New Infrastructure Guidelines have replaced the Public Spending Code requirements for capital expenditure. David Gunn, partner, examines some key aspects of the Guidelines and how the provisions apply to all public bodies and all bodies receiving capital funding from the Exchequer.
The Public Spending Code (PSC) update delivered in March 2023 indicated that the PSC would soon be replaced. Following that announcement, the Department of Public Expenditure, NDP Delivery and Reform (DPER) published the New Infrastructure Guidelines (the Guidelines) in December 2023. It is intended that the changes brought about by the Guidelines will improve the timeliness of project delivery and minimise unnecessary administrative delays.
The requirements for capital projects have been refreshed in the Guidelines. These are now in line with the previous changes made to the PSC in March 2023, which reduced the number of approval stages and streamlined the requirements for major projects. The Guidelines are clear that the intention is to ensure that vital infrastructure projects will be delivered on time and delivered in a manner that ensures value for public money. We examine the key updates brought about by the Guidelines.
Key updates from the Guidelines
- Project Lifecycle: The number of stages at which approval is required prior to implementation remains three. For those projects with an estimated capital cost of less than €20 million, there are two approval stages in the project lifecycle prior to implementation. This is welcome news which should help to ensure a timely process.
- Major Projects: The threshold for proposals to be considered major projects remains those with an estimated capital cost of more than €200 million. This is also welcome news that the threshold has remained the same and that projects with a value less than €200 million can remain in the process for non-major projects.
- The Detailed Business Case requirement remains; however, this has been expanded and clarified. References to a detailed Business Case under the PSC were to incorporate a financial and economic appraisal. The Guidelines set out that this “is the full and complete statement of the investment proposal expressed in output requirements. It defines all design requirements for a project or programme including performance standards and quality thresholds. It is the benchmark for measuring the development of the project and later becomes the basis for the construction contract.” This clarification is welcome news for developers who will be preparing their Detailed Business Cases.
These updates should continue to ensure a faster approval process.
Major projects
Proposals for major projects remain subject to the following:
- External Assurance Process at the Strategic Assessment and Preliminary Business Case (AG1) stage of the project lifecycle
- Review by the Major Projects Advisory Group at the Preliminary Business Case (AG1) stage of the project lifecycle, and
- Consideration by Government at the Preliminary Business Case (AG1) and Final Business Case (AG3) stage of the project lifecycle.
Capital Works Management Framework
The Capital Works Management Framework (CWMF) suite of contracts remains subject to ongoing reform, which we previously noted is welcome news to contractors. There had been concern about excessive risk allocation to contractors in the CWMF including that it did not contain limitations on the contractor’s liability.
In response to contractors’ concerns, the public sector has shown a pragmatic and flexible approach to contracting in recent years which greatly assists in the delivery of projects. The forms of public works contracts PW-CF1 to PW-CF5 and PW-CF6 to PW-CF8, and their corresponding Form of Tender and Schedule, contain amendments to the price variation provisions which facilitate a more balanced position between the parties regarding inflation and also a new limit on liability clause. This means that the liability of a contractor to the employer is limited to a monetary amount stated in the Form of Tender and Schedule. It is important to note that the liability cap does not apply in all circumstances and is subject to certain exclusions, as set as out in the clause.
The Guidelines note that the CWMF will be updated to reflect the specific provisions of the Guidelines and that in the interim, it continues to provide support documentation which remains consistent with its principles.
Recent updates for certain construction contracts
The Office of Government Procurement (OGP) recently published new Cost Control and Carbon Reporting templates, which incorporate the International Cost Management Standards (ICMS3). These are to be used on all new capital works projects, commencing stage 1, from 1 January 2024.
Consultants engaged to design and oversee the construction of public works contracts with a value more than €100 million will, from January 2024, have Building Information Modelling (BIM) requirements included in their scope of service. The OGP, working with the Government Contracts Committee for Construction, will monitor the uptake of BIM across those public bodies who are required to use the CWMF.
Comment
The Guidelines have not provided any major surprises but have given us welcome clarity in certain areas. We now await further updates to the CWMF to reflect the Guidelines. The continuing public sector action and focus on making Ireland an attractive and viable country for contractors to undertake infrastructure projects is a key step towards meeting our long-term infrastructure needs.
For more information, please contact a member of our Infrastructure & Project Finance team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
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