KEY UPDATE: Information Note on amendments to the Public Works Contract
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The OGP publishes news relevant to the Capital Works Framework Management on this section of the website. You can also read this news on our RSS feed. Older news stories are available in the News Archive section.

Demand Analysis Survey 2024

2 June 2023

The OGP’s Commercial Skills Academy has developed a comprehensive practitioner training programme for public servants involved in the delivery of public capital projects.

This Demand analysis Survey is related to the Commercial Skills Academy’s Tier 1: Practitioner Training, Commercial Skills for Public Capital Works Projects, training course.

This training is aimed at project coordinators, project managers, members of works project teams along with other public servants whose roles are concerned with the planning, procurement or management of traditional employer designed public works projects, including building and civil engineering projects.

The CSA are assessing future demand for this training course and would appreciate if you answered the short survey.

Take the survey  

Update to Central Statistics Office (CSO) Table 3 Detailed Wholesale Price Indices (excluding VAT) for Building and Construction Material

6 April 2023

Update to Central Statistics Office (CSO) Table 3 Detailed Wholesale Price Indices (excluding VAT) for Building and Construction Material

The CSO Table 3 updated on 23 March 2023, notes that the subcategories Precast Concrete and Other Concrete Products (excluding precast concrete) will no longer be maintained from February 2023. The higher-level category Other Concrete Products Including Precast includes products from both these categories and this index can be used as an approximation to obsolete categories.
For more information on categories of products in Table 3, see Description of Products for Buildings and Construction

31/03/2023 – Introduction of Liability Caps – Phase 1: Standard Conditions of Engagement, Consultancy Publication Date: 31st March 2023

Further to the announcement on 21 March 2023 of the introduction of liability caps for those engaged in public works contracts by the Minister for Public Expenditure, NDP Delivery and Reform, the Office of Government Procurement (OGP) has today issued amendments to Pillar 2 (Conditions of Engagement) of the Capital Works Management Framework (CWMF). The amendments incorporate Liability Caps into the Standard Conditions of Engagement, Consultancy for technical and archaeology services. The introduction of Liability Caps follows commitments made in Circular 05/2022: Construction Procurement Reform- Revised Guidelines for Professional Indemnity Insurance Levels in Public Works Projects  published on 9 February 2022.

The amendments are summarised below.

Details of Amendments

  1. Introduction of Liability Caps

In Pillar 2 (Conditions of Engagement), the Standard Conditions of Engagement for technical consultancy services (COE1) and archaeological services (COE2) have been amended by the incorporation of new sub-clauses (called Limit of Liability) that provide that the Consultant’s liability to the Client arising out of or under the contract is limited, to a monetary amount ascertained in a calendar year (“the Liability Cap”). Amendments have been also been made to the Forms of Tender and Schedule (FTS-9 and FTS-10), to facilitate the introduction of the new sub-clauses in COE1 and COE2. In the Schedule, Part A, the Client must state the monetary amount of the Liability Cap. The Liability Cap does not apply in all circumstances and is subject to exclusions (such as death, personal injury or illness, wilful default or gross negligence), also stated in the Schedule, Part A.

In Pillar 4 (Guidance Notes), a new Guidance Note GN 1.6.4 Liability Caps: Application in the Standard Conditions of Engagement COE1 and COE2 is provided. The note describes the operation of the Liability Cap and outlines a recommended framework (based on an assessment of risk of loss/damages to the Client and considering relevant value for money considerations) to arrive at an appropriate monetary amount to apply to the Liability Cap for the contract concerned. When setting the amount of the Liability Cap, a Client should conduct a considered assessment of the potential risks associated with the contract, combined with consideration of factors that may influence value for money in the tender process.

The guidance will be kept under review and may be amended or supplemented as necessary.

  1. Additional provisions relation to insurance requirements

Additional provisions regarding insurances have been incorporated into both forms of the Standard Conditions of Engagement in order to provide the Client with an enhanced level of oversight in relation to the insurances required under the contract.

Other

An additional provision that requires the Consultant to procure that the Collateral Warranties from sub-consultants in a form approved by the Client has been incorporated into the Standard Conditions of Engagement.

Minor clarifications and minor formatting changes have been made to the Forms of Tender and Schedule FTS9 and FTS10.

