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Dáil Éireann debate -
Thursday, 10 May 2012

Vol. 765 No. 1

Construction Contracts Bill 2010 [Seanad]: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

When I was speaking last on this Bill, I had reached the difficult issue with regard to development contracts in general, incomplete and poorly completed developments and, in particular, developments such as Priory Hall where construction quality was, to say the least, inferior. The round tower in my parish, Taghadoe, is more than 1,000 years old. As far as I am aware, there were no planning or building regulations or construction guidelines applicable at the time the tower was built, but it has stood the test of time and there has been no investigation as to why cracks appeared in it, because none appeared. It is a sad reflection on modern society and methods of building and provision of services for future generations that we face the kinds of situations unfolding before us at this time. There is no excuse for this.

Twenty years or more ago, there was a scheme in place which guaranteed the quality of building work for consumers, namely, the housebuilders guarantee scheme. This scheme covered everything and whatever was necessary was done. There were no limitations and everything was done in accordance with the commitment made. Where did we go wrong? What has happened? We find defects in developments throughout the country, nobody appears to accept responsibility and people have to go to court to have their rights vindicated. Furthermore, in these times of serious economic difficulty, unfortunate families must face the prospect of living in a building that is inadequately constructed, unsound and unfit for habitation for one reason or another.

More than ten years ago, I made a speech in this House that was critical of the quality of development taking place then. Developments accommodate people and these people are entitled to a reasonable quality of life when they buy, purchase or rent accommodation. I am extremely disappointed by the quality of some of the developments built. In recent years I have heard people scream and squawk about bad zoning decisions and bad planning. Not all zoning decisions were bad, but much of the development, design and construction in the past ten years leaves a lot to be desired. These developments were not designed to accommodate families. They are like chicken boxes. A large portion of the development that has taken place in the past ten or 15 years, in the middle of an economic boom, embodies those little boxes. People are contained like chickens in an incubation system.

Of all the negative economic events that have occurred, what has done most damage is the lack of quality in housing development that has been foisted on the public at a time when money was available to do significantly better. We now have families living in two-bedroomed accommodation in developments that were never intended to accommodate families. These units are now worthless in the market, but the people in them are basically prisoners because they cannot sell the properties, move out of them or walk away. They are imprisoned in their own properties and inferior developments. This does not apply to all developments and I acknowledge those developers who went out of their way to be constructive, to do the right thing and to live up to the highest standards. However, this did not always happen and this is what saddens me most.

Those of us who were here in the 1980s know there was very little money around then. However, the quality of housing development then was good and places built then have stood the test of time. People bought houses then that would last their lifetime. When they bought a family home, they could remain in it or trade up and move on if they wished. That is no longer the case. Everything is an emergency now and we have emergency accommodation to meet unknown requirements now and in the future. It is regrettable that after a time when so many resources were available to us, we have arrived at this juncture. It is regrettable that we - those who had responsibility for overseeing these issues - now walk away from the ashes of the Celtic tiger with nothing to offer to the new generation. All we can salvage from this is the satisfaction that those who did not buy houses, now have the opportunity to buy carefully.

I welcome and endorse this important Bill and I commend the work and effort of the draftspersons and those who took it through the Seanad. It was introduced by an independent Senator, Senator Feargal Quinn, which is an unusual occurrence in the Houses of the Oireachtas. I also commend the work of Seán Gallagher, who has been a driving force behind the concept and necessity for this Bill and who linked with many people in the Oireachtas to ensure it would get on the political agenda and reach this stage.

Unfortunately, the Bill is too late in many ways. Although it is timely, it is untimely in the sense that it is something we needed a number of years ago. Throughout the country subcontractors are suffering the consequences of not having the protection the Bill endeavours to give them in terms of ensuring safeguards exist that will allow them to be paid in circumstances where the main contractors refuse to pay or go out of business and leave their subcontractors high and dry. Unfortunately, some 57% of job losses in our economy emanate from the construction industry. Many of these losses comprise self-employed tradesmen and contractors who provided services within the construction industry. There are very few people in that category who were not burned and left with outstanding debts because they were not paid for work they carried out. For the vast majority, that amounts to a number of unpaid sums they have little to no hope of receiving, which leaves them in a most unfortunate situation. I have no doubt that other Deputies have seen a similar scenario. In my experience, in the constituency I represent, the situation is more acute because of the predominance of the construction trade in providing employment, particularly to men. The area I come from has one of the highest proportions of people who were involved in the construction industry and subcontractors working in the same area. From cases I have come across, I know there is nobody who worked in this sector who has not suffered consequences because this type of legislation was not in place to offer them protection.

A situation prevailed in this country in recent years whereby there were protections in place for the large contractors. They enter into negotiations, either with a private entity contractor or, in many cases, with the State. Part of the contract negotiations normally involves a payment schedule, a clearly laid-down agreement of when payments will be made and what needs to be achieved in order for these to be handed over. In many instances that contract offers clear protections for the senior or main contractors. However, when one goes down to the next level, where senior contractors employ subcontractors to carry out work, one finds there is not the same level of regulation. The processes are much more informal and there is much more unregulated competition because different people compete for the work. Those subcontractors who are most flexible in terms of giving the senior contractor the option of delayed payment are those who may have the better chance of getting the job, and because there are not such strongly formed contracts, as is the case with the main contractors and their employers, the subcontractors are much more vulnerable to being left high and dry. Unfortunately, this is what we have seen. The subcontractors are those who, in many ways, are least equipped to be able to take this. The majority are relatively small, perhaps one man with a few workmen, and it is a challenge for them to keep going, pay out wages every week to their own employees and carry the cost pending the potential payment. When that does not come the consequences can be devastating.

I offer one example that arose in the building of a new accident and emergency medical assessment unit in Letterkenny General Hospital. It is a very fine project that awaits final completion. The contract was awarded to the McNamara group before, unfortunately, it went into receivership. As a result, the project has not been finished, leaving an array of subcontractors who had carried out their work. After the receivers came in these were left with nowhere to go in order to get full payment. Many are likely to get very little. This was in spite of the fact that the State would have paid staged payments to the senior contractors, McNamara, for the work that was carried out. There was no drop-down of parallel contracts, however, between the senior contractor, McNamara, and its subcontractors and this meant the latter group took the hit, leaving many of them in a position where their business was threatened. Indeed, some went out of business. In addition, this created real problems for the State because, naturally, those subcontractors who were left high and dry, who had sunk much of their money into the work, were either reluctant or unwilling to go back and complete the work under a new contract, either because they were not being paid or did not see any chance of being paid for their previous work. They refused to take up that mantle until such time as there would be payment, which led to a very long delay in this instance. Subsequently, a new contractor was employed and the work is now being completed. However, it is an example of the type of situation we have experienced, particularly in recent years. This Bill is designed to guard against this in the future.

The real irony is that because so many people in the sub-contracting sector have been burned there will be much more caution. At present, there is a great deal of caution among those who work in the construction industry, in terms of the jobs they take on and their attempts to ensure they will be paid. Although the Bill will be very welcome in terms of offering these people protection, subcontractors will be very cautious about the types of agreements into which they enter in the coming period.

There are some aspects of the Bill that could be improved or that need to be strengthened. One such is that mini-contracts with a value of not more than €200,000 would not have the protections afforded by the Bill. That is a very high threshold, one that would exclude many contracts the average subcontractor would take on. This needs to be looked at again by the State when this Bill goes on to Committee Stage. I wonder about the merit of bringing in a Bill which will not afford protections to the majority of contracts that, in many cases, are those subcontractors would actually take on. I do not believe that situation is fair. We need to get to a place where, when a contractor engages a subcontractor, the standard and expected procedure is to have a payment schedule over the time of the agreed contract. If the State engages a contractor in a significant job, as part of our awarding and monitoring of that contract we should expect that contractor to show a certain procedure for engaging its subcontractors. We must ensure there are no scenarios such as those we have seen played out in far too many cases in the recent past.

I commend the Bill but I seek to have its weaknesses dealt with and strengthened in the course of its journey through the Houses of the Oireachtas. I again commend Senator Quinn and Seán Gallagher, and those who work with them, for their trojan work in producing the Bill.

I call Deputy Patrick O'Donovan who is sharing time with Deputies Lawlor and McHugh.

I welcome the opportunity to speak on the Bill and acknowledge the presence of Senator Feargal Quinn in the House. Many people have remarked on the legislation in recent days but, in fairness, it would not have been before the House were it not for the work done in the Seanad.

As Deputy McConalogue observed, for many people this Bill comes a little too late but the most important point is that is on the way. All Deputies have constituents we know to have been burned, who were subcontractors working to contract. I grew up in a house where my father worked in an area associated with construction. We always heard about people who got burned when we were young but the number of people who have been scalded by contractors in the past few years is frightening.

We tend to overlook the importance of the construction industry. It grew to an unsustainably high level in the previous ten years but now it is at an unsustainably low level and needs to be stimulated. This legislation is an important aspect of restarting the construction industry and instilling confidence in it once again. People are worried about re-engaging in construction, particularly in subcontracting roles, because without protection they are like lambs to the slaughter. It is bad to be burnt once but to be burnt more than once is very difficult for families.

