Written Answers Nos. 121-140
122. Deputy Kieran O'Donnell asked the Minister for Public Expenditure and Reform the measures that are being taken to improve the resilience of IT systems in the civil service and wider public sector given the ever-present risk of cybercrime. [31330/22]
Amharc ar fhreagraIn November 2021, the Public Sector Cyber Security Baseline Standard was published by the Minister for the Environment, Climate and Communications. This was a commitment in the National Cyber Security Strategy 2019-2024 and sets out a range of guidance for civil and public service bodies as they continue to work to mitigate the risk of cyber crime and improve resilience of their ICT and digital systems. The Cyber Security Baseline Standards Framework will be used by Public Service Bodies to assess and improve the management of cybersecurity and will allow them to identify, protect, detect, respond to, and recover from an attack, minimising damage and impact. While I cannot answer on behalf of colleagues in other Departments I am happy to advise that the measures in place in my own Department already meet the baseline standard.
It is critical that the State continues to upgrade and improve the resilience of the State’s IT systems across both public and private sectors. This is a global issue and the European Union has put in place specific EU-wide legislation, the Network and Information Security (NIS) directive, to ensure that critical IT systems are subject to a higher standard of cyber-security. Updated legislation is currently being drafted by my colleague the Minister for the Environment, Climate and Communications whose Department is responsible for the transposition of the NIS2 Directive in to national law. This new legislation is needed in order to strengthen the security requirements and expand the list of systems and industries that fall under its scope. For the first time this legislation will cover critical public administration activities carried out by the public sector.
124. Deputy Bríd Smith asked the Minister for Public Expenditure and Reform if unclaimed National Lottery winnings are subject to any oversight or monitoring by the Government in terms of the way and when they are spent; if he has plans to revisit previous agreements on the issue with the winning contractor for the national Lottery; when the current contract expires; if there are plans on the future of the Lottery; and if he will make a statement on the matter. [31248/22]
Amharc ar fhreagraMonitoring and oversight of unclaimed National Lottery winnings
Unclaimed National Lottery winnings are subject to oversight and monitoring by the Regulator of the National Lottery, in terms of the way and when they are spent.
1. The Regulator of the National Lottery is an independent office established under the National Lottery Act 2013 solely to regulate the National Lottery in accordance with the legislation and the Licence awarded to the Operator of the National Lottery.
2. Clause 6.9.2 of the Licence requires that any expired, unclaimed prizes go the Operator of the National Lottery - to be used solely for the promotion of the National Lottery and/or National Lottery games within 365 days.
3. The Operator reports annually to the Regulator on (a) the value of expired unclaimed prizes and (b) its expenditure on promoting the National Lottery.
4. The amount of expired unclaimed National Lottery prizes in each of the years 2016 to 2021 was as follows.
|
Year |
Expired Unclaimed Prizes € |
|
2016 |
€16,359,564 |
|
2017 |
€16,164,125 |
|
2018 |
€18,922,846 |
|
2019 |
€18,993,483 |
|
2020 |
€17,026,536 |
|
2021 |
€17,054,620 |
5. The Regulator reviews the Operator’s compliance with Clause 6.9.2 of the Licence and monitors the transfers of expired unclaimed prizes to the Operator.
The Regulator also oversees the actions of the Operator to prevent prizes going unclaimed. For example, the Regulator monitors large, unclaimed prizes to ensure that the Operator is taking appropriate steps to alert players and the general public and find the winner before the prize expires.
The current contract/Licence
The current Licence to operate the National Lottery expires in 2034 (20 years from 30 November 2014).
The Licence does not include a “break clause” for renegotiation.
Future contracts/Licences
The Regulator of the National Lottery is responsible for holding a competition for the next licence.
Section 25 of the National Lottery Act 2013 provides that the Minister may issue a direction to the Regulator in relation to the next licence to be granted following the expiry (or revocation) of the existing licence and the Regulator must ensure that the licence is in accordance with this direction.
Section 26 of the National Lottery Act 2013 provides that the Regulator will draft the next licence to be issued as part of this competition and the draft shall be submitted to the Minister for approval before being issued.
125. Deputy Alan Dillon asked the Minister for Public Expenditure and Reform the level of involvement that his Department has had in dealing with the Ukrainian crisis; and if he will make a statement on the matter. [31311/22]
Amharc ar fhreagraIreland is resolute in our solidarity and support for Ukraine. There is a whole-of-Government response in place to co-ordinate the humanitarian supports required to respond to the conflict.
My Department’s role is primarily focused on ensuring that the necessary resources are in place to respond to this humanitarian crisis with work ongoing, in consultation with other Government Departments, to estimate the potential resources required to provide a range of supports to Ukrainian refugees including accommodation and social welfare supports. It remains difficult to accurately estimate the total amount of funding that may be required given the ongoing uncertainty on the overall numbers of arrivals, their demographic profile and specific needs, and accommodation solutions. In recognition of this important humanitarian priority, provision of up to €3 billon was included in the Stability Programme Update (SPU) as an indicative figure for 2023. The scale of funding needed, for 2022 and future years, will be reviewed on an ongoing basis, as more information becomes available.