The new provisions will apply to those tenders received from 10 April 2023 onwards (10 April being the date 10 days after the date of publication of the amendments, disregarding the day of publication). For those tenders, Clients should arrange to issue tenderers with the amended form of the Tender and Schedule, and may consider extending their tender deadline(s) to accommodate the implementation of the amendments.    

Subsequent Phases

Liability Caps will also be introduced into Pillar 1 (Public Works Contracts) early in the second quarter of 2023.

The introduction of Liability Caps into the CWMF is an output from the ongoing CWMF Review and is intended to improve the overall risk/reward balance, and to provide greater certainty for parties engaged under the CWMF contracts. It is envisaged that the introduction of Liability Caps will also encourage both competition and participation in the tendering process for public works projects, and lead to improved results for clients, contractors and service providers.

28 March 2023 – Publication of Circular 5/23: Initiatives to assist SMEs in Public Procurement

The Office of Government Procurement (OGP) has today published Circular 05/2023 : Initiatives to assist SMEs in Public Procurement.  Circular 05/2023 has been developed by the OGP following an extensive consultation process involving both public bodies and SME representatives. The circular is designed to further enable SMEs to compete for public contracts and replaces Department of Public Expenditure and Reform Circular 10/2014.

Circular 05/2023 sets out positive measures for contracting authorities to take to promote SME participation in public procurement. Included amongst the measures are increases to the national advertising thresholds for goods, services and works for advertising contract opportunities on the national tendering portal www.etenders.gov.ie.

To coincide with the issuing of the circular, the OGP has published a dedicated webpage where public bodies can find further information on the circular including an FAQ.

Works Threshold for advertising on eTenders

The threshold at which contracting authorities are required to advertise all contracts for works on eTenders is now €200,000 (exclusive of VAT). Contracts for works with an estimated value less than €200,000 (exclusive of VAT) may still be advertised on eTenders. However, where it is decided not to advertise on eTenders, contracting authorities should seek a minimum of five written tenders from interested and competent contractors.

Works-related Services Threshold for advertising on eTenders

The threshold at which contracting authorities are required to advertise all contracts for works-related services remains at €50,000 (exclusive of VAT). Contracts for works-related services with an estimated value less than €50,000 (exclusive of VAT) may still be advertised on eTenders. Where it is decided not to advertise the contract, contracting authorities should seek a minimum of five written tenders from interested and competent consultants.

 

 

26 August 2022 – Publication of updated GN 1.5.2 Public Works Contracts: Price Variation Clauses

The OGP has today published an updated version of GN 1.5.2 Public Works Contracts: Price Variation Clauses, which deals with the contractual entitlements associated with the price variation clauses in the public works contracts forms PW-CF1 – PW-CF5.

The updated guidance reflects the amendments made to these forms of public works contracts on 7 January 2022 and is available here.

8 June 2022 – Publication of Inflation Calculation Workbooks for Short Public Works Contract (PW-CF6)

Further to the publication of details on 20 May 2022 of the Inflation/Supply Chain Delay Co-operation Framework Agreement for PW-CF1 – PW-CF5, the OGP published on Friday 3 June 2022 the suite of documents associated with the Short Public Works Contract (PW-CF6).  These include the Letter of Agreement, guidance and associated workbooks to assist contracting authorities in calculating the Ex Gratia Payment for PW-CF6.

The OGP has also published a series of video tutorials to assist contracting authorities in the use of the template workbooks, a worked example and FAQs.

All of the above are available on 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 our website (https://constructionprocurement.gov.ie).

23 May 2022 – Publication of Inflation Calculation Workbooks

Further to the publication of details on Friday 20 May 2022 of the Inflation/Supply Chain Delay Co-operation Framework Agreement for PW-CF1 – PW-CF5, the OGP has today published the associated workbooks to assist contracting authorities in calculating the Ex Gratia Payment.

Please note that the workbooks should be opened in a web browser other than Internet Explorer.

Inflation Calculation Workbooks

Building Projects using PW-CF1, PW-CF2 & PW-CF5

W1 for use with Category 1 projects

W3 for use with Category 2 projects

Civil Engineering Projects using PW-CF3, PW-CF4 & PW-CF5

W2 for use with Category 1 projects

W4 for use with Category 2 projects

Short Form of Contract for Building & Civil Engineering Works Projects – PW-CF6

Workbook(s) will publish shortly.

