Mairead Farrell (Galway West, Sinn Fein)
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92. To ask the Minister for Public Expenditure and Reform if he will detail the analysis of the inflation-supply chain delay co-operation framework that has been carried out to date; and if he will make a statement on the matter. [10526/23]

Mairead Farrell (Galway West, Sinn Fein)
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I think we all echo the Minister's sentiments.

My question relates to the inflation-supply chain delay co-operation framework and what analysis has been done on it.

Ossian Smyth (Dún Laoghaire, Green Party)
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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.

Mairead Farrell (Galway West, Sinn Fein)
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Gabhaim buíochas leis an Aire Stáit. There is no question that the cost of building has increased. The cost of underlying materials, be they concrete, timber, steel and so on, has increased. The cost of energy has also increased. These are the inflation effects we are dealing with as a result of this war. This will obviously have a knock-on effect on the end price and I completely get that. However, it was recently pointed out in The Irish Timesthat local authorities were paying up to 50% more for social homes in 2020. It was concerning and I flagged it. The inflation-supply chain delay co-operation framework was introduced and is there to see the State bear up to 70% of the additional inflation-related costs. This was to ensure key NDP projects and housing went ahead and was the right thing to do. I am wondering what oversight is taking place of the framework, especially in the case of local authorities, which may not have the same amount of resources.

Ossian Smyth (Dún Laoghaire, Green Party)
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I thank the Deputy for acknowledging the framework was the right thing to do. We were in a situation where builders or construction firms were unlikely to be able to complete projects because they were no longer able to complete them for the amount of money that had been contracted, as the increase in inflation had not been foreseen. This would have left us in a position where we would have to retender them and the State would possibly have to pay even more.

The feedback coming from the local authorities is there projects are no longer in danger and are going to complete. They have not been awarded extra money. We have not gone out to local authorities and told them we are increasing their budget to meet these; they must instead meet them out of their existing capital envelopes, though they have been allowed renegotiate the prices. It is not entirely the Government picking up the tab for everything.

There is risk sharing. While the State may pay up to 70% of the cost, the construction firm must take on some of what is there. We do not have aggregate data yet because we do not know at this stage how many contracts were affected and we will not know that until they are complete. Equally, each Department is responsible for keeping track of its own expenditure. The Department of Public Expenditure, National Development Plan Delivery and Reform looks at this at an aggregate level but we are not tracking individual projects. We are looking at the total amount of money that has been allocated to the Department of Education, for example, but not for an individual school it is building.

Mairead Farrell (Galway West, Sinn Fein)
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I appreciate that response. When this framework came into being, I looked into it and discussed it with the Minister of State's officials. I have always said that what we must ensure is that there is robust oversight to ensure nobody is trying to game the system. I understand completely that there is an increase, and all of that, but of course we must ensure that what I referred to does not happen. When it comes to public works contracts, issues such as bid-rigging, low-ball offers, etc., have been flagged for a long time, as acknowledged by the Competition and Consumer Protection Commission, CCPC, and the Department of Enterprise, Trade and Employment. Only last year, Reuters reported that the Spanish competition authority had fined six of that country's major construction companies for engaging in price collusion over 25 years. I understand that five of these companies have been heavily involved in major public works contracts here. It is not, therefore, that I am saying something fanciful or anything like that. Concern does arise that those who engage in such practices would try to make hay from this situation. For those authorities that do not have the capability to ensure none of this kind of thing can happen, what sort of oversight is coming from the Minister of State's Department to ensure it does not occur? What assistance is available to ensure this does not happen?

Ossian Smyth (Dún Laoghaire, Green Party)
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It is a fair question. Individual Departments are allocated money at budget time. They are given the independence to spend that money with the oversight of the Office of the Comptroller and Auditor General. It monitors their expenditure, audits them and then produces a report on each Department. The relevant committees of the Oireachtas can then bring the Accounting Officers before them and question them on the expenditure and what type of anomalies exist. The job of the Department of Public Expenditure, National Development Plan Delivery and Reform is to ensure that the individual Departments act within their budgets and deliver what they said they would do within the amount of money they have been allocated. We also, however, have this additional responsibility that we are now taking on, namely NDP delivery. This is a focus which goes beyond just approval and appraisal of projects and also includes ensuring that projects happen, that they are pushed out and that we assist individual Departments in finding ways to ensure their projects do proceed. Overall, though, there is a balance here. Individual Departments are responsible and will continue to be responsible for their own expenditures. The Department of Public Expenditure, National Development Plan Delivery and Reform is ensuring they stick within their budgets.