Social Clauses in Public Procurement Bill 2013: Second Stage [Private Members]

Deputy Mary Lou McDonald

I move: "That the Bill be now read a Second Time."

This Bill legislates for the mandatory inclusion of social clauses in all public procurement contracts worth in excess of €1 million. Social clauses enable Government to use public procurement contracts as a multitasking instrument of policy. Merely using public contracts to obtain goods and services is now an outdated approach. The inclusion of social clauses in public contracts requires public purchasers and suppliers also to protect the vulnerable, support the disadvantaged, develop the social economy, protect the environment and promote other social goals and community benefits during the course of the project as a condition of the contractual award. In other words, social clauses are a tool for getting more value out of each public euro spent. In the tendering process, such clauses provide selection criteria that sit alongside more traditional criteria, such as economic performance.

The State spends approximately €9 billion each year on goods and services. While social clauses have been included in a very small number of public contracts, they are not currently legislated for nor are they mandatory. It is our view that in order to best serve the public good, any value for money strategy in respect of the spending of public money must not focus exclusively on the bottom line, although that would be an element of the decision. Unfortunately, to date, current procurement policy has all but ignored the potential benefits for small and medium-sized indigenous businesses, social economy enterprises and wider society from Government spending.

Some Ministers have wrongly argued that EU directives prevent them from using social clauses. However, this was and is incorrect. Indeed, new EU rules under the EU public procurement directives adopted in January of this year:

Seek to ensure greater inclusion of common societal goals in the procurement process. These goals include environmental protection, social responsibility, innovation, combatting climate change, employment, public health and other social and environmental considerations.

The new rules modify the 2004 rules on public procurement and have been described by the Council as a "major overhaul". They introduce a new criterion of the "most economically advantageous tender", otherwise and perhaps unfortunately known as MEAT, in the award procedure. Applying this criterion will enable public authorities to put more emphasis on social considerations and the need to use public money to meet social goals while still taking account of price considerations. Any company failing to comply with obligations relevant to social clauses in a public contract may be lawfully excluded from public procurement procedures on this basis. As the European Parliament's rapporteur for procurement described it, the new EU criteria will "put an end to the dictatorship of the lowest price and once again make quality the central issue" in the spending of public money. It represents a much more rounded value for money concept than that which is currently applied in Government procurement decisions. In other words, it is no threat to value for money considerations but rather complements them. On the contrary, it has the potential to ensure better value for each public euro spent. This means that the Government is now legally obliged to legislate on the issue of social clauses no later than January 2016. While I do not argue that my Bill fully implements the new EU public procurement directives, it is simply a strong start that could be built upon by complementary legislation between now and the compliance deadline.

This reality of the new EU requirements recently forced the Minister for Public Expenditure and Reform to establish a social clauses project group within the new Office of Government Procurement, OGP, which is charged with increasing the use of social clauses on a pilot basis. It has not been afforded a robust mandate by the Minister and I understand that it has met only twice since it was established in June so it is hardly a bold initiative. Nevertheless in theory, this Minister and this Government are committed to at least the minimum goals of this Bill. I welcome the establishment of the OGP, the centralisation of procurement decisions into the future and the fact that the chief procurement officer is now charged with putting more focus on the issue of social clauses than in the past. However, this is hardly the same as putting social procurement on a statutory basis and making it mandatory, as I am proposing.

There is nothing stopping the Government and the Minister from supporting and adopting this legislation. I welcome the fact that the Government has taken the decision to allow this legislation pass to Committee Stage. I hope that it is not simply a strategy to put it in cold storage but nonetheless I welcome that decision. It is worth noting that Sinn Féin has successfully pursued the inclusion of social clauses in public contracts in Northern Ireland. The then Minister for Regional Development, Conor Murphy, insisted that social clauses be written into major capital road building contracts providing jobs for the long-term unemployed and also apprenticeships. There is no reason such an approach cannot be adopted here and rolled out on an all-island basis. It should also be noted that progress is also possible at local authority level with respect to the inclusion of community benefit clauses in public contracts. In March 2014, the Sinn Féin Dublin City Council group succeeded in passing a motion on including social procurement clauses in council contracts based on my proposed legislation.

It is hoped that similar initiatives can succeed in other local authorities. It will certainly be pursued by our local representatives in the forthcoming period.

It is not just a matter of promising what Sinn Féin might do in government. We have demonstrated that where we have influence or power, it is possible to deliver on these initiatives.

This legislation allows for a flexible minimum or maximum approach to social clauses with regard to content. However, it is robust in the scope of its application. It applies to all contracts valued in excess of €1 million tendered by all public authorities, which are defined in section 1 as including "any person or body established by law and through which any of the legislative or executive powers of the State are exercised, other than the President".

The legislation contains the following provisions under section 2, to which the main contractor must adhere while retaining all current employees of the company. Under section 2(b), one long-term unemployed person must be hired per €1 million value of the public contract. Under section 2(c), one apprentice must be hired per €2 million value of the public contract. Under section 2(e), the opportunity to develop work-related skills and, where necessary, training programmes must be provided for. Under section 2(g), the main contractor must contribute to sustainable development. These are the minimum social requirements and they are modest. However, section 2(h) is a crucial clause which provides for a Government to go even further, by allowing for "any other social clause which the Minister or public authority sees fit to be included in the contract". Of course, such clauses would also have to comply with EU rules.

Section 4 of the Bill provides that the new tender process will require applicants to demonstrate at the outset how the indicated social goals will be met, and that failure to meet the social clause criteria will constitute grounds for rejection of the tender application.

