Deputy Sean Fleming is in possession and has nine minutes remaining.
Construction Contracts Bill 2010 [Seanad]: Second Stage (Resumed)
Question again proposed: "That the Bill be now read a Second Time."
I welcome the opportunity to continue my contribution to this debate. All speakers have referred to the background to the Bill and why it is necessary. The only difficulty is that it has taken a long time for it to reach this stage. We must ensure it completes its passage through the Oireachtas before the summer recess.
Before the debate adjourned I was discussing the issue of planning, payment and performance bonds. As it stands, no consideration whatsoever is given to the ability or track record of a contractor with regard to payment of suppliers in the awarding of either public or private contracts. In this situation having a requirement for the provision of security for payment, as applies in other countries, is by far the most effective means of protecting suppliers. That is the view set out by the Irish Concrete Federation and we all appreciate from where it is coming.
During the regulatory impact assessment process which I mentioned and in which many others and I were involved I referred to the US Miller Act. The payment of bonds to protect suppliers of labour and materials must be made a requirement for contractors who tender for projects, as is the case under the Miller Act which requires that a performance bond to protect the client be put in place and a payment bond to protect suppliers be lodged by the contractor before the contract is awarded for the construction of any federal government funded project. There is a value in that requirement.
There may be other ways to deal with this aspect, but this is an issue on which we will have to come to a firm conclusion. I have an open mind, but that is one possibility. However, there would be a cost to the contractor in obtaining a payment bond. Many contractors are being offered projects, but they are having difficulty in obtaining bonds from their banks to secure the contracts. It would be an extra imposition on contractors to have to produce a payment bond in addition to the current bond arrangement and it would be an additional cost which, ultimately, would have to be borne by whoever was paying for the contract and would have to be built into the tendering process. That is one possibility, but I am not saying it is the best way to go.
I have a different view. During the regulatory impact assessment process I said that at the tendering stage the previous payment record should be taken into account. There should be some provision in the tendering process whereby people must confirm that they have complied with previous Labour Court adjudications. A parliamentary question was tabled recently to the Minister for Public Expenditure and Reform about people against whom there were outstanding Labour Court judgments. The people concerned can still be granted new contracts and the Minister did not give a satisfactory reply. He said there was not an equivalent mechanism to the tax clearance certificate in place whereby one could obtain a certificate from the Labour Court to say one was compliant. Nobody was suggesting this because it would be enormously cumbersome. The vast majority of people never have to go near the Labour Court, whereas everyone has to go to the Revenue Commissioners. People must comply and if it is found they have not, they will be in breach of their tendering and contract notice.
When a local authority grants planning permission, it writes to the person concerned stating its intention to grant planning permission in 28 days. During those 28 days others have an opportunity to appeal the decision to An Bord Pleanála. If there is no appeal, permission is granted. We see notices in the newspapers of the Environmental Protection Agency's intention to grant a licence for a waste facility and people have 28 days during which to come forward. In the case of publicly funded contracts, a public notice should be published in whatever medium is deemed appropriate stating it is intended to grant a contract to a company in 28 days. This would give anybody who had not been paid for a job done for the contractor time to come forward. Some 20 people could arrive at the contracting authority's head office to say they had been not paid for the last job done.
The importance of this provision is that it would not only apply to direct subcontractors. There could be a chain of subcontractors and suppliers down the line. It would put the onus on the main contractor to ensure his or her subcontractors behaved themselves because it is not always the case that the main contractor is not paying the subcontractor. The problem could be further down the line in that the subcontractors have not paid those whom they engage. This mechanism would ensure the main contractor only employed reputable subcontractors whom he or she knew would not interfere with his or her ability to be given future jobs. If people were to come out of the woodwork after 28 days and one was to find out that a company had a bad track record, it should not be given any further work. It is as simple as that. If it does something once, shame on it, but if it does it twice, shame on us. If that does not happen, I will have to be convinced on Committee Stage that something better is being done.
The big issue about which we will talk on Committee Stage is the supply of materials and bespoke products. The retention of title does not count in these situations. One cannot grab concrete from the ground as it is not a moveable fixture or fitting. The Irish Concrete Federation, those involved in quarries and who provide tarmacadam are very involved in this issue. It also applies to people who provide bespoke products, whether they be customised windows, doors, electrical fittings, heating installation equipment, etc. which cannot be removed. A provision must be included to facilitate them.
There should not be a differentiation between public and private contracts. The same rules should apply to every category of business. A different set of rules should not be introduced in this legislation. There are arrangements in place for publicly funded contracts, but they are not working because we would not be speaking about this issue if they were. INobody should talk about the current arrangements in place.
The Construction Industry Federation stated in one of its magazines recently that 90% of all disputes were settled on the steps of the court after proceedings had taken place and all legal costs had been incurred. We want to reach a situation where a adjudication would be binding. I understand there is always a legal right not to abide by it, but if it is undermined by not having strong legal force behind it, people will not pay attention to the adjudication process. The regulatory impact assessment process will remind us to take into account the views of the Chartered Institute of Arbitrators which has gone through the issue. Most of us who will be involved on Committee Stage have received correspondence from it. It makes a few excellent points, but time does not permit me to read them.
