Dáil Éireann Debate, Thursday - 12 February 2026
73. Deputy Cian O'Callaghan asked the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation if he will take steps to address the issue of special purpose vehicle’s being used to avoid future liability in public construction contracts; and if he will make a statement on the matter. [10079/26]
Amharc ar fhreagraA Special Purpose Vehicle (SPV) is a separate legal entity established for a specific, predefined financial objective. With respect to public works projects, they are extensively used in the area of public private partnerships. They occasionally arise in conventional delivery models mainly in the form of subsidiaries or joint ventures. They may also feature in housing delivery models such as turnkey or development agreements where private developers normally establish SPVs for specific developments. However, turnkey and development agreements are contracts to purchase, rather what would be considered a traditional construction contract.
Whilst SPV’s are a legitimate means to limit a business’s liability, nonetheless careful scrutiny is required in the procurement process in order to ensure that the successful tenderer has the capacity to undertake the contract to completion, and bear the liability that is reasonably placed upon them under the contract.
Where public private partnerships (PPP) are concerned that liability can extend to 20 years or more beyond construction of the asset. In that period, the PPP company is liable for the maintenance and operation of the asset as well as its handover, upon completion, to a predetermined standard.
The financial standing of the PPP company and individual members of any joint venture are assessed and minimum financial thresholds for individual members of a joint venture may be specified. In the case of a member of a joint venture or a tenderer who is a subsidiary, if they are unable to meet the financial requirements of the tender, they would normally be required to provide a parent company guarantee.
The terms of the contract define the extent of liability that the successful tenderer is required to bear. Under the standard public works contract that liability may extend to a period of 6 or 12 years after completion of the asset, the choice will normally be determined by the level of complexity associated with the project.
The terms of the contract also specify the levels of insurance that the successful tenderer is required to maintain for the duration of the contract.
The standard form of public works contract requires the contracting authority to set a financial cap on liability. The value of the cap defaults to the value of the contract but contracting authorities may specify a lesser, or greater, amount depending on the risk or complexity of the project.
Regular inspections and diligent contract management is a key mitigant to the main risks which arise on construction project.
There are also a number of other requirements that are designed to mitigate the risk of non-performance. These include:
• Retention of a specified percentage of each interim payment is held back – half of the total retention sum held is released upon completion with half retained over the defects liability period, which is normally 12 months post-completion. It is only released if all the recorded defects are addressed or it may be paid to a different contractor where the original fails to address the defects.
• On most public works contracts there is also a requirement for a performance bond, normally 10% of the contract sum. This is also reduced in half upon completion with the remaining portion held in place for 15 months post-completion.
