Public Sector Contracts: Rebalancing of Risk to Continue
The Government is to proceed with several measures aimed at delivering infrastructure under the National Development Plan (“NDP”), which we looked at here.
It was recently indicated that liability caps will be introduced to Public Works Contracts (“PWCs”), which we looked at here. The latest announcement now states that work will continue on rebalancing some of the risks borne by the contractors/consultants through capping their liability and also amending indemnity insurance requirements. There will be an increased focus on lifecycle costs in tender documentation, as opposed to construction costs, to allow public sector clients to focus on quality over the cheapest bid. It will be interesting to see how this is used to support efforts to decarbonise the built environment and support modern methods of construction.
This is the latest of several measures introduced during the course of 2021 and 2022 to amend or supplement the terms of the PWCs, as inflationary and other supply chain pressures have adversely impacted contractor ability to deliver projects with little or no ability to seek any redress under the PWC forms.
The latest announcement includes several further measures, including a lighter touch approvals’ process under the Public Spending Code, reconfiguration of the Project Ireland 2040 Delivery Board, and review of capacity in major departments and agencies to deliver on NDP priorities in order to ensure appropriate resourcing.
Contracts that allocate risk to the party best placed to manage it, taking into account the wider commercial climate, will be critical to delivering the NDP, as will adequate resourcing of public agencies, particularly those responsible for timely provision of consenting and planning permission.
The Government’s Press Release is available here.