The most important point on contracts, whether public or private, concerns the ability of small and medium-sized businesses to receive them, but the threshold is too high. One must have had a high level of turnover in the past three years. Many companies which have built housing schemes would not qualify to complete two further houses for the local authority because of the reduction in their turnover in the past couple of years, even though they built hundreds perhaps one decade ago. There must be some mechanism to rebalance the position. Some 99% of contracts of awarded by the State should be given to Irish companies, as happens in every other EU country. They are able to do so under the same EU arrangements, but we have been soft on the issue. We must be as tough as other countries and construct our tendering process to suit Irish businesses, as they do for theirs. We should look after own.
I welcome the opportunity to speak to the Bill. This is another example of how politics is changing because the Bill started out as a Private Members' Bill in the other House where it was introduced by Senator Feargal Quinn whom I am delighted to see in the Distinguished Visitors Gallery. It has made its way through following a change of Government to be presented to us. As I am sure the Senator knows, if we pass it, it will be the first which started out as a Private Members' Bill in the other House to be passed since 1965. It is the new politics the people want to see and I hope we will continue to do things like this in the coming years.
In the programme for Government the Government committed to protecting all small business subcontractors who had been denied payment by larger companies. The Bill introduces a new dispute resolution system for subcontractors in order that they will not have to wait years for payment from larger contractors. It also allows for contracts to provide for interim payments during the duration of a contract. It is very worthwhile legislation, but some issues have been raised with me by a number of small contractors. The Minister of State, Deputy O'Dowd, may also have been contacted by them because they were from the east Meath-Drogheda area. I am sure he is familiar with these issues.
One issue concerns the proposed €200,000 threshold for contracts that fall within the scope of the Bill. This provision caused some unease among many small businesses which felt they would be left out in the cold by the high limit. The Bill would have done nothing for them at all and would have meant continued non-payment for work. It would have put some of the businesses under financial pressure. Many of the businesses are struggling because of the economic climate. I have raised this issue with the Minister on numerous occasions. I was very glad when I received word from his office that the proposed financial thresholds are to be re-examined. In effect, they will be reduced considerably, or possibly removed from the legislation. This is excellent news for small subcontractors and I very much welcome it.
I wish to raise another issue that has been raised with me in respect of this Bill and on which issue I have not received clarification. I hope we will receive clarification in the Minister of State's closing remarks. Will the Bill help suppliers of construction products that are irretrievable from a site because they have been incorporated into the structure of a building? An example includes subcontractors who provide tiling to a larger contractor. One cannot take tiling or a partition wall away from a site after installation. Will subcontractors in this category be included in the legislation? Perhaps the Minister of State will confirm this in his closing remarks.
I hope we can pass this legislation as soon as possible, preferably before the summer recess. There are many businesses that need to see the legislation put into law as soon as possible. They will welcome it and so will we.
I welcome the Bill. It was introduced in the Seanad by Senator Feargal Quinn, who is present to observe this debate. The Bill passed through the Seanad and the Minister of State, Deputy Brian Hayes, worked on it. It is a Private Members' Bill, which is very welcome because it is important that legislation passed in the House not always be Government legislation. It is very rare for a Private Members' Bill to be accepted by the Government and taken on board. I welcome this.
I wish to make a point on the importance of the Seanad. Under the Constitution, legislators operate in a bicameral system with a three-part structure involving the Dáil, Seanad and President. It is a question of checks and balances and protection. The Seanad can provide extra scrutiny and legislative proposals. This Bill demonstrates the value of the Seanad in our parliamentary democracy. I am aware there was a vote in the Seanad today in which it asserted its independence in a motion on Seanad reform. Eradicating the Seanad without considering the consequences for our democracy poses a problem. It is important the Dáil considers the matter sympathetically.
The Bill addresses a very important issue which has been more pronounced during the recession but which was probably relevant before it, albeit not to the same extent. As a Deputy, I was approached with regard to this issue by a number of sole traders and small business people working in the construction sector. They outlined the impact on their businesses if they did not receive payment for the work they had done. It is very important for a business to have cashflow. Money is not exactly forthcoming from the banks or other sources. In this context, it is very important that construction work carried out be paid for.
People who carry out surveying work have raised the issue of not being paid on time. In one case, a contractor had not been paid because of a hold-up at local authority level. Therefore, the problem is not associated with the private sector alone.
While the legislation is very welcome, I contend there are many issues that need to be addressed in respect of construction. It has been brought to my attention by many contractors that while they are compliant regarding their obligations concerning payments, wages and conditions, including the payment of workers' pensions, some companies that receive State work and which are paid from State coffers are not compliant and have been brought before the Labour Court because of various practices. This is not just speculation because I am aware of one case reported in the newspapers in that regard. I have raised this issue a number of times through parliamentary questions and I have written to the relevant Ministers about it. There needs to be an even playing pitch for construction workers. We should reward those who have done the work and who are compliant in respect of various liabilities concerning tax, wages, conditions and pensions.
Hindsight is great. If we were to examine the history of the economic downturn and its effect on the construction sector, our hindsight would show that subcontractors and others working in the sector were clearly not properly protected. This Bill seeks to address the imbalance and protect the workers concerned. If we are to do anything during the term of this Dáil, we must consider all the dreadful mistakes of the past, the blind eye that was turned to various practices, the complete indifference to the market, etc. and try to put some protections in place to remedy what occurred. We should use this term to ensure that what we construct over the next five to 15 years as an economy will be different from what preceded it and that we look after people. This Bill is a small but very significant piece in the larger puzzle that is being solved and I am delighted to support it.
