Construction Contracts Bill 2010 [Seanad]: Report and Final Stages

Amendment No. 1 in the name of Deputy McDonald is out of order. Amendment No. 2 in the name of Deputy Fleming arises out of committee proceedings. Amendments Nos. 2, 7, 11 and 20 are related and may be discussed together.

Amendment No. 1 not moved.

I move amendment No. 2:

In page 4, between lines 41 and 42, to insert the following:

" "social contract clause” means a clause that obliges an executing party to—

(a) employ some unemployed persons who are on the live register and who are under 25 years of age, and

(b) employ some persons who are long term unemployed;".

I welcome the opportunity to discuss amendment No. 2, with amendments Nos. 7, 11 and 20. Essentially, as we discussed this on Committee Stage, we do not need a major discussion of it now. The essence of it is that all major contracts should have a social contract inserted therein. This relates to those working in construction who were laid off before they got to complete their apprenticeships, many of whom do not have any actual work. Youth unemployment is a major issue not just in Ireland but right across Europe. Amendment No. 2 seeks to insert a social contract clause into the various contracts referred to and covered by this legislation so that some unemployed persons on the live register and under 25 years of age and some people who are long-term unemployed can be employed.

The Government has introduced various initiatives to help employers take on people who are long-term unemployed and various schemes were announced last week by the Ministers for Jobs, Enterprise and Innovation and Social Protection.

This is a classic example of where this can be put into practice.

Amendment No. 7 deals with a slightly different issue but states there would be a duty on the person carrying out the contract when making a request for payment to be in a position to supply the State contracting entity with a list of all subcontractors on site and to ensure subcontractors, employees and suppliers would be paid for the work they carry out on the project within seven days of receipt of payment.

The reason the amendments are grouped is to maintain a system whereby the PPS number of each person who enters the site at any stage during the construction contract shall be maintained by the company carrying out the project. There are many reasons for this, but primarily it is to ensure the existence of a record of everybody who works on a particular site in order that we do not have unscrupulous contractors paying people in the black economy while they claim social welfare at the same time. It would also help to ensure a full record of everybody on site to ensure they comply with the various registered employment agreements for payment purposes.

Maintaining PPS numbers should be an essential requirement under health and safety legislation in order that in the event of an accident on site there would be a record of who was on it. I know the Minister of State will say this is not the purpose of the legislation, but I respectfully suggest health and safety should be part of his concern with regard to State contracts, in particular. I suggest keeping a record of PPS numbers would have a beneficial effect for health and safety purposes. The main purpose is to ensure the existence of a record of people who work on a site and to ensure some people under 25 years of age and others who are long-term unemployed would be given an opportunity to work.

Amendment No. 11 states it would be a duty of the State contracting authority to ensure a social contract clause was inserted in every construction contract a State contracting entity might award to a prospective executing party. We want to put the onus on the Minister and the OPW to include in the procurement circulars issued to the various contracting authorities throughout the country, whether they be the HSE, Departments, school boards of management or local authorities, that every contract funded by taxpayers' money should be covered by this provision.

The Minister of State will say if people under 25 years were guaranteed a proportion of the jobs, by definition, somebody over 25 years would be put out of work, but somewhere along the line an effort must be made. Last week the Government launched an initiative to help long-term unemployed persons through a grants scheme to encourage employers to take them on. The principle should be extended to contracts awarded by State bodies.

I am very pleased that we have reached the final Stages of the Bill which I have no doubt will be widely welcomed because it is so hugely necessary to secure payment for subcontractors. The Minister of State is probably not minded to accept amendments, but I hope he will reconsider. With Deputy Sean Fleming and others, on every Stage I have raised the issue of a social clause and social considerations to be factored in as part of public procurement processes. I anticipate the reply of the Minister of State to be that he agrees with the sentiment of the amendment, but that this is not the legislative instrument in which to place these matters. I have no doubt that this is what he will state. Nonetheless, I want to underscore the absolute necessity for a social clause to be written and hardwired into the entire public procurement process.