The construction industry has left many difficulties in many communities but the vast majority of people working in construction were ordinary decent people who were trying to keep their families. When we talk about construction, there is a temptation to lump everyone into one category and suggest that they were all developers. They were not all developers and developers did not cause all the problems with the subcontractors. In our local authority areas, we all know of contracts that went pear-shaped. The Bill is an opportunity to examine tendering, especially when we are about to embark on Irish Water, which will be one the largest utility companies in the history of the State. Irish Water will enable inevitably involve subcontractors at several levels. My concern is when the contractor is on a go slow or goes missing on a contract involving the Department of Education and Skills, for example, subcontractors may be far from the original location and may not know the personalities involved. They may not be able to get answers and they may find it difficult and frustrating to get money. However they may be afraid to raise their heads or raise their voices and draw attention to it because the likelihood of the main contractor getting work from local authority or State agency will have consequences for them getting work as a subcontractor. The contractor has the subcontractor between a rock and a hard place and it is about time Departments, local authorities and State agencies included a mechanism to determine how contractors have treated subcontractors. That may involve asking subcontractors how they have been treated.

We are in a race to the bottom when awarding contracts. In the laying of water mains, the building of local authority houses and work on schools, we see that it takes more than a baseline figure to determine whether a person is capable of doing the job. The lowest baseline figure may not come from the best person but we do not take all these factors into consideration. The essential factor, which we do not take into consideration, is how people treat their subcontractors. If the contractor was found guilty in the Circuit Court of ignoring the Safety, Health and Welfare at Work Act, it would be treated as a black mark against the person when awarding future contracts. However, we seem to take the attitude that we can treat people differently to how we treat employees when they are three steps removed from the main contractor. That is grossly unfair. In light of the establishment of Irish Water, I would like to see something done to make contracts more robust. School projects have been abandoned, water mains works have been abandoned and the group water schemes require remediation works. It all comes back to a failure of the tender process, which failed to take into consideration the history of these people. If one local authority or board of management can talk to another, one could tell the other that a particular contractor had been problematic from the start.

I welcome the Bill but we must talk about much more than the provisions it contains. Deputies Durkan and McConalogue mentioned bonding of contractors, which is totally inadequate at present. The industry has a major role to play in the recovery of our economy and it should not be all gloom and doom. Fairness is what these people seek and I ask the Minister to take on board this point.

I propose to share time with Deputy Anthony Lawlor. The introduction of the Construction Contracts Bill is a welcome move and I congratulate the Minister, Deputy Howlin, for showing leadership on this issue. It is also within the brief of the Minister of State, Deputy Brian Hayes, and affects a range of Departments. Unfortunately, the Bill is not retrospective because that would open up a can of worms. Many small companies have been burnt by bigger contractors leading to the use of terms like subbie busters to describe large contractors. In advance of large contractors being awarded contracts, people on the ground knew the companies would go bust yet they were still awarded contracts. That is an unmitigated, unacceptable and inexplicable disaster. So many small companies went to the wall despite people working hard and investing their time, energy and finance into what were mainly Government projects. The extension to Letterkenny General Hospital is a case in point. It is a fine building and will be opened this year. Its history will leave a sour taste in many people's mouths because so many small contractors got burnt in that scheme. After Michael McNamara & Company got into trouble, I spoke to people in Government at an official level and they were aware there would be difficulties prior to the contract being awarded. Small contractors and people on the ground in Donegal knew they were entering into a contract that would later be in jeopardy. Specific elements in the Bill allow for staged payments and making clear when payments become due, their amount and final date of payment are badly needed.

Citizens of this State are living in Australia. I have one company in mind, although I will not mention the name of the individual. He moved from Donegal to Australia because he could not keep his company going. He is owed money and he was burnt, which is morally wrong. We must pass legislation so that it does not happen again. I am a realist and companies will go bust even if they have ticked all the boxes by providing a bond, meeting the turnover requirement and have dotted the i's and crossed the t's. We cannot legislate for all eventualities but we should instil a sense of confidence in smaller contractors. Big companies, such as Sisk, have been subcontracting work for years and will continue to do so. We must ensure we protect smaller companies.

Our rules of procurement must be seriously considered. The Minister of State is looking at them thoroughly. We have so many good companies in this country that have tried to get onto the tender list for Government projects but cannot because they do not satisfy the minimum turnover threshold of €2 million. There are many good companies with a great track record, employing ten to 30 employees and they are still in business despite the difficult and tight times but they cannot get on the tender list because they do not satisfy that minimum threshold of €2 million. It is ridiculous. Companies should be considered on the basis of their competence. There has to be scale of competence and of past work done, both government and private sector work. Such companies have completed excellent projects for €500,000 or €1 million but they are struggling to survive. We should be giving them a lift up because they will be the people who will help economic recovery as opposed to bigger companies. They will continue to deliver an excellent building product.

The construction sector has been viewed in a negative light. I agree that the construction bubble wrecked this country but at the same time there are very good small companies who are working to survive. We must provide the proper environment for these companies to survive. They are not making big profits but they want to survive. These small companies have a moral responsibility to their workers and they want to keep them in work.

Other Members have spoken eloquently in their contributions and have made good points. I welcome Senator Quinn who is observing the proceedings as he initiated this Bill in the other House. As previous speakers have remarked, it is a pity that this Bill was not in place three to five years ago when the construction boom was at its height because many small companies and subcontractors have suffered as a result of the crash.

I will speak about the construction of the Bill, if I may be excused the pun. I have remarked on previous occasions in the House about how language is used in the drafting of legislation. I remember reading a sentence in a Bill which consisted of 272 words and by the time I had read half the sentence, I was almost asleep. I commend Senator Quinn on the clarity of the language used in this Bill. This is the first time I have not needed to read the explanatory memorandum, which I call the Ladybird version of a Bill. Senator Quinn and the Bills Office are to be congratulated on a Bill which is clear in its language. People will be able to understand the provisions and the Bill is short, succinct and to the point. This is important because the people who will read this Bill are not necessarily qualified barristers or solicitors; they are people who may have left school early in order to work in the construction industry. They will be able to read this Bill and understand what it provides with regard to their rights and obligations.

I am concerned at the practice whereby Bills are amended significantly on Committee Stage. I do not understand why a Minister cannot include any required amendments at the initiation of the Bill so that these can be discussed by the House on Second Stage. Many Members are not involved in committees and will not have an opportunity to speak on amendments to a Bill. When a Bill returns to the House, as a Government backbencher I will not have an opportunity to speak on those amendments. I ask Ministers to bring forward Bills which are as complete as possible so that the House can discuss the full Bill in detail. I contend that if the Minister is required to introduce amendments to a Bill it shows a flaw within the Department, that the Bill has not been examined in detail.

I note that in cases of legislative changes put before the House, such legislative provisions may already have been enacted in other jurisdictions - I refer in particular to UK legislation which will also apply in Northern Ireland. I ask why such legislation cannot be adapted for use in this jurisdiction if it is suitable. There in no point in re-inventing the wheel. The Minister of State, Deputy Brian Hayes, stated that the UK situation was referred to when considering the regulatory impact assessment. As my colleague from Sinn Féin noted, UK legislation is implemented in the North of Ireland. Therefore, what is good enough for the North of Ireland should, in certain circumstances, be good enough for here. As my colleague from Sinn Féin also stated, we should consider such legislation in an all-Ireland context. For instance, some construction companies operate on both sides of the Border and the legislation enacted in the UK a number of years ago should have been implemented here as well.

I refer to the provisions in the Bill with regard to payments and staged payments. I cite the example of a tender for a school building in my village of Kill. A contract was awarded to a company but the dogs in the street knew that the company was going to the wall. I could not understand why the contract was not subsequently awarded to the next best company on the tendering list. Instead, the work was re-tendered and another year passed before the school was built and the children had to work in damp prefabs and old school buildings. I urge the Minister when he reviews this Bill to present the amendments for debate in the House if possible. My key point is that when Bills are brought before the Dáil I ask that they be as complete as possible so that we can discuss them fully and have as few amendments as possible.

Like the previous speaker, I welcome the presence of Senator Quinn and I welcome the long overdue publication of the Construction Contracts Bill. I commend Senator Quinn on his initiative and his work in crafting this legislation. The plight of small and medium-sized building contractors has created widespread hardship for thousands of construction workers, small contractors and their families. Many have fallen victim to the sharp practices of larger companies who on countless occasions have failed to honour contracts or pay for the work that was carried out in good faith on their behalf. Some contractors, even during the so called Celtic tiger years when they were making huge profits, often took the decision to delay as much as possible payment to the small builders they had employed. Sometimes payments were not paid in full and in others were not paid at all.

As the recession took hold things worsened. Many large developers and contractors, who were aided by the banks' casino-like lending policies and their friends in other lending institutions, recklessly overstretched and found themselves in financial difficulties as the housing market collapsed. More often than not, small subcontractors or individual tradesmen were first to pay the price when large building firms found themselves in trouble, as they were denied payment for their labour.