Section 5 introduces a penalty process where the social clauses contractually agreed have not been implemented in full. In this regard, the main contractor will be obliged to provide a quarterly report on the implementation of the social clause in the contractual agreement. Section 3 gives the chief procurement officer oversight responsibility. Finally, section 6 provides for an independent appeals process where the chief procurement officer makes a finding that a contractor is in breach of a social clause.

The Minister and the Government have previously argued that the inclusion of social clauses will displace existing workers in a company that is awarded a public contract. I do not accept that. Indeed, experience shows that this is not necessarily the case, and the new EU rules on social procurement arguably preclude this. However, to make absolutely certain that it cannot happen, we have included a further provision at section 2(d) that the contractor must comply with fair employment, equality of treatment and anti-discrimination principles as set out in employment law.

It is true that Departments are already including social clauses in certain public contracts, but this is done in an ad hoc way and on a small scale. While I acknowledge that they are being used under the devolved schools programme, they are only being piloted on a limited number of schools projects, according to the Minister. He has given no commitment that social clauses will be attached to all public works contracts awarded under the much-trumpeted €2.25 billion stimulus programme that he has repeatedly re-announced since 2012, or in the €17 billion in funding under the infrastructure and capital investment programme to 2016.

We argue that social clauses should be attached to all large capital projects without exception so that public moneys are used more smartly, more efficiently and in such a manner that citizens, who are in fact the investors, and not just companies, feel a tangible benefit from public spending. This should no longer be discretionary but mandatory. Hence we suggest legislating for this now, well in advance of the EU directive compliance deadline.

In conclusion, I commend the Bill to the House and I invite Members from all sides to support this legislation. I welcome the fact that the Minister for Public Expenditure and Reform will allow the Bill to progress to Committee Stage and will co-operate in the job of improving and amending it where necessary. I will be happy to have the legislation amended with a view to strengthening it, although, obviously, not with an eye to watering it down. I also welcome and encourage co-operation from colleagues across the House, including on the Opposition benches. I urge the Minister to take this opportunity to build on what has been a minimalist approach so far to social clauses and to resist the temptation to delay what is inevitable, advisable and beneficial. I look forward to the debate.

Minister of State at the Department of Public Expenditure and Reform (Deputy Simon Harris)

I welcome the opportunity to debate the Social Clauses in Public Procurement Bill 2013 and I thank Deputy McDonald for providing me, as Minister of State with responsibility for the Office of Government Procurement, with this opportunity. I echo Deputy McDonald's call for the debate this morning, and indeed the ongoing discussion we must have on procurement, to be constructive and to involve Members from all sides of the House. In my new role as Minister of State I hope to be able to foster that culture of constructive co-operation, including constructive criticism where it is merited, and to take and explore good ideas and try to build on them. With that in mind, the Government will not oppose Second Stage of the Bill.

The Bill is timely. Procurement in Ireland is changing and evolving. I agree with Deputy McDonald that the role of procurement must move beyond simply achieving a bottom line of value for money. In fairness to my colleagues in the Office of Government Procurement, they have undertaken a number of projects, measures and outreach exercises to try to involve the small and medium enterprises, SME, sector. In fact, when I visited the National Ploughing Championships this year - I am sure representatives of Sinn Féin also visited - there was a very interesting tent in which SMEs, farmers and everybody else could find out how to tender and how to register for eTenders. There is a new text message service. We are intent on trying to reach out to as many sectors as possible. It is in everybody's interest, including the Office of Government Procurement, and it is certainly in the interest of the Government to have the SME sector as involved as possible in public procurement.

The Government is committed to driving an ambitious reform programme designed to modernise the public sector and improve service delivery. Public procurement is seen as a key element of this programme, not only in terms of the potential to deliver much-needed public services in a more efficient manner but also as a platform to facilitate policy in areas such as employment, training and sustainability.

The Government sees significant merit in developing a social clauses framework, and there are currently a number of initiatives in which social clauses are being developed. In June, as Deputy McDonald mentioned, the Minister for Public Expenditure and Reform, Deputy Howlin, established a social clauses project group led by the Office of Government Procurement. This group is charged with proactively looking at public contracts in which social clauses could be deployed to contribute to employment or training opportunities for the long-term unemployed. The expected outcomes from this pilot project will be as follows: the identification of suitable policy priorities to be addressed through the insertion of social clauses in public contracts; guidance relating to suitable candidate project types and spending areas; examples of suitable contract clauses developed in conjunction with the Chief State Solicitor's office; and the design of a monitoring and reporting framework which can be applied to future projects where social clauses are to be used.

The group has met twice to date - in June and September, if memory serves - and it is due to have its next meeting in November. It is important to acknowledge that a significant amount of work is ongoing within Departments and State offices in advance of the group's next meeting in November.

On the composition of the project group, the nominees are from a number of Departments and organisations. They include a representative each from the local government sector, the Department of Jobs, Enterprise and Innovation, the Department of Social Protection in connection with the role of the Intreo offices, the Department of Education and Skills in connection with the role of SOLAS, the Health Service Executive, the National Roads Authority, the National Development Finance Agency, Pobal, the Office of Public Works and the Office of the Chief State Solicitor which is providing legal assistance. The priorities of the working group will be the long-term unemployed and training and apprentice opportunities. The Department is seeking tenders to promote these priorities in pilot goods and services contracts.

It is important to adopt a targeted approach to the use of social clauses, one that is focused on contracts where employers are likely to hire additional workers to deliver the contract. This is likely to mitigate the risk of displacing workers already in employment, while offering the opportunity of assisting with labour activation measures for the long-term unemployed. Two examples of this approach in progress are the Grangegorman development and the devolved schools building programme. With regard to the latter, a clause has been included in the public works contracts which requires that 10% of the aggregate time worked on site must have been undertaken by individuals who have been registered on a national unemployment register within the European Union for a continuous period of at least 12 months immediately prior to their employment on the project and that 2.5% of the aggregate time worked on site must have been undertaken by individuals who are employed under a registered scheme of apprenticeship or other similar national accredited training or educational work placement arrangement. While it could be argued that these requirements are modest in terms of the percentages involved, they are a signal of intent on the part of the Government.

