Guidance and Tool to Support New Fee Adjustment Mechanism

The Office of Government Procurement (OGP) has unveiled a new Fee Adjustment Mechanism, accompanied by a comprehensive tool and guidance, designed to mitigate inflation risks within public sector capital works contracts. Integrated into the amended Conditions of Engagement (COE1 and COE2) under the Capital Works Management Framework, this initiative introduces the Conditions of Engagement – Fee Adjustment Factor (COE-FAF). The COE-FAF is a composite index, drawing on economy-wide wage and price movements compiled by the Central Statistics Office. This factor will enable annual fee adjustments for consultants, following an initial fixed period, thereby providing greater cost certainty and stability for both contracting authorities and consultants. Crucially, the OGP will assume responsibility for calculating and publishing the COE-FAF quarterly on the CWMF website, significantly reducing the administrative burden on contracting parties. Tendered fees and hourly rates will remain fixed for a minimum of two years from the tender deadline. The first COE-FAF values are scheduled for publication in Q4 2026, marking the earliest operational date for the new mechanism. Senior decision-makers in the construction sector, particularly those involved in procuring and managing consultancy contracts, should proactively familiarise themselves with these provisions. Early adoption of the supporting tool will allow authorities already utilising the new contracts to establish base dates and indexation periods ahead of the official COE-FAF publications, ensuring robust inflation management in future procurements. Read More