A vicious cycle was created that resulted in wages being stopped, suppliers going unpaid and long-established, reputable firms being forced under. This in turn had far reaching implications for local economies - I have seen it in my own area - as building suppliers and retailers were left without payment.

To make matters worse, the legislation that was supposed to be in place to protect builders and ensure contracts were honoured, proved useless. In some instances, banks, to their shame, advised clients not to pay creditors. They took the view that the cost of pursuing payment through the courts was prohibitively expensive. In effect, therefore, the small contractor or individual tradesman or woman was sacrificed in order to protect the over-exposed developer.

This scandalous situation resulted in many workers being forced onto the dole or having to leave these shores to find work. A friend of mine and his family will be going abroad within the next two weeks as they have been caught in this situation. He was a small contractor who employed four to ten people during the boom time. Unfortunately, he will be leaving for Canada within the next ten days.

I want to refer to one example that I am aware of in my own constituency. In 2010, subcontractors working on the N7 motorway found they were being denied payment by the main contractor who, despite being guaranteed payment themselves because they were employed on a public works contract, refused to pay the subcontractors. There was a stand-off for days when people had to protest outside compounds and try to block machinery from being used.

As a result, a number of workers went for weeks or months without pay and the small contractor was eventually left financially ruined. All of this happened despite numerous political representations from all of us, including the previous Taoiseach, Brian Cowen, who made efforts to resolve the matter because it was in his own constituency. Despite the representations, however, nothing could be done to resolve the matter because this was a dispute between two private companies. Similar situations have happened on contracts to build new schools. Unfortunately, such examples are all too typical.

Like every other Deputy in this House, I am only too aware of the many protracted disputes, legal and otherwise, between small contractors seeking payment from large building firms. Those who pursued their debts through the courts - an expensive and extremely fraught process that placed additional strain on companies and individuals already under pressure - found that judgements which ruled in their favour were ultimately worthless.

In one case with which I am familiar, a court ruling that a large contractor should pay its debt was largely rendered meaningless when the company applied to be "strike off listed" with the Companies Registration Office. This meant they were under no legal obligation to pay the outstanding amount currently owed. To put it simply, all the time and effort it had taken to get the case to court was rendered useless and meaningless.

In the course of this debate, we should remember that the financial hits being taken by many small companies are often for relatively small amounts of money. Yet being denied €20,000 or €30,000 can often make the difference between a company remaining viable or being forced into bankruptcy.

The building firms this legislation is designed to protect have played an important role in producing generations of highly skilled tradesmen. They have been to the fore in ensuring the high standards and levels of craftsmanship that characterise those working within the building industry, and which remain constant.

As the economy gets going again over the next few years and we have a stimulus, these people will be able to play an important role once more. Therefore, there needs to be a more simplified and transparent system to ensure contracts are honoured, and labour and materials are paid for on time.

I welcome the provision in the Bill that enshrines as a statutory right a timeframe for interim, periodic or stage payments. I have been told repeatedly by the owners of small companies how important that provision is for them. This would at least reduce a payee's exposure to non-payment.

Equally important, is having in place procedures and mechanisms to permit the swift resolution of payments through a process of adjudication. Sinn Féin welcomes that very much.

Harsh sanctions should be in place for contractors and developers who break a contract and refuse to pay those whose labour they have employed, in addition to refusing to pay for materials supplied.

I acknowledge that the Bill before us is a work in progress and I welcome the period of consultation with various industry stakeholders that has already taken place. There are some additional provisions which could usefully be considered for inclusion in the Bill, such as outlawing conditional payment clauses and assurances that there are minimum interim payment periods in all construction contracts.

It is the right of everyone to get paid for an honest day's work. For too long ordinary workers have had their labour exploited and rights denied.

I concur with the previous speaker on the need to have all-Ireland legislation. The Minister of State, who lives in a Border county, will know that. We live in an age where we are moving into an all-Ireland economy but companies are transient, particularly in the construction sector. It is important that this legislation is brought forward to ensure that honest, hard-working builders and construction workers are protected from the sharp practices of unethical developers and companies.

I am glad to have an opportunity to contribute to the debate on this important Bill. I am glad to see the Minister of State, Deputy Brian Hayes, here as he has a particular interest in the legislation. In fact, he has done a lot of preparatory work on it. When I was at the Cabinet table, it is no secret that this area exercised me considerably. At that time, I spoke to the Minister for Public Expenditure and Reform, Deputy Howlin, to see if we could get the legislation brought forward.

I heard Deputy Stanley speaking about his own constituency and I remember attending a meeting in October 2010 in a Tullamore hotel. There was one significant company which had recently made an application for examinership in the High Court. There were a number of PPP projects, including the construction of schools in Banagher, Ferbane and Portlaoise. I think I am right in saying that.

That is correct.

They had done a lot of work in this respect. A particular company owned the schools that were being leased by the Department which paid them back over 27 years. Among those who did not get paid were some from the Leas-Cheann Comhairle's country in east Galway. I can recall them sitting in front of me when I was a humble TD, as I am again today. I took care to listen to them. I remember that former Deputy Ulick Burke was there, as well as former Senator Pat Moylan and some other colleagues. Many of those present were owed significant sums of money even though they were guaranteed PPPs or State contracts. How could we arrive at such a situation involving ordinary people in small and medium-sized businesses? Individuals and family businesses were left bereft of any finance. In that situation, money should have been withheld and retained. In addition, there has to be a mechanism for paying subcontractors directly. We should have a system where everybody is under the framework umbrella.

There are many excellent contractors, so we should not lump them all into the same negative category. I do not like tarring everyone with the same brush because people are not all the same. Nonetheless there are one or two who did not discharge their liabilities to contractors who expended considerable sums of money to carry out necessary works. These works included building car parks, landscaping, pipe-laying, tarmacking, fencing, and the removal of asbestos from sites. Those contractors were providing vital employment at the time. Some of them are from my own area, including Mick Finn Contracting and Horan's, which is a great family business. They certainly suffered significantly.

At the mouth of Christmas in 2010 they found that they had to let off workers as they were not able to pay them and those workers then became unemployed, which added to their financial problems. A huge swell of problems came to the fore at the end of 2010 and early 2011. I remember contacting the then Minister for Education and Science in that regard. There was huge anger among the subcontractors. Deputy Stanley was correct in what he said. They protested outside the various school openings and events trying to secure the money they were owed but they did not want to go so far as to as deprive young children of their education, and rightly so. That put a strain on everything for them and they were left high and dry. That is the reason that case was important. It had a significant effect on me when I realised that only one group was being left out of the whole process - the small subcontractors who had carried out excellent quality work.

I am glad the Minister of State will enact this legislation as quickly as possible, subject to appropriate amendments. I want to compliment all involved in the preparation of this legislation, especially Senator Feargal Quinn, who pioneered, invoked and worked on it in an assiduous fashion with some help from colleagues, including Senator O'Toole and various Senators across the spectrum in the Seanad. That shows the benefit of having the forum of the Seanad to tease out the many difficult issues that were and are, even up today, integral to the successful implementation of this legislation. This Bill, when enacted, will hopefully put an end to the practice of withholding sums correctly due and owing to subcontractors mainly, without any or appropriate prior notice being given to those contractors of the intention to do so. Section 7, is an essential component of the Bill, which the Minister of State will know as he paid particular attention to it in his contribution. It is extremely important. Payments should now be made in full and, if not, the subcontractor involved will now be in a position to suspend the provision of works and/or the supply of services due under the contract until the relevant payment in made in full. It will introduce much needed clarity and, more important, transparency in regard to moneys due under construction contracts.

I recall an evening in late October 2010 attending a hotel in Tullamore and speaking to a huge number of subcontractors, those in small and medium-sized enterprises and family businesses and hearing from them that they had carried out substantial works and supplied services to well established and well known contractors who were the main contractors engaged by, for example, the Department of Education and Skills and the Department of the Environment, Community and Local Government, to which Deputy Stanley referred. Despite these being gilt-edged State-backed contracts where the main contractors were sure of getting paid once the work was carried out and conformed to the specifications and guidelines laid down - and obviously they received their payments - they failed to pass on these moneys rightfully due to those unfortunate subcontractors, all of whom were midlands-based. Many of them were left penniless with insufficient money to provide the basic provisions for their families or to meet repayments on their own loans or mortgages. We want to ensure that we never ever see a recurrence of these situations. It is estimated that more than €0.5 billion or thereabouts is owed to subcontractors who performed subcontract works in the manner to which I referred. It was the little guys who were left high and dry. We had a hierarchy of contractors. Some of them were clearly cosseted and protected, and that is what annoyed many people. They seemed to be sure of getting paid but whatever happened, the unfortunate subcontractors, who were at the very bottom of the pyramid and who do a great deal of the spade work, did not get paid.

This Bill will achieve one important breakthrough. It will break the link of dependency. There will be no more "we'll pay when we're paid". We know that almost 200,000 jobs have been lost in the construction and related sectors and we know the devastation this has brought for many families. The social welfare safety net was not available to many of those who were classified as self-employed. Provision for those is a mission I have been pursuing and that I will continue to pursue. The Minister, Deputy Burton, is acutely aware of it and she has set up a committee to deal with this. I know that the Minister of State hopefully, in conjunction with the Minister, will ensure that by providing for small subcontractors to be given the option to pay a special self -employed rate, which will be somewhat higher because they will have to pay the employer's and the employee's rate. They should be given the option and they can decide to opt in or opt out.

