Sorca Clarke (Longford-Westmeath, Sinn Fein)
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255. To ask the Minister for Housing, Planning, and Local Government the engagement that his Department has had with representatives of construction industry regarding the expected delays to building projects due to the increase in building and fuel costs; and if he will make a statement on the matter. [27493/22]

Darragh O'Brien (Dublin Fingal, Fianna Fail)
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Construction costs have risen considerably over recent years. This is due to a combination of the increased cost of regulatory compliance, general increases in labour and material costs, and increases in energy costs. The CSO Wholesale Price Index (WPI) shows the annual increase for building and construction materials to be 18.2% to the end of April 2022.

My Department continues to diligently monitor this trend, and has implemented extensive mitigation measures under its own its own remit, whilst also collaborating expansively with other Government Departments and Agencies in addressing the increasing cost issue

Given the importance of technology to the maximisation of construction efficiencies, and accordingly, cost-reduction, the Government is enhancing the role of the new Construction Technology Centre (CTC) which is under development by Enterprise Ireland. The CTC’s role will be enhanced beyond the standard remit of Technology Centres in general for its first three years of operation in order to prioritise residential construction. It will incorporate:

- Structures to enable innovation in residential construction;

- A proactive role in strengthening the residential construction value chain;

- Promotion, development and support for innovation / modern methods of construction (MMCs) using digital and manufacturing technology;

- Support for SMEs to develop scale and to adopt MMCs and Building Innovation Modelling (BIM) techniques; and

- Support for digitisation in the manufacturing sector for residential construction.

This will be complemented by an increased focus for the Department of Public Expenditure and Reform-led Construction Sector Group (CSG) on the residential construction sector. This will include the introduction and full implementation of a pipeline of cost reducing innovations and productivity measures, in line with its established remit to improve productivity and efficiency, and to control price inflation.

To further support innovation the development of MMC will be broadened, and will include the establishment of a national Centre of Excellence Demonstration Park for MMC. Construction industry representatives have expressed robust support for these measures, and collaboration between stakeholders will be overseen by the Department of Enterprise, Trade and Employment. 

My Department is also in the process of preparing a study to carry out an analysis for each component of cost of construction (including cost of compliance) of house and apartment development, with a view to reducing cost and increasing standardisation. It will also identify opportunities for cost reduction for consideration by relevant Government departments and industry. It is proposed that this study will also include workshops to engage with industry on construction costs.

Additionally, in January 2022, the Office of Government Procurement (OGP) introduced the following interim measures to address the impact that the recent price increases in construction materials is having on public works tenders:

- Reduced fixed price period duration to 24 months (previously 30 months minimum).

- Permit mutual cost recovery within the fixed price period for material price changes in excess of 15% (previously 50%).

- Introduction of a new mechanism to address the period between tender submission and award through limited indexation of the tender price.

The above measures related to new Public Works Contracts going forward (contracts with a version date earlier than 7 January 2022). More recently, in the interest of safeguarding public projects that are already under construction and to mitigate the risks of significant losses being sustained by contractors, the OGP has introduced an ‘Inflation/Supply Chain Delay Co-operation Framework’ for parties engaged under a public works contract. This framework will operate on an ex-gratia basis and includes measures to:

- address delay to the Substantial Completion of the Works, or a Section of the Works, that has occurred since 1 January 2022 where the delay is caused by supply chain disruption;

- address recent inflation in the prices of fuel and energy;

- address inflation in materials, from 1 January 2022 onwards for those Public Works contracts with a version date earlier than 7 January 2022; and

- proactively, and collaboratively, manage the on-going impact of these external factors insofar as is possible within the project’s original delivery parameters.

My Department meets with the Construction Sector Group on a quarterly basis and the Construction Sector Group Digital and Innovation sub group on a monthly basis to ensure regular and open dialogue between government and industry on how best to achieve and maintain a sustainable and innovative construction sector positioned to successfully deliver on the commitments in Project Ireland 2040. My Department also meets regularly with Industry Representative bodies and participates in Industry conferences met where increases in building and fuel costs and their impact on the delivery of housing is discussed. My Department has both enacted and collaborated in a host of cost saving measures to facilitate both the necessary growth in and the speeding up of residential construction, and engagement with the construction industry has been and remains central to this.