24 February 2025
The OGP have published a Tool, along with guidance, to support the New Fee Adjustment Mechanism. The new provisions relating to inflation adjustment are contained in the amended forms of Conditions of Engagement (COE1 and COE2).
They apply to contacts awarded pursuant to tenders received on or after the 10 October 2024 Contract
The Conditions of Engagement – Fee Adjustment Factor (COE-FAF) is a composite factor that has been developed for use with COE1 and COE2. The factor uses movement in economy-wide wages and prices that are compiled by the Central Statistics Office. After a fixed period, the fee will be adjusted, on an annual basis by a factor that is applied to any fees earned in the subsequent year.
To reduce the administrative burden for Clients and Consultants, the OGP will calculate the value of the COE-FAF and publish it on the CWMF website.
Because the main element of the adjustment factor is a statistic that is released quarterly, the COE-FAF will be published at the same frequency. The tendered fee and tendered hourly rates will remain fixed for a period of 2 years from the date 10 days prior to the deadline for receipt of tenders on lump sum contracts and for a minimum of 2 years from this date on percentage fee contracts.
The first COE-FAF will be published in Q4 of 2026, which is the earliest date that the new mechanism may be operational.
Those procuring and managing consultant contracts should ensure they are familiar with
- the Inflation Adjustment sub clause in the contracts (COE1/COE2)
- associated definitions in the relevant forms of tender and schedule (FTS9/FTS10)
- published COE-FAF methodology which provides details on the inputs to the new factor.
To further support the introduction of Inflation Adjustment, the OGP have published
- A guidance note on Inflation Adjustment when procuring consultants, in contract and relating to budget forecasting.
- A worked example of fee payment including the new inflation adjustment mechanism.
- A tool to facilitate the determination and management of COE-FAF in COE1 and COE2 contracts.
- A video presentation to support the introduction of the COE-FAF tool.
All supporting documentation is available on the CWMF website.
In advance of the first publication of the COE-FAF values, contracting authorities procuring works-related consultancy should pay particular attention to procurement considerations relating to inflation adjustment. Those already using the new contract will be able to use the tool to determine the Base Date, First Adjustment Date and Indexation Periods for their contracts pending the publication of COE-FAF values in Q4 2026.
If you have any further questions contact the Construction Procurement Policy Unit.