James Lawless (Kildare North, Fianna Fail)
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89. To ask the Minister for Public Expenditure and Reform if he will provide details of the first elements of the Inflation/Supply Chain Delay Co-operation Framework Agreement; and if he will make a statement on the matter. [30066/22]

Michael McGrath (Cork South Central, Fianna Fail)
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The Inflation/Supply Chain Co-operation Framework sets down the approaches and the parameters within which the parties to a public works contract can operate to determine the additional costs attributable to inflation and to share that financial burden in a proportionate manner.

The Office of Government Procurement has published guidance material, template letters of agreement and workbooks to allow public bodies and their contractors to establish a framework that will sit alongside the public works contract. It will facilitate engagement and a speedy determination of the impacts of exceptional inflation and supply chain disruption.

The first element of the framework was published on 20 May 2022 for projects with values in excess of €1m.

The second element was published on 3 June 2022 for projects with values less than €1m.

Where the first element is concerned there are two strands, depending on whether the project is operating under the older form of contract; published before 7 January 2022, or the new form; published on 7 January 2022. For the older forms, the framework covers materials and energy price increases. For the new forms, only energy price increases are covered as these forms were amended to allow for materials price inflation.

Where the completion of the works is delayed due to supply chain disruption, contractors will not be held liable for any liquidated damages payments for the late delivery of the works.

It will operate from the point at which the parties enter the framework until project completion. It also permits inflation cost recovery on payments already made on projects from 1 January 2022 in recognition that inflationary pressures were further building from this point in anticipation of the invasion of Ukraine.

Inflation-related costs are determined according to a standardised approach using specified price indices published by the CSO. These additional costs are apportioned between the parties, with, subject to budgetary constraints, the State bearing up to 70% of the additional inflationary related costs on an ex gratia basis.

The use of the framework is voluntary, but participation by the parties is strongly encouraged. It represents a pragmatic response to the current challenges caused by inflation that are not within either party’s control.