The reason I chose to speak on this Bill is the great cross-party support for it. Countless subcontractors and others who worked in the building industry have come to see me in Galway and I have spoken to them. Irrespective of whether the contracts are big or small, contractors fear being at the mercy of a large developer. We must never forget the significant power play that took place. Very large developers and companies with considerable assets were able to dictate terms in many respects and completely set the agenda regarding contracts and operations. If one tried to go against this or to assert oneself, one found very quickly that one was excluded from subsequent contracts or one was treated so badly or poorly that one was forced out of a contract. There was an imbalance and this Bill will go a long way towards redressing it.
I read Senator Quinn's opening speech in the Seanad. He spoke, quite rightly, about how corporate and company law allows large companies to set up various companies. The corporate veil was not simply between the developer and the company. There were many different corporate veils protecting people from various factors. We may have to consider the means by which company law, which involves limited liability, can be and has been abused. In this House, it was recognised recently how company law has protected people. It has been abused and we need to put in place protections for those who are suffering.
What I like about the Bill is that it is putting the architecture on a statutory footing. For far too long, we have regarded the introduction of codes of conduct and best practice guidelines for businesses as sufficient, but this has always been the weak approach in that it really accounts only for those who are compliant in the first place.
The only way one can regulate and ensure people have rights is through legislation where their rights are spelt out and are put down in law, and people can have access to them and can litigate for them.
On the litigation, what I particularly like about this Bill is that it speaks of a right to adjudication. Many of these companies are small, do not have significant cashflow and simply do not have the ability to pay large legal fees. Having the right to an adjudication - the real focus of developing law reform is alternative dispute resolution and dispute settling mechanisms - is important and to be commended.
I am not sure the Government is focusing enough on the black economy and on business that is being done outside the law. In speaking on the corporate donations aspect of the electoral reform Bill yesterday, I stated that one cannot legislate for a moral compass. We can provide as many laws as we want to reduce donations but we cannot stop somebody pocketing money and not declaring it. We are increasingly seeing, particularly in the construction sector, a move towards the black economy where people who were capable of operating in a more regulated environment are competing for work in such an aggressive manner with such strict competition that the black economy is growing. Laws never apply to the black economy. Considerable emphasis needs to be placed on the black economy which is estimated to cost the taxpayer €5 billion a year in lost revenue. I am working on proposals in this regard about which I hope to speak to the relevant parties in Government.
I commend Senator Feargal Quinn on his Bill. In his opening speech in the Seanad he acknowledged the work of Mr. Seán Gallagher who approached him about it, and I commend Mr. Gallagher, too, on his input into the Bill. It is a good example of a Private Members' Bill being used properly and constructively and being facilitated, and that is to be commended. I will not get into the debate of my colleague on the worthiness of the Seanad except to say that this certainly shows the Seanad is capable of proposing excellent legislation, and I am delighted to support it.
I very much welcome the opportunity to speak on the Construction Contracts Bill 2010. This has been a long time coming for many subcontractors, in my own county of Wicklow and throughout the country.
Deputy Nolan is quite correct when he states we cannot fix the problems that have occurred but there is an onus on us in this House to put structures in place to prevent these problems recurring. There is a tendency among those of us in politics to wax lyrical about the mistakes of the past, but this is a real example of forward-looking legislation. It is making a genuine attempt to learn from what happened in the past and to send out a message to subcontractors that the Oireachtas is addressing this issue and that we want a degree of fair play to ensure people are paid for a fair day's work and a fair job done.
As others have done, I place on record my gratitude, and that of many of my constituents who have been employed as subcontractors, to Senator Feargal Quinn for his commitment and dedication to this issue and for developing his own Bill on the issue. I am pleased that Senator Quinn is in the House. It is rare that politicians get such high praise as I have heard for him this afternoon from other politicians but it is a credit to his work and his credentials on this issue. Indeed, I note that Senator Quinn was assisted Mr. Seán Gallagher, and it is important to acknowledge that as well. I am pleased the Government has approached this in a constructive manner, taking on board Senator Quinn's Bill while also liaising with him and the Office of the Attorney General to ensure we have the most effective legislation possible.
As the provisions of this Bill have been outlined by many Members and by the Minister of State during the course of the debate, I want to take the brief time available to me to put on the record the concerns which have been articulated to me by Wicklow subcontractors. I would ask the Minister of State to ensure he is satisfied the provisions of this Bill address the challenges, obstacles and, at times, the downright abuse which have been experienced by the subcontractors with whom I have come in contact. It is important we ensure in the process of Committee Stage that we have the best possible legislation. There have been undoubtedly many examples over recent years, in my county and beyond, of large-scale contractors leaving the small guy or so-called subby high and dry, and endangering as a result not only that subcontractor's livelihood and business but also occasionally even his or her family home.
What has been most galling for subcontractors - the State cannot merely point the figure at others - is that the State was complicit in this over the years. We, as a State, allowed this to happen. Often State agencies, Departments or local authorities paid the full sum owed to a contractor knowing all too well the subcontractors were not being paid. Deputy Nolan and others spoke of the powerful role of some of these large contractors whereby it was almost the case they could walk in to any local authority and get a contract. They were seen as the only show in town and scant regard was paid to the subcontractors who had been left high and dry. The State turned a blind eye to large contractors failing to pay subcontractors for a job well done.
