The Public Expenditure Minister has said the Office of Government Procurement is examining whether help can be provided to construction firms working on public projects to deal with soaring costs.
It comes as the Construction Industry Federation warned some firms may have to walk away from ongoing public contracts, rather than incur huge losses that would force them out of business.
This afternoon, Minister Michael McGrath met with representatives of the industry who are seeking assistance from the Government in dealing with hyper-inflation in the construction sector.
The problem is particularly acute in public sector contracts, because these operate on a fixed lump sum basis, with no clauses for variations in charges if raw material costs increase.
Speaking after the meeting, Mr McGrath said he accepts the current level of materials price inflation is having a real impact on contractors and on the ability to deliver vital public capital projects.
He said some changes have already been made for new tenders and contracts, but they don't apply to existing contracts that are of a fixed price nature.
"And so the Office of Government Procurement is actively examining this issue, to see what the options may be that strike a balance between protecting the interests of taxpayers, while also recognising that we are now experiencing an extraordinary level of inflation that we hope to be temporary," Mr McGrath told RTÉ News.
He added that the Government is working within EU and Irish public procurement law and there are limitations.
"But we do recognise that this is an exceptional period of inflation when it comes to the input materials for construction," he stated.
"So we are looking at this issue in detail to see what options there may be."
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Mr McGrath said nobody wants to see contractors failing or having to walk away from public works contracts.
However, the Construction Industry Federation warned that both were real possibilities.
Director General, Tom Parlon, said there has been very significant cost inflation across all basic raw materials, like steel, concrete, wood and diesel, with some more than doubling in price.
"Unfortunately our members are going to the wall," he said.
"We've had a number of high-profile casualties and we've made it very clear to the Minister that we will have further, because it is totally unsustainable that we'd be able to continue to operate in this situation."
The CIF is seeking a price variation clause to be included in all new public works contracts, and that it be retrospective to projects that are currently underway.
He said company owners and managers have a responsibility to protect their company and workers, and so it would be a tough decision for contractors to sign future contracts knowing that they may not be able to get additional costs back if prices rise further.
"I'd say very few of our members will be tendering for public sector contracts now, it is just impossible. It would be madness to tender now at the moment when there is no provision for inflation," Mr Parlon claimed.
The CIF said the Minister acknowledged the difficulties.
But Mr Parlon said the Office of Government Procurement has been working on the issue for the past 12 months and it has been raised by the industry as an issue since 2007, yet so far nothing has come from it.
He added that Minister McGrath indicated a response would come next week.
"The industry cannot wait any longer," he said.