My Department is also monitoring developments arising from the conflict both in terms of the overall fiscal impacts and for key areas under the remit of my Department.
The Office of Government Procurement continues to monitor the implications of war for supply chain constraints and inflationary pressures. To address the significant ongoing uncertainty faced by contractors engaged on public works projects due to inflationary pressures outside the control of either party that have arisen due to the Russian invasion of Ukraine the Inflation Co-operation Framework was introduced last month.
The EU has introduced a range of flexibilities to address the impact of the influx of Ukrainian refugees including a regulation on Cohesion Action for Refugees in Europe (CARE) allowing for the swift release and reallocation of existing cohesion policy funding. Member States are also permitted to use existing funds not yet programmed under the Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU), a post-COVID recovery package and all unallocated resources under the current 2014-2020 funding period where programmes are drawing to a close. Ireland is making use of remaining unallocated funding under the European Regional Development Fund (€0.4m) and REACT-EU (€53m) for this purpose. My Department is currently working closely with other Government Departments and agencies to determine the range of existing activities supporting Ukrainian refugees which could be financed under this mechanism.
126. Deputy John Lahart asked the Minister for Public Expenditure and Reform if he is examining any further expenditure measures to alleviate cost of living pressures; and if he will make a statement on the matter. [30138/22]
Amharc ar fhreagra127. Deputy Alan Dillon asked the Minister for Public Expenditure and Reform his Department’s plans to deal with rising inflation; and if he will make a statement on the matter. [31310/22]
Amharc ar fhreagra143. Deputy John Paul Phelan asked the Minister for Public Expenditure and Reform his Department's strategy towards tackling the cost-of-living crisis; and if he will make a statement on the matter. [31081/22]
Amharc ar fhreagraI propose to take Questions Nos. 126, 127 and 143 together.
The Government is acutely aware of the increase in consumer prices in recent months, especially the increase in fuel and other energy prices. This increase in inflation is not a problem unique to Ireland. Internationally, arising from the pandemic supply chain issues were a factor, and now with the war in Ukraine driving further increases in energy prices countries are facing higher prices. These external factors are not within our control.
In recognition of this inflationary challenge, Budget 2022 set out a €1.2 billion package of expenditure measures to support citizens across a range of sectors with cost of living pressures. Some headline measures include increases in social protection payments, Fuel Allowance and Working Family Payment; health affordability measures; social and affordable housing funding, and enhanced student and childcare supports. Budget 2022 also contained an income tax package of just over half a billion euro.
Since December 2021, over half a billion euro of additional expenditure measures have been put in place to support citizens and businesses with increased costs. A number of these measures build on supports put in place in Budget 2022. A summary of the main measures is as follows:
- An Energy Credit payment automatically applied to the electricity bill of all domestic account holders to assist with rising energy costs.
- In addition to the €5 per week increase in Fuel Allowance payments introduced in Budget 2022, a further two lump sum payments totalling €225, paid in March and in mid-May, will benefit over 370,000 households.
- Budget 2022 announced an increase of €10 in the weekly income threshold for the Working Family Payment. The implementation of this increase was brought forward from April to June.
- A further reduction from €100 to €80 in the monthly payment threshold for the Drugs Payment Scheme. This will reduce medicines and drugs costs for over 70,000 recipients.
- A temporary 20% reduction in Public Service Obligation Public Transport fares until the end of 2022 to reduce the financial burden on commuters returning to the workplace.
- The maximum annual School Transport charge was reduced to €150 per family at primary level and €500 per family at post-primary level for the next academic year.
- A temporary and targeted emergency grant scheme for licensed hauliers provides a payment of €100 per week for licenced heavy goods vehicle for a period of eight weeks.
To provide further support towards mitigating fuel cost increases, the Department of Finance have introduced temporary reductions in the excise duties charged on petrol, diesel and marked gas oil and have reduced the rate of VAT on the supply of gas and electricity.
While public resources cannot be deployed at the scale that would be needed to fully compensate for all cost increases, the Government has committed significant resources to mitigate cost of living issues, targeted at the main underlying problem of higher energy prices and with additional assistance to those most vulnerable.
Over the coming weeks, I will be engaging with my colleague the Minister for Finance to prepare the Summer Economic Statement. This will set out the budgetary parameters for Budget 2023 taking account of an increasingly challenging and complex economic context.
128. Deputy Éamon Ó Cuív asked the Minister for Public Expenditure and Reform the number of general grade civil servants recruited to the civil service with a proven capability to do their work through English and through Irish since the recent enactment by the Houses of the Oireachtas of the amended Acht na dTeangacha Oifigiúla; if the civil servants with an ability to work in more than one of the official languages of the State or of the European Union are given an allowance for this capability in view of its importance for service provision; and if he will make a statement on the matter. [30333/22]
Amharc ar fhreagraAs the Deputy will be aware, the Public Appointments Service (PAS) is the primary recruiter for the civil service and establishes recruitment panels that individual civil service employers may access as vacancies falls to be filled.