Prior to coming to the House I took a phone call from a man who had been self-employed for 16 years and last December was the first time he found himself out of work. He has been six months out of work now. He got word from the Department of Social Protection the other day that because his wife is working he is not entitled to a penny. He would have paid that stamp if it had been available. I told him when it comes in it will be much dearer but he said he would not care how dear it would be because it would be well worth it in the end. This must be a package of provision. These people will be protected in the future by having the safety net of social welfare system available when they find themselves out of work, impecunious for the most part, in despairing situations and in duress, which impacts negatively upon their health status. We know those people - they are plasterers, carpenters, plumbers, electricians, painters, gardeners and so on. This is the cashflow quagmire that unfortunate people found themselves in, having been forced out of business. This Bill will hopefully bring a bit of balance, fairness and respite for those people back into the system.

The thrust and objective of the Bill must be that of "pay now and argue later". In other words, we should forget about the idea of "we will pay when we get paid" or "we will argue now and we will pay later". The contractors are in the dominant position as they have the resources. The notion of "we will pay now and argue later" is the thrust of the UK Act that was introduced in 1998. Rather than having the old outdated and one-sided philosophy of "pay when paid", that is why it is important that the adjudicator's decision will be binding in all respects. That is the important aspect. It should be binding in all respects save where an appeal would lie on a point of law, which pertains in regard to the current arbitration procedure. I have sat as an arbitrator and if there was a point of law and, say, I made a mistake that is clearly evident to an eagle-eyed lawyer and it is a point of law, then the party concerned has a right to go to the Circuit Court, High Court of whatever is the appropriate forum. However, that is a different issue. That right is available. Under the Constitution, nobody can be deprived of the right to go to the courts. However, in this respect, if the adjudication decision is binding, one can go to the courts on a point of law but not otherwise. If it is not binding, a coach and four will go through it. It is important that the adjudicator's decision is binding in all respects, save where an appeal would be on a point of law, which pertains in regard to the current arbitration procedure. If it is not of a binding nature, then the party against whom the decision is made would be well able to delay the due payment by referring the dispute to arbitration, thus forcing the other, and often innocent party, into a protracted dispute, without providing a mechanism for immediate payment. This issue must be addressed before the Bill is enacted.

I see Senator Quinn in the Chamber and I know that in the voluminous and comprehensive contribution he made on the Bill in the Seanad he was concerned about this aspect of adjudication. I think he asked Senator O'Toole to address it, somebody who has some degree of expertise in this area.

The decision of the adjudicator is binding in the UK Act, which is in operation since 1998, and it is binding, notwithstanding a referral to arbitration for final determination of the dispute. Similar Acts have been enacted in Hong Kong, New Zealand, Australia and Singapore. Therefore, there is nothing new about this.

My colleague, Deputy Jack Wall, has been in constant contact and has been contacted - as have I by a number of people in my county and in the constituency of Longford-Westmeath - by a number of people who have been involved in construction for a number of years, such as Anthony O'Leary, who has taken a keen and constructive view of what is required to deal with this situation. I believe he met the Minister of State.

I wish to deal with the main items that need to be addressed by way of amendment on Committee Stage, and the Minister of State referred to some amendments he will bring forward. One is the binding nature of the adjudication for all parties in regard to public and private contracts. I know the reason for provision in regard to public contracts and I will address that later. It is in case the State would be out of money because it paid over money but that can be solved. The State is in a dominant position whereby it can have a retention clause. In other words, if the Minister of State, Deputy Hayes, was a contractor and was owed €150,000 as the main contractor and the State only paid him €120,000 and he owed me €40,000, he might say "hold on, I am only paying you €30,000 because I have to deal with matters myself". There is a mechanism to manage this, if we were to take the initiative. Otherwise, the boys are very cute; they will slip through the net again and they will drag it out interminably. They have the wherewithal. They are in the dominant position and eventually they will abuse it. That is what always happens. That is why we must have regulation. That is why we cannot have free market forces, notwithstanding that I support them in certain areas, but we cannot have them with untrammelled power. We must have regulation.

Another item is the Bill is that the threshold for adjudication, originally set out in the Bill at €200,000 and €50,000, which I know the Minister of State intends to change, were too high. He saw the light. In fairness to Senator Quinn, he just wanted to get the ball rolling and get this legislation on the Statute Book. He wanted to introduce it and pass it to us in the Lower House for us to our job, and that is what we have to do.

It would eliminate many subcontractors, and perhaps the cost of adjudication should determine the thresholds. This is just a thought and it would turn the ball the other way around.

Being able to stop work for only 14 days if not paid is short and could be easily sidestepped. As a barrister one looks at the two sides; one is given a case to advise but one always wonders what the other side will come up with. Perhaps I am a bad person to look at the Bill because I always wonder what I would do if I were on the other side. One should be able to stop working until such time as payment is made. Let it be clear that one must pay over the money and if there is a point in law one can go off and chase it.

There should be adjudication for all disputes. Should it be confined solely to disputes relating to payment? Should we have a construction judge or a specific court similar to the UK? The Commercial Court works tremendously well and many of us did not think it would. Mr. Justice Peter Kelly and all of the people working there must be complimented because it works effectively and efficiently. Cases are being dealt with and procedures are put in place. One must comply with various steps; if Mr. Justice Kelly gives one a month and one does not do what one is told, one is gone and that is proper order.

This is a golden opportunity. The Minister of State, Deputy Hayes, is very bright and I do not say this in a condescending way. He is the person to drive this and Senator Quinn would acknowledge this. We must ensure adjudication awards can be enforced quickly. At present it can take up to two years to get to court to have an adjudication award enforced. This nullifies and defeats the express purpose of the Bill. We must consider how effective and efficiently the Commercial Court has worked since it was established in the jurisdiction.

Section 1 defines construction contracts and follows an amendment in the Seanad made last March on the day before the Dáil was recalled. I was interested in the debate that day. Senator Quinn may not have known but I was watching proceedings. I did not realise where I would be the day after or where I would be on 16 November. The definition in section 1 was widened. Notwithstanding the extended definition achieved by Senator Quinn's amendment in the Seanad and the fact we are all wholeheartedly in favour of putting the Bill on the Statute Book, it is vital that any legislation so enacted covers all relevant situations. Following consultation with suppliers and subcontractors, I understand some people play both roles. People in my constituency are both suppliers and subcontractors; they supply goods and carry out the work. They do not subscribe to the view this worthwhile objective has been achieved. I do not want to be negative but Senator Quinn asked us to be positive in making suggestions to improve the Bill. The Bill remains somewhat flawed as it does not protect subcontractors who supply goods or services. It deals with the bigger and more valuable end, which is important in its own right and cannot be downplayed, but it fails to protect those at the lower end. Many thousands have fallen victim to the economic circumstances and it behoves us as legislators to ensure all sectoral interests are looked after and encompassed in as comprehensive a fashion as possible.

I read what Senator Quinn stated about materials and he has a point, but we must be able to do this. I received a letter from a supplier who employs 100 people. He came from a cottage and never forgot his roots. He looks after his workmen and everyone gets paid. Some men have worked for him for 25 or 30 years and this is a good sign. He told me one of his major concerns is that material suppliers are not covered by the Bill. Repeated efforts have been made to rectify this but to no avail. He also stated it is time some of those elected got a taste of the same, even me. He stated it is believed such suppliers are covered by the terms and conditions of sale but most of the material supplied, particularly specialist materials, are covered under the project contract and retention of title is getting more difficult to enforce because contractors are middlemen. There have been warnings that specialist materials will be omitted from the Bill. We must deal with this specific issue.

We are looking at it.

How much time do I have left?

I could speak for an hour because this subject is close to my heart. Section 1(3) states references in the Bill to construction operations do not include the manufacture or delivery to a construction site of building or engineering components or equipment or materials, plant or machinery. This is an important point.

The Bill states a contract between a State authority and its partner in a public private partnership arrangement, as those terms are defined in the State Authorities (Public Private Partnership Arrangements) Act 2002, is not a construction contract. Certain contracts are excluded from the definition of the construction contract. The Bill does not apply to ordinary individuals who enter into a contract for building and this is fair enough. In future, construction contracts will provide for interim and final payments, the specific sums due in each case and when they fall due. Major or main contractors have a custom of relying on a system of paying when they are paid and having such clauses inserted as part of a contract. This will no longer be tolerated and Senator Quinn has done a tremendous job in achieving this.

I ask the Minister of State to examine the issue with regard to State contracts. Often when awards are made against a company by the Employment Appeals Tribunal or the Rights Commissioner or another body they are not honoured. However, local authorities and semi-State bodies subsequently award contracts to the company. Under the terms of the 2016 agreement this was supposed to be addressed. The practice has caused angst. Why should a company get a contract if it has not complied with and fulfilled its statutory duties under a previous contract? One can argue it is a new contract and that one cannot state Penrose Limited should not be prevented from being awarded the contract, but if Penrose Limited owes Deputy Stanley money awarded by the Employment Appeals Tribunal, the Rights Commissioner or the Circuit Court it should not be awarded a State contract unless it honours the commitments made by State adjudicating bodies or provided by the State's adjudication mechanism in employment law. It is another area we must examine.

