra resources to ensure the delivery of the NDP this year. I have acknowledged that if the current level of inflation in construction persists for a long period, it will impact on the number of projects in the NDP that are delivered. We have seen some signs in respect of individual tender competitions of limited interest in the private sector. I think that is because of the significant risk they have to carry regarding fixed-price contracts under the standard public works contract. It is about finding a balance between protecting the interests of the State and taxpayers on one hand and, on the other hand, ensuring that it is a viable and attractive proposition for contractors to partner with us in the delivery of the national development plan. I have examined this issue in considerable detail in recent weeks. Building on the changes we made earlier in the year, I intend to introduce proposals to address this issue, at least in part.