I am advised by PAS that since the enactment of the Official Languages (Amendment) Act 2021 on 22 December last, a total of 36 candidates have been assigned from panels established from recruitment competitions - from Clerical Officer to Principal Officer level - where fluency in Irish was required for the post in question and for which proficiency in Irish was tested as part of the PAS assessment process.
Additionally, PAS has assigned 101 candidates from competitions to posts where Irish was not identified by the hiring employer as a prerequisite for the post in question and where the candidate declared as part of their application that they had fluency in Irish. Their proficiency in Irish was not, however, tested as part of the PAS assessment process.
It is possible that some Departments or Government Officers may also have recruited fluent speakers directly under their local recruitment licence instead of PAS.
An allowance is not payable to an individual that can discharge the responsibilities attaching to their posts in more than one official language of the State or of the European Union.
The Deputy will be aware that the Act requires the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media to establish an Irish Languages Services Advisory Committee within 6 months of the date of enactment. The functions of this Advisory Committee are set out in the Act and include the preparation of a National Plan, within two years of its establishment, to increase the provision of services through the medium of Irish as well periodic surveying of the number of Irish speakers employed by the public service. The work of this Committee may include consideration of approaches to the future recruitment of Irish speakers. My Department and PAS, as the principal recruiter for the civil and public service, will be represented as members on this Committee at the appropriate level.
130. Deputy Brendan Smith asked the Minister for Public Expenditure and Reform when the Peace Plus Programme will become operational; and if he will make a statement on the matter. [31324/22]
Amharc ar fhreagraThe PEACEPLUS cross-border EU programme is at a very advanced point of development and I look forward to its launch and to the first calls for funding applications later in 2022.
This new €1.1bn North South programme will carry on the work of the current INTERREG and PEACE programmes in support of shared peace and prosperity across an eligible area of Northern Ireland and the Border counties of Ireland.
The development of PEACEPLUS has been led by the Special EU Programmes Body (SEUPB). SEUPB have finalised a draft programme which was approved by Government, by the Northern Ireland Executive and by the North South Ministerial Council in autumn 2021.
The draft programme was submitted to the European Commissision for final review and adoption in March 2022, in line with EU Regulatary requirements. Commission approval is anticipated in the coming weeks. Parallel to this, work is currently underway to finalise the Financing Agreement between the EU, UK and Ireland which will be required for PEACEPLUS.
It is anticipated that a formal launch event for PEACEPLUS will take place in autumn 2022. However, in advance of this, the EU, Ireland and the UK are all clear on the importance of funding reaching the ground as soon as possible.
With this in mind, the SEUPB have already commenced a programme of pre-development support for potential applicants to PEACEPLUS. Work is also underway to establish and convene a Programme Monitoring Committee for PEACEPLUS in order to approve programme rules as well as the first draft calls for applications.
This will help to ensure that PEACEPLUS can open at the earliest possible stage this autumn following European Commission approval and the completion of a Financing Agreement.
131. Deputy Alan Farrell asked the Minister for Public Expenditure and Reform the status of the implementation of Project Ireland 2040; and if he will make a statement on the matter. [30551/22]
Amharc ar fhreagraThe National Planning Framework (NPF) and the National Development Plan (NDP) combine to form Project Ireland 2040. The NPF sets the vision and strategy for development out to 2040 and the current NDP provides the enabling investment to implement that strategy from 2021 to 2030. With an investment in capital of €165 billion, the NDP shows the ambition of the government with the largest ever public capital investment plan in the history of the State.
As Minister for Public Expenditure and Reform I am responsible for setting the overall capital allocations across Departments. Management and delivery of individual investment projects within the allocations agreed under the NDP is a key responsibility of every Department and Minister. However, I am conscious of the challenges to the delivery of the NDP being posed by the increases in the prices of construction materials in the aftermath of the pandemic and as a result of the Russian invasion of Ukraine. My Department has put in place a series of policy measures to mitigate those challenges and will continue to assess and respond to a rapidly changing environment.
As the NDP is a high-level financial and budgetary framework it does not outline a comprehensive list of all public investment projects. An extensive list of projects that are currently planned as part of Project Ireland 2040 are available in the capital tracker and the myProjectIreland map published most recently by my Department in May 2022. The tracker provides a composite update on the progress of all major investments that make up Project Ireland 2040. MyProjectIreland is a citizen-focussed interactive map where information can easily be accessed on projects planned for local areas.
The Government is committed to continue to detail the delivery of the National Development Plan at regular intervals into the future to allow for full transparency on the implementation of Project Ireland 2040. This aim will be achieved through regular updates of the capital tracker and map as well as the publication of annual reports and regional reports highlighting Project Ireland 2040 achievements and giving a detailed overview of the public investments which have been made throughout the country.
