Amendments to the public works contracts: An overview

Ben Browne, junior associate at Quigg Golden, discusses the amendments to the public works contracts, which were announced on July 3, 2023.

On July 3, 2023, a number of amendments to the public works contracts were announced, which include:

A new clause to limit contractor’s liability;
Simplification of the price variation clause;
Updates to Suitability Assessment Questionnaires; and
Adoption of Building Information Modelling (BIM) and International Construction Management Standard (ICMS).

The new clauses for the liability cap and price variation apply to tenders received on or after July 27, 2023.

New limitation on contractor’s liability

Following on from the introduction of liability caps to the Standard Conditions of Engagement for consultants, PW-CF1 to PW-CF8 now include a new clause entitled ‘Limit on Liability’.

Employers must now add a monetary amount (the Liability Cap) to the form of tender and schedule. Where no monetary amount is added to the schedule the contractor’s liability shall not be greater than the contract sum.

Guidance Note 2.3.5 v1.0 outlines that there is no standard approach in relation to setting the liability cap. It advises that the employer should conduct a risk assessment in the early stages of preparing a tender in order to better understand the potential loss to the employer, should the contractor be negligent or act in breach of the contract.

The liability cap is subject to the following exclusions:

Fraud or fraudulent misrepresentation, wilful default, gross negligence;
Death, personal injury or illness;
Loss of, or damage to, tangible or intangible property (except for the works);
Where applicable, liquidated damages pursuant to the relevant subclause in the contract (where applicable);
Any liability to which insurance for the works pursuant to the relevant clause in the contract, whether before or after substantial completion, is intended to respond (where applicable to the particular contract);
For PW-CF1 to PW-CF5 only, and where applicable in the contract, the contractor’s liability under sub-clause 3.8 Existing Facilities and Use or Occupation by the Employer; or
Any liability which the contractor cannot lawfully exclude or limit.

Section 2.2 of Guidance Note 2.3.5 provides detailed descriptions of each of the above-mentioned exclusions.

Simplification of price variation clause

Clause PV1 which was based on the proven cost method eg invoice based calculations, has been removed from PW-CF1 to PW-CF5 and replaced with Clause 15. Clause 15 calculates adjustments to the contract sum on the basis of movements of the Central Statistics Office Wholesale Price Index for fuel and materials.

The threshold of 15% for the recovery for variation in prices of materials and fuel has also been removed. Instead, employers must select an increase threshold of between 3% to 10%. With regards to downward movement in the indices the Employer can only claim for movements which are less than minus 10%.

Fluctuations in the price of labour will no longer be calculated on the basis of the consumer price index. Instead, any adjustments will be based on changes in the rates of sectoral employment orders made two years from the designated date.

Updates to Suitability Assessment Questionnaires (SAQs)

Similar to the amendments introduced to the SAQs for service providers last year, amendments to SAQs QW1 to QW4 for contractors have also been introduced. The objective of the revised SAQs is to:

Improve user friendliness of the document suite;
Reduce the administrative burden and volume of documents to be completed; and
Facilitate delivery in digital format.

The SAQs are now issued in two parts:

Part 1: Contains information for contractors, the project particulars and the suitability assessment questionnaire.
Part 2: Contractor must provide their details such as their contacts details, nature of their company and undertakings/declarations as applicable per Appendix 1 as part of its response to the SAQ.

Other amendments which have been introduced include:

Applicants are now permitted to rely on the resources of another entity for contracts PW-CF1 to PW-CF4. The newly published Reliance Guarantee or Reliance Warranty will need to be completed depending on whether the contractor has relied upon the other entity for its financial resources or its technical capabilities.
Additional grounds for exclusion have also been introduced. For example, EU threshold projects will need to declare their status in relation to the Russia sanctions per EU Regulation 2022/576.

The below mentioned changes have also been introduced and will be discussed in further detail in our next article:

International procurement instrument provisions;
Environmental management measures;
Supply chain tracking; and
Changes to reserved specialist provisions.

Adoption of BIM and ICMS

Finally, the measuring and reporting on embodied carbon in construction projects has become an increasingly important priority for public sector projects to ensure near zero carbon goals are achieved.

ICMS is being introduced across the National Development Plan. ICMS not only enables the reporting of costs, life cycle costs and life cycle analysis but it is also the first globally consistent method for measuring carbon life cycle reporting across construction projects.

In addition, a public sector BIM adoption timeline was introduced and comes into action from January 2024. In short it mandates that:

As of January 2024, consultants engage to design and oversee the construction of public sector contracts valued in excess of €100, they must provide BIM included in their scope of service; and
By the end of 2028 all public sector projects will require both design team and contractors to incorporate the provision of BIM into their service.

Quigg Golden’s Commentary

The introduction of liability caps for contractors is welcomed. This amendment largely reflects some of the contractual practices now seen in the private sector. Any contract which can more efficiently allocate risk to contractors should achieve better value for money. More contractors may be willing to tender for public sector projects.

The price variation amendments are likely to be welcomed by contractors as material and fuel price increase claims can now be made without having to provide commercially sensitive information to the employer such as invoices and purchase orders.

In addition, it is in neither of the parties’ interest for the contractor to fall into financial difficulties, due to the contractor being unable to claim for any price increases. With this in mind, the removal of the inflation risk is of benefit to both parties.

The changes to the SAQ structure will be welcomed by SMEs in particular aa they lessen the administrative burden and contractors can more easily rely on the resources of other entities.

It is estimated that approximately 37% of Ireland’s carbon emissions are from the construction and built environment sector with 23% resulting from operational emissions and the remaining 14% coming from embodied carbon(1).

Ireland has yet to introduce any regulations governing embodied carbon, so the introduction of ICMS and BIM to improve its measuring is a step in the right direction to achieving Ireland's ambitious goal of a 100% reduction in net zero greenhouse gas emissions by 2050.

The PWC typically has a negative perception among the construction industry. However, its recent amendments are welcomed and will hopefully improve its reputation by bringing the PWCs more in line with the contractual practices used in the private sector while greatly assisting with Ireland's climate action goals.

On a side note, it would be of benefit to the main contractors that the subcontract that exists for use with the PWCs is also amended accordingly.

Author: Ben Browne, BBS, MSc, is a junior associate at Quigg Golden, where he provides support on both contentious and non-contentious construction and procurement matters. Prior to joining Quigg Golden, he acquired over four years’ experience as a quantity surveyor being responsible for the commercial management and procurement of large-scale construction projects such as the Intel FAB34 project, down to small-scale housing developments. With his experience, he can assess and understand both the commercial and legal issues experienced on most projects.