The Department of Social Protection, through its Intreo offices, is providing support to the contractors in meeting their obligations under the contract by providing suitable candidates to match the skills requirements from long-term unemployed construction workers. To date, approximately 48 long-term unemployed persons have been hired across the 15 sites in question out of a total workforce of about 440. The purpose of the project is to get people back to work and the public and private sectors are working together and providing real information on the types of people and training requirements they need for employment in the relevant sectors.

Overall, we want to ensure that we learn from the practical experience arising from contracts in which social clauses are being piloted. We are proceeding with caution as we need to develop a robust social procurement framework that is effective.

Deputy McDonald referred to the European Union context. It is important to acknowledge that EU rules on public procurement encourage social inclusion and I do not contend otherwise. However, the use of social clauses in public procurement is a complex area. Public procurement is governed by EU rules, national legislation and World Trade Organisation agreements. The aim of these rules is to promote an open, competitive and non-discriminatory public procurement regime. To be compatible with EU law social clauses must be made known to all interested parties and must not restrict participation by contractors from other member states. These requirements constitute an important legal reality. It would be a breach of these rules for a public body to favour or discriminate against particular candidates and legal remedies are available that may be used against any public body infringing these rules.

The EU procurement directives primarily envisage that social considerations may be included as contract performance conditions provided they are not discriminatory and are included in the contract notice or contract documents and relate to the performance of the contract. In 2010, the European Commission documented a long list of possible policy issues which might be taken into account within the framework of a socially responsible public procurement policy. The list ranges from the promotion of employment opportunities for various groups of employees and promotion of decent work to compliance with social and labour rights, support for social inclusion to the encouragement of human rights and consideration of ethical and fair trade principles. The proposed legislation clearly goes beyond this by seeking to include certain mandatory social clauses in public contracts. These issues can be discussed in greater detail.

The revised EU directives, when transposed, will provide greater scope and legal clarity on the use of social criteria in the context of an open, competitive and non-discriminatory public procurement regime which delivers best value for money, while taking into consideration the factors I have highlighted. The new rules will contribute to the implementation of the Europe 2020 Strategy for a more social, innovative and inclusive economy. The rules are not obligatory and it will be a matter for contracting authorities to decide if they want to take advantage of the new possibilities placed at their disposal.

I note the Bill contains a number of provisions on employment law and its enforcement. Procurement procedures already require all applicants to meet certain standards when applying for public contracts that come within the EU definition of social clauses. As part of the standard terms and conditions of a contract for service, the contractor is required to provide the services with good industry practice and comply with all applicable laws, including employment legislation and health and safety regulations. My colleague, the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, has primary responsibility in these areas and, as such, procurement contracts are not the best place to deal with these issues. Furthermore, the Office of Government Procurement is not the appropriate office to enforce employment law.

The National Employment Rights Authority, NERA, is responsible for enforcing minimum statutory employment rights and entitlements in the State. In undertaking this role NERA carries out a range of functions, including the provision of employment rights information and the inspection of employment-related records. It operates a system of risk-based inspections in sectors where there are identifiable risks. Inspections are also carried out in response to complaints received and routine inspections are undertaken as a control measure. Companies that have been awarded State contracts are also required to provide access to certain information. This information should allow the authority to assess compliance with employment legislation consistent with the requirements of EU and national law. Any subcontractors employed are also required to adhere to these conditions.

The reform of the public procurement function continues to be driven by the need to obtain value for public money in procuring works, supplies and services. It is essential to ensure that value for money is not adversely affected by the inclusion of social clauses or that additional costs are not placed on domestic suppliers relative to other potential suppliers. I stress the need to have a conversation about what is value for money because the role played by small and medium enterprises, SMEs, in villages, towns and cities is of value to the economy. In acknowledging this benefit I emphasise that the Office of Government Procurement, the Government and I are not solely interested in the bottom line. Procurement has a bigger role to play in this regard. I am concerned, however, that merely inserting clauses that require additional employment or train additional staff could give rise to increased public procurement costs because of higher input costs imposed on suppliers. We need to be careful in respect of social clauses and ensure we do not inadvertently disadvantage small and medium enterprises in favour of larger companies which can absorb the additional cost involved. We must also avoid displacement of the current workforce as the economy would not obtain any net employment gain were displacement to take place. I hope Deputies will agree that the use of social clauses in public procurement contracts must focus on creating additional employment, returning the long-term unemployed to the workforce and ensuring it does not inadvertently impact on existing workers.

For these reasons, the proposal that all public procurement contracts include a requirement that a quota of long-term unemployed be employed in their delivery poses a number of significant risks. In the current economic climate and bearing in mind particular difficulties in the construction sector, rather than taking on employees, businesses in some areas have been reducing their existing workforce for obvious reasons. Consequently, it is likely that, where a business is awarded a public contract, in particular a small-scale contract, the work will be carried out by the existing employees of the business in question. In such circumstances, a social clause requiring that a number of long-term unemployed be employed in delivering a public contract could either impose an additional cost on the business in question that it may not be able to afford or result in an employee of the supplier being let go in favour of a long-term unemployed person. I acknowledge that this is not the objective Deputy McDonald seeks to achieve but it is an issue that requires discussion.

