NDP construction consultant contracts to be index linked
Public contracts used to engage construction consultants and archaeologists working on projects under the National Development Plant are to have fee indexation introduced to them.
The Minister for Public Expenditure, NDP Delivery and Reform, said the move will lead to a proportionate sharing of inflation risk between both suppliers and contracting authorities.
"It also represents a significant reduction in the level of inflation risk that consultants engaged by the state are expected to bear," Paschal Donohoe said.
"The introduction of fee indexation is a part of the ongoing work to balance the risk/reward involved in engaging in public works projects."
"A key priority for my department is enabling the timely delivery of NDP projects so that we can continue to deliver critical infrastructure and meet the needs of our growing population."
Previously consultants had to take account of inflation that might happen over the course of a project when calculating their tender fee.
But the Department of Public Expenditure said in the current climate it is hard to forecast inflation more than two years ahead.
Another issue was that a consultant could be placed at a disadvantage if they included the possible impact of inflation in their tender price, but others didn't.
Under the new arrangements, the tendered fee will remain fixed for a period of two years from the tender submission.
After that, the fee will be adjusted on an annual basis by a factor applied to any fees earned the following year.
This will be calculated by the Office of Government Procurement using an established and published formula.
After the two years during which fees remain fixed, the contracting authority retains the complete risk of the inflation up to 2%.
If inflation is over 2%, the risk will be shared between the consultant and the contracting authority, with the consultant carrying 30% and the contracting authority taking on 70%.
