COMMITTEE OF PUBLIC ACCOUNTS debate -
Tuesday, 2 Mar 2021

Vote 39 - Office of Government Procurement

Mr. David Moloney (Acting Secretary General, Department of Public Enterprise and Reform) called and examined.

Chairman

Deputy MacSharry wishes to record his apologies, however, he may be able to join us.

I welcome everyone to our online meeting. Due to the current situation regarding Covid-19, only the clerk, support staff and I are in the committee room. Members of the committee are attending remotely from within the precincts of Leinster House. This is due to the constitutional requirement that, in order to participate in public meetings, Members must be physically present within the confines of the place where Parliament has chosen to sit, namely Leinster House or the Convention Centre Dublin. I will ask members to confirm their location before contributing to ensure we are adhering to this constitutional requirement.

The Comptroller and Auditor General, Mr. Seamus McCarthy, is a permanent witness to the committee and is attending remotely.

Before we begin our public engagement, we considered the minutes of our meetings of 11 and 16 February at our private meeting last week. Standing Order 107(3) requires that the minutes are agreed in public session. Are the minutes agreed? Agreed. As previously agreed, the minutes will be published on the committee’s web page.

Today we engage with officials from the Office of Government Procurement to examine the 2019 Appropriation Accounts for Vote 39 - Office of Government Procurement. We are joined remotely from within the precincts of Leinster House by Mr. David Moloney, acting Secretary General, Department of Public Expenditure and Reform, Mr. Paul Quinn, chief procurement officer, Office of Government Procurement, and Mr. David O’Brien, principal officer, Office of Government Procurement. I welcome them to the meeting and thank them and their staff for the briefing material they prepared for the committee.

I ask members and witnesses to mute themselves when not contributing to avoid background noise or feedback. I also ask that they use the button to raise their hand when they wish to contribute and then put it down. I also remind all those in attendance to ensure their mobile phones are on silent mode or switched off.

Before starting, I wish to explain some limitations to parliamentary privilege, and the practice of the Houses as regards reference you may make to other person in your evidence. As they are within the precincts of Leinster House, they are protected by absolute privilege in respect of the presentation they make to the committee. This means that they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Chair to ensure that this privilege is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that witnesses comply with any such direction.

Witnesses should also be aware of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity, by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity.

Members are reminded of the provisions within Standing Order 218 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

Members are also reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

To assist our broadcasting and debates services, I ask that Members direct their questions to a specific witness. If the question has not been directed to a specific witness, I would ask the witness to state their name the first time they contribute.

I now call on the Comptroller and Auditor General, Mr. Seamus McCarthy, for his opening statement.

Mr. Seamus McCarthy

As members are aware, procurement of goods and services by public bodies is a highly complex process that can be challenging from both a technical and legal point of view. Public procurement covers a vast range of goods and services from administrative supplies such as stationery and paper through to large scale and complex projects in areas such as information technology, capital works and the purchase of drugs.

A sustained focus on public procurement over the past number of years, both by my office and by the Committee of Public Accounts, has driven a significant improvement in public procurement practice across the whole public sector. As a matter of policy, I have drawn attention to any situation in an audited body where we identified procurement of goods and services that was not compliant with relevant national and EU rules, and where the aggregate value of the spending was in excess of €500,000 in a year. The committee has followed up on such cases, seeking additional explanations, and clear outlines of plans to address the problem. The Department of Public Expenditure and Reform has responded to recommendations made. As a result, we have seen improvements such as improved tracking by many public bodies of their procurement, including identifying cases where procedures followed were not competitive and-or not compliant; and more transparency by public bodies in their annual financial statements about situations where there has been significant non-compliant procurement, and the reasons for that. With the exception of the health service, there has been a downward trend in the level of non-compliant procurement requiring disclosure in the accounts of public sector bodies subject to audit by me.

Competitive and open procurement is generally considered to be the best way to ensure that a public body has secured good value for money spent. It should also allow legitimate suppliers who are interested in the business opportunity to submit bids for consideration, and to have those bids evaluated in an equitable and fair way. Public bodies need to take a strategic approach to their procurement activity to ensure these benefits are achieved. Competitive procurement needs to be followed up by careful contract agreement and effective contract management.

Members will be aware that some procurements carried out without a competitive process can still be considered compliant with procurement rules. Within the existing procurement rules, there are a number of types of circumstances where purchasing may take place without a competitive process. Examples of such purchases include where only a single supplier providing a required service can be identified; the purchase of proprietary or branded goods; where there is a genuine urgency; or where there are specific security considerations. Public bodies availing of such options need to be able to demonstrate that it is appropriate to do so, and that good value for money has nevertheless been achieved.

The Office of Government Procurement, OGP, was established as a separate Vote in 2014. It was created through a merger of units that previously existed in the Department of Public Expenditure and Reform and in the Office of Public Works. The OGP has responsibility for service-wide procurement policy and procedures, sourcing systems and data analytics. It also seeks to put in place shared framework agreements and contracts for the purchase of goods and services by public sector bodies. The OGP aims to provide information and support to public sector bodies through account managers and help desk staff.

The 2019 appropriation account for Vote 39 - Office of Government Procurement records gross expenditure of €16.1 million. This represented a small increase, of around 4%, on the prior year outturn. The expenditure was incurred on a single programme, with the bulk of the spending accounted for by salaries and other pay costs. The OGP had a surplus to surrender of €2.4 million at the end of 2019. The underspend fell into two areas: pay, with an underspend of €2 million or 13%; and procurement consultancy and other costs with an underspend of €589,000 or 24%. I issued a clear audit opinion in relation to the appropriation account for 2019.

Chairman

Before Mr. Moloney gives his opening statement, unfortunately I must limit him to five minutes. The committee is tied by Covid-19 restrictions and his opening statement is quite lengthy.

I ask Mr. Moloney to summarise it and keep within five minutes because we are tied to a two-hour limit for our meeting.

Mr. David Moloney

I thank the Chairman for the opportunity to make a statement. The statement is lengthy and I will try to skip through it. If members have questions on the parts that I skip, I am happy to take them.

The Office of Government Procurement, OGP, is a division of the Department of Public Expenditure and Reform that has at its core the management of public expenditure at sustainable levels and responsible and responsive public management and governance. As the Comptroller and Auditor General said, €2.4 million of the €18.4 million allocation from the Exchequer was surrendered at the end of the year but this was mostly due to delays in recruiting staff and longer than expected start-up times in a number of key projects.

The programme for procurement reform commenced in 2013 and since then, great progress has been made. The OGP works with sector partners in health, local government, education and defence to source goods and services that are common throughout public service, such as ICT, professional services and cleaning. The sector partners themselves source sector specific goods and services. We estimate that €6 billion of procurement addressable spend falls within the remit of the OGP and other central purchasing bodies. While the OGP is charged with developing the policy framework and associated guidelines, it is up to the contracting authorities to ensure they adhere to these rules. The OGP does not have a policing role in compliance and nor does it have the remit to review individual public procurement processes.

The procurement arrangements put in place by the OGP cover a broad range of services and it helps its clients with complex legal arrangements under the European procurement regime. At the same time, these arrangements drive real value for money for citizens, not only delivering savings that can be reinvested in the delivery of front-line services but also supporting sustained participation by small and medium-sized enterprises. The OGP provided advice to the public sector on Brexit and issued information notes highlighting the various steps public bodies could take to prepare for the impact of Brexit, including a focus on tender documentation, contract management and contingency planning. The OGP also has responsibility for providing policy guidance to the construction sector under the capital works management framework, which consists of a comprehensive suite of guidance and template documents implementing Government reforms in construction procurement.

The impact of Covid-19 on the national development plan has been significant and the OGP has provided guidance to public bodies in managing the contractual issues arising and determining how to manage tender competitions under way. These steps have helped public bodies and the industry to respond well to the new working environment, particularly in protecting infrastructure projects under the national development plan. A review of the capital works management framework is under way and a key focus for the construction industry in 2021 will be on improving productivity.

Ensuring SMEs can successfully compete for public contracts is critical in public procurement. In this context, the OGP also supports the Minister of State in his quarterly meetings with the SME advisory group and works to address the concerns of industry bodies. The OGP gathers comprehensive information on procurement spending and tendering throughout the public service, which shows that 53% of spend in 2018 was directly with SMEs and that 92% of spend was with firms based in Ireland with a median tender size of €100,000.

The operational work of the OGP is focused on establishing and servicing procurement solutions, such as overarching framework agreements and commercial solutions for all public bodies as well as the procurement of bespoke goods and services for individual clients. Framework agreements operate by aggregating demand from the whole of the public service and are established through open competitive processes. In this way, they offer the potential to realise significant efficiencies. Framework agreements are often broken down by lots into geography, specialism or contract size to encourage SME participation at local level. In the years since 2014, frameworks and contracts put in place by the OGP and its sectoral sourcing partners have already enabled savings estimated at €570 million for the State. At present, the OGP has more than 121 framework agreements in place and in 2019 it completed more than 1,000 competitions. The work of the OGP touches on many aspects of citizens' lives. It covers a broad range of issues, such as contracts for electric vehicles, a framework for legal services, electricity framework agreements, a framework for robotic process automation and arrangements for rapid build housing.