On Committee Stage I intend to deal with a number of other issues. I compliment the Minister of State on the Bill and Senator Quinn on the invaluable work he did. He showed the value of the Seanad in teasing out this legislation in the delicate way he did.

The idea of protecting subcontractors and ensuring prompt payment is an exceptionally worthy one to which we all ascribe. However, the issues we need to grapple with in the context of the Bill are very much who it covers, at what level people can get access to this protection and how it will be implemented in the most effective way. Everybody would admit we are not quite there yet with the legislation but these are some of the issues we need to highlight now. We very much have to put it in the context that there is no doubt many subcontractors have been left in dire straits as a result of the lack of adequate protection at present. This is also the case for many suppliers, not those who have been doing a great deal of lobbying such as Roadstone, Kilsaran and the concrete industry, which are well protected and none of which has gone to the wall in the crisis. However, many of the smaller suppliers and suppliers which feed to subcontractors and hardware stores need protection and have been left high and dry. The spotlight needs to be put on this.

We are speaking about how to devise a system for dealing with disputes. We must register that many of the instances about which we are speaking are not genuine disputes. They are very much on the basis of a refusal by the main contractor to pay the subcontractor. Many key contractors have built up their businesses on an approach such as this. It is fair to say the likes of McNamara Construction, which is in receipt of many State contracts, made a great deal of its money on the back of intimidating, bullying, dragging out payments and not paying subcontractors. There are many examples of this. There are even cases of companies which have gone to the wall recently, such as Pierse Construction which was awarded a huge amount of State work, having the spotlight put on them by the Judiciary.

It is obvious that this company, before it folded, was engaged in bleeding subcontractors. It had them out on the motorways on cold winter nights to get the motorway service area projects finished. The subcontractors were working up to midnight, under lights in the middle of winter, at a time when the company knew it would fold and that it would not pay them the money for the work done. The judge in the case pointed to the fact that the company moved €47 million out of its accounts before folding and leaving a queue of subcontractors high and dry. It was quite scandalous, but the National Roads Authority, NRA, still paid the company the money. It was the subcontractors further down who lost out. Huge numbers of subcontractors are trying to chase money through the National Asset Management Agency, NAMA, but they are being told to go to the courts and that NAMA can do nothing as they do not fit in on the scale.

The issue of State work is crucial. Many State contracts have been awarded to main contractors who have deliberately manipulated the lack of protection so they can fleece subcontractors. There was an example of this in my area of Fingal. Fingal County Council employed SIAC to construct a waste water treatment plant. Towards the end of the work SIAC ended the contracts of some of the subcontractors, when they were due to get their second last payment. It offered spurious reasons, such as that the work was not done properly. As a result, the subcontractor had to let its ten workers go and engage in a battle to get paid its money. Effectively, SIAC orchestrated a situation where the bulk of the work was done before it axed the subcontractors at the end, knowing that they did not have the wherewithal for a legal battle, could not survive and might accept a few bob less, in other words, cut the price.

The tendering process is where much of the rot starts, and much of this problem is rooted in it. The State has a responsibility in that regard. What we have seen is a race to the bottom in the construction sector. The lowest quote always wins. However, there must be a better examination of it than that. The lowest quote is not always the best. Often the low quotes are based on a situation where the main contractor is probably factoring in that it will lean on the subcontractor later on and force them to take a reduction of 20% to 30% by virtue of the fact that they cannot hold out and wait for the money to be paid. The low quote is based on exploiting the subcontractor further down the line. The procedures we should put in place should put the emphasis on ensuring high quality work. The cost to society is better served by us putting in the standards early in the process. We must examine this issue.

In all areas we see State decisions being ignored. We see Government and semi-State bodies ignoring judgments from the Labour Court and employment rights decisions. If the State is doing that, presumably the private sector will do the same. The binding nature of decisions and how we implement them is very important.

It is clear that a better arbitration process or panel is necessary. That would be a good thing but careful consideration will have to be given to its composition and its power. We cannot have a panel that comprises only representatives of the Construction Industry Federation and legal personnel. Those people do not have the expertise to adjudicate on matters of dispute. If the panel is to be in any way meaningful, it must be composed of representatives and members of the trades as well. If there is a dispute where one party is claiming the work was not done or was not done properly, there must be a mechanism to adjudicate whether the work was done correctly. In that context I believe it will be necessary to define who will be on the panel. It must contain architects, mechanical, electrical and structural engineers, quantity surveyors, carpenters, plasterers, bricklayers, form workers, steel fixers, concrete finishers, pavers and painters. That might sound a little unwieldy and if they were all sitting in a room it would be a large body, but there must be the ability to call on those skills to adjudicate and make a decision on whether the work was done and to issue a finding.

I agree with other Deputies that this process is absolutely pointless unless the decision is binding and unless a mechanism is put in place for a speedy hearing. In this situation the small operators cannot wait. It must also be constructed in such a way that it does not facilitate early running to the normal courts. There must be a mechanism for a binding decision. I also agree with the point that they must get paid first and argue later. That is the most common sense option in that regard.

Like other Deputies, I believe the amount quoted in the Bill is far too high. It must be lowered substantially. Figures of €10,000 and €5,000 have been mentioned. The latter might sound quite small but we must factor in people other than subcontractors. There must be a mechanism whereby the professions are covered. A huge number of engineers, architects, landscapers and so forth, whose skills have been employed by contractors, have been left high and dry without their money. It might be €5,000 or €10,000, which might not seem large but for a small architect's office employing one or two people, it is a huge amount of money. There must be some provision for such people to get their money.

Consider cases that have received a great deal of attention such as Terminal 2 at Dublin Airport. The subcontractors and suppliers are still engaged in a battle to get the moneys owed to them. If that can happen with one of the State's premier projects, what hope is there for other people down the line? While many subcontractors were owed up to €1 million in that case, a number of them would not be protected by the level provided for in the Bill. It must be lowered. That case raised an interesting scenario. The State, through the Dublin Airport Authority, DAA, repaid the retention money to Mercury Engineering, the main contractor, in the knowledge that the main contractor owed the subcontractors massive amounts of money. The argument was put forward that there should be a mechanism whereby one could get access to the retention money. It would not go to the main contractor but instead be passed on to the people further down the line who were basically bled dry, rather than the State and the taxpayer facilitating the payment of money to such individuals.

It is great to have the opportunity to examine this issue. We must fine tune the who, the how and the level provided for, but it is good the Bill is before us. I look forward to Committee Stage.

I welcome the opportunity to speak on the Bill. I ask the Minister to become involved personally in the situation I intend to outline. In Carrick-on-Suir in my constituency a remedial works scheme is being carried out in the Ballylynch area. The area has approximately 160 local authority houses. The scheme was originally very badly designed, with no individual open space, no front gardens and no community or sports facilities. Proposals were made for a remedial works scheme and they went back and forth to the Department for about seven or eight years. Eventually the scheme was approved in a number of phases.

Phase one has been completed. It was completed well and the residents are happy with it. It took a further almost three years to get approval for phase two of the development. Unfortunately, the contractor who was appointed for the scheme has now gone into receivership. There are approximately 35 houses in this section of the scheme, but it is a very compact scheme so the entire scheme has been affected by this. What has resulted is a very unfair situation for residents. They are effectively living each day in the middle of a building site. I hope the Minister will personally get involved in an expeditious resolution of this situation.

As for what happened, the job was put out for tender and a company from County Galway, which was the lowest tenderer, got the contract. It had started the work but left the site just before Easter and although it was due to return on the following Tuesday, it never arrived. Worse still, it failed to contact the local authority or the residents. The local authority had difficulty even in contacting the company's representatives and this resulted in the area's residents being surrounded by bricks, mortar, fences, rubble and half-finished houses. It is most unfair to the residents, the local authority and the area's local authority representatives. While there was no contact whatsoever, eventually it was established the company in question had gone into receivership. As matters stand at present, the work has stopped and the specification as to what remains to be done in the scheme is being completed. Emergency works have been identified and while it is hoped they will be commenced by the second lowest tenderer within the next couple of months, this entails a delay of approximately three months. Moreover, my understanding is the remainder of the works must go out to tender again and if this is the case, another six to nine months will elapse before the appointment of a new contractor and the commencement of the works, during which time the residents will be obliged to live in the middle of a building site. As I stated earlier, this entire scheme now has been under way for seven or eight years and, consequently, I again ask the Minister of State to become personally involved in expediting this situation. For instance, would it not be possible for the second lowest tenderer to be awarded the contract immediately and to start the work? The second lowest tenderer already has been awarded the emergency works that must be done from a safety perspective and I ask the Minister of State to appoint that tenderer to complete the scheme and to commence the works immediately.

