Written answers

Wednesday, 29 July 2020

Department of Public Expenditure and Reform

Public Procurement Contracts

Mairead Farrell (Galway West, Sinn Fein)
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133. To ask the Minister for Public Expenditure and Reform the public procurement contracts in excess of €10 million in which the final cost of the project exceeded the guaranteed maximum price in tabular form. [19221/20]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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As Minister for Public Expenditure and Reform I have responsibility for the development of policy to ensure adequate expenditure oversight on capital projects and for public procurement. 

The Public Spending Code is the set of rules, procedures and guidance developed to ensure Value for Money in public expenditure.  It sets out the oversight and approval process for public expenditure proposals including capital projects. 

All public works projects that are delivered under the Exchequer-funded element of the National Development Plan must be procured in accordance with the provisions laid down in the Capital Works Management Framework (CWMF).  The standard form of public works contract is used on the vast majority of public works projects.  It is a lump sum, fixed-price contract with tightly defined conditions governing price increases and time extensions. 

In limited circumstances, a derogation from the use of the standard forms of contract may be sought by means of an application to the Government Contracts Committee for Construction (GCCC).  This process may be used for complex or large projects or for those which have specific requirements which do not naturally fit with the standard forms of contract.

Since the public works contracts were introduced in 2007, two projects utilising a two stage award process resulting in a guaranteed maximum price (GMP) have been agreed through this derogation process; the New Children’s Hospital and Dunkettle Interchange Upgrade works.  Due to the scale of the NCH and the complexity of the Dunkettle project, the early involvement of the contractor, facilitated by these types of contracts, formed part of the risk management strategy.

It is important to note that a derogation, if agreed, does not approve the approach or strategy of the contracting authority, but simply acknowledges that the circumstances are such as to warrant a different approach than the standard.  It is a matter for the contracting authority and the approving authority to satisfy themselves as to the adequacy of the approach with regards to compliance with procurement rules and project appraisal in accordance with the Public Spending Code.  Accountability for the procurement strategy rests with the contracting authority.

It is also a matter for the contracting authority who has awarded the contract to manage its performance thereafter and report on budgetary matters to the capital approving authority concerned.  The information on final cost outcomes for individual contracts being sought by the Deputy is not held centrally in my department as this is a matter for individual contracting authorities.

With respect to the two projects where a GMP process was applied, final costs for the NCH, which is still under construction, are not available and details on budgetary matters associated with this project are a matter for the Department of Health.  It should be noted that the Dunkettle project did not proceed to the second stage (GMP) and is currently the subject of a new tender process that is utilising one of the standard public works contracts which will be awarded on the basis of a lump sum, fixed price.

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