Mairead Farrell (Galway West, Sinn Fein)
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78. To ask the Minister for Public Expenditure and Reform if he will provide an update on the national development plan; the impact of cost inflation; if he will provide a list of any projects which may now need to go back out for tender; and if he will make a statement on the matter. [48646/22]

Mairead Farrell (Galway West, Sinn Fein)
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The question is fairly self-explanatory. It is to look for an update on the national development plan, the impact of cost inflation and if the Minister of State will provide a list of any projects which may now need to go back out for tender. As the Minister of State knows, the national development plan is very significant and many people are concerned about the impact of inflation.

Ossian Smyth (Dún Laoghaire, Green Party)
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The National Development Plan 2021-2030, NDP, published last year, demonstrates the Government’s commitment to meeting Ireland’s infrastructure and investment needs over the medium-term horizon. The NDP 2021-2030 provides €165 billion in public capital funding alongside a detailed and positive vision for Ireland up to 2030 as part of Project Ireland 2040.

In budget 2023 last week, the Minister, Deputy Michael McGrath, announced an additional €800 million which will be made available under the NDP for core capital spending to help in delivering the largest, greenest and most ambitious infrastructure plan in the history of the State. This represents a very substantial commitment of resources. Project Ireland 2040 remains the Government’s long-term overarching strategy to make Ireland a better country for all of its people, including the additional one million people expected to live in Ireland by 2040.

Inflation in the cost of construction materials and energy are factors which must be considered by sponsoring agencies and approving authorities when establishing their project programmes. Costs relating to inflation are to be met within existing overall NDP capital expenditure ceilings. Similar to any process of Vote management, it will be up to sectors and Accounting Officers to assess whether existing timelines for the implementation of key projects will need to be adjusted or if there will be a need for prioritisation within their existing five-year Departmental ceilings. It is also possible for the same set of projects to be delivered with some extension of delivery timelines or some re-evaluation of project scope.

At the project delivery level, the Office of Government Procurement issued a range of measures and guidance that are designed to assist contracting authorities to manage the impact of the exceptional price increases that have arisen since the reopening of economies post-pandemic which were further exacerbated by the Russian invasion of Ukraine in February of this year. Interim amendments to the public works contracts and the associated procurement templates were introduced on 7 January 2022 in response to the inflationary pressures on construction materials evident throughout 2021. These applied to new works contracts whose tenders were received after 18 January 2022 and permit cost recovery for inflation even within the fixed price period for exceptional increases.

In light of increased volatility in the price of materials and energy arising out of the invasion of Ukraine, the inflation-supply chain delay co-operation framework was introduced on 10 May to mitigate the risk of insolvency or contract repudiation on contracts that were under way prior to the invasion where there would have been little or no appreciation of the price increases that we have witnessed.

Mairead Farrell (Galway West, Sinn Fein)
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There are two questions that spring to mind initially. I am aware of the €800 million that was assigned in the budget. I am wondering how it looks at the moment in respect of capital carry-over. The Minister of State also mentioned that the extensions would be done by the approving authorities, which is fair enough. Is there any analysis at departmental level to see if there much need for time extensions? I would be interested in hearing that.

Ossian Smyth (Dún Laoghaire, Green Party)
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I understand the capital carry-over is projected to be €800 million for next year, although we will not know without the outturn. The Minister, Deputy Michael McGrath, can tell me if I am wrong, but in general I believe we are not constrained by money in our capital programme at the moment. The real constraints are coming from lack of labour and delays that arise in the legal process or the planning system. We are not short of money for projects. As the Deputy said, it is the contracting authorities and the Accounting Officer in each individual Department who is responsible for making sure their own projects are on track. They update us on the capital projects tracker spreadsheet, which is available for every member of the public to read. If they feel their projects are going to run late or they are not going to complete as many projects as expected within the time, it is up to them to tell us and tell the Deputies opposite at the same time.

Mairead Farrell (Galway West, Sinn Fein)
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I thank the Minister of State. On the inflation co-operation framework, that was totally new when it was announced. I was wondering how it is working at this time. Were there any hiccups at the start? One of the things that sprung to mind at the time, which I had discussed, was that certain contracting authorities might not have the same ability, know-how or knowledge base going into it. How is that working practically? Does the Minister of State see it needing to be extended? How is it working in general?

Ossian Smyth (Dún Laoghaire, Green Party)
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I meet quarterly with the Construction Industry Federation to ask it how things are going. My understanding is that it is happy and satisfied and is not looking for changes to what was brought in in the inflation co-operation framework. When a new capital works contract is taken out, the various sub-indices of inflation are agreed and a risk-sharing arrangement is put in place. If a contract is heavily dependent on the price of wood and concrete, for example, an agreement is made beforehand that if the price goes above a certain level, a certain degree of risk-sharing will take place between the Government and the contractor. The idea of that is to prevent a situation arising where it is not worthwhile for the contractor to complete the project. Situations arose where there would be a large housing project and the builders could legitimately come back, open their books and say they would lose money on it if they completed it, or go bust. To avoid that, there has to be a degree of risk-sharing. They have to take that on, they understand that, with their financing. However, there also has to be some risk taken on by the contractor and the Government.