Likewise the blanket monetary values included in this legislation would not be effective as the State purchases many supplies that have a minimal impact on employment. Examples include the purchase of land, electricity, fuels, pharmaceuticals, vehicles, heavy machinery, aeroplanes, ships and defence equipment. Such purchases would not be suited to a blanket provision based on the value of the works or services.

The Bill includes a provision that requires the main contractor to contribute to sustainable development. Considerable guidance on the use of sustainability clauses is already available to contracting authorities in the documents, An Action Plan on Green Public Procurement, which was issued jointly by the Ministers for Public Expenditure and Reform and Environment, Community and Local Government on 18 January 2012, and the guidance document on green procurement, which was prepared by the Environmental Protection Agency in collaboration with a number of State agencies and Departments and published on 11 September last. The Office of Public Works, through the State architect, is completing a green public procurement for construction guidance document for issue in quarter one of 2015. This document will provide staged guidance that is relevant to all construction projects, from site selection through design and construction to post-construction operation, and will include restoration and refurbishment. Core and comprehensive criteria are explained, combined with optimal and effective strategies to achieve clear and verifiable results. For each area of guidance, environmental criteria are defined and guidance is given on how they may be achieved using relevant examples.

The Government does not oppose the Bill. As Deputy McDonald acknowledged, however, considerable work needs to be done before it can become viable legislation that provides the necessary flexibility to procure the wide variety of works, goods and services necessary to deliver vital public services. Further debate and discussion is required on the correct policy approach to enabling social clauses. We need to be mindful of the need to maintain flexibility to reflect changing circumstances. As I stated, Deputies should take a constructive approach to this matter.

I would be delighted to assist Deputies, particularly Opposition Deputies, in accessing information from the Office of Government Procurement or meeting relevant officials as we continue the pilot project and the working group. I will continue to keep the House updated on its progress.

An Leas-Cheann Comhairle

I call Deputy Broughan, who is sharing time with Deputies Troy, Lawlor and Crowe.

Deputy Thomas P. Broughan

I warmly congratulate Deputy McDonald and her Sinn Féin colleagues on their introduction of the Social Clauses in Public Procurement Bill 2013. I agree strongly with its basic principle in providing specific recognition of the need to hire unemployed persons and apprentices on publicly funded contracts through the use of social clauses. This is an issue I have raised before with the Minister for Public Expenditure and Reform, Deputy Howlin, in the House. Deputy McDonald also mentioned European legislative developments in this area, as well as the initiatives taken by the former Northern Ireland Minister for Regional Development, Conor Murphy, which we could emulate on this part of Ireland.

I note that there has been a small pilot programme on the Government's part to ensure that a certain percentage of workers hired on public contracts come directly from the live register, particularly in the schools building programme. However, I have major concerns about how this is working generally. Serious issues have been raised by workers and trade union representatives about the effect of their being forced to become self-employed through the RCT, relevant contracts tax, system.

The Bill is timely given the commitment of the Government in budget 2015 to increase capital expenditure for the first time in seven years following cuts of 70% since 2008. The welcome small resumption of a social housing programme will bring into sharp focus the need to ensure that the Government's stated aim of getting people back to work is actually realised, and the use of social clauses as proposed in the Bill is one of the measures needed.

Another issue that has come to my attention recently is the urgent need to get local unemployed people working on local projects, particularly construction projects, which may arise in their areas. I recently met unemployed constituents who again proposed that local unemployed construction workers, of which there are a significant number in Dublin Bay North, should be hired on a housing project due to commence soon in Darndale, Dublin 17. One of my local colleagues, Councillor Larry O’Toole, has been interested in pursuing this issue.

Section 2 outlines the requirement for social clauses to be contained in public procurement contracts worth more than €1 million. Section 2(b) provides for the hiring of one unemployed worker for every €1 million of project value, while section 2(c) provides for the hiring of one apprentice for every €2 million of project value. Sections 3, 5 and 6 provide for invigilation by the Office of Government Procurement of compliance with the social clauses as proposed in the Bill.

I welcome the Bill's provisions. I am also grateful for the useful note prepared by the Library and Research Service on it. However, its paper refers, as did the Minister of State this morning, to an alleged potential negative implication of the Bill - that is, the costs associated with enforcement of social clauses. Developers and employers might raise such an issue. Surely any costs associated with such an invigilation process, however, would far outweigh the benefits of increasing employment opportunities for the significant number of construction workers who remain unemployed since 2009.

Like other Members, including Deputy McDonald, I previously asked the Minister for Public Expenditure and Reform, Deputy Howlin, how social clauses in public procurement contracts could be applied. When I last asked him about it in April, he informed me of the approval last year by the Government’s contracts committee for construction of a pilot initiative to be included in the National Development Finance Agency’s devolved schools programme. The Minister stated:

A clause has been included in the contract which requires that 10% of the person-weeks worked on the contract be undertaken by individuals recruited from the ranks of the long-term unemployed. There is also a requirement for 2.5% of the person-weeks on the contract to be undertaken by apprentices.

However, the Minister suggested that such clauses could not be applied more generally to public contracts because of their displacement effect on employed people. I am not entirely sure if this argument would stand up to close scrutiny, particularly when we have such significant levels of unemployment in the construction sector. The introduction of new public capital contracts will inevitably involve the need to recruit additional workers who are not already in employment. Being involved in other local community development projects in Dublin Bay North, I have noted that several companies can be involved in a contract, or one could be partnering a small local company. There may be scope through local development bodies to implement this social clause provision.