20 May 2022 – Publication of Inflation/ Supply Chain Delay Co-operation Framework Agreement

The Office of Government Procurement (OGP) has today published details of the Inflation/Supply Chain Delay Co-operation Framework Agreement (‘the Agreement). The publication follows the announcement by the Minister for Public Expenditure and Reform, Michael McGrath T.D. on the 10 May 2022 of new measures to address the risk posed by exceptional inflation and supply chain disruption on projects being delivered under the public works contract.  These measures represent an appropriate and balanced set of provisions to address the impact of global events which are outside the control of either party to the contract, are uncertain in both their duration and impact and therefore place the successful completion of a project at risk.

The first tranche of documents deal with the major forms of contract PW-CF1 – PW-CF5 inclusive.  Documents to implement the measures with respect to the Short Public Works Contract will follow next week.

The documents published today include:

PW-CF1 – PW-CF5 – Inflation/Supply Chain Delay Co-operation Framework Agreement

Guidance Note on Inflation/ Supply Chain Co-operation Framework Agreement

Workbooks to assist contracting authorities in calculating the ex gratia contribution will be published on Monday, 23 May 2022.

Once entered into, the Agreement operates without prejudice to each party’s rights under the Contract and is predicated on a cost burden share basis, whereby the Employer makes an ex gratia contribution of up to 70% of the inflation amount calculated and waives the application of liquidated damages arising from a delay in meeting the Date for Substantial Completion that is caused by supply chain delay.

 

10 May 2022 – Minister Michael McGrath TD introduces measures to address the impact of Construction Material Price Inflation on Public Works Projects

The Minister for Public Expenditure and Reform, Michael McGrath TD, today, (Tuesday), announced details of further measures to address the impact that exceptional inflation in construction materials and energy is having on public works contracts.

As economies reopened in the aftermath of Covid-19, significant inflation, coupled with shortages in the supply of particular construction materials was experienced. The Russian invasion of Ukraine has considerably exacerbated these pressures on construction projects. Since early 2022, significant increases in energy prices are driving further price increases and leading to great uncertainty around delivery periods for certain construction materials.

As a consequence of the conditions experienced in 2021, amendments to address further price volatility were announced in November 2021. These apply to new contracts. The amendments did not address energy price volatility or delay caused by supply chain disruption.

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 was 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, Minister McGrath is introducing an “Inflation Co-operation Framework” for those parties engaged under a public works contract.

The Framework will facilitate 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 will operate on an ex gratia basis. The Framework will set 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 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 will be apportioned between the parties, with, subject to budgetary constraints, the State bearing up to 70% of the additional inflationary related costs. The Framework will apply to payments made from 1 January 2022.

Outlining the details, Minister McGrath said:

“While the changes introduced in January have brought greater stability to contracting arrangements, through ongoing engagement there has been sustained feedback from Government Departments and their Agencies that successful delivery of priority projects included in the NDP is jeopardised by construction inflation. More recently, Departments have reported specific issues with fuel costs and supply chain disruption, including reduced competition for public works contracts and challenges relating to completing projects underway during 2021. The changes implemented in January have provided a degree of mitigation on materials price increases (for contracts awarded with a revision date of 7th January 2022).

“I recognise the problems that these exceptional material cost increases, fuel costs, and supply chain disruption continue to have on public projects and those charged with their delivery at present. I am conscious of the difficulties being experienced by public bodies in progressing their projects and the ability to deliver the wider NDP whilst at the same time I need to maximise value for money for the taxpayer. It is vital that public works contracts remain a viable proposition for contractors with whom we partner in the delivery of the NDP.

“It is for these reasons, I am introducing further measures in addition to the ones put in place in January. I consider that these actions are necessary and proportionate in the context of the significant risk that global exceptional inflation poses to the delivery of much needed public facilities in the NDP. 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, whilst providing value for money for the taxpayer.”

Notes for Editors

The key provisions of the Inflation Co-operation Framework are:

-It will operate from the point at which the parties agree to engage until the project is completed.

-that further inflationary pressures have been building since the beginning of 2022, it will provide for the back-payment of a proportion of inflation related costs (on materials and energy) to 1 January 2022 on those contracts that are in progress since the beginning of 2022 (i.e. before the revised contracts were issued).

-Going forward, for the duration of the framework, additional inflation costs will be calculated in a similar manner.

