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Minister hints at construction contract compromise

Rising costs imperil prospects for some National Development Plan projects

Minister for Public Expenditure Michael McGrath said he understood the case being made for price variation clauses in public-works contracts. Photograph: Alan Betson

Thu Apr 14 2022 - 05:27

As construction inflation soars, pressure is mounting on the Government to tackle fixed-cost public-works contracts as builders grow restless at the inexorable rise in the cost of materials.

But will Ministers do anything to settle the matter? And is inflation now advancing at a rate that will curtail the ambitions of the multibillion-euro national development plan (NDP)?

Questioned yesterday on the hottest topic in the building world, Minister for Public Expenditure Michael McGrath hinted that some contract changes might be on the way. But he also seemed to concede that parts of the NDP – important politically for each of the three Coalition parties – might indeed have to be sacrificed at the altar of inflation.

“If this level of inflation persisted over a prolonged period of time, then I think your conclusion about it impacting on the number of projects that you could deliver might prove to be true,” he told a reporter.

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“In the short term I don’t believe it will have an impact on the delivery of individual projects. But if it was to continue for a prolonged period of time, then the budget we have will only go so far – and I don’t believe we’re in an environment where we should be increasing the capital budget.”

Noting that a €2 billion capital underspend in 2020 and 2021 because of coronavirus might provide a little wriggle room, McGrath insisted he understood the case being made for price variation clauses.

“I’m not ruling out any changes in that area but of course there is a balance to be struck,” he said. “I have a duty to protect the taxpayers when it comes to the use of public money while also recognising that there are live contracts currently that were entered into at a time when there was no expectation of the type of construction inflation that is currently being experienced. So I will come to a view on this very shortly.”

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