I have also asked the Tánaiste and Minister for Social Protection, Deputy Burton, and the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, for their views on how more employment opportunities could be created for unemployed construction workers on public contracts. They expressed support for the initiative from the Minister for Public Expenditure and Reform. The pilot scheme in place, however, is just a small first step. The former Minister for Education and Skills, Deputy Quinn, advised me in April that across three contract bundles for building works on 15 schools, eight unemployed people had been hired in one of the contract bundles, with only a further two hired in the other two contract bundles. Still, I welcome the ongoing progress of the pilot project as outlined by the Minister of State this morning and the fact that he is to accept this Bill.

A related concern, of course, exists with regard to the schools building programme in its treatment of workers on some sites operating under the programme. I have referred to this issue on several occasions in this House, including last week during the debate on the Workplace Relations Bill 2014. I, as well as Sinn Féin and Fianna Fáil Members, have asked numerous Ministers to address the concerns of workers on some of the sites. The primary issue at the heart of the whole matter is the continued use of the RCT system to force construction workers into self-employment and very low wages. This is borne out in the statistics, which show that the majority of RCT workers are registered in the construction sector, representing around 40,000 people each year. Some workers on these sites allege that the RCT system is being forced upon them to drive down the overall price of the job. I recently referred my concerns about the matter to the Minister of State at the Department of Jobs, Enterprise and Innovation, Deputy Nash, who informed me he would take the matter up with the Department of Social Protection and the Revenue Commissioners. A dramatic change in the treatment of construction workers is needed. I noted that in his budget speech the Minister for Public Expenditure and Reform cited the success of the schools building programme and said it was the preferred model to be employed in the social housing projects pledged by the Government. I presume legislation will be introduced on the new off-balance-sheet vehicle to which Ministers referred last week as part of the response to the desperate need for housing.

There is also a need to provide locally-based construction employment opportunities. Over the past few years, I have been asked several times by unemployed construction workers in Dublin Bay North about whether there should be a social clause in all public procurement contracts mandating the employment of workers registered in our local exchanges in Coolock and Kilbarrack. The most recent figures for September 2014 show that between the two offices there are over 8,500 people on the live register. During the past year there has been a particular focus on the final phase of the Darndale parish refurbishment at Buttercup Park. This has been ongoing since Garret FitzGerald was Taoiseach. We have battled for this last phase for the past ten years. It is expected that the work to construct 35 homes in north Buttercup will commence shortly. Yet, in an area with some of the largest numbers of unemployed construction workers, there is no commitment to employ workers from the north Coolock-Donaghmede ward of Dublin City Council. Unemployed workers ask why the council does not insist on a provision in public contracts whereby even 10% to 15% of local unemployed construction workers would be considered for those positions. I know that colleagues on the council have been trying to pursue the involvement of local small and medium-sized enterprises in major contracts. In the huge North Fringe district of Dublin City Council and Fingal County Council there is a plan to build up to 30,000 houses, which would comprise a town similar in size to Tralee. It is remarkable that over 5,000 homes and thousands of square metres of commercial development were built in this region during the Celtic tiger years with little or no local labour. It must also be noted that some of the construction, such as that of the notorious Priory Hall, was of a very poor standard.

I have been a director and board member of the Northside Centre for the Unemployed for nearly 25 years.

We recently passed a motion which strongly supported the idea of social clause contracts and greater local involvement. I warmly welcome Deputy Mary Lou McDonald's Bill. In the past seven years skilled construction workers have suffered greatly owing to the building crash and it is critical that they be facilitated in returning to the work at which they excelled and which earned them a decent living during the good times.

Deputy Robert Troy

Before I make my contribution on the Social Clauses in Public Procurement Bill 2013, I wish to make a point about Friday sittings. It is regrettable that there is no second Bill for debate today, given that Deputies submit legislation for selection by lottery. I understand the Deputy concerned has withdrawn the second Bill, which is fair enough. Clearly, something arose for that Deputy, but it reduces the chances of other Deputies of being selected in the lottery. If Deputies have Bills in the lottery, they should make themselves available to bring them before the Dáil. We are aware of when the sitting will take place when a Bill is submitted for the lottery.

Fianna Fáil will be supporting this legislation which will go some way towards enhancing procurement procedures in Ireland and ensuring opportunities arising from local projects lead to local employment. The public procurement market in the European Union is estimated to be worth around one sixth of total GDP. This is a huge market, one from which Europe's SMEs and local companies ought to be deriving a significant share, considering their overall contribution to the economy. Despite this, many local firms or small and medium-sized enterprises are locked out of the market owing to restrictions they find impossible to overcome. As a result, public procurement is often seen as squeezing out the little guy and undermining the possible benefits of public procurement in the area in which it is to be carried out. This results in a huge drag on the European economy, given that 98% of all businesses in the Union employ fewer than 250 employees. Some 85% of net new jobs in the Union have been created by SMEs. In Ireland, 67% of all new jobs are created in businesses in the first five years of their existence. SMEs make up over 99% of businesses in the enterprise economy in Ireland and account for almost 70% of those employed. That public procurement tenders which, in essence, are State contracts undermine the flourishing of this sector of the economy is shameful and must be addressed.

I acknowledge that attempts have been made in the past to address this problem. The 2004 EU directives reforming the public procurement rules provide a new basis to create a level playing field for SMEs bidding for public contracts. However, despite assertions that the European Commission encouraged member states to share their good practices in facilitating SME access to public procurement and stimulating the innovation and growth potential of SMEs, most people who work in the sector and try and engage from a local or smaller business continue to feel shut out. The reason for this is that many barriers remain to discourage SMEs from responding to requests for tenders or even lead them to avoid such opportunities altogether. They include difficulties in obtaining information; lack of knowledge of tender procedures; the large size of contracts; the fact that time spans that are too short to prepare proposals; the cost of preparing proposals - since many costs are fixed, SMEs face disproportionately high costs in comparison with larger enterprises; overly high administrative burdens; unclear jargon; high qualification levels and required certification; requirements for financial guarantees; discrimination against foreign tenderers and preference for local and national enterprises; and finding collaboration partners abroad.