132. Deputy Bernard J. Durkan asked the Minister for Public Expenditure and Reform the extent to which he expects his Department to be in a position to address the issues which threaten the economy; and if he expects to put in place protective measures. [31276/22]
Amharc ar fhreagra146. Deputy Bernard J. Durkan asked the Minister for Public Expenditure and Reform the extent to which he expects his Department to take steps in the context of public expenditure and reform to address any issues which may threaten domestic stability and progress; and if he will make a statement on the matter. [31277/22]
Amharc ar fhreagraI propose to take Questions Nos. 132 and 146 together.
Our economy has faced significant challenges in recent years including from the Covid-19 pandemic, Brexit and most recently rising prices. Many of the drivers of inflation at present are global in nature, such as supply chain issues and have been exacerbated by the war in Ukraine.
Government has provided substantial supports to protect our economy, people and public services since the onset of the Covid-19 pandemic. Some €30 billion in additional funding was made available to Departments across 2020 and 2021 for measures related to Covid-19 with provision for up to €7 billion made under Budget 2022. This has supported delivery of key public services while addressing the challenges of Covid-19, including critical income and employment supports to our workers and businesses, through the Pandemic Unemployment Payment (PUP) and Employment Wage Subsidy Scheme (EWSS).
While Government cannot fully insulate all from the impact of rising prices, significant resources have been provided to protect those that may be struggling due to price pressures. Budget 2022 set out a €1.2 billion package of expenditure measures to support citizens across a range of sectors with cost of living pressures and also contained an income tax package of just over half a billion euro.
Since December 2021, over half a billion euro of additional expenditure measures have been put in place to support citizens and businesses with increased costs targeted at energy prices, including the Electricity Credit for all domestic account holders. To provide further support towards mitigating fuel cost increases, the Department of Finance have introduced temporary reductions in the excise duties charged on petrol, diesel and marked gas oil and have reduced the rate of VAT on the supply of gas and electricity.
Government has sought to implement measures which strike a balance between delivering targeted support, capable of timely implementation and are temporary in nature to ensure that our public finances remain on sustainable trajectory and avoid actions that could result in further inflation.
Over the coming weeks, I will engage with my colleague the Minister for Finance in preparation for the Summer Economic Statement. This will outline the fiscal parameters for Budget 2023 against the backdrop of this challenging and complex economic environment.
133. Deputy Paul McAuliffe asked the Minister for Public Expenditure and Reform if he proposes to reinforce the 5% spending rule; and if he will make a statement on the matter. [29748/22]
Amharc ar fhreagraThe Summer Economic Statement 2021 set out a medium term expenditure strategy for the period to 2025. This strategy aims to align core expenditure growth with the trend growth rate of the economy while unwinding the exceptional Covid-19 spending.
Recent months have seen a number of new challenges emerge across the economy. These developments have changed the context for this year's Summer Economic Statement (SES) with inflation levels elevated above those projected in Budget 2022. This adds complexity to the formulation of our fiscal strategy for 2023.
I am currently engaged in preparing the SES with my colleague the Minister for Finance for publication in the coming weeks. In finalising the budgetary parameters, we will seek to strike a balance between helping to mitigate cost of living pressures, continuing to invest in critical public services and ensuring sustainability of the public finances. Overall we aim to design policy to protect the most vulnerable in our society whilst also seeking to ensure that measures do not add to inflationary pressures.
135. Deputy Ruairí Ó Murchú asked the Minister for Public Expenditure and Reform if he will introduce a public service oversight body; and if he will make a statement on the matter. [30060/22]
Amharc ar fhreagraI wish to thank the Deputy for the question.
The Programme for Government does not contain any commitments concerning the establishment of a new oversight body for the Public Service.
The Deputy may wish to note that, in 2014, the Civil Service Management Board (comprised of secretaries general of government departments) was established to oversee the implementation of the ongoing change programme across the Civil Service.
Similarly, the Public Service Leadership Board (comprised of a mix of secretaries general and chief executives/directors general of public service bodies) was established in 2018 to provide leadership across the wider public service for the public service innovation and development programme.
136. Deputy Cormac Devlin asked the Minister for Public Expenditure and Reform the measures that he is taking to address the impact of construction material price inflation on public works projects; and if he will make a statement on the matter. [29641/22]
Amharc ar fhreagraThere have been significant and sustained increases in the prices of a broad range of commonly used materials in the construction sector throughout 2021 in the aftermath of the pandemic. Energy prices also showed marked increases in 2021 and have further escalated in response to the Russian invasion of Ukraine. Both materials and energy represent significant input costs for construction projects and inflation is a risk that contractors have been expected to bear under the public works contracts for a defined period.
These inflationary provisions have operated reasonably effectively over the years since their introduction, albeit in times of relative price stability. However, the price movements experienced on construction materials over the past 12 months have arisen suddenly and with no warning. In response to this challenge, I introduced a series of measures in January to address the risk posed.
- The OGP issued procurement guidance in November 2021 to assist public bodies in managing the challenges they face concluding ‘live’ tenders.