The message I have received loudly and clearly from subcontractors in my constituency is they want to see change. They want to see subcontractors listed in the main contract for a project. They want to see sanctions and penalties for contractors who fail to fulfil their obligation to subcontractors so that one cannot have a situation where a contractor who fails in his obligations on one job is able to get another job from the local authority. They want a system in place whereby a subcontractor must be paid within a set number of days of a contractor being paid an instalment for a project, and they want the State to ensure the next instalment is not forthcoming to the contractor until this is done.
Quite importantly, the subcontractors want to see a ban on the practice of below-cost tendering. We have seen a system - almost a culture - develop whereby contractors effectively bid below cost for a project. Often, it is not the contractor who takes the financial hit, but rather the subcontractors and the range of other individuals carrying out element of the project further down the line.
I have been informed by subcontractors that their industry is, effectively, paralysed with fear. At a time when we are trying to grow the economy and get out of the way of business to let it get on with the job of creating jobs and wealth in this country, subcontractors are almost afraid to tender for work for fear they will be left holding the baby, so to speak, with overheads such as the cost of materials and fuel, and without a safety net. This legislation attempts to introduce that safety net and I very much welcome it.
I am satisfied that, from day one of Government, we have taken this issue seriously. We have listened to the concerns of subcontractors, and in the programme for Government, we made a clear commitment to "introduce new legislation to protect all small building subcontractors that have been denied payments from bigger companies" Today and over the course of this debate we set about fulfilling that commitment. The work done on this Bill by Government in consultation with Senator Quinn has been extensive, and it has involved researching how other jurisdictions deal with this and also consulting relevant industry and professional bodies.
I welcome the clarification from the Minister during the course of this debate that the issue of financial thresholds will be examined again on Committee Stage. That is important. When we are introducing a Bill to protect the smaller guy, one does not want to leave out the much smaller guy. Let us get this right once and for all. One only gets one bite of the cherry.
As a member of the Committee on Public Accounts, I have seen a situation which emerged during Celtic tiger Ireland whereby the price budgeted for a public project was very different from the price with which we ended up and the taxpayer took a huge hit on that. It is important to place on the record of the House the considerable progress that has been made in trying to get public projects delivered on budget and on time. Much credit must go to the officials in the various Departments and the work done by the Civil Service in this regard.
With this Bill we are trying to introduce the protections and safety nets that are so badly required but at the same time limit the exposure of the taxpayer to cost and risk, while also recognising and not wanting to undo the considerable reforms that have been achieved for the taxpayer in public sector construction procurement. It is estimated these reforms in the regime of public contracts has generated savings of €300 million per annum, which is a sizeable amount.
I very much welcome the legislation and hope we can see this introduced into law as quickly as possible.
I welcome Senator Feargal Quinn to the Chamber. I acknowledge and thank him for the work and effort over a long period of time that he has put into bringing this legislation before the House to be discussed today. I welcome the opportunity and thank the Technical Group for allowing me some of its time to speak on this important Bill. I also wish to acknowledge Mr. Seán Gallagher, who went to Senator Quinn in the early stages about this continuing problem.
In case anybody thinks that because of the breakdown in the construction sector, this is not a problem today, it is a more confounded problem now than ever before for the following reasons. There are people pricing jobs and making commitments to carry out work at unrealistic prices. The only way they can meet their commitments is if someone is not paid. I will cite an example of this ongoing practice in a public contract.
People who worked on a school building project in Kenmare have not and will not be paid. It is awful that subcontractors who supplied concrete, stone and aggregate for certain jobs and enabled projects to rise from the ground will never be paid. I have been given permission to name one of the subcontractors in question in the House. Timmy Harrington ran South West Concrete and was owed money by a subcontractor who is gone. Mr. Harrington stopped producing concrete last Thursday and his business has closed at great loss to himself, his family and the excellent people who worked for him. They no longer have employment because he was not paid for supplying concrete at a critical time in his business.
Such cases should not be allowed to happen. Where did the money come from to build the school in question? It was provided by those who are working today, contributing to society and paying taxes. The contractor got his money and when the subcontractor was paid, he did not fulfil his obligations.
While I have great time for the Bill because it seeks to address a serious problem, I am concerned it does not go far enough. It is wrong to impose a threshold of €200,000. One contractor described the decision not to apply the provisions of the Bill to contracts for work valued at under €200,000 as problematic. Subcontractors could be penalised for not finishing a project, even if they have not been paid. I know of subcontractors who have moved overseas leaving many people high and dry. If the legislation is passed without amending the threshold, people will not be offered full protection. As far as I can discern, a subcontractor is protected where the contract is with the main contractor, whereas those who work for subcontractors remain extremely vulnerable. Those who supply plasterers and block layers with concrete, stone and tarmacadam and hardware shops that provide goods for building works are at the end of the money chain. When payment is not made, they are the first people to be left high and dry.
It is unfortunate that Mr. Harrington had to cease producing concrete last week. I am proud of every small business in my area. They started with nothing, paid their taxes and other charges, and, like others operating small businesses, were crippled under an avalanche of paperwork and regulations. Mr. Harrington employed people and worked hard. It is ridiculous and wrong that he has not been paid for work he did on a project funded by the State. It is the worst type of blackguardism in which anyone could engage. What protection will be in place for those who provide goods and services to subcontractors as opposed to the main contractor?