The HSE has been very active in contributing to the national response to Covid. The OGP has liaised with the HSE, utilising its personal protective equipment supply lines and securing equipment for non-health front-line public sector workers. A team was established to support the establishment of emergency site facilities with the HSE. The OGP, with others, launched a web page to capture offers of assistance and equipment from businesses and other organisations seeking to provide supplies and services in support of the national response to Covid. A number of OGP staff volunteered-----

Chairman

I ask Mr. Moloney to take a minute to conclude.

Mr. David Moloney

The chief procurement officer is now on the high-level task force.

The OGP has taken initiatives to try to create greater understanding of procurement throughout the public service and the commercial skills academy forms a very important part of this. As the OGP continues to develop, it will maintain a strong focus and engagement with industry clients and suppliers to promote the benefits of excellent procurement. As part of the programme for Government, the OGP will continue to find innovative ways to incorporate green and social considerations in its procurement solutions. Working with its clients, the OGP will continue to provide a broad suite of solutions to procurement issues.

Promoting better planning, earlier engagement and robust post-award contract management will mean the State is better equipped to deliver real value for Government spending, not only ensuring there are cash savings through the arrangements put in place but also that public sector buyers access the right goods and services at the right time and that rigorous quality assurance is in place. I thank the committee for its time and I look forward to answering questions.

Chairman

I thank Mr. Moloney and I apologise for having to interrupt him. He understands why we are tight for time.

Deputy Colm Burke

I confirm I am in Leinster House. I thank Mr. Moloney for his presentation. I also thank him and all of his staff for the work done in this area. As he outlined in his report, they have saved the State money. I want to raise an issue that is not referred to in the report. It is with regard to the mechanism for dealing with urgent decisions. When we faced into the pandemic urgent decisions had to be taken on products such as personal protective equipment. PPE. Is there a mechanism for dealing with this? The tendering process takes a bit of time. With regard to personal protective equipment, ventilators and medication, was a process in place to deal with the urgency? Did we get all of what we required? Did the hospital services get all of the equipment they required in a timely manner? Was the process delayed because of how we now structure the tendering process? Will Mr. Moloney outline areas where improvements could be made when urgency arises or where there is a need for immediate decisions?

Mr. David Moloney

I thank the Deputy. It is a basic principle of public procurement that competitive tendering should be used except in justifiably exceptional circumstances. Notwithstanding this, the procurement rules do provide flexibility to contracting authorities in times of extreme urgency arising from events that are unforeseeable by the contracting authority. Of course, the Covid pandemic is an example of such an unforeseeable event. The OGP has been very involved in helping and advising the various contracting authorities on this and has issued notes and guidance on it. Of course, the use and justification for non-competitive procurement is a matter for each contracting authority to decide. For example, the health sector would decide how to implement it within the health sector but the OGP is available to all public bodies to offer advice. Any time non-standard procurement is used it is notified. Contracts valued at more than €25,000 are notified to the Comptroller and Auditor General and published in the appropriation accounts of the bodies concerned.

Since the start of the pandemic, we have been very involved in working with HSE and others in trying to address the issues the Deputy has raised. The chief procurement officer, Mr. Paul Quinn, is with me and he can give more detail on the operation on the ground of these experiences.

Deputy Colm Burke

Are there lessons to be learned from it? Do we need to have a better structure in place to deal with this kind of situation into the future? What lessons have we learned over the past 12 months in dealing with it?

Mr. Paul Quinn

I am the Government's chief procurement officer. In terms of lessons learned, what was very important during this period was the speed with which the Office of Government Procurement, OGP, and the health system acted. It is coming up on a year since the OGP issued guidance to all the public service bodies regarding the flexibilities it had within the procurement laws and the procurement directives. What that allowed was for public bodies to move ahead under the situation that people found themselves in of extreme and unforeseeable urgency to produce that which they needed to do. It extended not only into the health service but beyond that to other bodies like the Garda, the prison services, direct provision centres and eventually into education. People needed to do things to enable the services to citizens to continue. We issued guidance almost a year ago, literally within days of the start of the pandemic on 22 March. That supported people in doing that which they needed to do. About a week later the European Commission followed up with a similar piece of guidance that supported people in doing what they needed to do.

The Deputy's question about what we learned is an important one. I would draw attention to a couple of things. These are lessons we have shared with the OECD and the European Commission. Importantly, the structures we established under the reform guise helped enormously in the entire system pulling together. It enabled my office at the centre, working with players like health, education and local government, to procure that which was needed and to leverage arrangements that were required. In particular, the health system moved ahead very quickly, as we know, to procure personal protective equipment, PPE. My office worked across the remainder of the public service to consolidate their needs and we were able to leverage off those arrangements with the health system to ensure people like the Prison Service, direct provision centres, etc. were able to get that which they needed very quickly.

We played a huge role not only in providing advice but also providing a mechanism for co-ordination. It is a similar story across other countries internationally but Ireland's scale and the fact we had established these arrangements for co-operation and collaboration under the reform banner paid dividends during that time.

Deputy Colm Burke

On Brexit and the effect it has had on the tendering process, what difference has that made with regard to contracts? Has it made any difference or is there a situation where we need to be more careful because of the new rules that apply as a result of Brexit in dealing with contractors or suppliers from the UK?

Mr. David Moloney

In general terms, one of the things we have with regard to Brexit is several agreements. There is the agreement between the EU and the UK, which agrees that there will be access to each other's markets in terms of public procurement so that companies from the EU can compete for public procurement in the UK and vice versa.

There is a changed situation. We have barriers to trade that were not there before, particularly logistical barriers, non-tariff barriers and the imposition of VAT in respect of trade. There are greater challenges in that regard but the OGP has been involved over recent years in trying to encourage businesses to prepare for those greater challenges. It has issued advice on that and engaged with its governance structures and with the small and medium enterprise advisory group. It is early days yet. In principle, we have equal access in terms of procurement but undoubtedly there will be challenges ahead.

Deputy Colm Burke

Has the OGP identified those challenges? Is there any particular one that has arisen since the changeover on 1 January?

Mr. Paul Quinn

As the Secretary General said, there is no real change to the procurement rules. The trade and co-operation agreement under Title VI deals with public procurement specifically and goes somewhat beyond the Government procurement under the World Trade Organization rules. We do not anticipate substantial issues arising with regard to procurement rules per se, but the challenges in terms of the regulatory environment, the customs environment and rules of origin are already creating issues that are quite perceivable for anybody who does their shopping in any of the UK multiples or sees products coming through there. We see the wrinkles in terms of those arrangements actually starting to arise. They will arise for Government too in terms of challenges in customs declarations and ensuring people are aware of the delays that can occur now at ports.

We have seen some issues, especially on the construction side where, because of some of the challenges, we have seen a slowdown in certain materials that travel either from or through the UK. They are likely to result potentially in increased costs as well as potential delays in terms of slowdowns. Those costs will probably arise from the administration of the customs arrangements more so than anything arising because of tariffs or duties because there is a free trade element to the trade and co-operation agreement. Rules of origin also apply which look into the materials and their origin that flow from the UK. Putting a badge "Made in the UK" or "Made in the EU" requires the fulfilling of certain rules of origin, which means where do all the component parts come from and is it genuinely either a UK product or an EU product? Some of those technicalities are starting to create challenges, ultimately, from a regulatory, customs and rules of origin perspective. Beyond that they are trade issues rather than public procurement matters. We do not anticipate substantial issues arising from a public procurement perspective.

Deputy Colm Burke

On the statement made by Mr. Moloney with regard to the €4.5 billion in contracts, is it possible to get a breakdown of the relevant Departments to which that relates? He spoke about savings of €570 million. There is nothing setting out where those savings were made and the area in which they were made. Is it possible for the committee to get some details on that particular issue? That is an important part which applies to us. Mr. Moloney might make some comments on that.

Chairman

The Deputy has three minutes left.

Mr. David Moloney

It certainly is possible to get the committee more information on that. The way we calculate savings is set out in a methodology agreed when the OGP was established, so that is what we do. We can certainly provide the committee with a breakdown of those savings and how they are calculated. They are in the major areas. When we think about the OGP and what it has done, we have gone from a situation where many thousands of people procured goods and services on behalf of the State at relatively low levels of expertise in terms of the people who were procuring goods and services and increasing that level of expertise and to some extent aggregating the procurement activities across-----

Deputy Colm Burke

I am sorry but I have only one or two minutes left. Where contracts were entered into and additional costs subsequently arose, is it possible to get those figures also? If, say, we have a contract for a specific amount and the contract ends up costing more, is it possible to get details on contracts where the end-day costs were far more?

Mr. David Moloney

The issue there is that the contracting authority is responsible for the individual contracts but Mr. Quinn might be able to give the Deputy some more information in that regard.

Mr. Paul Quinn

We would not hold that information centrally. Ultimately, the contract is entered into between the contracting authority, namely the public body itself and a supplier. The public bodies themselves would hold that information. We do not hold information centrally on the final spend against a contract amount. That information would be held by the public bodies themselves. I will give the Deputy a sense of why that is the case. There are approximately 8,000 public service bodies out there who contract for small and large amounts. We do not have the capacity to hold that information; it would be far too voluminous for us to hold or gather.

Chairman

Our next speaker is Deputy Carroll MacNeill. The Deputy has ten minutes and I will give her a reminder after seven minutes.