This example raises the question of the awarding of contracts. It has been pointed out to me a number of times that while not many contracts are in place in south Tipperary at present, it is noteworthy that not a single one of them is being carried out by a local contractor. One wonders whether it is the case that almost irrespective of anything else, the lowest tenderer is being awarded contracts. This must be reconsidered in the context of contractors' standard of work and their past experience, rather than simply taking into account the lowest tender. I reiterate my appeal to the Minister of State to become personally involved in this case because the residents find themselves in an horrendous position.

As for the Bill in general, I will turn to the position in which small subcontractors find themselves. I speak of very small subcontractors, comprising a single or perhaps two individuals who, in the boom times were individual tradespeople who had been employed by a contractor However, very many of them were forced to register and work as subcontractors during the building boom and by January 2009, like most other Members I had a queue of such small subcontractors waiting outside my constituency office. Their work had finished the previous Christmas and they had absolutely nothing for the future. Moreover, they were not entitled to social welfare payments either, because the PRSI payments they had been making merely covered them for the State pension. This issue must be examined. Obviously, I would rather that such people had been employed as employees who were paying the normal rate of social welfare contribution, because they found themselves with nowhere to turn except to apply for jobseeker's allowance. Moreover, in cases in which their partners or spouses were employed, the applicants were not entitled to any payment as they were subject to means testing. I reiterate this issue obviously must be reconsidered.

I note the issue as outlined by previous speakers whereby main contractors, when drawing up their tenders, effectively factor in a scenario in which they will not pay the full amount to their subcontractors but will knock 10%, 20% or even 30% in some cases off the price. This issue also harks back to the question of lowest tenders and obviously must be considered. On the subject of arbitration, it is necessary to have in place an arbitration system that is fair, representative and of short duration because most of the subcontractors in question find they have no legal clout and taking a matter through the courts would take forever. Moreover, they would be up against the best and most highly-paid counsel acting for the main contractors and, consequently, an arbitration system that is brief, fair and representative is absolutely essential in this regard.

I wish to share time with Deputy Andrew Doyle.

Is that agreed? Agreed.

There is not a public representative in the State who could not narrate a number of horrific stories of subcontractors and the outcomes they have experienced when developers have refused to pay them, thereby placing them in a very bad position. I have dealt with a number of such individuals in my own immediate locality and have had heartrending meetings with a number of subcontractors who have been so affected. It often has involved families going without a Christmas or the removal of people's creditworthiness. It also has affected their employees right down the line. No one can exaggerate the gravity and seriousness of this issue or its real impact on people who often are powerless and who lack the resources to go through the court process. Such people do not have the time to wait and find themselves in a very difficult position.

It is for this reason that I warmly congratulate my former colleague in the Seanad, Senator Fergal Quinn, for whom I have great personal regard. I note he is present for this debate. I warmly congratulate the Senator on initiating this legislation in the Seanad. It was far-seeing, insightful and typical of the manner in which he conducts his business. I also wish to warmly congratulate my colleague, the Minister of State, Deputy Brian Hayes, on the manner in which he took the legislation, worked with Senator Quinn and has brought this Bill before the House. The legislation is extremely well crafted and is a great synthesis of the work of the Minister of State, Deputy Brian Hayes, and Senator Quinn. I warmly congratulate both for this timely measure.

The Bill achieves a couple of highly important objectives. It establishes a new statutory right to interim, periodic or staged payments, making clear when those payments become due, the amounts thereof and a final date for payment. It is extremely important that this be put on a statutory footing. All of us who have had jobs done privately in our homes know that interim payments are the norm, which is important in terms of cash flow to subcontractors. This is very important and I welcome that it is being provided for on a statutory footing.

The Bill also provides that a payee may suspend performance where a sum owing is not paid by the due date, which is critical. A subcontractor should no longer be bound by the terms of a contract. The arbitrary clause which permitted a developer to pay only after he or she had been paid is no longer tenable and was unfair to those concerned. As stated by Deputy Healy, people who fail as subcontractors, because of the type of abuse which this Bill seeks to address, are often, because of the nature of PRSI contributions, only entitled to jobseeker's benefit which, too, is denied them if their spouse or partner has an income above a certain threshold. As such, these people are in a particularly vulnerable position. It is an issue to which we need to turn our attention.

The provision whereby small subcontractors are paid when the main contractor has been paid, which was arbitrarily used and abused by developers when the recession set in, leaving small subcontractors in a vulnerable position that could readily be exploited, is unsustainable. This was often matched with an abuse of company law by way of the creation of new companies with no assets and resources outside of the original company, leaving no potential comeback for the subcontractor.

The establishment of arbitration and adjudication processes outside the normal court system with all its attendant expenses is important. It is critical that these processes are efficient and secure outcomes in as relatively a short timeframe as possible. On the question of thresholds, I appeal to the Minister of State, Deputy Brian Hayes, to consider introducing an amendment on Committee Stage to lower considerably the proposed initial threshold, which does not accommodate small contractors such as plumbers, carpenters, landscapers and so on. These people are more vulnerable than any other grouping and must be protected. Their level of exposure is greater. Often the small contractors are the weakest. It is critical this issue is addressed on Committee Stage. I look forward with interest to what will emerge during that debate. Having heard the Minister of State's Second Stage speech, I know that he is favourably disposed in this regard and that he wants to ensure the legislation works and achieves outcomes for people.

I welcome this legislation, the objectives of which are laudable. I believe, following refinement on Committee Stage, it will achieve its objectives. I acknowledge the need for protection of the taxpayer, in terms of exposure, in the area of State contracts. While there is existing legislation in place in this regard, there is a need for a good regulatory process within the public contract area. The point has been well made by previous speakers that occasionally - thankfully not often - the person proffering the lowest tender in a public contract arena does so predicated on bad practice, abuse and non-payment of subcontractors. Anything we can do to eliminate this practice is to be welcomed. It may be necessary to provide for a type of review in order to achieve that objective. The situation for subcontractors caught up in contracts such as the building of a school, hospital and so on will be particularly bleak if the mechanisms of the State cannot protect them. Every effort should be made to protect them. In regard to private contracts, the regulatory framework being put in place should impact in this area.

I welcome this legislation. I know from personal experience, from people with whom I have worked in my advice centres, that it is necessary legislation. I congratulate the Minister of State, Deputy Brian Hayes, and Senator Feargal Quinn on the great work they have done on this Bill. It would be wrong not to acknowledge that it was Mr. Seán Gallagher who initiated debate around this issue. As acknowledged by Senator Quinn in his Second Stage speech in the Seanad, Mr. Gallagher played a role in bringing this issue centre stage. This is a serious issue. I am happy we are addressing it and would welcome further improvements on Committee Stage.

It is important to acknowledge and commend the people who are the genesis of this Bill, including Senator Feargal Quinn who introduced the Bill two years ago in the Seanad. It is to the credit of the Minister of State, Deputy Brian Hayes, that it has been progressed rather than replaced with a Government Bill. This has allowed the Bill to make its progression through the Houses as quickly as could have been expected under the circumstances of a change of Administration.

Most of us who represent the people experiencing the knock-on effects of defaults by large construction companies, in many cases multinationals, have had a flavour of the effects of non-payment not alone on these subcontractors, but on their employees and communities. The Government has also had experience of this in terms of major contracts, more often than not State contracts, for schools and roads. In the more recent past, one of the main contractors on a road project went out of business, leaving a number of subcontractors owed a great deal of money. It is hard for people to understand why, when a receiver takes over a construction company, it is allowed continue to operate its trucks under the same brand name despite being under new management and owing a great deal of money to many people. That must be mitigated as much as possible.

I have a couple of questions for the Minister of State. I refer to the overall construction - pardon the pun - of contracts, in particular public contracts, when they are being issued, prepared for tender and prepared for completion. A structure of payment is put in place but there should be some method by which it is clear that people who are due to be paid under the subcontractors clause have been paid. Those project managing the work on behalf of the State or otherwise should be able to verify that these people have been paid from the tranche of money issued. That is important. Cash flows need to be able to reflect that when contracts are being awarded. Some of these contracts are for anything between €10 million to €100 million, so it is important we ensure the flow of money goes all the way down to the people carrying out the work. In many cases, especially in today's environment, these people have greatly reduced credit facilities, such as overdrafts and terms loans, than would have been the case heretofore. There is not an open cheque book nor should there be.

Deputy O'Reilly mentioned thresholds but coming at it from a different perspective, I refer to the thresholds for public tendering and the statute barring of some people because they have been out of the business for a couple of years. I mentioned to the Minister of State before that people who have expertise, who traditionally worked as subcontractors and who have done all the civil engineering or specialist work, should be allowed to tender for smaller contracts. This, in part, would eliminate the dependence on a main contractor and the relationship that exists between subcontractors and main contractors. If that was allowed, it would neutralise some of the problems which occurred in the past. Perhaps it is something at which the Minister of State will look. I do not know if it could be done by way of an amendment to this Bill but it is something I would be willing to discuss with him at some other stage.

The fact we have established a default payment schedule in the legislation means people know at the outset when the payment schedule should take place and that if it does not, there is recourse to proper, swift and cost-effective adjudication. Those are the key points for people. People who have had bad experiences and have limited financial wriggle room have said it is not worth their while taking the risk anymore. That is an unfortunate scenario. These people have built up expertise over the years and are well capable of carrying out the work, yet they feel excluded by fear of being burned again. This Bill sets out to address that.

