Construction and Engineering
TREND OF CONTRACTUAL CHANGES
We anticipate further changes to the Public Works Contracts. The last of the changes throughout 2022 and 2023 were the introduction of a limit on the Contractor’s liability to a sum stated or the Contract Price, and of revised price variation clauses for materials and fuel, and for labour.
We anticipate further changes for the benefit of contractors during 2024. 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 National Development Plan, as will adequate resourcing of public agencies responsible for consenting. We also expect the trend of negotiating liability caps in private sector contracts to continue, reflective of pressures on supply chains.
ENVIRONMENTAL, SOCIAL & CORPORATE GOVERNANCE
The importance of ESG credentials will continue to increase. Taxonomy-aligned projects will be a more attractive asset, and a supply chain capable of helping lenders and large corporates to meet their obligations under the Corporate Sustainability Reporting Directive and Sustainable Finance Disclosures Regulation will be valued. We expect to see more discussion during the negotiation of construction contracts around alignment with the wider ESG regulatory framework.
DISPUTE RESOLUTION
We expect the use of statutory adjudication to remain a key tool in the resolution of disputes relating to payment arising under a construction contract. The most recent report of the Chairperson of the Construction Contracts Adjudication Panel indicates that the number of applications and adjudicator appointments in 2022/2023 were the second highest since the statutory regime came into force.
ENERGY EFFICIENCY
New aspects of the revised Energy Efficiency Directive will largely have to be transposed in Irish law by 11 October 2025. The Directive will embed the energy efficiency first principle in large planning, policy and investment decisions and increase the targets for energy efficiency and energy savings.
CARBON
The price of carbon emissions has already been factored into many products used in construction given that heavy industry is in the scope of the EU ETS trading system. We expect the price of carbon arising from production within the EU to continue to creep upwards given the reforms to the EU ETS under Fit for 55.
2024 will also see entities importing certain goods (such as cement, iron and steel, and aluminium) from outside the EU to get to grips with their reporting obligations under the Carbon Border Adjustment Mechanism, which we reviewed here. This transitional phase will bring us to 2026, when a price will be applied to cover any differential between the price of carbon in goods outside and in the EU.
In the longterm, suppliers of fossil fuels to buildings will pay the price of carbon in the later part of the decade through a new EU ETS II to start in 2027.
CONSUMERS
It is expected that the EU will finalise several instruments intended to reduce the risk of greenwashing, including a Regulation laying down harmonised conditions for the marketing of construction products; a Regulation to establish a framework for setting ecodesign requirements for sustainable products; a Directive on substantiation and communication of explicit environmental claims; and a Directive on empowering consumers for the green transition.
CONSTRUCTION SAFETY
As the Construction Safety Licencing Bill makes slow progress through the legislative procedure, it will be interesting to see if it is passed in 2024. It is intended to modernise and reform the existing accreditation model and provide instead for a licensing model for construction and quarrying activities.
CONSTRUCTION INDUSTRY REGISTER
Once section 33 of the Regulation of Providers of Building Works and Miscellaneous Provisions Act 2022 is commenced, it will be an offence for a person to engage as a provider of building works unless registered on the Construction Industry Register of Ireland. Registration is for now open on a voluntary basis with the website indicating that the requirement will become mandatory in 2025.
For developments as 2024 progresses, look out for our horizon scanner on infrastructure, construction, and energy, published each month on our website.