Deputy Jennifer Carroll MacNeill

I thank our guests for coming today. I wish to pick up on some of the points raised by Deputy Burke on cases of overspending. I understand that with more than 8,000 bodies, the office cannot monitor every contract. However, I want to tease out the responsiveness of the OGP to the more systemic issues. What capacity has the office to receive feedback either on the original procurement process, how it is working or where it has not met expectations? Out of the 8,000 bodies, what proportion of them overspending would give rise to questions about the systems that the OGP had in place in the first instance? I invite the witnesses to talk us through some of the office's safeguards.

Mr. David Moloney

The point that we make when we say that we provide guidelines as opposed to taking responsibility for individual procurements or indeed, policing individual procurements, is related to capacity, approach, role and function. From the perspective of the OGP, the attempt is to strengthen procurement through pushing out appropriate guidelines and strengthening expertise. In terms of the policing or auditing of contracts, the Comptroller and Auditor General has responsibility for that. Indeed, as is clear from his opening statement, his office takes that responsibility very seriously and brings issues arising to the attention of the Accounting Officers, in terms of commentary on the appropriation accounts, and to the attention of the Committee of Public Accounts. In a sense, that oversight aspect is delivered in that way. In terms of systematic issues that come up and that need to be addressed in the context of the general public procurement guidelines and how they might be improved, we maintain an awareness of issues that arise and seek to strengthen and improve our guidelines as those issues come into view. Mr. Quinn may have more to add to that.

Mr. Paul Quinn

To follow on from what the Secretary General said, we also engage very heavily with our client base because while there are approximately 8,000 public bodies out there, a relatively small number of them account for a large proportion of overall expenditure. We have engagement forums, as the Comptroller and Auditor General said in his opening statement, and we have a number of account managers who go out and engage with those larger public bodies on their public procurement plans to see how they are doing, what supports we can provide to them and how we can better support them in delivering their procurement responsibilities. In addition, we maintain a very large register of offerings on our website so if a public body needs audit services, tyres for vehicles or new ICT systems, for example, they can go to our website and get information on the supports they may need to ensure that they are living within the policies and legal responsibilities that are placed on them. In addition, our website contains lots of guidance, helpful information notes and lots of templates to support people in doing what they need to do in terms of public service obligations for public procurement.

Deputy Jennifer Carroll MacNeill

I understand that the Comptroller and Auditor General reviews procurement on a sector-by-sector or departmental basis. What I am curious about is the process by which, if any, that is then formally fed back into a formal or periodic review process. It sounds like it is there but perhaps not as formalised as I am describing. Does the Comptroller and Auditor General wish to comment?

Mr. Seamus McCarthy

Yes, I just wanted to add to the information that has been provided by the other witnesses. Internal audit and the audit committee of a public sector body should also be, on a fairly systematic basis, going through the procurement that is undertaken by the relevant Department. There are systems in place to capture where contract overruns are occurring. The difficulty is to aggregate it, which is exactly what the Deputy has put her finger on. The requirement on public sector bodies to disclose information about where they have non-compliant procurement is really the key to getting that information on a regular basis directly from the individual bodies.

Deputy Jennifer Carroll MacNeill

As a State, how do we capture that and feed it back as an aggregate? Is that an ongoing challenge? Is that something that the Department of Public Expenditure and Reform has constantly under review?

Mr. Paul Quinn

The 40/02 reports, which the Comptroller and Auditor General mentioned, also get copied to my office. We compile a report on an annual basis in relation to that and see how we can help, both from an operational perspective but also from a policy perspective. I must caution that it is only one input into our overall procurement plans and inputs but it does form part of one and is a very formal process. It features in our annual planning and it also features in how we engage with public bodies from a policy and operational perspective.

Deputy Jennifer Carroll MacNeill

On another point, I recall the establishment of the OGP. Obviously it is essential that there is a clear and transparent public procurement process in any modern democracy and it is really heartening to see the savings that have emerged, of approximately €570 million, since the office's establishment. I would like to get into that a little deeper if I can. A parliamentary question tabled in 2013 sought an update on the office's establishment and the addressable spend. I ask Mr. Moloney to clarify something for me. He spoke about a State spend of €7 billion, for which OGP is relevant but if one goes back to 2013, the equivalent figure seems to have been €9 billion. Reference was made to an addressable spend and I ask the witnesses to help me out. What is the difference there?

Chairman

The Deputy has three minutes left.

Mr. David Moloney

I will ask Mr. Quinn to go through the different definitions.

Mr. Paul Quinn

I thank the Deputy for the question. A few things have moved on since 2013. Since that period, the expenditure profile has changed somewhat. While I do not have the details of what the Deputy has in front of her, if I recall it correctly, we made a distinction between the overall procurement spend of public bodies and what we call the addressable spend. The difference between the two relates to a number of things we exclude because they would be excluded under public procurement, including, for example, inter-agency expenditure. For example, some bodies would count in their non-pay expenditure moneys they grant or pass on to other public service bodies. The system pushes money out from the centre through a grant system and a lot of that would not be procurable. Other things that would not be procurable would include, in the standard fashion, rent and rates. Again, they are not included. A large sum that we also excluded was money reimbursed for pharmaceuticals through the Primary Care Reimbursement Service, PCRS, which accounts for approximately €1.1 billion or €1.2 billion.

Deputy Jennifer Carroll MacNeill

I understand the difference. Returning to the savings and the profile of that, I appreciate Deputy Colm Burke has asked for a greater breakdown of it but looking at it systemically and on the basis of international comparison, when an office of this kind is established, there is a certain amount of capture one can get in the first instance simply by streamlining the process. There is a proportion of savings one will get from that and then perhaps there is an additional proportion of savings to be had just by capturing a better value for money than had previously been the case. Is it the case that Mr. Quinn expects that amount of €570 million to remain approximately static? At what rate does he expect it to grow or has it captured the savings which are available to be captured at this point? Is that a reasonable question? Does Mr. Quinn know what I mean?

Mr. Paul Quinn

I understand exactly what the Deputy is saying. There is an early win for procurement aggregation, is how I would put it. That arises by looking at the holistic needs of the entire public sector and ensuring that, for example, the price a small school out on the Aran Islands is paying for its electricity is the same as what we can procure it for say, the Revenue Commissioners. Part of what the OGP has been able to do in enabling its savings has been to ensure things like that do happen. We look at the needs of the entire public sector, from small bodies to large ones and ensure we get those benefits from aggregation. That has to be balanced then with the reality that we cannot over-aggregate-----

Chairman

The Deputy's time is up.

Mr. Paul Quinn

-----business either. We have to look at ensuring small businesses also have an opportunity so while we aggregate, we then disaggregate into lots and we allow lotting to happen to find the right kind of balance between those things. What it does do is it enables small bodies, typically, to benefit from the buying power of larger public bodies and that is where a lot of that happens. It does also become cyclical in that during better economic times, it is more difficult to deliver incremental savings and during tougher economic times, one generally finds markets are hungrier. It does become somewhat baked into the base and our savings numbers probably peaked in the early years. When I look at a breakdown year by year, which we will provided separately as the Deputy has requested, in 2016 and 2017 when the office got up and running at scale and we were delivering a lot of new frameworks for the public sector that people were buying into, we delivered a lot more in savings than we have done over the past number of years.

There are a lot of other benefits that accrue from the centralisation of public procurement other than simply saving money. It is part of the picture but it also enables things like secondary policies like green and social to be implemented. It give a far more credible offering out there to the markets that we know what we are about, that we are dealing with things in a much more professional way and it delivers a lot of administration savings because, as the Secretary General said earlier, all these individual public bodies were off doing their own thing - excuse the expression - whereas now, not only the OGP but our partners in the health system, in local government, in defence and education are procuring on behalf of the entire system and that reduces a lot of administration costs as well, which are available to public bodies.

Chairman

We have gone over time. The next speaker is Deputy Devlin. He has five minutes, I will give him a reminder after four.

Deputy Cormac Devlin

I thank the representatives of the OGP for their time. My first question relates to the long-running interpretation and translation services case. I appreciate that it was successfully defended in the High Court and I am not going to go into the merits and the detail of the case. I know the OGP cannot either because I understand it is being judicially reviewed. I am not sure if that has concluded. However, does Mr. Quinn have an estimated cost for that long-running process at this point, given I understand the final decision was made in May 2019? Also, how has that particular case changed the procurement rules for the Office of Government Procurement?

Mr. Paul Quinn

I thank the Deputy for his question. To be clear, there is one case that has run its entire course. As there are two other cases in relation to the same company which are also before the courts, I will not refer to matters that are live in front of the courts.

Deputy Cormac Devlin

Of course.

Mr. Paul Quinn

On the case that has concluded, I should mention in the first instance there were no damages because the contract was not ultimately awarded so the only issue relates to costs.

Deputy Cormac Devlin

I appreciate that.

Mr. Paul Quinn

As the Deputy is probably aware, we had different rulings from the High Court through to the Court of Appeal and then the Supreme Court where we got a final ruling in relation to matters. Therefore, the costs did not fall solely to the State but we did pick up a higher proportion than the other party. Those costs were finally settled in December 2020. The final cost was just a shade, that is, a few euro under €360,000.