The Minister of State and Senator Quinn have come a long way towards addressing many of the key areas which have been mentioned by others. It is important that when this Bill is passed - the sooner, the better - subcontractors cannot be walked into a situation where they keep doing work on the basis that they will be paid when it is finished but by which time they have extended their credit to the limit and find they will not be paid at all or in full. That is what the Bill is meant to achieve.

This is a case of providing reassurance for people who are part of our small and medium-sized business sector. They are in every community and they provide local employment and the money is spent locally. It keeps all the ancillary services - the breakfast cafe, the local filling stations, the local hardware merchants or whatever - going. Every job counts. While we welcome the big announcements, it is important we keep those diverse economies going and the best way to do that is to keep money circulating in them.

This is a key area because what we do not want to see is a situation where the only people who feel comfortable tendering and doing the work are large multinational companies, which have a role to play, but which engage direct labour. This does not encourage entrepreneurship, people who want to improve their lot or competition.

I would like the Minister of State to look at the thresholds and at the statute barring. Given what has happened, some people have not been engaged in the industry for the past two or three years, so they are excluded by rules as they pertain. This could deal with many of the problems we saw in the past. I wish this Bill a swift passage through the House.

I welcome the Bill. Many sectors in society have experienced huge difficulties over the past three or fours years. People in the construction industry - contractors and subcontractors - have been very badly hit. These people were earning a living but saw their industry disappear. There are many positives in the Bill and it is important it is passed by the Houses of the Oireachtas as quickly as possible.

I would like to raise a number of issues. While perhaps slightly outside the scope of the Bill, although related, subcontractors, small contractors, brick layers, electricians and so on have seen their livelihoods wiped away and when they have gone to look for benefits they have found they are not entitled to any because they have S class contributions. As in the United Kingdom and other countries in Europe, the Department has been looking at amending the regulations in regard to PRSI for company directors, sole traders or people with C2 certificates. During the discussion on the Social Welfare Bill last December, we heard it was looking at the issue of the S class contribution and to upgrade it to a contribution which would entitle the sole trader or the self-employed person to access benefits for whatever reason, whether going out of business, ill health and so on. Can that be looked at to ensure there is fair play?

Anyone who became a Member of this House in this Dáil or the last one will have had many people come to his or her clinic on this issue. I cannot verify it but I understand negotiations are ongoing between the Minister's office and the Office of the Attorney General on the issue and at possibly looking at some of the rulings which have been made in different countries in Europe in regard to this class of contribution. Perhaps we can get clarity on that.

I turn now to the substance of the Bill.

It is important that we acknowledge the contributions of Senator Quinn and Mr. Seán Gallagher, who are the motivation behind the Bill and its passage through the Houses. The reason for the Bill is simple, in that far too many small to medium-sized contractors were going unpaid for work done or services rendered. When a major company or person in the chain went out of business, the contractor was left high and dry. This would have a knock-on effect, as the contractor would be unwilling to be burned by the industry again.

Many people have been affected. We know of examples of State contracts in which the people at the lower end of the chain have not received their payment. The Bill goes a long way towards rectifying this problem, which has caused significant hardship. Many sectors in society have felt pain in the past three or four years, but construction has been the worst hit. In our clinics, each Deputy has been approached by people who have been badly burned. The Bill's main purposes are to improve payment practices and to put them on a statutory footing, thus providing contractors and subcontractors with statutory rights. Disputes can be referred to a fast-track adjudication process. However, the measures contained in the Bill should not be viewed as an alternative to undertaking appropriate due diligence in a project or to the contract terms under which contractors are to perform their work or provide their services.

While this may be the case, we must acknowledge the excellent work done across the sector. People might claim that some work was shoddy, but subcontractors in every sector of the construction industry who have done excellent work have been left unpaid. During our debate on this and Committee and Report Stages, we should acknowledge the great work that has been done. Craftsmen of all types have been left high and dry.

The Seanad's amendments make a case for the excellent work that House can do. It is important that we acknowledge that process as well.

As has been stated, many people depend on suppliers, food outlets, filling stations and small businesses, yet those businesses' incomes have collapsed. A certain age group of people entered the Celtic tiger economy after leaving school early or without attaining further qualifications because of the buoyancy in the economy at the time. Some people gained trade qualifications and moved on to do what they did best, yet they have been left high and dry. No parish or townland has gone unaffected. Some crafts people have decided to emigrate and others are unwilling to take further chances. The expertise built up over the years will be lost because of late payments or the difficulty in getting paid.

A State contract relating to a school was brought to my attention. The main contractors were paid, but the contractors furthest down the line were not. In many cases, the State or an arm of it agreed to extend a contract's terms to allow additional work to be done. When squeezed, however, the State reverted to the original contract and people were left high and dry. It is vital that the State honour its responsibilities and contractual arrangements and respect the people who carry out excellent work for it.

While the Bill goes a long way towards resolving issues for small to medium-sized contractors, will the Minister of State use his good offices to clarify with the Department of Social Protection the situation regarding the S class PRSI contributions paid by the people in question? This is an ongoing issue and discussions have been under way between the Minister's office and the Attorney General's office since September or October regarding the question of whether S class contributions should actually have been A class contributions in cases of, for example, sole traders or companies formed by husbands and wives working together. In other EU countries, court decisions have allowed people to access payments when they are most in need. Will the Minister of State clarify this important issue? Too many sole traders and self-employed individuals in all spheres have been unable to access State benefits or services due to sickness or unemployment. This is unfair.

I commend the Bill to the House and I thank the Acting Chairman for allowing me the opportunity to contribute.

May I share time with Deputy Carey?

I thank the Acting Chairman for the opportunity to contribute on this important Bill. I commend Senator Quinn on his work in introducing this considered and timely legislation. His background in business is evident from the attention to detail in the Bill, which looks set to be the first Seanad-initiated Bill to be passed by the Oireachtas for quite some time.

Even in 2010 post the construction crash and during a period when many people were of the opinion that construction was not contributing anything to the economy, construction was still accounting for 9% of gross national product. This was well down from the peak in 2006 when construction accounted for a quarter of gross national product. Hindsight is always 20:20, but having a quarter of the national economy centred on building houses was always going to end in disaster once supply exceeded demand, with that quarter of the economy not producing a good or service that could be sold outside the country. In the first quarter of 2011, the construction sector still employed 118,100 people, a significant number.

The Bill's aim is to help subcontractors to secure their rightful payment by introducing an interim payment of money due, statutory rights and a new adjudication system to arbitrate where disputes arise. It introduces a mechanism whereby prior notice of an intention to withhold payment must be given to subcontractors or else the payee can suspend works or services until payment is made.

The recent financial crash, allied with an implosion in the construction industry, has seen many subcontractors ruined financially because they remained unpaid while those they were working for often received their money. To add to their difficulty, they were unable to access State benefits because they were self-employed, leaving them destitute. Subcontractors who will benefit from the Bill include architects, engineers, plumbers, electrical contractors and carpenters.

Previously, many developers set up separate companies for different projects. When subcontractors remained unpaid, they could not take action against the assets of the developer. The difficulties caused stretch far beyond financial implications. Many families have been destroyed by the considerable emotional and psychological problems caused by these massive unpaid bills.

The problem of subcontractors remaining unpaid is prevalent. In recent months, I have been contacted by a large number of subcontractors from east County Galway, many of whom were left out of pocket by vast amounts after completing work on State contracts. They were the subcontractors and not the main contractors involved. The State has a duty to ensure that subcontractors are paid before large contracts are signed off. To do otherwise is counterproductive, as it will be the State that ultimately pays for the difficulties involved, either through social welfare or the additional health services required to deal with the health problems that ensue for family members. For many businesses, court action is not an option because it is too costly and the wait is excessive at a time when credit is not available to tide them over the interim period. Essentially, this Bill aims to improve cash flow for small businesses at a time when cash is king by allowing overheads to be paid and businesses to remain open. It also aims to ensure that disputes are dealt with promptly and in a manner that is not too costly for small and medium enterprises.

However, while the aims and objectives of the Bill are commendable more work needs to be done to ensure subcontractors on contracts worth less than €200,000 receive payment, particularly where the contract involves State projects. Another issue that needs to be addressed is the high cost of arbitration in disputes. Data from the UK show that adjudicators charged an average of between £151 and £175 per hour in 2008. The rates charged in Ireland are believed to be even higher. With hundreds of law graduates out of work, there is no reason for such excessive charges. Many of these out-of-work graduates would relish the opportunity to get involved in arbitration, even if it meant upskilling in the area of construction contracts. By bringing these individuals into the arbitration process, important job opportunities would be made available for law graduates and small and medium businesses could also look forward to lower costs.

This Bill is a step in the right direction thanks to the innovative attitude of Senator Quinn but we must continue to focus on ways to make business life easier for the owners of small and medium enterprises across Ireland.

