Malcolm Noonan (Carlow-Kilkenny, Green Party) | Oireachtas source

I welcome the pupils to the Visitors Gallery. It is always fantastic when students come to the Houses and see how our democracy works, so they are very welcome.

A key priority for the Government is that everybody should have access to sustainable, good-quality housing for purchase or rent at an affordable price, built to a high standard, located close to essential services and offering a high quality of life. The Government plans to increase the supply of housing to an average of 33,000 units per year over the next decade. This includes the delivery of 90,000 social homes, 36,000 affordable purchase homes and 18,000 cost-rental homes by 2030. Housing for All is supported by an investment package of more than €4 billion per annum.

One key challenge being faced during 2022 relates to the significant level of construction inflation, which has led to delays in some projects because contractors face difficulty in meeting contracted prices. The Minister for Housing, Local Government and Heritage and departmental officials have been working closely with stakeholders, including the local authorities, approved housing bodies and construction industry representatives, and there is clear evidence of the impact inflation is having on public housing projects, as the Senator outlined. The Minister has been engaging on this matter with the Minister for Public Expenditure and Reform, who has responsibility for public procurement policy.

In January, the Office of Government Procurement, which is under the latter Minister’s remit, introduced measures applying to new public works contracts. Under these arrangements, the fixed-price period for public works contracts was reduced to 24 months and mutual cost recovery is permitted within the fixed-price period for material price changes in excess of 15%. Provision was also made for the indexation of the materials element of the tender sum from the point at which the tender was submitted to the award of the contract. In the interests of further safeguarding public projects already under construction and to mitigate the risks of significant losses being sustained by contractors, the Minister for Public Expenditure and Reform yesterday announced further measures to address the impact of construction material inflation on public work projects. This includes the introduction of an inflation co-operation framework, which the Senator referenced, for those parties engaged under a public works contract, including public housing. This framework will facilitate both parties to engage with each other for the purpose of addressing the impacts of the most recent onset of exceptional inflation and supply chain disruption, and will operate on an ex gratia basis. The framework will set down the approaches and parameters within which the parties to a public works contract circulate additional costs attributable to material and fuel price fluctuations, using price indices published by the Central Statistics Office, CSO.

In recognition that neither party is responsible for the global events that have given rise to this inflation, it is proposed, subject to budgetary constraints, that the additional inflation costs will be apportioned between the parties, with the State bearing up to 70% of the additional inflationary-related costs. The framework will apply to payments made from 1 January 2022. The Department will work closely with our delivery partners to support the implementation of this framework.

I do not have details on the rationale as to why the ratio was set at 70:30 and not 80:20, although we can revert to the Senator with that response.