Paul McGrath (Westmeath, Fine Gael)
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Question 557: To ask the Minister for Finance if concern has been expressed to him by the Construction Industry Federation concerning his proposals for fixed price contracts; if he has had discussions or meetings with this organisation; the outcome of those discussions; and the text of the agreement reached with this organisation. [2269/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have received many representations and have met representatives of the Construction Industry Federation in relation to the proposed construction procurement reforms. The key objectives of the reforms are greater cost certainty, better value for money and more cost effective delivery of capital works projects. Our aim is to incorporate best practice from the private and public sectors into new standard forms for construction contracts and services.

Currently, in public sector works contracts, there can be a significant variance between the price tendered and the final outturn cost. New draft standard forms of contract, conditions of engagement for construction related services and related guidance material have been drafted which provide for the introduction of fixed price lump sum contracts tendered on a competitive basis with appropriate risk transfer. These new contracts have been professionally produced based on best international practice in both the public and private sectors. They have also been subjected to independent private sector scrutiny.

The contractor will be incentivised to control and manage specified risks and deliver projects on time and within budget. While there will be higher tender prices, the final cost should be less than under existing arrangements. In respect of construction related services, the new arrangements will end the present situation where a significant proportion of the fees are calculated by reference to the final outturn cost. In effect, the present arrangements can lead to an unacceptable situation where fees rise as project costs rise. The new conditions of engagement will provide for fixed price lump sum contracts as the norm for these appointments also but without compromising on quality.

These new documents issued to the construction industry and relevant professional bodies via the Forum for the Construction Industry from April to June 2005. My Department has been involved in an intensive consultation process on these documents with the industry and the professional bodies since July of last year. During these extensive discussions, their views, comments and concerns have been outlined in considerable detail. My Department has sought to address these concerns where possible but without compromising Government policy on construction procurement reform. The consultation process is expected to be completed shortly with the aim of having the new contracts and related material ready for use as soon as possible in 2006.