I will refer to another concern people have expressed. There is a major difference between being competitive and tough when trying to secure a job and being unrealistic. It is clear from the prices being charged for some jobs that the only way the project will be completed is if someone is not paid. Hard-pressed small businesses respond positively to requests to supply stone or concrete and live in hope of being paid. Unfortunately, payment is not made in many cases and I am concerned the Bill does not provide sufficient protection for smaller contractors. While these people may be sole contractors who hire extra help when required or an employer of one, two, five or ten staff, they form the backbone of the economy and need to be protected. I hope changes will be made to the €200,000 threshold.
On the issue of personal guarantees, I must declare an interest as I am one of the contractors who have been burned over the years. Personal guarantees have been shown to be worthless. I have had personal dealings with many people who have been left in an awful position as a result of being unable to collect the money they are owed for work they have done. Collecting what they are owed would keep their businesses solvent and allow them to overcome a hurdle until the next opportunity for work arises. Unfortunately, many of them will be unable to do so.
Are there irregularities in some of the relationships between main contractors and subcontractors? Is there an understanding in some cases that the subcontractor will be paid first and others down the line will be burned? Having studied the prices for jobs, I and others have concluded that something untoward is taking place. This issue should be closely monitored because if people are winning State contracts with the intention of not paying people at the bottom rung of the ladder, it is a serious issue for the Government. We must all be mindful of the possibility that this type of practice is taking place.
I compliment the Taoiseach on confirming on a number of occasions, most recently in the past week or ten days, that notwithstanding other business before the House, this important legislation will be passed before the summer recess. I commend the Government on treating the Bill with the urgency it deserves. There is no point talking about arbitration if those who owe the money have hightailed it and caught enough people out to make it worth their while to run away to another country to work. That is happening in many cases and it is impossible to bring them back for any process of arbitration, negotiation or mediation, with a view to settling outstanding debts because they are long gone. This issue must be dealt with.
I would like to raise the issue of those self-employed persons who, unfortunately, go out of business. Some provision will have to be made for social welfare assistance from the State. The people concerned have been gainfully employed for many years and often employed others. They were fully tax compliant and always did everything correctly and all of a sudden they find themselves without work and with no money coming in. Whatever savings they had have been spent. They still have a house to run and their families to rear, but they are unable to receive any welfare payment. In such cases, the people whom they employed are, thankfully, able to receive help from the State to live and look after their families, but those who employed them are not able to do so. Since coming into this House over one year ago, I have consistently demanded that some provision be made to speed up mechanisms of payment for persons with C2 tax clearance certificates, who were self-employed and are now unable to find work and fund themselves. All they want is assistance to keep them going. We have to put measures in place to ensure they can receive welfare payments. They paid enough taxes during the years and always did things correctly but now they find themselves left in the lurch which is an awful place to be.
Senator Feargal Quinn's work in bringing forward the Bill certainly shows that the Seanad is capable of doing excellent work. It is great to see a person of his calibre bringing forward a Bill in the first instance. Where I come from, we sometimes see people in that House acting as glorified news correspondents, relaying news about the work of local county councillors and other public representatives and regurgitating it.
Would the Deputy have anyone, in particular, in mind?
If some people want to label themselves as correspondents and belong there rather than in public office, that is good for them, but it is welcome to see a worker coming into this House. He has now left, but it is welcome that he was here to listen to the debate. It is nice to see people doing what they are supposed to be doing. I welcome the Senator's excellent work during the years and thank him for his contribution to political life on many other issues.
My problem with the Bill is that we need to re-examine the €200,000 limit and think at all times of the small business operator. I am not here to speak for the big contractors but for the small operators who have a van or truck and a couple of machines. These are the people who are under severe threat and have built their businesses from an early age. There is nothing worse for a person than to have worked hard all of his or her life and then to see it all crumble because others are not paying what they rightfully owe. They are running off with that person's money. That is what is happening. It is robbery and blackguardism and should not be allowed to happen. No Minister wants to see that carry-on. Everybody in this House wants to see fair play for ordinary workers and if changes need to be made to the Bill and if the Minister can make them, I would really appreciate it.
I do not want to see more small businesses go to the wall, as has happened in the last few years owing to unrealistic pricing and people going in below cost. Below cost selling is not allowed in shops anymore; surely therefore there should be some provision whereby a person cannot price below cost for a project, particularly a public project. This should not be allowed. It does not make sense because somebody will not be paid. If a contractor goes below the level of the cost of a job, somebody will be burned. That usually happens towards the end. The blocklayer or the person digging the foundations might be all right, but those coming in at the end of the job such as those who lay the tarmac are in grave danger. God help the painter and the man who puts in the windows because they are some of the last in and will also be the last to be paid. I hope tsome provisions can be made to ensure this will not happen anymore. We want to protect small business operators and ensure they will be there for better days if they come; please God, they will.
Mr. Harrington's business which went last Thursday is just an example of the businesses of all the small contractors around the country which are hurting. Some provision will have to be put in place to look after contractors when they fall on hard times. When they present before a community welfare officer to seek assistance, it is not good enough for the CWO to say they have a C2 form and that they cannot be given a payment. I ask the Minister for Social Protection to ensure her Department works on this issue and come ups with something quickly to ensure a speedy payment to such persons who have worked very hard during the years and now find themselves on the opposite end of the spectrum.