While the difficulties SMEs face are widely understood, significant efforts are still required to change public procurement practice across the European Union. After all, those responsible for awarding contracts on behalf of governments and public authorities are required to safeguard public funds and many need to be convinced that reforming their procedures will not jeopardise this. The current legislative directives on public procurement are supposedly designed to reduce the administrative burden and costs related to tendering, make procurement systems more transparent and easier for SMEs to access and to encourage the use of information technology systems to simplify the process. However, those who have engaged in the public procedure process still find the system extremely bureaucratic and not in any way user friendly. It is welcome that European Union rules on tendering and public procurement permit the use of clauses that promote social considerations and it is understandable they must satisfy certain requirements such as objectivity, being made publically available and striking a balance between competitive tendering and social considerations. Furthermore, they must not be discriminatory. Several EU member states already make use of socially responsible clauses in their tendering processes. Scotland and the United Kingdom in general have passed legislation which has given local firms an advantage where they can show that their tenders would offer significant community benefits in their areas. We have yet to introduce such legislation here and, as such, the legislation before us is most welcome. Every day that we as a Parliament fail to introduce social clauses to our public procurement process, we are allowing the opportunity to create local jobs creating significant local benefits to slip through our hands.

I understand there is a trade-off in using socially responsible clauses and that the prohibition on discriminatory clauses facilitates Irish enterprises tendering for contracts in other EU member states. However, we are losing out as a country because of our failure to recognise that some tender submissions offer far more than economic development or service delivery. They can also offer a renewed, more prosperous community. Research has shown that many other European countries use these clauses. Italian clauses favour bidders from less developed regions of the country. Dutch and Danish local government laws provide for requirements to create jobs for the long-term unemployed. German rules allowed favourable terms for bidders with a background in the former German lands in Poland, the Soviet Union and Czechoslovakia. Most member states also favour workshops for the disabled, workshops in prisons and procurement opportunities for small and medium-sized enterprises. Irish public opinion is strongly behind this proposal. A total of 82% of Irish people surveyed agreed that it was acceptable to choose a more expensive offer for a public contract when local people were employed by the winning company. The EU average was 85%. It is time for our legislators to start acting on this public support by delivering local jobs through local contracts.

Ireland should pass this legislation as Europe 2020, the European Union's growth strategy for the coming decade, begins to pick up pace. In a changing world we must drive forward the country to become a smart, sustainable and inclusive economy. These three mutually reinforcing priorities should help Ireland and the European Union to deliver high levels of employment, productivity and social cohesion. Under Europe 2020, the Union has set five ambitious objectives - employment innovation, education, social inclusion and climate and energy - which are to be reached by 2020. Each member state has adopted its own national targets in these areas. Concrete actions at EU and national level underpin the strategy. As we emerge from the economic crisis which has caused pain and hardship, we must take steps to guarantee the future prosperity of the country. Passing the legislation before us would be one step forward in securing that prosperity. It would also chime well with each of the five objectives as outlined in the Europe 2020 strategy.

I would like to conclude my contribution by looking at the overall situation in Europe with regard to the idea of a social contract, which is central to the idea of including social clauses in the public procurement process. One of the central aims of the European Union was to build an equal society across Europe and ensure opportunities for all citizens to reach their full potential, regardless of their economic circumstances. Policies pursued at a European level in the past five years have dramatically reduced social inclusion and resulted in growing inequality in many member states. Young people and the elderly have been particularly hard hit with the onset of the financial crisis. We must seek to ensure EU economic policy enhances social inclusion and reduces poverty. As a small nation which has benefited greatly from EU membership and has a proud record of contributing to the building of the Union, we must strive to ensure its basic values are protected and promoted.

In an ever-increasing Union we need to find new ways to accommodate all voices, not just those with the largest populations or biggest GDP. The European Union needs to listen to its citizens more and work to enhance their livelihoods.

The scourge of high unemployment has returned to many member states of the European Union. EUROSTAT estimates that 24.85 million men and women in the EU 28, of whom 18.4 million were in the euro area, were unemployed in July 2014. That is 26.5 million men and women whom the Union has failed dreadfully. The experimental policies of the past five years emanating from Frankfurt and Brussels have, in many instances, made the crisis deeper and more prolonged.

Increasingly, people who have lost all hope in moderate politics turn to the extremes to give them answers that moderate politics supposedly cannot. This can and must be challenged by democrats among Europeans left, right and centre. We must provide the answers. The European Union must provide the answer for its citizens who are crying out for work. In order to consolidate peace in Europe and act as a guardian of the peace in the world, we must guarantee the well-being of all citizens within the Union.

I welcome and support the Bill which could go some way towards helping the emerging recovery in the country, broadening it and ensuring community benefits and social inclusion are central to any public procurement policy.

Deputy Anthony Lawlor

It is welcome that we are having a discussion on procurement and social clauses. I am very much in favour of the concept of having social clauses. However, I have a difficulty with the legislation which will be very restrictive. It is too much across the board and will not be very prescriptive as to what can and cannot be done. From that perspective, I am concerned about how the SME sector will be able to implement it. The Minister of State has indicated that the Government will accept the legislation, but I agree with Deputy Mary Lou McDonald that it could be put in cold storage. I, therefore, ask the Minister of State to indicate when the Government will introduce its own legislation on social clauses.

It is ironic that the programme for Government 2011 to 2015 in the North of Ireland proposed to include social clauses in all public procurement contracts. However, what has been proposed is very limited. Deputy Robert Troy who has left the Chamber highlighted that legislation had been introduced in England and Scotland, yet I can find no such legislation which has been introduced in the North of Ireland. It is hypocritical for Sinn Féin to bring forward something here and not to have done so where it is in power in the North of Ireland.