- With reference to future tenders, the OGP published interim amendments to the provisions in the public works contracts on 7 January 2022. Within certain parameters, these amendments reduce the level of risk of extraordinary materials price inflation that contractors have to bear, while also enabling the Exchequer to obtain cost reductions should exceptional price reductions occur during the course of the works. The measures are designed to encourage confidence in the tender process and to mitigate against the over-provision for price inflation in tender prices. However, they do not cater for fuel/energy price increases or supply chain disruption.
While these changes had been expected to bring greater stability to contracting arrangements on projects whose tenders were received after 18 January 2022, there has been sustained feedback from Government Departments and their Agencies that successful delivery of priority projects included in the NDP is jeopardised by further inflationary pressures associated with the war in Ukraine. Departments have reported specific issues with fuel costs and supply chain disruption, including reduced competition for public works contracts and challenges relating to projects underway during 2021.
Through extensive engagement with industry and public sector stakeholders involved in the delivery of the National Development Plan (NDP) 2021-2030, it is clear that the delivery of many critical public capital projects is being put at risk due to the rapid increases in material and energy prices in recent times. For contractors who tendered for projects prior to the onset of these inflationary pressures, this issue is particularly acute.
In the interest of safeguarding public projects that are already under construction and to mitigate the risks of significant losses being sustained by contractors, on Tuesday 10 May I announced details of the “Inflation Co-operation Framework" for those parties engaged under a public works contract.
The Framework facilitates both parties to engage with one another for the purpose of addressing the impacts of this most recent onset of exceptional inflation and supply chain disruption and operates on an ex gratia basis. The Framework sets down the approaches and the parameters within which parties to a public works contract may calculate additional costs attributable to material and fuel price fluctuations using price indices published by the Central Statistics Office.
In recognition that neither party is responsible for the global events that have given rise to inflation, it is proposed that the additional inflation costs be apportioned between the parties, with, subject to budgetary constraints, the State bearing up to 70% of the additional inflationary related costs. The Framework applies to payments made from 1 January 2022.
The key provisions of the Inflation Co-operation Framework are:
- It operates from the point at which the parties agree to engage until the project is completed or the parties elect to withdraw by giving notice to the other.
- Given that further inflationary pressures have been building since the beginning of 2022, it provides for the back-payment of a proportion of inflation related costs (on materials and energy) to 1 January 2022 on those contracts which pre-date the introduction of the interim amendments (contracts with a revision date earlier than 7 January 2022).
- The inflation analysis is undertaken using relevant indices published by the Central Statistics Office.
- Going forward, for the duration of the framework, additional inflation costs (for materials and energy) are to be calculated in a similar manner.
- For more recent contracts (i.e. those that commenced under the amended forms of contract), the framework permits the recovery of costs arising from fluctuations in energy prices.
- And finally, for all contracts currently in progress, where it can be shown that a supply chain disruption that has arisen since 01 January 2022 that has led to a delay in completing the project, contractors will not be held liable to pay liquidated damages for the late delivery of the project.
The use of the framework is voluntary, but participation by the parties is strongly encouraged. It represents a pragmatic and proportionate response to the current challenges caused by inflation that are not within either party’s control.
Guidance, workbook templates and forms of agreement have been published by the Office of Government Procurement and are available on the Capital Works Management Framework website: constructionprocurement.gov.ie/. There is a new dedicated page ‘Details of Inflation/ Supply Chain Delay Co-operation Framework ’, which can be accessed directly from the link in the top banner on the website.
The measures available under the Framework strike an important balance between the additional costs incurred by the State to support Contractors engaged on public projects and the State’s ability to deliver the NDP including housing delivery, whilst providing value for money for the taxpayer.
The OGP will be further amending the conditions of the public works contracts so that these measures are incorporated into the contractual framework on a permanent basis.
These amendments will ensure a clear apportionment of the risk associated with inflation to enable contractors to price that risk and ensure that we retain a reasonable degree of budgetary certainty without seeing a reduction in those participating in tenders and over-provision for inflation by those that submit tenders.
137. Deputy Pádraig O'Sullivan asked the Minister for Public Expenditure and Reform the extent to which his Department continues to monitor the progress of Government contracts; his views on whether the amendments to the Public Works Contracts in January 2022 aimed at sharing the risk of materials price inflation is having a positive impact; and if he will make a statement on the matter. [31074/22]
Amharc ar fhreagraSignificant progress has been made in the delivery of Project Ireland 2040 and the National Development Plan. Hosted at gov.ie/2040, the Investment Projects and Programmes Tracker and interactive map provide people with in-depth information on the progress of capital projects in their own area. The most recent version of the tracker was released on 18 May 2022. It is drawn from data provided by relevant Government Departments and agencies. It focuses mainly on projects and programmes with costs greater than €20 million.
Management and delivery of the projects and programmes are a matter for the Sponsoring Agency and Approving Authority in each case. The latest update of the tracker provides progress updates on over 270 projects and 140 programmes, including almost 100 projects in excess of €50m. Developed in collaboration with Ordnance Survey Ireland, MyProjectIreland is a citizen-focussed interactive map. By clicking on the map at gov.ie/2040, citizens can find updated information on what has been achieved and what is planned for their own local area. The May 2022 update expands the coverage of the map to incorporate over 1,100 projects.