I thank all of those involved in this issue. I would also like to go back to Mr. Seán Gallagher who went to Senator Feargal Quinn in the first instance with it. The general election last year delayed passage of the Bill, but it is welcome that it is before us now and that we can make progress on it.
Deputies Michael Creed and Noel Harrington are sharing the next 20 minute slot.
I spoke last night in the debate on the Electoral (Amendment)(Political Funding) Bill 2011 when I made the point that I was always somewhat nervous when there was virtual unanimity on legislation. I have looked at this Bill in its amended form, with the Minister's proposed amendments on Committee Stage. On this occasion, and with few, if any, reservations, I rush to join the ranks of the masses in the context of supporting the legislation before the House. In so doing, I acknowledge the role played by Senator Quinn, Mr. Seán Gallagher and the Upper House in the production of this Bill. Very often, and I am sure it will be no different later today, the Seanad comes in for some criticism regarding the manner in which it goes about its business. In the context of real reform, the way what began as a Private Members' Bill in the Seanad has wound its way through both Houses and attracted virtually unanimous support is a reflection of a mature parliament going about is business in a mature fashion. We need more of that and fewer of the restrictions imposed by the Whip system.
The Bill relates to the construction industry. It is interesting to reflect on that industry in a broad sense. In 2007 some 270,000 people were employed in the construction industry, whereas today the figure stands at approximately 100,000. This represents a substantial collapse. Given that in excess of 160,000 people lost their jobs, we must ask what is a sustainable construction industry in a mature economy. I contend that the pendulum swung too far in the context of the correction which occurred and that there is scope to create sustainable jobs within the construction industry. It is critical, however, that we should put in place the proper legislative framework to allow the industry to re-establish itself.
It has been regrettable to watch the dismantling of the construction industry on television. I refer here to reports relating to the sale and export of heavy plant and machinery to eastern Europe and elsewhere. We must remember though that a critical aspect of re-establishing the industry relates to the human component, namely, those who comprise the skilled workforce. All Members will have sat in the kitchens and living rooms of constituents who worked as block layers, plasterers, carpenters, electricians, general labourers, painters, window installers, etc. and witnessed the carnage that has been wrought. Many of these people subcontracted in the absence of the safety net of a written contract and were left high and dry. What the Bill involves is people learning lessons - perhaps after the horse has bolted in many instances - and putting in place some certainty about the manner in which those to whom I refer can go about their business in the future and be assured of receiving payment for the work they do. Regrettably, many of the individuals in question have fallen foul of a system which has allowed main contractors prosper at their expense. The law appears to be entirely skewed against their interests and in many respects the Bill tries to create a level playing pitch.
One of the issues which is bedevilling the construction industry as it attempts to get back on a sustainable footing is the prevalence of the black economy. That is a matter which the Government must address with some urgency. I recently spoke to a small building contractor in my constituency who tendered for a job relating to a house extension. Many people are deciding not to move to bigger homes but are rather upgrading their existing residences. The man in question tendered for the job but he was beaten hands down by some individuals who are operating in the black economy and who are concurrently working and signing on. There is an onus on the Government, through agencies such as the planning authorities and Revenue, to address the black economy in a sustained fashion in order that people who are paying their taxes and trying to survive in a very difficult environment will not be hounded out of business as a result of the State's inactivity in this area.
We now have substantial control over the banks and we should oblige them to notify Revenue when someone who is funding extension or improvement works or a construction project by means of a bank loan draws down money. In addition, a person who is extending his or her house should also be obliged to notify Revenue when work commences. A simple obligation of the type to which I refer would put the fear of God into the sponsor of the project and anyone working on the site that if they were not tax compliant, if they were concurrently working and signing on or if their affairs were not in order, inspectors from the Department of Social Protection, Revenue or some other agency might come calling. That is one way to proceed. If the sponsors of projects were obliged to notify Revenue on commencement of work and if the banks were similarly obliged to issue notification when moneys were drawn down, that would go a long way towards addressing the issues to which I refer.
Essentially, the real issue relating to subcontractors is that in many cases legal contracts were not in place. The relationship between main contractors and subcontractors was not one of equals. Subcontractors were very much at the receiving end when it came to terms and conditions. This was despite the fact they did not have written contracts. What is critical in respect of this legislation is that in the future the adjudication process, which is quick and affordable, must be binding. I welcome the commitment the Minister made to the effect that it will be binding. The fact the latter will be the case will not mean someone who is aggrieved by the outcome of the process will not have recourse to conciliation, arbitration or, ultimately, litigation. The essential point is that the adjudication process will be binding. In other words, people will pay now and argue the matter in court or elsewhere at a later date. This will mean subcontractors will not be left high and dry.
We must ask whether the notion of binding adjudication is sufficient. As Deputy Healy-Rae observed, contracts are awarded to main contractors and the simple requirement on them is that they must have a tax clearance certificate to tender for work. In itself, this can hardly be considered adequate any longer. Main contractors should be obliged to display some financial muscle which demonstrates they are not merely winning contracts on the basis of tax clearance requirements. When they do win contracts, these individuals or companies approach subcontractors and state they will take 20% off the top for themselves and the former can have the work on a subcontract basis for 80% of the original amount on offer. We must examine the tender process and ensure the prices being charged are realistic and are not below cost. We must also ensure main contractors are not in a position to drive a coach and four through the legislation and the intent behind it.