I welcome this Bill and commend the Minister of State at the Department of Finance, Deputy Brian Hayes, and his officials on bringing it before the House. The Bill has received bipartisan support in the Dáil and was championed in the Seanad by Senator Quinn, who was in turn informed by the businessman, Seán Gallagher. I acknowledge the work these individuals have done. In his contribution on Second Stage, the Minister of State gave his commitment to amend certain provisions on Committee Stage. I followed the Second Stage debate with interest and the contributions from other speakers suggest that we have a robust and responsive Bill which can be wholeheartedly welcomed.

At its peak, total output from the construction sector accounted for approximately 25% of GNP. Since then, however, the sector has seen its share of GNP decline to 13.8%, or €18 billion, in 2009 and an estimated 9%, or €11.7 billion, at the end of 2010. This in itself is a clear indication of the trouble that the construction industry faces. In a normal economy construction should represent between 8% and 9% of GDP but it currently stands at between 4% and 5%. The most regrettable aspect of the boom was the extent to which our public services were funded through unsustainable property related taxes. In the absence of this revenue source our public finances have suffered. The decline in the construction industry has also impacted on employment levels. The latest seasonally adjusted employment data show that the numbers employed in the construction sector have declined from 181,400 in the first quarter of 2009 to 108,100 in the first quarter of 2011.

The recession has highlighted the lack of proper contractual arrangements and bad payment practices in the construction sector. Evidence gathered over the past several years suggests that abuse of subcontractors by main contractor has become an accepted process. In many projects the probability that the full amount owed will not ultimately be paid is factored into the initial tendering process. As companies struggle to survive the economic downturn, we have seen a significant increase in contractual disputes and the inevitable court action that ensues. Neither the High Court nor the Commercial Court is the preserve of the subcontractor or the SME because the costs associated with these courts greatly exceed what is owed in most cases. The adjudication and arbitration processes proposed in this legislation can only help in this regard.

While the issue of procurement and tendering in State contracts is not dealt with by the Bill, it is an area that needs to be examined. The procurement system as it stands is poor and the thresholds required for turnover and other areas reflect a different era. Some of the more significant public projects awarded in recent years were shelved or abandoned when apparently blue chip contractors went belly up. Biggest is not always best. I ask the Minister of State review this process in addition to the work he doing on this Bill.

The Bill contributes to the development of supports for small and medium-sized Irish enterprises. We speak of creating an entrepreneurial culture and making Ireland the best small country in which to do business. However, the movement in principle with this legislation from pay when paid to argue now, pay later instead of pay now, argue later through the non-binding resolution process is open to abuse and needs further attention on Committee Stage.

I would like to speak about the value of PRSI contributions by the self-employed when times are not so good. The current system, whereby no apparent benefit accrues in the short to medium term, dissuades people from taking the risk of creating a business. I acknowledge this issue is not in the remit of the Bill or the Minister of State but I ask that it be considered.

Like other speakers, I have come across numerous cases of subcontractors who have been badly burned. In one case a contractor has not yet been paid for work he carried out on a State project. It is ironic that many of these cases of non-payment involve State funded projects. The perception of subcontractors is that payment for such contracts are guaranteed but this has not always been the case. The subcontractor is a low form of life when creditors are listed for receiverships and liquidations. In my experience the hierarchy consists of the Revenue Commissioners, banks' secured debts, unsecured suppliers and subcontractors, in that order. In many cases the amounts owed are between €20,000 and €150,000. The thresholds set out in the Bill are too high and I hope they will be lowered on Committee Stage.

Although I anticipate that the Minister of State will argue that he has to achieve value for money for the taxpayer, I cannot understand why a proportion of the money made available from a Iiquidation is not ring-fenced for suppliers and subcontractors. It is not logical to force a supplier or subcontractor out of business for the want of cash flow if this eliminates his or her future capacity to contribute to the Exchequer, not to mention the associated costs of going out of business. The Revenue may take an initial modest hit but in the medium and longer term it may be of more benefit to the taxpayer. I accept this is a complex and fraught area but I ask that it be given full consideration. It has become apparent that big developers and contractors have had much in their armoury to protect themselves. Many cases adjudicated over by Mr. Justice Kelly in the Commercial Court shine a light on some of the sharper practices. This legislation is a step towards redressing the balance and I welcome its introduction.

I thank those who prepared the Bill, Senator Feargal Quinn, who is here today, and Mr. Seán Gallagher, who provided much of the expertise behind it. While it is important legislation, much more needs to be done in the construction sector. However, that should not stop us from doing things that could have a fairly immediate effect. I would like to see much more comprehensive legislation that puts the consumer centre stage similar to the licensing system in parts of Australia, including New South Wales, which I will deal with later.

Many of us know of people who ran successful businesses, in many cases for decades, including family businesses transferred from one generation to the next, but are struggling to stay in business or have had to close a business because somebody else higher in the food chain did not pay them. Many jobs have been lost in this way. They go under the radar because they are in ones and twos or over a protracted period of time. They are under appalling pressure because they have taken out guarantees to pay suppliers and they may owe the Revenue, which is intolerable.

Obviously the Bill cannot apply retrospectively but we need to learn from our mistakes. Many of the people involved do not have recourse to the law because it is either too slow or too expensive. While this Bill is aimed at the construction sector such practices are not confined to the construction sector. However, in recent years with the downturn in fortunes of that sector, examples are all around us. One could understand that the limits might be different for a tradesperson whose labour is being paid for. However, the threshold needs to reflect that suppliers may have a number of customers who did not pay and I believe €10,000 is a more realistic level to keep these businesses afloat. While the definitions in the Bill appear to be wide they could be expanded upon in Committee Stage to address anything that is excluded at that level.

Clearly those who have already taken a hit it will not get comfort from this. However, at least they will have the knowledge that some lessons have been learned. We need to become more proactive. While the Bill will form the legal basis for enforcing payments given that the Government has accepted it, I would like to hear from the Minister how it is intended to apply in practice. Who will have responsibility for the day-to-day enforcement? We need to understand the practicalities of implementing the Bill's provisions, given that it is not the courts' role in the first instance.

Like other all walks of life main contractors come in the "can't pay", "can't pay in full" and "won't pay" categories. During the boom years subcontractors and suppliers could avoid those with the worst reputations. However, as that will not be the case in the years to come, exploitation of those is possible as we ramp up the industry. It is really important at this stage that we put some protections in place. Withholding retentions has been commonplace as has been the employment of tradespeople on C2 contracts. Many of those tradespeople did not have the option of working directly for a main contractor or subcontractor, but were self-employed. They found themselves earning a considerable amount of money for a short period of time and then suffering the consequence of not having any kind of social protection when the downturn came. Redundancy payments and social protection payments need to be dealt with for these tradespeople.

Of course this legislation needs to be linked to the proposed bankruptcy legislation, which sadly has been postponed. We are constantly told about the need for confidence which will not be possible unless there is certainty. While we often talk about that in a European context, it is deplorable that where we can put some confidence into the system by introducing that legislation we are delaying doing so. That legislation is complementary to the Bill we are discussing.

Currently those who were first into the courts to seek a judgment have an unfair advantage over those who do not have the funds to go to court. Fair allocation of what is left when a business winds up needs to come into this equation. That may end up saving some small businesses at the expense, for example, of some money that is owed to the banks. It will allow them to be there and regrow their businesses when the industry ramps up.

One of my suggestions to the pyrite panel was that we embrace the Australian system of licensing contractors. I understand that may well be one of the recommendations coming from that panel and I hope that is the case because it would fundamentally change things. Currently a person with access to a set of tools can validly call himself or herself a contractor. Developers need only have access to funds to call themselves developers. They do not need one day's experience in constructing anything to call themselves contractors. There is no penalty if they have left a trail of destruction, as many have done, often leaving it to individuals or the State to pick up the pieces.

Legally, local authorities can refuse planning permission where there have been failures in the past. However, all the building contractor has to do is to move to a different county and start developing there because there is no national register. Local authorities do not pass information to each other as to who the offenders are. I suspect County Kildare is no different from anywhere else in the country in terms of the construction sector. However, given that its population grew threefold in three decades, we have considerable experience with that sector.

It is about the good, the mediocre, the bad and the ugly. The good are those who get planning permission, build according to that permission, complete the estate and seek to have it taken in charge by the council. They pay their subcontractors and their suppliers. They are the ones we do not notice. They are the compliant ones, the ones we want to keep in the industry. They are the ones to whom we should give advantage. They take pride in what they do and use the work they do to enhance their reputation. A licensing system is not necessary for them, but it gives them an advantage which is that in a fair trade situation they are the cream of the crop and the ones who do not comply are weeded out.

The next group are the mediocre and the bad. They are the ones who start with the best of intentions but need to be badgered to ensure that what is built meets the expectations of those who purchase. They are the ones who do not finish the road surface, landscaping or public elements of the estate. Often there is a glossy brochure with a vision. People bought into that vision and paid for it. However, several aspects of the finished product end up falling short. A licensing system would improve the standards and add to the consumer protection. It would also make it much easier for local authorities which are trying to badger them into compliance. It is wrong that the public purse is paying for this, as the industry should do so. Licensing is one way to ensure the industry itself enforces regulations.

Debate adjourned.