Key amendments have recently been announced to the suite of Public Works Contracts. These changes seek to address continuing challenges in the construction industry and create greater certainty for contractors on the risks associated with delivering a public works contract. Our Construction team reviews the implications.
The Minister for Public Expenditure, NDP Delivery and Reform and the Minister of State for Public Procurement and eGovernment recently announced some long anticipated changes to the suite of Public Works Contracts (PWCs).
The changes seek to address liability and price variation issues which contractors have continuously faced when dealing with public contracts, particularly in recent years. These measures, along with the measures discussed in our previous article on Infrastructure Delivery, seek to address continuing challenges in the construction industry. In particular, the changes aim to create greater certainty for contractors on the risks associated with delivering a public works contract and encouraging private sector engagement with the public sector on capital projects to be delivered under the National Development Plan.
We have elaborated on these amendments in more detail below.
- Key Amendment 1 – Caps on Liability: Contractors liability in the PWCs will now be limited either to the monetary amount agreed in the contract or, where the contract is silent, the default liability cap will be the contract sum. This is subject to the usual exclusions including liability arising as a result of death or personal injury, fraud, wilful default or gross negligence. This is a particularly welcome change as contractor’s liability was uncapped in the previous suite of PWCs.
- Key Amendment 2 – Price Variations: The PWCs will contain a new price variation clause, where the contract sum can be adjusted to reflect fluctuations in the price of materials, fuel and labour. Importantly, this price variation mechanism will be based on movements in the categories set out in Table 3 of the Central Statistics Office Wholesale Price Indices for Building and Construction Materials and specified indices covering energy and fuel. Additionally, the threshold of 15% for recovery for variation in the price of materials and fuel is removed and contracting authorities must instead select a threshold of between 3% and 10%. Once that threshold is met, the price variation clause will apply. Finally, there will be no longer be a fixed price period of 24 months for variations in the price of fuel and materials. These changes will simplify how price fluctuations are calculated and provide greater scope for contractors to claim for increased costs.
The amendments will be published in tranches, commencing in mid-July with the new clauses on liability caps and price variation applying to tenders received by a contracting authority on or after 27 July 2023. While these changes will certainly be welcomed by contractors, it remains to be seen whether these changes go far enough to ease contractors concerns on entering into works contracts with contracting authorities in Ireland.
If you would like to discuss any of the above or the construction and infrastructure landscape in Ireland more generally, please reach out to any member of our Infrastructure team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
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