Minister McGrath welcomes the publication of the first elements of the Inflation/Supply Chain Delay Co-operation Framework Agreement

The Minister for Public Expenditure and Reform Michael McGrath today (Monday 23 May) welcomed the publication by the Office of Government Procurement of the guidance for parties to public works contracts to establish an Inflation Co-operation Framework announced by the Minister.

The documents published today include:

guidance to public bodies on establishing and using an 'Inflation/Supply Chain Delay Co-operation Framework Agreement'
Guidance Note on Inflation/Supply Chain Co-operation Framework Agreement
workbooks

Commenting on the publication Minister McGrath noted:

“In tandem with the measures announced in November we have developed a comprehensive and agile response to the risk posed by exceptional levels of inflation and supply disruptions that create a challenging and uncertain environment for project delivery.

“The publication today of the guidance material and the letter of agreement allows public bodies and their contractors to establish a co-operation framework that will sit alongside the public works contract. It will facilitate engagement and a speedy determination of the impacts of exceptional inflation and supply chain disruption.

"The accompanying workbooks, will streamline the process through clearly constructed spreadsheets to reduce the workload on both parties in determining the additional costs associated with inflation.

“The measures and the implementing arrangements provide a transparent framework to address the challenges that events outside the control of either party pose to the successful delivery of public works projects.”

Notes

A template letter of agreement, guidance and workbooks are available on the Capital Works Management Framework for the major forms of contract (PW-CF1 – PW-CF5).

The letter of agreement sets out the terms that apply to the co-operation framework. It defines which reliefs are available depending on the form of contract that is in use. It sets out the process that applies, the formulae and specifies the indices published by the Central Statistics Office which are to be used.

The workbooks are in a spreadsheet format, incorporating the formulae and the indices specified in the agreement to assist contracting authorities to determine the additional costs arising due to inflation on construction materials and energy where applicable.

Further documentation will follow to cover the cohort of smaller projects that are typically delivered using the short public works contract.

Key features of the Inflation Co-operation Framework

it will operate 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 will provide 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 will be 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) will be calculated in a similar manner
for more recent contracts (that is, those that commenced under the amended forms of contract), the framework will permit the recovery of costs arising from fluctuations in energy prices
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 up to 70% of the additional costs
and finally, for all contracts currently in progress, where it can be shown that a supply chain disruption that arose on or after 01 January 2022 associated with the war in Ukraine and/or continuing COVID-19 related issues which 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 for that period of delay.