An argument that affording opportunities to long-term unemployed persons or young people who are out of work, perhaps as part of the youth guarantee, somehow displaces others is wrongly cast. The very purpose of any investment in public works should be to generate new employment opportunities. The Minister of State will see that my amendment includes consideration of long-term unemployed persons and the availability of apprenticeship schemes, but it goes further than this and refers to issues such as environmentally sustainable approaches involving reuse and recycling. It knits together the best elements of good practice across a number of public policy areas in a way which would not make the contracting process impossible or overly complex or bureaucratic but would write large good practice. In the event that the Minister of State is not minded to accept the amendments for the purposes of this legislation, I again ask him to follow up on the commitment he has made, in fairness to him, on many occasions to ensure that when we examine the entire issue of public procurement in all of its guises the issue of social and equality clauses will be given the prominence necessary.

We had a good discussion on these amendments on Committee Stage and I thank my colleagues opposite for placing them on the agenda again. We are of one mind with regard to using, as Deputy Mary Lou MacDonald stated, public contracts as a means of trying to generate employment. As the economy picks up and we get more money into the construction sector, we all have a vested interest in getting more people back to work in the sector, given the fact that 60% of those who lost their jobs in the crash were working directly or indirectly in the construction sector. There is a huge moral responsibility on us to get the people concerned back to work.

We see potential for social clauses to be used in a careful and dedicated way. As colleagues opposite are aware, we must ensure that where we install social clauses, they are compatible with EU legislation. There are grounds on which procurement can be used in terms of social contracts, employment opportunities, equal opportunities and social inclusion, but the European Commission in its guidance on this issue has made it perfectly clear to us and everyone else that this must be done in a very careful way and strictly in accordance with EU principles and the procurement directives.

The Deputy second-guessed my answer; I do not believe it is appropriate to do so in this legislation, but it is right that the issue should be raised because it puts pressure on the Government to ensure we respond to it. I am pleased to be able to inform the House that since our last discussion we now have social clauses in place in Ireland. The most recent announcement made concerns the PPP devolved schools programme which the National Development Finance Agency is managing on behalf of the Department of Education and Science. For the first time in this country, the contract contains social clauses.

I am conscious of what Deputy Mary Lou MacDonald stated on Committee Stage when she referred to what had happened in the North. Social clauses in place in the North have been specific to one project or a group of projects, rather than across the board. We are following exactly the principles on which the Northern Ireland Executive has correctly moved in this direction. We believe that through specifying the use of PPP projects in the area of schools and potentially other areas of public contracts such as for primary health care units we will not only be able to achieve our targets but also that they will be entirely within the context of EU law.

The clause contained in the most recent announcement requires that 10% of the total person-weeks required to complete a project by those employed on a public works construction contract be undertaken by workers recruited from the ranks of the long-term unemployed.

In order to win the most recent bundle of public private partnership schemes on the bundle of schools, those winning contractors will be taking 10% of workers from the live register. That is now happening as a result of the most recent announcement. It is important that it works because other contractors who have lost out will want to make sure it is working. If they have lost out they will want to ensure the contractor who has won has complied with the 10% requirement.

There is a responsibility on all of the agencies to be on the ground, on site, to ensure the 10% requirement is in place. We will monitor that closely to make sure the general support for social clauses across the House is implemented. We have done it in a selective and careful way, not just because of EU requirements but also because we do not want a situation where existing workers within a large construction company or subcontracting firm would have to shed workers from the payroll to take on other people. That would defeat the whole purpose of the measure. We will monitor the pilot scheme that we have now put in place but since our Committee Stage deliberations we have social clauses in this country.

I have nothing further to add. We will move on.

Amendment put and declared lost.

Amendments Nos. 3 to 5, inclusive, are related and may be discussed together.

I move amendment No. 3:

In page 5, line 15, to delete “materials,”.

We are also discussing amendments Nos. 4 and 5 as they are all related. I will try to be brief because we have very little time left for the discussion. We could have done with perhaps another hour. Be that as it may, we are where we are. Essentially, this is an issue both Deputy McDonald and I tried to raise on Committee Stage and we were ruled out of order. We wanted to include the supply of specific or bespoke materials in the scope of the legislation. Our amendments are crafted to deal with the issue. Amendment No. 3 refers to matters that are to be excluded from a construction contract. I call for the deletion of the word “materials” in order that it would not be specifically excluded. Amendment No. 4 calls for the deletion of two lines in the amendment and the substitution of other paragraphs in terms of materials being supplied.