As to the Deputy's question on learning from it, there has been an amount of learning from it. In particular, as Mr. McCarthy said in his opening statement, public procurement is an extraordinarily complex area and is extremely legalistic. That makes it very difficult for practitioners, particularly when one sees that the courts at various levels can sometimes have different rulings themselves. It shows some of the complexity of interpreting the rules but we always learn from what we do, what goes well and what does not. Undoubtedly, there are some learnings from that particular case that we have codified and shared because there were some learnings from it, as there always are in relation to these things.

Deputy Cormac Devlin

That is good, I thank Mr. Quinn.

My second question is on the non-competitive procurement and, as the Comptroller and Auditor General and members will be aware, in recent months we have had a number of bodies and Departments come before the committee where it has been noted in the accounts that there have been contracts that have been extended or rolled over. I am aware that this can be for various reasons but I seek the OGP's perspective on ensuring that people are complying with procurement rules. In some cases those roll-overs and extensions last several years. Therefore, from the OGP's point of view, how is that dealt with, how is it prevented from happening and how do we ensure the public purse is getting value for money?

Mr. David Moloney

First and foremost, it really does go back to the responsibility of the individual Accounting Officer in the contracting body to ensure they obey the rules. The rules are really clear and what the OGP can do is set out those procurement frameworks and allow people to understand, through the materials it provides, what those rules say. As the Comptroller and Auditor General said earlier, there are a number of exceptions where non-competitive procurement is allowable - proprietary, urgency, etc. - but there are really very limited exceptions.

Chairman

There is one minute left.

Mr. David Moloney

The OGP has really become quite a strong brand. There is a lot of ability for people to become very clear on what the existing rules are. As I said, while we are not in a position where we police those rules, we make them very clear and the Comptroller and Auditor General and his appropriation account reports and this committee and its work follow up on that.

Deputy Cormac Devlin

I accept the OGP is not policing that particular rule but how often would the office reiterate that, particularly in light of Covid-19? As we exit the pandemic period, I presume we are going to see quite a few extensions and roll-overs over the next couple of years in separate accounts. In order to ensure there is a competitive process, and as I say-----

Chairman

The Deputy's time is up.

Deputy Cormac Devlin

-----value for money is secured for the public purse, how often does the office reiterate that need to put contracts out to tender?

Mr. David Moloney

It is a fair point that as we emerge from the current situation and return to normality across so many spheres, there will be a strong need to re-emphasise, especially for people who have used the emergency provisions that are there, the return to normality and the return to competitive tendering as the core of our system and we will endeavour to do that, absolutely.

Deputy Cormac Devlin

Should I take it that the OGP issues regular reminders to people just to ensure that those Accounting Officers are adhering to the rules? I know it cannot follow up if they are, but does the office issue reminders on that basis?

Mr. Paul Quinn

The OGP is in constant contact with the various contracting bodies. We mentioned earlier the engagement we had in regard to bringing attention to the flexibilities within the national procurement guidelines in the context of the pandemic. We would expect to have a similar engagement as we exit the pandemic to remind people of that.

Chairman

The Deputy is over time. I will let him back in for a second round. I call Deputy Verona Murphy.

Deputy Verona Murphy

I welcome the witnesses. To follow on from Deputy Devlin regarding the interpretation and translation case, where was the advice given or who gave the advice to take that appeal to the Supreme Court?

Mr. Paul Quinn

I thank the Deputy for the question. We have legal advisers through the Office of the Attorney General and the Chief State Solicitor's office, so they provided us with the legal advice in regard to those matters.

Deputy Verona Murphy

Are other cases of a similar nature ongoing?

Mr. Paul Quinn

As I mentioned to another Deputy earlier, we have two other cases from that same supplier ongoing.

Deputy Verona Murphy

They are both about interpretation and translation.

Mr. Paul Quinn

Correct.

Deputy Verona Murphy

Okay. The final cost was €360,000, although there was an estimate of €1 million. Was that set aside or is that part of the return for the year?

Mr. Paul Quinn

That is part of the return for 2020. It was an estimate that was noted at the bottom of the appropriation accounts for 2019 because it was an open matter in 2019. The estimate we had at that stage, the €1 million, was simply to note that and it was not accrued for or set aside in any way, shape or form. It was met from expenditure in 2020.

Deputy Verona Murphy

Is the judicial review ongoing?

Mr. Paul Quinn

We have two other cases that are live before the courts at this moment in time. In case there is a perception that we have a lot of cases on an ongoing basis, the OGP since its foundation has had three cases, and these are the three cases we are talking about. That relates to the number of competitions, which would now be in excess of 6,000. We very rarely have cases that are before the courts, almost never.

Deputy Verona Murphy

Mr. Quinn mentioned 6,000 competitions. How many of those does the office actively review on an annual basis? The OGP has 225 employees. Is that correct?

Mr. Paul Quinn

Yes, it is approximately 230 at this time.

Deputy Verona Murphy

It currently has just over 6,000 competition tenders.

Mr. Paul Quinn

No. To be clear, since we commenced operations, we would have conducted approximately 6,000 competitions. Our run rate over the past number of years, albeit that 2020 is slightly down, has typically been of the order of approximately 1,000 competitions per annum, some of them really large and some of them much smaller.

Deputy Verona Murphy

Is the OGP a watchdog on each of those? It would work out at something like four competitions per employee.

Mr. Paul Quinn

Again, it comes back to what are the functions within the OGP. We have people on the policy side who would not conduct public procurement competitions and they would provide policy advice. We have key account managers who are in the field. The number of people who actually run competitions in conjunction with public service bodies is approximately 150. Again, the competitions vary in size and complexity. For example, there could be very large, critically important, strategically important competitions-----

Chairman

The Deputy has one minute left.

Deputy Verona Murphy

Thank you. I appreciate that. As we are almost out of time, I have one other question. It is in regard to the promotion of the use of environmental and social considerations in public procurement. Can Mr. Quinn give some examples of contracts where the OGP has been successful with that, where it is relevant?

Mr. Paul Quinn

I am conscious of time so I will be brief. For example, we have recently put in place an electric vehicle framework for both cars and small vans. We have run competitions to support the education sector to buy its electricity from 100% green sources. Other examples would be that we have just put in place a framework for furniture with the HSE that would include reuse of materials as part of the furniture provided, but also life-cycle management by ensuring effective disposal. We would have a broad range of examples where we have already incorporated that, although there is a lot more to be done.

Deputy Verona Murphy

I appreciate that and frequent updates on that would be great.

On another issue, there were reports across the EU that when PPE was purchased, there was fraudulent interception of payments, so PPE was purchased through the process but, when the payment was made, it never reached the suppliers. Is the OGP aware of any incidents like that in the Irish case from our purchases?

Mr. Paul Quinn

I am not aware of any. I know there were a lot of potential suppliers which appeared in the marketplace and had to be looked at from a due diligence perspective. Most of the expenditure in that space would be a matter for the HSE, so it may be able to give the Deputy more information. At the end of the day, the OGP procurement arrangements were through another supplier and we had no issues.

Deputy Alan Dillon

I welcome the witnesses. In his opening statement, Mr. Moloney referenced the issue of ensuring that SMEs can successfully compete for public contracts, which is critical in the public procurement process. I ask what type of issues and concerns have been raised with the OGP and the Minister by the SME advisory group. What steps is the OGP taking to address the concerns from the different industry bodies?

Mr. David Moloney

I thank the Deputy. In some respects, the facts speak for themselves in the sense that more than 50% of value goes to SMEs, and that is a constant year-to-year figure. Of course, we work with the SMEs very intensively through the SME advisory group, so there is constant interaction at that level. There are a number of different issues that have been raised over time, such as the size of the contract lot and the emphasis on aggregation. As I said in my statement, one of the things we provide for is for lots to be broken down on a specialty and geographical basis in order to support SMEs and sectors. Mr. Quinn works more intensively on a day-to-day basis with the SME advisory group and he may wish to add to that.

Mr. Paul Quinn

I thank the Deputy for his question. In the interests of time, I will mention a couple of issues. The SME advisory group meets quarterly and has the key groupings in there, so we get the right people around the table with the Minister of State and my office to ensure there is good dialogue in regard to these matters. Over the past number of years, their main concern was less about the bureaucracy and more about ensuring bidders and businesses understood how to engage in public procurement. We worked with the main industry bodies to develop a communications strategy and to roll it out in conjunction with bodies like the Small Firms Association, IBEC, ISME, CIF and so on, and we have hosted quite an amount of information sessions and training sessions in conjunction with InterTradeIreland to ensure bidders could engage in public procurement and be successful in public procurement.

Deputy Alan Dillon

It is felt by many that contracts need to be broken down into lots, as Mr. Quinn has referenced previously, and that there are issues due to turnover requirements in that there is more or less a gravitational pull towards larger firms. Does Mr. Quinn agree?

Mr. Paul Quinn

We produce an annual report on spend and tendering. It is on our website. It looks at the median level of contract opportunities that are published across the public sector. For most public contracts, the contract value is somewhere of the order of €100,000. That is the median value. Some are bigger while others are smaller. A figure of €100,000 is not huge and the turnover requirement is not more than two times the contract value so one is talking about a business that would have a turnover of somewhere of the order of €200,000 as the median contract size. It is not that these opportunities are not achievable or attainable by smaller bodies. Obviously, we break our own arrangements into lots. A total of 78% of all our frameworks, and we do big stuff, are broken down into smaller lots to enable businesses to compete. Approximately 67% of all suppliers on OGP frameworks - again, these are bigger arrangements - are SMEs.