The Government is committed to continue to detail the delivery of the National Development Plan at regular intervals into the future to allow for full transparency on the implementation of Project Ireland 2040. This will be achieved through regular updates of the capital tracker and map as well as the publication of annual reports and regional reports highlighting Project Ireland 2040 achievements and giving a detailed overview of the public investments which have been made throughout the country.
The interim measures to address the impact of Construction Material Price Inflation on Public Works Projects announced in November 2021 and introduced in January 2022 apply to projects whose tenders were submitted since 18 January 2022. They were introduced to provide greater certainty as to the extent of inflation that has to be borne so as to avoid over-provisioning for inflation and attract greater competition in public tenders.
These amendments include:
1. Limited indexation of the tender price to cover price increases to materials in the period between the submission of the tender and the award of the contract,
2. A reduction in the fixed price period once the contract has been awarded to 24 months,
3. Provision for the contractor to seek an adjustment to their price once the contract has been awarded should the price of a particular material when purchased increase by more than 15% on its price at the time the contract was awarded, and
4. Provision for the public body to seek a reduction in the price where the price of a particular material reduces by more than 15% from the date the contract has been awarded has also been introduced.
While these changes had been expected to bring greater stability to contracting arrangements on projects whose tenders were received after 18 January 2022, there has been sustained feedback from Government Departments and their Agencies that successful delivery of priority projects included in the NDP is jeopardised by further inflationary pressures associated with the war in Ukraine. Departments have reported specific issues with fuel costs and supply chain disruption, including reduced competition for public works contracts and challenges relating to projects underway during 2021.
Through extensive engagement with industry and public sector stakeholders involved in the delivery of the National Development Plan (NDP) 2021-2030, it is clear that the delivery of many critical public capital projects is being put at risk due to the rapid increases in material and energy prices in recent times. For contractors who tendered for projects prior to the onset of these inflationary pressures, this issue is particularly acute.
In the interest of safeguarding public projects that are already under construction and to mitigate the risks of significant losses being sustained by contractors, on Tuesday 10 May I announced details of the “Inflation Co-operation Framework" for those parties engaged under a public works contract.
The Framework facilitates both parties to engage with one another for the purpose of addressing the impacts of this most recent onset of exceptional inflation and supply chain disruption and operates on an ex gratia basis. The Framework sets down the approaches and the parameters within which parties to a public works contract may calculate additional costs attributable to material and fuel price fluctuations using price indices published by the Central Statistics Office.
In recognition that neither party is responsible for the global events that have given rise to inflation, it is proposed that the additional inflation costs be apportioned between the parties, with, subject to budgetary constraints, the State bearing up to 70% of the additional inflationary related costs. The Framework applies to payments made from 1 January 2022.
The key provisions of the Inflation Co-operation Framework are:
- It operates from the point at which the parties agree to engage until the project is completed or the parties elect to withdraw by giving notice to the other.
- Given that further inflationary pressures have been building since the beginning of 2022, it provides for the back-payment of a proportion of inflation related costs (on materials and energy) to 1 January 2022 on those contracts which pre-date the introduction of the interim amendments (contracts with a revision date earlier than 7 January 2022).
- The inflation analysis is undertaken using relevant indices published by the Central Statistics Office.
- Going forward, for the duration of the framework, additional inflation costs (for materials and energy) are to be calculated in a similar manner.
- For more recent contracts (i.e. those that commenced under the amended forms of contract), the framework permits the recovery of costs arising from fluctuations in energy prices.
- And finally, for all contracts currently in progress, where it can be shown that a supply chain disruption that has arisen since 01 January 2022 that has led to a delay in completing the project, contractors will not be held liable to pay liquidated damages for the late delivery of the project.
The use of the framework is voluntary, but participation by the parties is strongly encouraged. It represents a pragmatic and proportionate response to the current challenges caused by inflation that are not within either party’s control.
Guidance, workbook templates and forms of agreement have been published by the Office of Government Procurement and are available on the Capital Works Management Framework website: constructionprocurement.gov.ie/. There is a new dedicated page ‘Details of Inflation/ Supply Chain Delay Co-operation Framework ’, which can be accessed directly from the link in the top banner on the website.
The measures available under the Framework strike an important balance between the additional costs incurred by the State to support Contractors engaged on public projects and the State’s ability to deliver the NDP including housing delivery, whilst providing value for money for the taxpayer.
The OGP will be further amending the conditions of the public works contracts so that these measures are incorporated into the contractual framework on a permanent basis.
These amendments will ensure a clear apportionment of the risk associated with inflation to enable contractors to price that risk and ensure that we retain a reasonable degree of budgetary certainty without seeing a reduction in those participating in tenders and over-provision for inflation by those that submit tenders.