Amendment No. 5 is key. It is a short amendment. Essentially, the legislation deals with items that are installed on site. Materials delivered and installed are covered but materials delivered but not installed by the company delivering them are not covered. In amendment No. 5, I call for a change after line 22. If the amendment is passed the sentence would read: "In this Act references to construction operations do include a case where the things referred to in subsection (3) are supplied under a contract which also provides for their installation by a contractor, subcontractor or sub-subcontractor." It does not have to be installed by the company that delivers it and is a way of getting around the supply of materials.

We all know of cases where people who delivered concrete, cement, blocks and tarmacadam were not paid for projects to build schools, public facilities and roads that are now open and fully operational. ISME sent us various letters on the matter during the course of the legislation, as did the National Concrete Producers Association and the Irish Concrete Federation. The CIF was in touch with us on all those issues also.

I refer the Minister of State to the summary of the regulatory impact analysis, RIA, that he undertook. In page 22 it states:

The provisions in the Bill do not apply to the delivery of goods, supplies or equipment under a construction contract. Various suppliers’ organisations would like to extend the scope of the Bill to include contracts for the supply of all construction materials/supplies/equipment or alternatively supplies that have been made for a specific construction project (bespoke supplies). However, there is a reasonable case for including some provision of supplies that have been made for a specific construction project (i.e. bespoke supplies). However, the technical process of amending the legislation to include such supplies could prove complex and may even give rise to further disputes.

In addition, on page 27 of the RIA, which deals with suppliers, essentially the same point is made. The reason I stress this is because it is in the RIA and I am not making it up. It is coming from the Department. In page 27 it states:

The provisions of the Bill do not extend to suppliers of materials except in the case of a contract that includes the installation of the supply ... Various suppliers’ organisations would like the scope of the Bill extended ... Whilst it was appreciated that the problem of non-payment of suppliers ... was not unique to the construction sector ... in certain circumstances, for the supplier to retrieve goods supplied as part of a construction contract was put forward as being unique.

I am informed that when the Minister of State addressed the Irish Adjudication Society in February 2012 he said that the RIA to which I referred concluded that supplies are made specifically for a contract and that bespoke materials could be included in the legislation but recognised that it might be difficult to interpret what is bespoke.

The issue has been discussed in the House. I will conclude my contribution because we are short of time. We could give it a further ten or 15 minutes, but we do not have the time as there is more to be done. The Minister of State gets the essence of the point; I want him to include materials that are ultimately installed by the supplier of a contractor, subcontractor or sub-subcontractor on a particular project.

This legislation was one of the very first where we put in place a regulatory impact assessment to which Deputy Fleming referred. The RIA in which both colleagues were also involved brought forward a number of the issues that arose out of the analysis undertaken during the process itself and the very productive stakeholder consultation to which many in the House also contributed.

It is worth taking a moment to reflect on the issues highlighted in the RIA before I turn to the substance of Deputy Fleming’s amendments. The RIA concluded that there are four main areas that should be examined and I gave a commitment to do so on Second Stage. The first of these areas concerns thresholds. On Committee Stage I introduced an amendment to reduce the thresholds across the board to €10,000. That applied to the contract value and not to the sum in dispute. The exclusion of a building contract between an owner-occupier of a private residence up to 200 sq. m and a main contractor has been retained.

Second, I gave a commitment to examine the question of suspensions. On Committee Stage we introduced an amendment to remove the 14-day limit on suspension in favour of suspension up to the point where a payment dispute is referred to adjudication. Third, on the question of the non-binding nature of an adjudicator’s award, the Government in a Committee Stage amendment made an adjudicator’s award binding until it may subsequently be resolved by agreement of the parties’ arbitration or litigation.

The fourth issue, arising from the RIA, was, as Deputy Fleming and others indicated, related to supplies. General supplies to a construction project were not covered by the legislation examined as part of the RIA. Representations were made during the Seanad debate on the Bill and as part of the consultation stage of the RIA. The RIA concluded that general supplies should not come within the scope of the Bill for reasons I will set out later. However, the RIA did recommend that the issue of bespoke suppliers be considered further. That was the point to which I referred in the statement. Even though it was acknowledged that drafting a definition which would not give rise to significant legal challenge would be difficult, I undertook to do that on Second Stage.