Deputy Alan Dillon

The sustainability of PPP supply was one of the main items of discussion in 2020 along with contingency measures that need to be put in place to meet future requirements domestically. Has Mr. Quinn or his officials discussed this with the Taoiseach and the HSE?

Mr. Paul Quinn

The short answer is "Yes". There is a senior officials group specifically that has dealt with Covid from the start. I sit on that group. One of the issues that was discussed at that group was sustainability of supply. A group has been formed across the key Departments, including the Department of Health and the HSE, to discuss how we achieve a more sustainable solution in the medium to long term. It brings in lots of issues associated with trade policy, etc.

Deputy Paul McAuliffe

I will stay with the issue of value for money as part of public procurement. I have just left a meeting of the Joint Committee on Housing, Local Government and Heritage. There has been much debate around the impact of public procurement on the affordability of housing. I know Dublin City Council's quantity surveyors have essentially said that the public procurement process adds a significant amount of time to the overall procurement process but the Society of Chartered Surveyors Ireland has indicated that in the area of professional fees, often through public procurement, one could pay double what the private sector might pay. I know the Royal Institute of the Architects of Ireland has said that we have allowed a situation to arise where we rule out risk but we are paying a very heavy price for that. Could the witnesses comment on the area of value for money in public procurement? While it is important to ensure nepotism and corruption do not happen, is it delivering value for money for public procurement?

Mr. David Moloney

There are a lot of different issues relating to the cost of housing. A lot depends on the area and the particular housing type and mix. In respect of the issues referred to by the Deputy with regard to differences in what Dublin City Council might see as the average cost of housing and what the Society of Chartered Surveyors Ireland might see or indeed the work of the Irish Government Economic and Evaluation Service, IGEES, on the type of housing, they show very different numbers. In particular, if we go back to the IGEES reports on housing, we see a study of the price that was paid or the cost of building housing. That was considerably lower but the issue does turn around the quality and mix of housing and whether one is comparing like with like.

Deputy Paul McAuliffe

Does Mr. Moloney accept that the criteria for entry and the capacity to take part in public procurement tenders often limit the pool and this leads to an inevitable reduction in the competition available?

Mr. Paul Quinn

Those issues do have an impact but in terms of social housing, some of the contract sizes can be relatively small. One could be talking about 50 houses in some estates. Some of the conversation is around major developments where there would be less of a pool of capable contractors.

Deputy Paul McAuliffe

I would argue the contrary. We are hoping to deliver a community facility that is being delivered by a not-for-profit agency. It indicated that the cost might be in the region of €300,000. It went out for public procurement and came back at €580,000 because many of the people with whom the agency had been speaking in advance were unable to participate. It does not seem as though Mr. Quinn is reflecting many of the concerns we are hearing on the ground that public procurement is leading to an increase in price. That might be acceptable if it is delivering extra quality or reducing risk but we should acknowledge it and it should be considered as something that is preventing the delivery of services.

Mr. David Moloney

One of the things we must consider is whether the prices we actually paid have been higher. When we look at the prices we actually paid, we can see that they have not necessarily been higher. In fact the research on prices has shown that housing built on public land has been cheaper. We know there are real issues in terms of building apartments on brownfield sites in urban areas and that there are costs, which have been set out in some detail by the Society of Chartered Surveyors Ireland. I know the Department of Housing, Local Government and Heritage is looking at the experience of Dublin City Council in respect of going to procurement for particular types of sites and development in a market that is highly constrained. It is a matter of concern for us as well in terms of-----

Deputy Paul McAuliffe

It also applies to a lack of innovation sometimes or the inability of partners to develop innovative solutions because that developed solution will often have to go back out to the market and a competitor would then take that innovative solution. I am not hearing the reform of public procurement for which many public bodies are calling.

Mr. David Moloney

The extent to which the issue is procurement is the problem. We are looking at innovation in construction in the NDP review. A construction sector subgroup chaired by my Department is looking at those issues. We are seeking to drive through change because change is needed in terms of innovation in construction. The reality is that we live in quite a supply constrained environment and I suspect the procurement price that Dublin City Council is seeing with regard to particular sites for particular types of housing developments reflects that. The prices we have actually paid for public land, as evidenced in the IGEES report, paint a different picture. We must unpack that. It is a concern but we must unpack it and see what is really driving those changes and differences in cost. A lot of that may be about the type of development we want to achieve on brownfield sites, particularly high-density development.

Deputy Sean Sherlock

I apologise if my questions are repetitive. I wish to ask about the existence of the EU procurement directive. I profess to be somewhat ignorant on this issue but I will seek the witnesses' guidance. I understand that Article 20 of the directive allows for reserved contracts for certain types of entities. I am speaking specifically about social enterprises or those people who operate within the disability sector. My understanding is that this provision of the directive is not being operated in Ireland. I am seeking some sort of appraisal or response from the witnesses from the OGP with regard to whether it is being operated.

If it is not possible to answer my question within the timeframe allocated to me today, could there be a report of some written correspondence to the committee about whether or not disability-focused organisations are being excluded from applying for reserved contracts?

Mr. Paul Quinn

I thank the Deputy for his question. The Irish regulations transpose faithfully the obligations under the procurement directive of 2014. Article 20 will be transposed into Irish law. Those facilities and the ability to use reserved contracts is there for public bodies to use. Whether they are employing that or not, I have no substantial awareness of Article 20 being used by many public bodies, if any. The OGP, in its frameworks, would not typically operate in that space so we have not deployed Article 20 provisions for reserved contracts. We can provide information on the facility but the implementation of it would fall to individual public bodies, to decide to reserve specific contracts. I am aware of one that was done but it was relatively small, where a local cleaning contract was reserved for local entities. There could be many more examples of that practice but they have not come across my desk.

Deputy Sean Sherlock

Am I to understand that the OGP is not obliged to police, a word which I use lightly, whether or not local authorities or public bodies are actually exercising the reserved contracts or the Article 20 provision? Is that the case?

Mr. Paul Quinn

It would be a matter for each local authority or public entity to decide which provisions within directives to apply because only they would understand the circumstances that they are trying to provide services or goods within. The OGP could not make an arm's length decision for a public body about what mechanism they should use to procure services, nor would we. We do not police the use of various different arrangements under public procurement law.

Deputy Sean Sherlock

Mr. Quinn says that the OGP has transposed the directive faithfully, verbatim, if I understand him correctly. It is not a leading question but it would be worrying if we are not using reserved contracts to encourage certain categories of workers who are able to access them. One would hope that the OGP would be as proactive as possible, especially in the disability sector and social enterprise.

Mr. Paul Quinn

I would not say that the directives are transposed verbatim. They are closely aligned. The directives have to be transposed into the relevant law of the country so minor changes would have to be made. The main provisions are there within Irish law as they are in the directives. The issue with the use of reserved contracts is that they are usually quite niche and targeted. If one takes something like a cleaning service, that I just mentioned, a public body may want, for specific reasons, to deploy Article 20 and to use a reserved contract for something that it is trying to do. I was aware of a large construction contract that used it because it wanted to use the local community for its site offices since it was a disadvantaged area. That was an appropriate use of Article 20. The issue with the scale at which the OGP operates is that our commercial cleaning framework is pitched at a different level and would encompass more than €200 million in annual spending on cleaning services. That is why there are certain things that can be done at a smaller, local scale and the mention of local authorities and local bodies is quite appropriate, where they would deploy such mechanisms. It is not that we do not use them but that they would not be generally appropriate in what we do.

Deputy Catherine Murphy

Good afternoon. I want to highlight one area and ask the witnesses' views on it. Some €14 million was paid to Roqu for Chinese ventilators. I understand that might have been done by the HSE. The standard of the machine was not the standard specified by the HSE. I understand that an internal audit was done. How would lessons about procurement be fed back to the OGP to enhance risk assessment even in an emergency scenario? I accept that this was done early in the pandemic but it was not done directly with the producer. A third party was involved and there was a host of other issues. How does that kind of issue feed into enhancing procurement and lessons learned?

Mr. Paul Quinn

The starting point for a number of procurements done on an emergency basis was the fact that they were done on an emergency basis. It is not what we do on an ongoing basis, either centrally or through most public procurement. At the time, the market forces were very different. My strong recollection of where things where at that time was that there was a scramble, not only in Ireland but across the world, to procure necessary supplies, especially medical supplies such as PPE and ventilators. The normal good functioning of public procurement, how it operates and due diligence would have to be examined as the balance of risk and speed were played out. There will be lessons to learn about it.

Deputy Catherine Murphy

Red flags were raised in advance and I am sure there will be analysis of this. The Comptroller and Auditor General said that he would look specifically at this in a special report. How would that feed in to lessons if there was a glaring case such as that?

Mr. Paul Quinn

The specifics of that case will be a matter for the HSE. Both the internal audit and the audit by the Comptroller and Auditor General will undoubtedly highlight issues. That will highlight issues and feed into policy, how emergency procedures are conducted and what aspects and procedures need to be followed in all cases.

Deputy Catherine Murphy

Regarding lessons learned, we had a two tender approach to procurement for the national children's hospital. I think Mr. Quinn was centrally involved in the board himself. What are his thoughts about lessons from that? Would it feed in to other procurement? For example, I am thinking about construction of the new Garda headquarters on Military Road.