138. Deputy Ged Nash asked the Minister for Public Expenditure and Reform if he will provide an update on the impact of rising construction costs on the delivery of the National Development Plan; the total cost to the State in 2022; the estimated cost in 2023 of his Department’s commitment to pay 70% of the construction cost inflation on recently agreed contracts; and if he will make a statement on the matter. [31014/22]
Amharc ar fhreagraThere have been significant and sustained increases in the prices of a broad range of commonly used materials in the construction sector throughout 2021 in the aftermath of the pandemic. Energy prices also showed marked increases in 2021 and have further escalated in response to the Russian invasion of Ukraine. Both represent significant input costs for construction projects and inflation is a risk that contractors have been expected to bear under the public works contracts for a defined period.
These inflationary provisions have operated reasonably effectively over the years since their introduction, albeit in times of relative price stability. However, the price movements experienced on construction materials over the past 12 months have arisen suddenly and with no warning. In response to this challenge, I introduced a series of measures to address the risk posed.
- The OGP issued procurement guidance in November 2021 to assist public bodies in managing the challenges they face concluding ‘live’ tenders.
- With reference to future tenders, the OGP published interim amendments to the provisions in the public works contracts on 7 January 2022. Within certain parameters, these amendments reduce the level of risk of extraordinary price inflation that contractors have to bear, while also enabling the Exchequer to obtain cost reductions should exceptional price reductions occur during the course of the works. The measures are designed to encourage confidence in the tender process and to mitigate against the over-provision for price inflation in tender prices. However, they do not cater for fuel/energy price increases or supply chain disruption.
While these changes had been expected to bring greater stability to contracting arrangements on projects whose tenders were received after 18 January 2022, there has been sustained feedback from Government Departments and their Agencies that successful delivery of priority projects included in the NDP is jeopardised by further inflationary pressures associated with the war in Ukraine. Departments have reported specific issues with fuel costs and supply chain disruption, including reduced competition for public works contracts and challenges relating to projects underway since early in 2021.
The ‘All Materials’ category of the Central Statistics Office’s (CSO) Detailed Wholesale Price Indices for Building and Construction Materials saw a 16.9% increase in the 12 months to March 2022. In some of the sub-categories the 12 month increase is more severe, ‘other structural steel’ for example shows a 64.1% increase and rough timber 46.3%.
Through extensive engagement with industry and public sector stakeholders involved in the delivery of the National Development Plan 2021-2030 (NDP), it is clear that the delivery of many critical public capital projects is being put at risk due to the rapid increases in material and energy prices in recent times. For contractors who tendered for projects prior to the onset of these inflationary pressures, this issue is particularly acute.
In the interest of safeguarding public projects that are already under construction and to mitigate the risks of significant losses being sustained by contractors, on Tuesday 10 May I announced details of the “Inflation Co-operation Framework" for those parties engaged under a public works contract.
There are two strands to the framework 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 will cover materials and energy price increases, and supply chain disruption. For the new forms only energy price increases and supply chain disruption will be covered as these forms were amended to allow for material price inflation.
The framework facilitates both parties to engage with one another for the purpose of addressing the impacts of this most recent onset of exceptional inflation and supply chain disruption and operates on an ex gratia basis. The framework sets down the approaches and the parameters within which parties to a public works contract calculate additional costs attributable to material and fuel price fluctuations using price indices published by the CSO.
In recognition that neither party is responsible for the global events that have given rise to inflation, it is proposed that the additional inflation costs be apportioned between the parties, with, subject to budgetary constraints, the State bearing up to 70% of the additional inflationary related costs.
It has been decided that it is appropriate for the State to bear the majority of any additional costs identified on the basis of the limited capacity of contractors to bear these additional costs which are exceptional in terms of the increase and the uncertainty with respect to their duration. As the State is the ultimate owner and beneficiary of the asset that is under construction, it is imperative that quality materials continue to be used to ensure the durability of completed asset.
However contractors should continue to carry some degree of the additional costs arising due to inflation in recognition of the original terms upon which they tendered and it encourages more efficient purchasing thereby addressing value for money concerns.
The framework applies to payments made from 1 January 2022 in recognition that inflationary pressures were further building from this point in anticipation of the invasion of Ukraine. The extent of additional payments that will arise on projects going forward will depend on the materials that are to be incorporated, the stage of the project’s development and further movement in prices which is extremely difficult to forecast at this moment and contracting authorities will be working within ranges which are related to movements in various indices.
The measures available under the framework strike an important balance between the additional costs incurred by the State to support Contractors engaged on public projects and the State’s ability to deliver the NDP including housing delivery, whilst providing value for money for the taxpayer.
Departments are consistently required to deal with fluctuations in market conditions in delivering required infrastructure. The key requirements that underpin approvals process for capital investment, namely appraisals on the economic and financial value of projects, will remain. Only projects that deliver the required benefits on key Government objectives and prove to be Value for Money for the State will go forward to implementation.
While the amendments announced recently may lead to some extended timelines in project delivery, it is open to Departments to amend existing plans to deliver similar outcomes within the agreed Budgetary ceilings in the NDP.