In summary, the Government has introduced amendments on Committee Stage addressing three of the four substantive issues that were raised by way of the regulatory impact assessment. It appears from the amendments tabled by Deputy Fleming that he is seeking to include all materials supplied to a construction site, which was not envisaged in the Bill as passed by the Seanad. It was not considered that general supplies should be included in the scope of the legislation since it cut across other legislative and common law provisions and that separate, dedicated legislation would be required since supplies in one sector could not be treated uniquely.

The issue of bespoke supplies was examined in great detail prior to Committee Stage, but it was concluded that a sufficient, clear and precise definition that would not in itself give rise to a legal challenge could not be provided. Indeed, I gave Opposition Deputies the opportunity to provide such a definition on Committee Stage and I am advised that the amendment dealing with the issue of bespoke supplies, although ruled out of order by the Ceann Comhairle, would not have given sufficient clarity.

The necessity for this legislation relates largely to formal contracts, which do not exist for many transactions that occur in the sector. This legislation encourages parties to agree terms in advance of commencing work and provides minimum default terms, which are set out in the Schedule to the Bill, that apply where parties fail to agree their own terms or where terms are less advantageous than those in the Schedule. The scope of the Bill will cover the services of contractors and subcontractors. In addition, supplies that are combined with installation will fall under the scope of the legislation.

As I stated on Committee Stage, the design and install principle is enshrined in the Bill. I hope that, as a result of this legislation, there will be a fundamental change for suppliers. Those who argue that they create, design and install something will be covered by this legislation.

It is likely that contracting parties will alter to reflect this provision and ensure that certain bespoke supplies fall within the scope of the Bill. However, the treatment of supplies that are not combined with a contract for installation will remain unchanged. The reasons for this were outlined on Committee Stage. First, the legislation sets up a structure designed specifically to deal with construction contract payment disputes. This structure would not be appropriate to deal with non-payment disputes relating to supplies alone. Second, identifying a construction supply that is not directly linked to installation could be impossible to define with any legal clarity. Third, other legislative instruments apply rules to all supplies, including those that form part of a construction contract.

One such instrument is SI 580 of 2012 European Communities (Late Payment in Commercial Transactions) Regulations 2012. In order to protect European businesses, particularly small to medium-sized enterprises, SMEs, against late payments, the European Commission adopted a new directive known as the late payment directive on 16 February 2011. This directive is aimed at improving payment practices in commercial transactions between businesses and between businesses and public authorities. Its main provisions include the setting of a maximum period for the receipt of payment for goods and services, the simplification of procedures for pursuing late payments and the establishment of penalties for late payments. The directive was transposed into Irish law on 16 February and came into force on 16 March this year.

It is also worth noting that the improvement in cash flow that will be brought about by this legislation will reduce the instances of delayed payment or non-payment to suppliers, given the fact that, in many cases, it was subcontractors who were denied payment legitimately owed and who could not afford to pay their suppliers.

The Bill does not purport to provide a response to all of the causes or manifestations of non-payment in the construction sector. This is a complex area and a comprehensive response to all of the causes of non-payment in the sector will not be provided for within a single enactment. With this in mind, I am unable to accept Deputy Sean Fleming's amendment. Deputy McDonald also raised this issue on Committee Stage. I assure the Deputies that, where I raised this in the regulatory impact assessment, RIA, it related to bespoke supplies. Suppliers who design, manufacture and install something are covered by this legislation. It is as close as we can possibly go in the context of the intent of the legislation.

Amendment, by leave, withdrawn.
Amendment No. 4 not moved.

I move amendment No. 5:

In page 5, line 22, after "installation" to insert the following:

"by a contractor, subcontractor or sub-subcontractor".

Amendment put:
The Dáil divided: Tá, 28; Níl, 69.