Mr. Paul Quinn

Much was learned from the children's hospital project and many changes were made to public procedures, including to expenditure, oversight and decision-making. Many of those things have already taken place.

Deputy Catherine Murphy

Was dual tendering looked at?

Mr. Paul Quinn

Dual tendering was looked at and remains a rarely deployed mechanism for delivery of projects in the Irish public sector.

We are aware that the children's hospital and the works in Cork, at Dunkettle, were approached through that mechanism, but it is an unusual mechanism to be used in an Irish public sector context. To say that two-stage tendering in and of itself is necessarily a bad approach would be incorrect and that there may be circumstances in which it does need to be used. It may be really difficult to ascertain the full cost without doing certain works in advance, or certain designs.

Chairman

I will allow Deputy Catherine Murphy to contribute for a second time later.

Deputy Imelda Munster

Mr. Quinn's briefing document outlines how disputes with contractors can be managed on an individual basis but it seems quite light on detail regarding how Departments or agencies should handle bad-faith actors, such as those who consistently underperform or end up in disputes or mediation. While Mr. Quinn touched on this earlier, I have a number of questions on the collation of data. Maybe a “Yes” or “No” answer would suffice in response to some of them. Does Mr Quinn's office collect data on tenders once they are awarded?

Mr. Paul Quinn

No.

Deputy Imelda Munster

Does it collect data on whether projects or works on services are completed on time?

Mr. Paul Quinn

The OGP does not but I believe the national investment office, NIO, as part of the Department of Public Expenditure and Reform, collects some information for key or large projects.

Deputy Imelda Munster

The OGP does not collect those data. Does it collect data on projects completed at the expected cost?

Mr. Paul Quinn

No.

Deputy Imelda Munster

Does it collect data on dispute resolution mechanisms and on whether costs are excessive?

Mr. Paul Quinn

What would form an excessive amount, I do not know. In general-----

Deputy Imelda Munster

Does Mr. Quinn’s office collect data on dispute resolution mechanisms?

Mr. Paul Quinn

No. Regarding the system of accountability we have, the office provides the policy arrangements, supports, templates, etc., but we do not gather significant data on the performance of contracts after they have been awarded. The office does not do that.

Deputy Imelda Munster

Does it carry out reviews of completed projects?

Mr. Paul Quinn

The office does not but, as I mentioned, the NIO does for certain larger investments.

Deputy Imelda Munster

Am I correct that the OGP would provide the frameworks?

Mr. Paul Quinn

It would provide certain operational frameworks and then a policy framework within which public bodies deliver their individual projects. It would provide templates, guidance and standard forms of contracts. In particular, it would provide a capital works management framework.

Deputy Imelda Munster

The OGP provides the frameworks but it does not gather data on how effective those frameworks are.

Mr. Paul Quinn

We do not gather specific statistical information. Maybe my colleague, Mr. David O’Brien, who is with us here today, is in a position to provide a little more colour on that. What we do is engage very carefully with the key players in industry and those on the public sector side. A consultative body called the Government Contracts Committee for Construction meets routinely, about every six weeks, to discuss how projects are being developed and implemented and the challenges in that regard. That group gathers a lot of information but we do not gather a whole pile of statistical information.

Deputy Imelda Munster

Since the OGP does not gather data on what I listed or on the effectiveness of its frameworks, how does it gauge its success and whether frameworks need improvement?

Mr. Paul Quinn

Is the Deputy talking about the capital works framework as opposed to a framework for the provision of services?

Deputy Imelda Munster

Yes.

Mr. Paul Quinn

The Government Contracts Committee for Construction is the main engagement body in relation to the parties that conduct the main construction activities of government. It would include bodies such as the National Treasury Management Agency and Transport Infrastructure Ireland. It includes all the key players, including local authorities. That is on one side. On the other side, we have routine and regular engagement with industry, so we very much do gather information on how our frameworks are operating and the need to modernise and reform them. We have plans regarding all this because that is our main mechanism. Data would obviously be of assistance as well, but most of the information we get would be through the key bodies charged with the delivery of projects. They give us feedback routinely and regularly on the issues at play.

Deputy Imelda Munster

Mr. Quinn referred to strengthening expertise and garnering business intelligence. Does he not believe the type of information I have listed would be key information to inform business intelligence? It stands to reason that if it were available, the OGP would be able to gain more expertise.

Mr. Paul Quinn

Particularly in the construction space, a lot of it comes down to understanding the key drivers of differences. It is very easy to say we spent 10% extra on a project, but the real question is why we spent 10% extra. It is a matter of having the information associated with that. Our experience of trying to derive that information in the past was that it is very difficult to derive because many issues play themselves out regarding responsibility for variances that arise in public works. It is really difficult to-----

Deputy Imelda Munster

I have a final question.

Chairman

I will allow Deputy Munster to contribute in the second round but I must now allow the other Deputies to contribute.

Deputy Neasa Hourigan

I have a different set of questions but I wish to follow up on what Deputy Munster was querying. When Mr. Quinn said there is no single body responsible for gathering data on the performance of contracts, was he referring to capital works or general expenditure?

Mr. Paul Quinn

Could Deputy Hourigan repeat the question?

Deputy Neasa Hourigan

From the previous conversation, I understand Mr. Quinn's position is that no single Government body has the task of gathering data on the performance of contracts.

Mr. Paul Quinn

That is correct.

Deputy Neasa Hourigan

Does that entail both capital works and general expenditure?

Mr. Paul Quinn

Both capital works and general expenditure. We gather a certain amount of data on the current side that informs the report on expenditure on tendering, and that is published each year. On the capital side, we do not gather that information. The NIO gathers it for a subset of larger projects, as I understand it, but I am not aware of any other public body that gets into the granularity of every contract. As I said, there are 8,000 public bodies.

Deputy Neasa Hourigan

I would like to return to the use of environmental and social considerations in public procurement. Mr. Quinn has already outlined a number of projects where that initiative is in place. Will he outline the scale of the implementation of those sustainable targets across public procurement generally?

Mr. Paul Quinn

There is a commitment under the programme for Government to have all procurement frameworks include green criteria within a three-year timeframe. That work has commenced. Obviously, we have arrangements that are already in place. Replacing a framework takes anything from one to two years because there is a lot of work required to make it happen. The work is happening on a rolling basis as we replace some of the 121 frameworks we have live at this moment. The work is ongoing. Much of this dates back to the previous Government and the climate action plan that came into place during its period in office.

A lot of work has started and is continuing.

Deputy Neasa Hourigan

There is a three-year timeframe and, as Mr. Quinn said, that relates back to the 2019 climate plan. The Government is about to publish a climate Bill, which will have significantly updated and binding targets. Is there an intention to review the current initiative in light of those?

Mr. Paul Quinn

The commitment at this time is that which is captured in the programme for Government. There is no immediate plan to accelerate or change that plan at the moment.

Deputy Neasa Hourigan

Most environmental assessment methods would utilise a baseline year for review if they are going to implement procurement changes. Am I to take it that the baseline of any system would be 2019?

Mr. Paul Quinn

I am not sure what baseline the Deputy is talking about. The commitment in the programme for Government was to transition the existing suite of frameworks to include green criteria. That is an ongoing piece of work that we have in train anyway. Some will lend themselves to green criteria more than others.

Deputy Neasa Hourigan

Is there no intention to update it for any new legislation that might come through that has binding targets in terms of public procurement?

Mr. Paul Quinn

It depends on the nature of the legislation and the commitment that is made. If there is a commitment in legislation, the OGP will obviously be bound by it and will adjust its plans accordingly.

Deputy Neasa Hourigan

The Land Development Agency, LDA, is already operating and we are about to see legislation on it coming through the Dáil. What kind of commencement supports does the OGP offer to new State or semi-State bodies in terms of procurement and setting up procurement standards?

Mr. Paul Quinn

I am not sure what standards the Deputy is referring to. To the best of my knowledge, the Land Development Agency has not approached us in relation to any consultative work unless my colleague, Mr. O'Brien, can tell me whether it has done so. I am not aware of that but we support public bodies that come to us for strategic advice on their public procurement arrangements. If the Land Development Agency comes to us, we will engage with it in establishing arrangements.

Deputy Neasa Hourigan

To be clear, the LDA has to reach out to the OGP. The OGP does not necessarily go into any State or semi-State body on its commencement to set up procurement standards for it.

Mr. Paul Quinn

No, we do not do that. It falls to each individual public body to establish its governance arrangements and we support it thereafter.

Deputy Matt Carthy

I am struggling to find the point of the Office of Government Procurement in terms of the information we have learned. While I see the potential in such an office, I would have thought its remit would include all the things we have heard today that the OGP does not do, including providing direction on indemnification or in respect of assessing previous winners of State contracts for their carrying out of responsibilities in order that the office can advise other public bodies not to re-employ those who fail to live up to contracts or whatever. I do not see any of that having been done.

My questions are specifically on the Covid-19 period. I understand the OGP sits on a high-level task force and has a role advising the Government regarding procurement related to Covid-19. This procurement has over the past year made heavy use of the negotiated procedure, which appears to be no procedure at all. I seek clarification as to whether there is any obligation on the Government to publish contracts negotiated under this procedure, the timeframe for publication that is required and whether there are consequence if those timetables are not met,

Mr. David Moloney

I thank the Deputy for the question. Before Mr. Quinn comes in on some of the operational aspects of that question, it is important to understand the role and nature of the Office of Government Procurement and the manner in which it has driven savings through the system. Each Accounting Officer, that is, each person who is responsible for spending public money has complete responsibility for spending it. The OGP in no sense comes in and takes over his or her responsibility and nor does it police the individual contracts.