I welcome the Minister's indication to the effect that thresholds will be removed, which is critical. It was originally envisaged that thresholds of €200,000 and €50,000 would apply in respect of public and private contracts. There are people who went out of business because they could not recoup amounts as low as €2,000 or €3,000. This was particularly the case when credit from the banks was drying up and people could not obtain payment. Effectively, the house of cards came down as a result. The Government must consider the impact of the domino effect in this regard. A subcontractor might have had two or three block layers, electricians or carpenters working for him. By virtue of the PRSI contributions the former paid on their behalf, these individuals had the comfort of a safety net. In other words, they qualified for jobseeker's benefit. However, because they paid a different class of PRSI contributions, subcontractors were effectively left swinging in the wind. Their contributions were only of use to them in terms of pension entitlement on retirement.
I return to my initial point. We must ensure we have available to us the people required to kick-start the construction sector when the opportunity arises and when the time is right. Many people were so badly burnt that they either emigrated or dismantled the capacity of their businesses. One of the reasons they did so was they felt they had been badly burned by the social welfare system when they needed a leg up. The entitlement of self-employed subcontractors to pay a higher rate of PRSI contribution on a voluntary basis needs to be looked at.
I welcome the Bill. I particularly welcome the collaborative approach that is at its heart, the involvement of the Minister of State, Deputy Brian Hayes, and the improvements that have been engineered so far.
I also welcome the Minister of State, Deputy Brian Hayes, and I am pleased to support the Bill. Like previous speakers, I recognise the tenacity of Senator Feargal Quinn in proposing the Bill in the current and previous Seanad. I also acknowledge the work of Mr. Seán Gallagher in bringing forward the Bill.
The Minister of State has said he will be introducing amendments to the Bill on Committee Stage. I welcome this approach and hope we will see more Bills introduced in this way. Like previous speakers, I particularly welcome the changes made to the thresholds for contracts to be covered by the Bill. This makes sense.
The Bill reinforces a basic principle of business and commerce, that one is paid for materials supplied and work done. The very idea that we have to legislate to solve this problem is not logical. A contract is a contract and my word is my word. In the last decade this was, unfortunately, not the case.
I understand many businesses ceased trading or closed down because their debtors had failed to pay them. This had knock-on effects and caused the closure of other businesses because of their inability to pay their debts. There was a domino effect. The failure of just one business can have a domino effect on other businesses and the employment of hundreds, if not, thousands.
I am sadly and acutely aware of subcontractors who took their own lives after the failure of developers to pay their contracted costs. This contrasts with reports on certain developers and major contractors toasting the creation of NAMA with champagne in Marbella.
The need for the Bill is perplexing. It is strange that we must protect a certain sector within the construction industry. Why do we not have a Bill to cover every supplier of goods and services in all sectors? The construction sector must look at itself. We must differentiate between major developers, on the one hand, and contractors, builders and small family firms, on the other. We tend to think all contractors are the same, but this is not so. We must look back at the development of the construction sector between 1997 and 2007 when the Government, led by Fianna Fáil, took control of the nation when it was on a rising tide. Even the highest tide cannot prevent a ship from running aground if the captain and officers are sipping champagne down below. The close connection between government and the building industry is one of the major reasons the Bill needs to be enacted.
In the 1980s the construction sector was largely made up of small family firms which had operated honourably for generations. The change came in the 1990s, which was one of the worst and saddest periods in the history of the country. The prospect of instant profits and doubling one's money overnight attracted people with few or no morals. What was revealed at tribunals, particularly the Mahon tribunal, was merely the tip of the iceberg. We saw the ostentatious lifestyle of those involved in the construction sector. Racecourses became like air traffic control centres as they dealt with helicopters which now patrol the Grand Canyon for our tourists who visit such places. It is a pity the people concerned did not keep their feet on the ground when they felt it was more appropriate to be high fliers, leaving subcontractors, for whom we must now legislate, high and dry. A new generation of developers was spawned in the Galway tent and moral standards and behaviour slipped accordingly. Those who were attracted by super profits left much to be desired. This is one of the reasons we must legislate to protect the smallest and most vulnerable in the sector.
I hope the Bill is the first step in reforming the construction sector, in which proper regulation and legislation is required. The time is right to get rid of those with the Del Boy mentality which has led us to the current sorry situation in the sector and the economy.
Honest, genuine, competent and hard working contractors need not be concerned about the legislation. We already regulate taxi drivers, publicans, driving instructors, architects and others. It should not be beyond the bounds of possibility to bring people who are tempted to enter the black economy into a more regulated sector. Those who are competent and genuine have nothing to fear. We do not want to see another Priory Hall. We have enough of them to deal with and will have more in the coming months and years. These difficulties were not caused by contractors but by developers who got others to do the work for them and then refused to pay them.
I welcome the legislation and thank Senator Feargal Quinn and Members of the Seanad for introducing the Bill. I congratulate the Minister of State and the Government for bringing it to this point.
With the agreement of the House, I will share my time with Deputy Paschal Donohoe.
Is that agreed? Agreed.
I welcome the Bill and thank the Minister of State for his support of it. I also thank all those who worked on the Bill which addresses the problem of non-payment in a balanced manner to avoid imposing unnecessary regulatory costs. The Bill has been introduced because of the situation in which we find ourselves because of the antics in the Galway tent and some of our banking leaders such as the management of Anglo Irish Bank and various others. There are many casualties, including small subcontractors and construction workers. In the last four or five years 160,000 construction workers have found themselves out of work. The boys who sipped champagne ran the country because there was no political leadership and we are now in a very difficult situation where the Bill is necessary.