  • Adams, Gerry.
  • Browne, John.
  • Calleary, Dara.
  • Colreavy, Michael.
  • Cowen, Barry.
  • Crowe, Seán.
  • Daly, Clare.
  • Flanagan, Luke 'Ming'.
  • Fleming, Sean.
  • Halligan, John.
  • Healy, Seamus.
  • Healy-Rae, Michael.
  • Mac Lochlainn, Pádraig.
  • McDonald, Mary Lou.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McLellan, Sandra.
  • Martin, Micheál.
  • Murphy, Catherine.
  • Naughten, Denis.
  • Ó Caoláin, Caoimhghín.
  • Ó Fearghaíl, Seán.
  • Ó Snodaigh, Aengus.
  • O'Sullivan, Maureen.
  • Pringle, Thomas.
  • Ross, Shane.
  • Troy, Robert.
  • Wallace, Mick.

Níl

  • Breen, Pat.
  • Bruton, Richard.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Catherine.
  • Byrne, Eric.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Coffey, Paudie.
  • Collins, Áine.
  • Conaghan, Michael.
  • Conlan, Seán.
  • Conway, Ciara.
  • Corcoran Kennedy, Marcella.
  • Costello, Joe.
  • Creed, Michael.
  • Deasy, John.
  • Deenihan, Jimmy.
  • Donohoe, Paschal.
  • Dowds, Robert.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Feighan, Frank.
  • Ferris, Anne.
  • Fitzpatrick, Peter.
  • Gilmore, Eamon.
  • Griffin, Brendan.
  • Hannigan, Dominic.
  • Harrington, Noel.
  • Harris, Simon.
  • Hayes, Brian.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Humphreys, Kevin.
  • Keating, Derek.
  • Kelly, Alan.
  • Kenny, Seán.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lynch, Ciarán.
  • Lynch, Kathleen.
  • Lyons, John.
  • McCarthy, Michael.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • McNamara, Michael.
  • Mitchell, Olivia.
  • Mitchell O'Connor, Mary.
  • Mulherin, Michelle.
  • Murphy, Eoghan.
  • Nash, Gerald.
  • Neville, Dan.
  • O'Donnell, Kieran.
  • O'Donovan, Patrick.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • O'Sullivan, Jan.
  • Phelan, Ann.
  • Phelan, John Paul.
  • Reilly, James.
  • Ring, Michael.
  • Stagg, Emmet.
  • Stanton, David.
  • Timmins, Billy.
  • Tuffy, Joanna.
  • Twomey, Liam.
  • Wall, Jack.
  • Walsh, Brian.
Tellers: Tá, Deputies Seán Ó Fearghaíl and Aengus Ó Snodaigh; Níl, Deputies Joe Carey and Emmet Stagg.
Amendment declared lost.
(Interruptions).

As we want to finish the debate, I want some order, please.

I move amendment No. 6:

In page 5, between lines 22 and 23, to insert the following:

“2.—(1) Before awarding a construction contract, a state contracting entity shall publish a notice of intention to award such contract, and such notice shall include—

(a) the name of the prospective executing party,

(b) an invitation to the public to submit observations to the state contracting entity in relation to the construction contract, such observations to be submitted within 28 days of the publication of the notice.

(2) A State contracting entity shall have the authority under this Act not to proceed to award a construction contact to a prospective executing party on the basis of information received under subsection (1)(b), such information to be independently verified.”.

We have already discussed this issue on Committee Stage. I have changed the wording to some extent because the Minister said he was awake all night wondering who the people were who had an interest in or who had observations to make concerning such a notice. Therefore, I clarified the amendment for Report Stage, stating it would be "an invitation to the public to submit observations" to any State contracting entity. The purpose of the amendment is to provide that "Before awarding a construction contract, a State contracting entity shall publish a notice of intention to award such contract". In addition, it shall give the public 28 days to make observations. The State authority can take into consideration any relevant information it receives during that period.

Essentially it provides an opportunity for unpaid contractors to come forward and highlight the previous bad payment record of the person proposed to be awarded the contract.

I apologise, but I must interrupt the Deputy.

I withdraw the amendment.

Amendment, by leave, withdrawn.

The Minister of State wishes to propose a verbal amendment to the Bill to correct a drafting error.

I move the following verbal amendment:

In page 5, line 39, to add "a" before the words "construction contract".

Amendment agreed to.

As it is now 11 p.m., I am required to put the following question in accordance with an order of the Dáil of this day: "That the amendments set down by the Minister for Finance and not disposed of are hereby made to the Bill; that the Title is hereby agreed to; that Report Stage is hereby completed; and that the Bill is hereby passed."

Question put and declared carried.