I reiterate my point that Deputy Mary Lou McDonald's legislation is an across-the-board social clause inclusion. As I said, there are parts I would have no problem in supporting because I believe in the inclusion of local SMEs, local employment and local people who are unemployed being catered for under the procurement process. A report was produced in the North of Ireland and Deputy Mary Lou McDonald's colleague, Ms Jennifer McCann, MLA, stated: "The social value of public spending is important and I welcome the fact that some of the recommendations in this report call for the targeted use of social clauses." The legislation is broad based. I agree with the Minister of State that we should use social clauses in a targeted manner.

We mentioned EU legislation with which we have to deal. I find it strange that in a recent debate in the Northern Ireland Assembly it was stated, "Northern Ireland has lobbied strongly for the relaxation of European regulations that have acted as barriers to SME participation in public contracts." From an SME perspective, this legislation will definitely be a barrier for small firms looking to tender for projects up to €2 million, which is not an exceptionally large contract. I find it strange that they lobbied against it and yet bring forward restrictive legislation in the Republic.

I would welcome Deputy Mary Lou McDonald's participation on Tuesday when the Joint Committee on Jobs, Enterprise and Innovation will have a full session on the issue of procurement. A number of small firms will be represented at the meeting, as will a professor from DCU to highlight - this is not the first time I have spoken on the issue - Government policy which excludes many small firms from Government procurement processes. The policy that seeks value for money in a procurement contract is all about money rather than the social side. A small company in a small town, which employs local people and wants to be able to tender for public procurement contracts cannot do so because the restrictions imposed by eTenders make it difficult for small companies to tender for some of the pot of almost €9 billion. We have allowed larger companies to dominate the tender process. This is part and parcel of what I would call social inclusion; it is not necessarily all about employment. It is important that small companies in small areas be allowed to tender to supply items such as stationery in a local school and toiletries in local public offices. However, we are restricting this completely. To my mind, that is very strongly part of the social side of things because small companies will employ people who are living locally. They may have a chance to expand and more than likely will take a local person off the unemployment register, which is very positive. If we are to proceed with the legislation - the Minister of State might indicate when that might be - we need to have a lead-in period in order that small companies can adapt to what might be prescribed in the legislation. We need to give them an opportunity to refocus on what they have to do with regard to social clauses.

It is welcome that the Minister established a social clauses project group. Deputy Mary Lou McDonald has said it has only met twice. I would welcome it if we could receive a report from that group, perhaps similar to the one completed in the North of Ireland which called for targeted use of social clauses.

The legislation refers to apprenticeships. We need to look at the overall apprenticeship set-up, as it stands. Many small businesses claim they cannot take on apprentices because of the block release process they have to go through. When I was at UCD, many of my pals were in the college on Kevin Street at the time. They used to spend one day a week there and four days working in the company. Therefore, the knowledge they picked up on Kevin Street could be implemented in practical ways on the other four days. Apprentices go away for nine months to learn in a college and have no relationship with the SME during that time. We should seriously look at what was done in the past. There will be a shortage of apprenticeships.

I have spoken to people in the construction side in particular. The construction sector is starting to pick up and I foresee problems when we reach the building target of approximately 25,000 houses per annum. It does not allow small companies to take on apprentices because of the long-term block release. Maybe the Minister could examine this.

Again, I raise the double-speak of Sinn Féin trying to implement legislation here that they have not implemented in the North of Ireland. While I am very much in favour of the concept of social clauses, we must consider the wider view. We must consider how we set up our tendering documentation to allow small companies to participate in it at a local level because if local businesses expand, they are likely to take people off the local register. I would like the Minister to consider it, and I invite him to take an interest in the debates of the Oireachtas Joint Committee on Jobs, Enterprise and Innovation on Tuesdays.

Deputy Seán Crowe

I welcome the Minister’s response to the debate. It is a pity Deputy Lawlor’s contribution was out of synch with the debate. The manner in which we have debated this so far has been positive. Everybody sees the commonsense in Deputy McDonald’s proposal and the idea of such social clauses. The European Parliament has examined this area and is encouraging countries to do the same. It is not double-speak by Sinn Féin. In the North, as Deputies are probably aware, parties have been forced into a coalition and there are difficulties within it.

Deputy Anthony Lawlor

It is in the Sinn Féin programme for Government.

Deputy Seán Crowe

When we have been in a position to bring about positive change, particularly around such social clauses, we have delivered them. Earlier, the example was given of Conor Murphy and what he did regarding roads and other elements of his ministerial portfolio. While this was happening in the North, we were being told it could not be done here. Although some of our memories might be failing, I clearly remember that period of the Celtic tiger and the constant mantra that we could not break contracts. One of the major investments at the time was in the road infrastructure, and we were always being told we could not break contracts.

Deputy Anthony Lawlor

The Deputy needs to address Fianna Fáil about it.

Deputy Seán Crowe

I am not addressing Fianna Fáil, but the debate. I am trying to be inclusive. At the time it was said that under EU regulations and directives it could not be done, but other countries were doing it. Although not many people would cite what was happening in Greece, and maybe rightly so, when Greece got the Olympic Games, companies were coming in to build new infrastructure in Athens, one of the oldest cities in Europe. They delivered a new infrastructure of metro, trams, roads and cycleways. If a foreign company came in, a Greek company was working in tandem with it. It was like the early days of this State with Ardnacrusha, with German companies coming in and training Irish workers. I argue for something similar here.