-For more recent contracts (i.e. those that commenced under the amended forms of contract), the framework will permit 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 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 will be published by the Office of Government Procurement shortly.

Application of the Inflation Co-operation Framework

There are two aspects to its application depending on the form of contract that applies –

I. retrospective analysis of cost increases with respect to payments made from 01 January 2022 and delays from the same date up to the point of entering the Inflation Co-operation Framework; and

II. ongoing engagement on mitigating cost increases and delays after entering the Inflation Co-operation Framework up to the completion of the project.

The inflation analysis will be undertaken using relevant indices published by the Central Statistics Office.

It is proposed that both parties will share the burden in recognition that neither party is responsible for the events that have already transpired and will continue to evolve. Where costs are identified it is proposed that parties will share these costs with the State bearing 70% of the additional costs.

Where unavoidable delays are attributable to disruption to supply chains, the                  Employer will waive liquidated damages for that period identified as arising from              disruption to its supply chains.

Any back-payment of additional inflation costs will be paid on a phased basis, with 50% paid up-front, and the remainder apportioned over future payments.

Summary of the application of Inflation Co-operation Framework:

Form of Contract Recovery for Materials Price Inflation Recovery for Energy/Fuel Price Inflation Relief from Liquidated Damages for delay caused by Supply Chain Disruption**
Dated prior to 7 January 2022 Yes Yes Yes
Dated 7 January 2022 No (already provided) Yes Yes
Duration of the measures

Once parties enter into the framework, it will operate until the project is completed or the parties elect to withdraw by giving notice to the other.

Future Amendments

The OGP will amend the conditions of the public works contracts so that some of these measures are incorporated into the contractual framework on a permanent basis. (This is in a similar fashion to how the OGP amended the contracts to provide a Covid mandatory Closure clause, following the introduction of the Agreement for ex gratia costs for mandatory closures).

These amendments will ensure a clear apportionment of the risk associated with inflation to enable contractors to price that risk and ensure that Contracting Authorities retain a reasonable degree of budgetary certainty, without seeing a reduction in those participating in tenders and an over-provision for inflation by those that submit tenders.

Basis of the 70:30 burden sharing

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.

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.

Previous measures introduced

The interim amendments published on 7 January 2022 only apply to projects whose tenders were submitted on or after 18 January 2022. Amendments were made to the price variation clause to lower the thresholds above which the State would bear the cost of inflation to address the potential for significant spikes in materials. At that point available forecasts, trends in pricing indices and feedback from public bodies indicated that the inflation that had arisen since 2021 was transitory and that supply chain disruptions were settling down.

In addition, the fixed price period was reduced to 24 months and mutual cost recovery is permitted within the fixed price period for material price changes in excess of 15%. The amendments also provided for the indexation of the tender sum to allow for fluctuations in material prices between the point at which the tender was submitted to the award of the contract.

Increases in the cost of construction materials and energy/fuel

Sustained price increases across a range of construction sector inputs, coupled with supply chain volatility, have led to increased market uncertainty and pose a challenge for the successful delivery of the National Development Plan.

Significant movements in timber and steel prices were noted during 2020, they accelerated further in 2021. These movements have broadened out since January 2021 to include a range of materials commonly used on building projects including plastics, insulation and electrical and plumbing fittings. The breadth of price increases is in excess of those typically experienced over the past 10 years.

The ‘All Materials’ category of the Detailed Wholesale Price Indices for Building and Construction Materials saw a 16.9% increase in the 12 months to March 2022. The average increase in the same category over the previous 3 years was 1.4%, the highest in 2021 was 2.3% with the lowest in 2020 being 0.2%. In some of the sub-categories the increase recorded in the March 2022 index over the past 12 months is more severe, ‘other structural steel’ for example shows a 64.1% increase and rough timber 46.3%.

Steel and timber products in particular saw substantial, sustained increases since early in 2021 and, to a lesser extent, materials such as insulation and plastics. These increases arose suddenly with no warning but had levelled off from September 2021 in line with inflationary forecasts from Q2 2021 which predicted that inflation would be temporary.

Energy prices showed marked increases in the latter half of 2021 and since January 2022 have increased further. This has a direct impact on costs in the construction sector, particularly on those projects with a significant complement of heavy machinery. Heightened energy costs also have an indirect impact through the increased cost of manufacturing and transporting materials.