There is a huge amount of information out there on the contracting bodies and it would be desirable to be able to access it but that is a huge undertaking. In the national investment office, NIO, we have established a revised capital projects tracker under the spending review series. We have looked at a huge number of different areas of expenditure. We attempt to do a lot of ex post evaluation but, to be fair to the OGP and the people in it, they are in a position where their input is advisory and they help in driving a huge number of frameworks which Accounting Officers and organisations can make use of and a huge number of sourcing competitions, as we referred to in these statements. It may seem the OGP does not do things one might have thought it would do but that is because the responsibility for the spending of money rests with Accounting Officers and contracting parties. That is not to say we cannot improve it as we go along but it is important to know that. I hand over to Mr. Quinn to deal with the remainder of the Deputy's questions.

Mr. Paul Quinn

To give the Deputy a sense of what the Secretary General said, more than 1,500 public bodies make use of OGP arrangements on a day-to-day basis. I appreciate there may be a desire for additional information to be gathered and that is a reasonable expectation. However, we would have to invest in additional capability to make that happen.

Coming back to the question the Deputy asked regarding notices, in terms of the arrangements that people have made on an emergency basis, they are required to publish notices and to make those arrangements available to their internal audit bodies. There is no obligation under public law at the moment for any public body to publish a contract in its entirety.

Deputy Matt Carthy

I will give two examples which this committee has been dealing with peripherally over the last year, or which at least have been brought to our attention, and ask some further questions. Mr. Quinn will be aware that the Department of Education used this negotiated procedure to procure the services of an individual vendor, which provided the basis of the leaving certificate for 60,000 students. If those services were required again this year, would the OGP believe that the negotiated procedure would be appropriate in this instance, given that the Department has had a year to prepare? Would the OGP believe the use of the same vendor would be appropriate, given the debacle that ensued last year?

We also had the issue of the negotiation process with the firm ViraPro, in relation to hand sanitisers. A number of anomalies were found in respect of the procurement process there. The frameworks in place are drawn up by either the OGP or its sister organisations in health, education, defence or local government. Are they essentially paper-based exercises or do they fulfil a function in terms of ensuring that what is contracted is what is received?

Mr. Paul Quinn

They are obviously not paper-based exercises because of the amount of money that flows through them. People draw down services and goods through them all the time and in significant volumes. It falls to the contracting authorities to manage those arrangements, to ensure they are getting what they paid for and to raise issues where they are not.

Coming back to the questions around the Department of Education and the ViraPro question, they are both matters for the Department of Education. We set out in the documentation sent to the committee in advance that there are possibilities under the procurement law to exclude parties that have not performed in contracts. To be reasonable to suppliers, however, that has to be proven and acted upon by the public bodies. It cannot be on the basis of conjecture, statement or assertion. People have to exert their rights and, once they do so, those parties can be excluded from further public procurement competitions in certain circumstances but they also have to be given the opportunity under law to self-clean.

Chairman

I have some questions for Mr. Moloney about the vaccination centres. People understand that a lot of the procurement rules had to be set aside due to the speed and nature of the pandemic. We have been aware for six or seven months that vaccination centres would be needed and a number of organisations did offer their premises for use as vaccination centres. In England and other countries, churches, cathedrals and various locations have been used as centres but not so in this country and these places were offered for use free of charge or just to cover costs. Mr, Moloney has confirmed that his body has a seat on the high-level body that deals with this matter. For example, the Protestant churches offered their venues. Why was this offer not availed of? There has been talk that these venues might not be suitable and hygiene has been mentioned. Some community facilities would be of the same standard or maybe higher than some of the hotels and so on that are being used. I want a straight answer as to why community and church facilities were not availed of.

Mr. David Moloney

In the first instance, this is a matter for the HSE and the Department of Health. I think we can all understand the complexity of rolling out vaccinations on the scale that we are planning to roll it out and the uncertainties about what the size and scale of vaccination centres should be, what the role of GPs and pharmacists would be, whether it was a one-jab or two-jab vaccination and how the ordering for vaccinations would affect the facilities required and where they would be required. We have some sympathy with it being a very complex issue and I am sure the issue gets resolved in different ways in different contexts.

Chairman

The complexity is a large venue that is clean. I understand that the Pfizer vaccine must be stored below minus 70° Celsius but it is being brought to centres that do not have a cold storage facility and used within a few hours. All of the other vaccines can be used at the typical kitchen fridge temperature, so a standard fridge will be used to store them. I do not see the complexity. I have seen some of these venues that are being used and the cubicles being constructed. They could be constructed in five or six halls, within a stone's throw of the house where I live in Portlaoise, that are not being used and it is the same in County Offaly and other counties. Many venues have been offered and are available. For example, school halls have been available, community facilities that are closed up and churches. We have not heard a credible explanation from anybody to date. Mr. Moloney mentioned the complexity but I do not see the matter as being that complex. Without trying to simplify things, if a venue is large enough, has parking facilities, and all of these places have huge parking facilities, and one can store the vaccine then I cannot see why the very same cubicles cannot be put in the same as they were in Cork City Hall.

I want to discuss the nature of the contract and two tenders for the national children's hospital, which have caused a lot of problems. We have had representatives of the hospital in here. For example, there are almost 700 of what is termed hearings between the contractor, BAM, and the body that has been set up to arbitrate on this, the employers' group. I take no pleasure from saying the following. I am more concerned since the day of that meeting of the Committee of Public Accounts than beforehand in terms of what is happening with the hospital. If the tender was being rolled out again, would Mr. Moloney avoid the two-tier or two contract nature of the project or would he strongly advise, in his role as the Office of Government Procurement, that it would be avoided in the future?

Mr. David Moloney

Thank you, Chairman. The issues around the national children's hospital, as we are all aware, are very significant. There have been many issues around it. One of the issues is around how well defined the project was to begin with and, subsequent to changes in the definition of the project, one of the things that we have done, under the public spending code, is we have tried to bring much more clarity to those initial gates of decisions leading up to the tender process. I think that that is one of the major learnings from the national children's hospital and all that went on there.

As the chief procurement officer said earlier, there are circumstances where a two-stage procurement process may be advisable and, in particular, those circumstances might be where it is simply not possible to know how one wants to finally secure what one wants to secure without engaging in a first-stage process.

Chairman

The two-stage tender process indicates that the children's hospital has not just the appearance of a mess; it is a mess now. It is a fact that there are up to 700 of what were described, here in this room, as hearings by the witnesses from the national children's hospital board and the Department of Health. Does that not tell us that the nature of that contract is substantially flawed?

Mr. David Moloney

I thank the Chairman. One of things around the national children's hospital contract is that we realise that there are a lot of lessons to be learned about the management of bespoke megaprojects. That is something that we are trying to absorb into our public spending code, into our processes, into the various gates that we have set out within that for public procurement and, in particular, for projects over €100 million. In fact the Minister is going to Government today with a set of proposals to strengthen assurance and to bring in greater expertise in relation to those megaprojects. So, we agree that there are considerable lessons to be learned and we are trying to do that.

Chairman

We would hope that those lessons are learned. My final questions concern social and environmental clauses in terms of public procurement. How much leeway have we about including these clauses in terms of EU Single Market rules?

We have had some discussion on the environmental and green elements that are being incorporated into contracts but very little discussion on the social element. As a public representative, workers who are working on small and large projects that are part of Government or State contracts have complained to me that they are not receiving the proper rate for the job and do not get an overtime payment or proper holiday pay. Some of these workers are on bogus self-employment even though they are employers or employees. They have asked me why has all of this has happened when it is a public contract. Have we been weak in terms of doing that? Have we less control in terms of putting in the workers' rights element? For example, the need for more apprenticeships, ensuring that they are targeted at disadvantaged groups, ensuring that the rate for the job is paid in terms of the established trade rates, ensuring that there is proper holiday pay and ensuring that there is no bogus self-employment. What is the situation? Why is this going on? This situation has pertained for as long as I have been around and has gone on for years.

Mr. David Moloney

On the issues related to employment law and legal terms and conditions, public contracts require people to obey employment law. They require people to keep records of how they have paid people, who they have employed so they are fundamental requirements of public contracts. Again, the enforcement of that is essentially through complaints to the contracting authority or to the WRC. So, again, those cases would be taken in that way. We would not have visibility on them necessarily here.

On the range of other issues that the Chairman has raised, there is some limited flexibility within the EU procurement frameworks in relation to social clauses and environmental clauses. Mr. Quinn has already pointed to some instances where green environmental issues have been taken on board. To the extent that they are taken on board, it is really the contracting authority that has to decide to do that. Perhaps that will change over the next three years as we roll out and implement the programme for Government commitments and take on board Government policy, including the new climate action plan.

Chairman

I will allow the committee members to each ask a brief question but first I would like Mr. Moloney to give me a "Yes" or "No" answer to the following. Is he saying that the contracted body, be it a Department or State agency, has the power to say to a contractor that has the contract for a particular project that it must do X, Y and Z when it comes to working conditions? Is that correct, "Yes" or "No"?

