Dáil Éireann Debate, Tuesday - 19 June 2018
164. Deputy Kevin O'Keeffe asked the Minister for Public Expenditure and Reform if the public forms of construction contract criteria will be reviewed to facilitate variations that may arise from legislative enactment, that is, wage increases under sectoral employment order or significant price increases in materials such as insulation and steel (details supplied). [26264/18]
Amharc ar fhreagraAll public works projects that are delivered under the Exchequer-funded element of the Government's capital plan must be procured in accordance with the provisions laid down in the Capital Works Management Framework (CWMF). The CWMF is mandated by circular and was developed to assist contracting authorities in meeting their ongoing procurement requirements. It provides an integrated set of contractual provisions, guidance material, technical templates and procedures which cover all aspects of the delivery process of a public works project from inception to final project delivery and review.
The conditions of the public works contracts which are used for the delivery of the majority of building and civil engineering projects are fixed price, lump sum contracts. This requirement is key to ensuring greater cost certainty in the delivery of the public capital programme. When tendering public works contracts, contractors are expected to take account of cost increases due to inflation up to the project’s completion. On projects with long delivery programmes, an adjustment to the contract sum for inflation is possible but only after the pre-determined fixed price period has elapsed.
In order to take cost increases due to inflation into account when pricing a project it is accepted that a degree of foresight is required on the likely increases in the input costs such as labour, materials and plant over the duration of the project.
With regards to the matter of Sectoral Employment Orders (SEO) introduced by Statutory Instrument, whilst it is the case that there were no transitional arrangements introduced when the SEOs were signed into law, nonetheless there was an 11 month process leading up to the establishment of the first SEO in October 2017.
In November 2016 an application was made to the Labour Court by the Construction Industry Federation to commence the process. As a body who represents significant numbers of employers in the construction sector it must be presumed that this application was made with the knowledge of its members. An invitation for submissions by interested parties was published by the Labour Court in February 2017. This was followed by an invitation from the Labour Court to an oral hearing on 26 June 2017 to those who made submissions. Having concluded its deliberations, the Labour Court issued a recommendation to the Minister for Business, Enterprise and Innovation on the 13 July 2017 which was published shortly thereafter. The Minister, having accepted the recommendation, submitted a draft order to both Houses of the Oireachtas and it was signed into law on 19 October 2017 after a resolution approving it had been passed by each House.
Wages in this sector have experienced increases in recent years as evidenced by average increases of 6% year on year in the biannual tender price index published by the Society of Chartered Surveyors in Ireland since 2014. The foregoing would suggest that contractors should have been taking wage inflation into account when tendering for construction contracts; public or private. Indeed the SCSI tender price index would suggest that contractors have been taking wage inflation into account in pricing work.
Circular 08/2018 was issued on 24 May 2018 through the Office of Government Procurement (OGP) which sets out the amendments that have been undertaken to the CWMF to reflect the introduction of the SEOs in the construction sector. These amendments will apply to tenders and contracts that are commenced after the periods set out in the circular and do not change the fixed price nature of the contracts.
The Office of Government Procurement is commencing its engagement on the development of a Medium Term Strategy for the procurement of public works. The Strategy will incorporate a broader review of the procurement of public works projects with a view to better manage risk generally and to ensure quality outcomes. The engagement on the Strategy will involve all industry stakeholders and public bodies involved in the delivery of the public capital programme.
