932. Deputy Malcolm Byrne asked the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation if calculations have been carried out regarding the impact of increased construction costs where capital grants are made by Government Departments but there are delays in making payments to recipient organisations. [61379/26]

Management and delivery of investment projects and public services within allocations and the national frameworks, including the Infrastructure Guidelines and National Planning Framework, is a key responsibility of every Department, Accounting Officer, and Minister. Calculations on construction costs should be assessed using the Guidelines and supporting documents.

As Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitisation, my department is responsible, through the Infrastructure Guidelines, for the value for money requirements and guidance for evaluating, planning and managing Exchequer-funded capital projects. The guidelines help to ensure value for money through detailed evaluation, appraisal and planning.

Under the Infrastructure Guidelines, an appraisal of the estimated cost of the proposal should be set out in the business case. Particular care should be taken to ensure the accuracy of these estimated costs. Estimates should adequately account for risks to the scope and delivery programme and inflation. To the maximum extent possible, estimates should be based on outturn costs of comparable projects.

It is the responsibility of the Government Department funding the capital grant to ensure compliance with the Infrastructure Guidelines including undertaking a robust estimate of the potential costs involved.

The Infrastructure Guidelines require that:

• Project costs are robustly assessed and updated throughout the project lifecycle, including financial appraisal, risk assessment, sensitivity analysis and affordability considerations.

• Sponsoring Agencies prepare detailed cost estimates, risk management plans and updated business cases as projects progress.

• Approving Authorities assess updated costs and monitor projects, including situations where cost increases threaten project viability.

• Government Departments notify Government where adverse developments occur, including unforeseen cost increases that call into question the viability or desirability of a project

Guidance on Financial Analysis provides the detailed methodology that public bodies must use, including how future costs should be forecast and escalated, how inflation assumptions should be applied, how risks relating to timing and market conditions should be tested, and how sensitivity analysis should examine the impact of cost increases on project viability.

The extent to which increased construction costs due to inflation may be recovered by contractors is governed by the terms of the contract between the organisation in receipt of the grant and the contractor. The terms of grant agreements vary, in many cases the grant amount will be fixed with any adjustments to the price of the contract, whether that is due to scope change or inflation (where recovery for inflation is permitted by the contract), is covered by the grant recipient.