Mr. David Moloney

They have a limited capacity to include those considerations when they are making the contract in awarding the procurement, as a part of awarding the procurement.

Chairman

I thank Mr. Moloney. If the members want to ask a brief question I will allow them in for two minutes. If they give me a hand signal I will call them in that order. Deputy Catherine Murphy has indicated first.

Deputy Catherine Murphy

I want to go back to the issue of the national children's hospital. Mr. Moloney said the office did a review of the two-tender process. Did that review conclude that it cost more as a consequence or was that a contributory factor? We were told there could not be another competitive process for the second part, which was largely building the hospital, because it would elongate the building of the hospital and consequently, we got tied in. Did he conclude that it cost more as a consequence of that? What was the finding?

Mr. David Moloney

There have been reviews of the national children's hospital, which I am sure took into account the impact of the two-stage review but I do not think there was a specific finding in respect of that issue. Mr. Quinn might confirm-----

Deputy Catherine Murphy

Mr. Moloney is Secretary General of the office of-----

Mr. Paul Quinn

If I might come in, as the Secretary General has said, quite a number of reviews have been done on the children's hospital by both internal and external parties. There is quite a range of factors in there that created the situation where there was cost escalation. There has been no finding that the use of the two-stage process alone caused the escalation in respect of costs. There is no specific finding that that has been a specific driver of cost escalation.

Deputy Catherine Murphy

How are we going to learn if we do not know what happened? Mr. Quinn is saying it is appropriate to use these two-stage processes but we could not do a second competitive tender so how would he know that?

Mr. Paul Quinn

The option was available within the contract for the parties not to proceed with the costs and that was a decision made by the Government at the time. As the Secretary General said, the use of two-stage projects can arise for various reasons. In that case, meeting the timeline was an enormous contributor to the use of the two-stage arrangement. There may be other situations. For example, if works are being done at an historic site, the use of a two-stage contract would be absolutely necessary in circumstances where one may not be in a position to foresee what might be under the ground when digging starts on an historic site. There may be cases where there is a need to run two-stage processes because one may not always have the time to do a specific set of preliminary works, pause while a tender is run and then proceed with a second tender.

Deputy Catherine Murphy

I do not dispute that but the children's hospital was the one on which I wanted to focus.

Deputy Marc MacSharry

I have two brief questions. First, does the Office of Government Procurement procure all services for the State?

Mr. Paul Quinn

I cannot say all services. The OGP was set up to procure common services, whether that is ICT, cleaning or security services, vehicle servicing and all that kind of stuff. It is common stuff but, typically, extraordinary stuff would be left to individual public bodies.

Deputy Marc MacSharry

Does it procure legal services or financial services?

Mr. Paul Quinn

Yes, both. We have frameworks for the provision of legal services and the provision of financial services.

Deputy Marc MacSharry

Does it procure stockbroking services?

Mr. Paul Quinn

Not specifically. It may be comprehended under financial services at a subcategory level but not specifically. We have not called out stockbroking services at any stage.

Deputy Marc MacSharry

It is known that Davy, for example, would carry out work on behalf of the National Treasury Management Agency, NTMA, and the State in terms of bonds and so on. Do we procure that work or are they just the go-to people? Does the OGP have any role in that?

Mr. Paul Quinn

Not specifically. That may be one that the NTMA has done itself and not through our office, to my knowledge. As we have so many contracting bodies out there and run thousands of procurements I do not see them all but to my knowledge, we do not. That would be an important enough one that it would come across my desk in terms of something we were doing, so to my knowledge no, we do not.

Deputy Marc MacSharry

Mr. Quinn might drop us a note after the meeting relevant to that. Obviously, there have been some developments today on stockbroking nationally with the Central Bank applying fines and so on. If we are in a contract with Davy, what options have we got to sever such contracts or examine the implications of what occurred today? Mr. Quinn might drop us a note on that.

Second, is there anything in European law or Irish law which insists upon us awarding tenders to people or giving fair consideration for tenders from organisations or companies that have a track record of litigation against the State in previous contracts?

Mr. Paul Quinn

The short answer is "No". I do not think people exerting what they might see as their legal rights through the courts could be seen as a reason to exclude them. There are no specific provisions in European law that would exclude people who may take a case against the State.

Deputy Marc MacSharry

That was not the question I asked. The question was if there is anything forcing us to consider them. I have made the point, and I might be over-simplistic, that if somebody builds me a house and sues me after the fact I am unlikely to use that builder for my next house. We have had situations where people with that sort of track record in taking litigation against the State - actions against the State on previous contracts - have then been awarded further contracts. While I appreciate the individual's rights I am interested in our rights as a State. Are we allowed use our own common sense and experience to acknowledge and take into account that somebody has a track record of going legal?

Chairman

Mr. Quinn might give a brief answer.

Mr. Paul Quinn

The mechanisms are defined under procurement law where we can exclude people but they are specific and set out in law. One of them is not where legal action has been taken by a party against the State so we cannot exclude is what I would say to the Deputy.

Deputy Cormac Devlin

I thank the Chairman for letting me back in. On the issue of the contracts that have been extended, or roll-over contracts, do the witnesses have an idea of the number we are talking about annually? I note from the report that there are several of those lasting several years.

Mr. Paul Quinn

The specifics are called out in the Circular 40/2002 returns that are sent to Mr. McCarthy's office and to my office in terms of the numbers and account of them. We do not have a list of the specific instances, so they are not specifically called out. We have a sense of the numbers and the reasons. Within the Circular 40/2002 returns there is always a reason set out and Mr. McCarthy's office and my office would look at those reasons to try to understand how we can improve our operational supports to those public bodies and what policy changes, if any, might apply.

Deputy Cormac Devlin

Having reviewed them for 2019, does Mr. Quinn have an idea, even off the top of his head, of the number we are talking about? Are we talking about 100, 300 or more?

Mr. Paul Quinn

I do not have it-----

Deputy Cormac Devlin

Mr. Quinn might come back to me on it, if he does not mind.

Mr. Paul Quinn

As we have analysis with regard to that, we can come back to the committee with a specific number in terms of the returns that we have.

Deputy Cormac Devlin

I thank Mr. Quinn. That would be helpful because it has come up time and again with various bodies and Departments. I understand some of them are necessary but with regard to others it is a bone of contention, particularly for suppliers who, when they see something up on eTenders and they are not successful, find that something has not even been tendered. It is important for me and, presumably, the witnesses, that we see that good processes are followed to ensure that there is a competitive nature in all tenders.

Mr. Seamus McCarthy

To add in respect of the Circular 40/2002 reporting, that only applies to Government Departments and offices. It does not apply to State bodies. For example, it does not apply to many of the bodies that I would audit.

If we find a situation in our testing of procurement and testing of spending we try to make sure the body discloses it in its financial statements. This would be outside an exercise one would undertake in compiling the Circular 40/2002 returns.

Mr. Paul Quinn

I might just come in on this to repeat what I said earlier.

Chairman

We are up against the clock.

Mr. Paul Quinn

Mr. McCarthy is absolutely right. The Circular 40/2002 return is simply one part of the overall picture we generate with regard to supporting public bodies.

Chairman

I thank Mr Quinn. I have a question and a "Yes" or "No" answer will do. Last March and April, when there was an understandable panic in trying to get personal protective equipment into the country, something that stood out was that we did not have a native supply. We did not even have a supply within Europe. There was a worldwide shortage. I understand that some companies in the country are now producing personal protective equipment and this is good. Are there mechanisms to give them an edge with a native contract in terms of ensuring security of supply? We had a problem with flying cargo on passenger planes from China, which is not the best way to do things. It was the best that could be done in the circumstances and ten out of ten to everybody involved. Is there a mechanism whereby we can try to retain the native suppliers and encourage this? Perhaps Mr. Moloney might answer this.

Mr. David Moloney

The basis of EU procurement laws is a level playing field. It is one of the four freedoms of movement of goods and services through the European Union. Preferentially treating domestic producers for any reason is in opposition to this.

Chairman

Even for security of supply, is there a mechanism to stitch it in?

Mr. Paul Quinn

I might come in here.

Chairman

Very briefly.

Mr. Paul Quinn

A group was created to look at this and it has not concluded yet. Security of supply is very much on the radar but this might include not only looking at potentially indigenous arrangements but also issues such as stockpiling. This group has to conclude its work and revert to the Government with recommendations. There are also discussions with the Commission on all of this because it is a matter for all jurisdictions, as the Chair rightly pointed out. Not only was Ireland in challenging circumstances but other countries in Europe and throughout the world found themselves in similar circumstances.

Chairman

I thank Mr. Quinn for answering this. It offers some hope on this front.

I thank the witnesses for joining us today and for the information they have given us. They had to answer a wide range of questions on various issues and I thank them for it and for the information they provided. I also thank the Comptroller and Auditor General and his staff, as always, for attending and assisting the committee in its work. Is it agreed to request that the clerk seeks follow-up information and carries out agreed actions arising from today's meeting? Agreed. Is it agreed that we note and publish the opening statements and briefings supplied to us for today's meetings? Agreed. At our next public meeting we will meet the Strategic Banking Corporation of Ireland and I ask members to note the earlier meeting time of 9.30 a.m.

The witnesses withdrew.

The joint committee adjourned at 3.04 p.m. until 9.30 a.m. on Tuesday, 9 March 2021.