I welcome the Bill. The casualties include ordinary individuals who bought houses and are now in negative equity, people who are out of work and those whose sons and daughters do not have a future in the country. The Government must ensure they will have a future here. The current situation was brought about by greed and recklessness. The Government and elected politicians forgot who was in control and allowed light touch regulation of those who spent €550 per room in Poznan. Those days are over.
I welcome the Bill. I was a Member of the Seanad when Senator Feargal Quinn introduced it. The manner in which he introduced it and brought it to this point is an example of how politics should be conducted. When the Bill reaches Committee Stage, I hope the Minister will accept amendments, from either side of the House, in a generous fashion. It reflects a bipartisan way of implementing important legislation. I would like to see that spirit maintained throughout the entire passage of the Bill.
In the last number of months I have had extensive dealings with a family in my constituency who have been brought to the brink of personal ruin by the absence of legislation such as this. This is a vivid and human illustration for me of the huge damage done to families and our society when we do not have legislation to ensure an industry is conducted in the correct manner.
My third point on the industry is that it is vital that the construction sector redevelop and that it be kick-started. Those who talk about the future of the economy are sometimes guilty of imagining that we can have an economy that does not include a sizeable and growing construction sector. We must have it back again. It will not be at the level it was at in the past, but, equally, it will not stay as it is. We can get to a mid-point and the legislation will, I hope, create an environment within which that can happen.
The amendments the Minister of State indicated he would introduce are crucial in terms of implementation of the Bill. The first issue he highlighted is vital, namely, the need to examine, or perhaps remove altogether, the monetary thresholds contained in the Bill because the people of whom I am conscious in the debate are not the large players or the big companies which have the ability to hire people to represent them but those who do not have access to any of this – the small players who must be recognised by the Bill. The amendment the Minister of State seeks to introduce in this regard is crucial.
I thank all colleagues for their contributions on the Bill. We have had a substantial debate in the course of the past two months. In excess of 40 or 50 colleagues spoke in the debate. There is urgency, however, in putting the legislation on the Statute Book because it was first mooted by my colleague, Senator Feargal Quinn, in the previous Seanad more than 16 months ago. We have done a lot of talking about it and there is now a need to get it in place. That is the crucial part of what we are trying to do.
It is fair to say there is cross-party support for the Bill. Given the fact that it remains a Private Members' Bill, I have made it clear from the start that it is in the ownership of Senator Feargal Quinn, it just happens to be in my charge in this House. We have gone through a thorough examination of the issues in the regulatory impact statement. In that assessment I was privileged to bring Opposition speakers and all of the construction industry together under the one roof, as it were, around the same table to tease out many of the issues that they thought required amendment in the original draft. I made a commitment at the outset of Second Stage, which I repeat, that we will introduce a number of amendments on Committee Stage which will greatly improve the operation of the Bill, not least on the issue of thresholds and the length of time involved in terms of the right of individuals to move off-site, as it were, if they consider their contract is not being upheld. We will also examine how suppliers can be incorporated into the Bill.
I have heard comments from all sides about those who produce products who find they are not being paid. They are also part of the supply chain and there is a fundamental issue of fairness that must be shown to them also. It is a difficult issue to resolve, but I am committed to doing so. We have also given a firm commitment that the adjudication process will be robust, fair and come down clearly in favour of subcontractors, all of whom have been left in a difficult position. The entire objective of the exercise is to be fair.
I was very impressed to see in the United Kingdom the adaptation of its adjudication system that had been in place for some years. It works well. In the great majority of cases there is a result and people get back to work and are paid over a period. The crucial responsibility we, as legislators, have is to put in place robust legislation that will allow for the current situation and what will happen in the future.
Deputy Paschal Donohoe has made the point that we will not always have a construction industry accounting for approximately 6% of GDP. That is not the position in any modern economy. We should have a construction industry which accounts for approximately 10% of GDP, but, equally, it is unsustainable to have a construction industry which accounts for 20% of GDP. That situation will not return any day soon, nor should we want it to. Therefore, we must plan for the future and put in place a sustainable construction industry with correct rules that will apply to everyone and in which there is fairness. In the great majority of construction cases people do not enter into contracts. That is the case, principally in the private sector, but there are also examples in the public sector. We must ensure the contracts in place are adhered to in order to achieve a swift resolution of disputes when the time comes.
The task we face, having concluded Second Stage, is to quickly take Committee Stage so as to introduce the Government amendments I have mentioned and seek the support of colleagues at the select committee and on Report Stage in the House. It is an ambitious timescale. We do not know when the Bill will be returned to the Seanad, but we have a responsibility to the entire industry to ensure we can move the Bill along as soon as we possibly can and in a manner which has cross-party support.
I very much appreciate the support we have obtained for the Bill from the Opposition parties with which I have worked in developing some of the ideas behind the amendments. I look forward to receiving their support. I am open to the production of additional amendments from all sides which will strengthen the legislation. This is a piece of work which has come from both Houses, from an Opposition Senator, as it were, and we have a responsibility to ensure the bipartisan approach applies on Committee and Report Stages. I will not be found wanting in that regard.
Question put and agreed to.