The 2022 capital allocation is €11,403 million. This is an increase of €0.9 billion or 8% on the 2021 allocation and an increase of almost €2.3 billion or 25% on the actual spend (exclusive of carryover) in 2021. In aggregate, including capital carryover, there is €12.2 billion available for capital spending this year.
The ceilings detailed in the NDP are cognisant of the overall capability of the construction sector to deliver on the NDP and of the appropriate share of National Income being devoted to infrastructure. The levels of capital spending, at close to 5% of GNI*, are already among the highest in the EU and are close to the limit of the overall capability to deliver in the coming decade.
In the NDP, it was clarified that there will need to be an agile approach to funding allocations and in-plan reprioritisation of funding, particularly where underspends and policy changes are apparent.
These changes impact on live contracts within the fixed price period, much of this period will have elapsed and the greater flexibility in the changes announced will only impact from 2022 onwards. Outside of that, there is evidence that the market prices and tender prices for core materials have increased. Similar to any process of Vote management, it will be up to sectors and Accounting Officers to assess whether existing timelines for the implementation of key projects will need to be adjusted on account of recent changes made or if there will be a need for prioritisation within their existing 5 year departmental ceilings. It is also possible for the same set of projects to be delivered with some extension of delivery timelines or some re-evaluation of project scope.
139. Deputy Cormac Devlin asked the Minister for Public Expenditure and Reform the amount of Covid-19 contingency funding that was drawn down in the first five months of 2022; and if he will make a statement on the matter. [29640/22]
Amharc ar fhreagraBudget 2022 made provision for up to €7 billion in funding to continue our response to the Covid-19 pandemic. Following the Revised Estimates in December 2021, €3.9 billion of this funding remained unallocated. This contingency is held in reserve centrally to allow Government flexibility to respond to emerging needs during the year.
In February 2022, the Government announced a suite of measures to assist with costs of living pressures. This included the Electricity Credit to domestic account holders, which had an estimated cost of €400 million. This required a Supplementary Estimate for the Department of Environment, Climate and Communications, given the scale of this amount in relation to the original Estimate for Vote 29. This Supplementary Estimate was brought before the Dáil in March to provide an additional allocation of €271 million with the remaining cost funded through reallocation of existing Vote 29 resources. Following this development, the remaining contingency balance stood at just under €3.7 billion.
While this is the only draw down from the contingency funding allocated in Departmental Estimates to date, there are significant pressures and commitments on the remaining funding including:
1. Further Covid support measures, including the response to the Omicron wave will require additional funding over that foreseen at the time of Budget 2022. This includes income and employment support schemes in the Department of Social Protection, Department of Health Covid-19 response, the targeted Commercial Rates Waiver for Q1 2022 and Department of Education Covid response measures. These Covid-19 expenditure pressures are evident in the end May expenditure reported in the Fiscal Monitor with gross current expenditure in the Department of Social Protection €315 million ahead of profile and €291 million ahead of profile in the Department of Health.
2. Additional allocations may be required to fund the other cost of living measures announced in February and April.
3. Costs related to the humanitarian response to the war in Ukraine will also need to be provided.
Further allocations from the contingency will be considered later in the year taking account of any offsetting underspends.
140. Deputy Ged Nash asked the Minister for Public Expenditure and Reform if he will review the current 5% spending rule given the cost-of-living crisis; if he agrees that efforts to support households through the crisis combined with the existing Programme for Government’s current spending commitments may see the 5% rule breached; and if he will make a statement on the matter. [31013/22]
Amharc ar fhreagraRecent months have seen a number of new challenges emerge across the economy. These challenges surfaced due to increased demand and supply chain issues as we emerged from the pandemic and have been compounded by the impact of conflict in Ukraine. As previously acknowledged, the Government cannot absorb the full spectrum of inflationary pressures. However, we have taken action to put in place targeted supports to assist households and businesses.
In recognition of the exceptional challenges facing the economy since the onset of the pandemic, provision for contingency funding has been put in place separate to core expenditure. This has enabled the Government to put in place these supports for businesses and households throughout the pandemic and to respond to the recent cost of living pressures.
The Summer Economic Statement 2021 set out a medium term expenditure strategy for core expenditure. This strategy aims to align core expenditure growth with the trend growth rate of the economy. It seeks to maintain fiscal policy on a sustainable path while continuing to invest in our public services and infrastructure.
I am currently engaged in preparations for this year's Summer Economic Statement with my colleague the Minister for Finance. The economic context has changed considerably with inflation levels elevated above those projected in Budget 2022. This adds complexity to the formulation of our fiscal strategy for 2023. In finalising the budgetary parameters, we will seek to strike a balance between helping to mitigate cost of living pressures and ensuring sustainability of the public finances. Overall we aim to design policy to protect the most vulnerable in society while also ensuring measures do not add to inflationary pressures. The Summer Economic Statement and the Mid-Year Expenditure Report will be published in the coming weeks.