The key to what they tried to do in the North was the apprentices. In the South, particularly in Dublin where there was much construction, apprentices could not follow through with their apprenticeships and were in limbo, back on the dole, because there was no work. Many of us asked if anything could be done by the Government or anybody. I went to the local authority, sat down with the county manager and talked about how we could draw these young people in, follow through and get them to finish their apprenticeships. They were reasonable suggestions. Everybody was scratching their heads.

By working together, Opposition and Government, hopefully we can all see the common-sense of this proposal on moving forward with social clauses. If the legislation is not radical enough, let us radicalise it. That was the point Deputy McDonald made this morning. If the Minister feels it is not strong enough, we will consider changing it. Is that not a common-sense approach? This is how the House should approach all legislation. Nobody is trying to score points on this. Let us park what happened in the past. All of us, even Fianna Fáil and the Green Party, accept that we made mistakes. We are talking about what we will do in the future for those young people who are leaving Ireland in their droves.

There are barriers to SMEs. It is about unbundling and breaking up the contracts and making them smaller. It is difficult for an SME to reach a threshold of, say, €20 million. Deputy McDonald will respond to many of the points made about the North, bearing in mind that it is a forced coalition. Despite the negativity about what is not happening, some positive things have happened in the past and will continue to happen. With my local authority we examined minority groups such as Travellers and what could be done. The local authority recognised that there was a need for positive role models in the Traveller community. The role models would usually be people in boxing or other sports. The local authority asked itself what it could do to support young Travellers going through education. Again, it is about the social clause. The local authority put some Travellers on the front desk so that people coming in to deal with housing issues or to pay their rent would meet them. That is what we are talking about, making minority groups part of society.

The suggestions in our Bill go some of the way. We are talking about contracts worth €9 billion. The Minister said there are areas we cannot break up or to which the legislation may not apply. We are not closing anything off and we must have an open mind. We collectively agree that what happened in the past was wrong and we need to change it. This idea of the dictatorship of the lowest price must change. We must examine where we are investing. Many people talked in very positive terms about the programme for schools.

Again, however, if one talks to people who are involved in the construction game - many of my family traditionally have been involved in bricklaying and block-building for generations - one difficulty at present is that in many of the contracts awarded for schools, universities and so on, many of the workers are involved in the black economy. I refer to the subcontractors and so on, as well as to the current scandalous situation involving the striking workers from J.J. Rhatigan, who were outside the gates of Leinster House on Thursday and who are fighting for a living wage on a Government-funded contract. In this case, there has been talk of €5 per hour with many of the contractors. They are seeking a review of the compliance mechanism to ensure that workers on building sites are paid the rate for the job. If the Minister of State has any influence in this area, I ask him to note that my party has raised consistently what was happening on these school contracts with both the current Minister and her predecessor, Deputy Quinn. Moreover, members of Deputy Quinn's own party who were involved in construction work raised this issue directly with him.

The proposal being put forward by Deputy McDonald is highly positive. Moreover, the debate has reflected this, albeit with one hiccup, involving a Deputy who has since left the Chamber. However, this is a positive measure and I reiterate that it is welcome that the Minister of State wishes to engage in this debate and is positive about it, which is a good signal for a way forward.

Deputy Peter Mathews

I thank Deputy McDonald for introducing this proposal, which is both timely and relevant, because €9 billion in contracts represents perhaps the third biggest budget in the State after health and education. Therefore, Members should ensure that the best opportunities are contained within the aforementioned €9 billion for Irish businesses and people. The country has come from a collapse in its banking system and economy, which arose as a result of a lack of probity across the various sectors of the economy, mainly banking. While Members are now trying to infuse this into the public procurement area for the rebuilding of much infrastructure, predominantly in respect of housing, schools and universities, as well as some transport infrastructure, they may be missing other areas in which social and responsible probity is important. For example, the restructuring of the balance sheets of banks has been missed completely in this type of debate and discussion because the policy the so-called pillar banks have adopted in recent years actually has crushed many households and families, and that is not right. While I will not go into this, it demonstrates that one cannot simply compartmentalise serious parts of the nation's productive effort. We produce goods and services within sectors, and for today, Members are focusing on public procurement aspect.

I believe the framework the Deputy has suggested as a starting point is excellent. However, in the context of practice and pragmatics, I worked in Vilnius, Lithuania for 15 months on a contract for a start-up that involved a great deal of sending out tenders to get different companies of different sizes to submit tenders. I was actually befuddled by the bureaucracy and I thought it was so pathetic and so strangling that it crushed even the enthusiasm to do the task at hand. Consequently, one must be careful not to lose one's flexibility. I will offer a thought from outside the box of linear thinking, or that comes from left field. Each firm and business has its accountant, minimally, and its auditor. Companies must have auditors, and in order to allow this type of social awareness or social responsibility thinking to permeate the conduct of business in general in this country, I suggest that the auditor to each company should perform an annual social responsibility compliance or awareness testing of the entire conduct of the business. This would include small businesses, as each limited company must have an auditor, and the purpose would be to ascertain the conduct awareness in all transactions throughout the year. This would be akin to a general medical check as to the probity of the business that provides goods and services, regardless of whether they go to public procurement contracts or are delivered to the economy in general. Auditors have to date been more obsessed with ticking and bashing and doing the arithmetic of the accounts, rather than their substance. This has been evident, and it will be seen to emerge from the banking inquiry that while they are neurotic about where the lines on the football pitch are, there is a question mark over the conduct of, and the interaction between, the players in the conduct of business. One could be neurotically scrupulous about being obliged to do a debit here or there and making sure it was before a particular date, but the substance could be all wrong. While technically one may not have stolen something, in substance or morally, one has.

In the area of public procurement, large companies will be the lead contractors or tenderers, and there will be subtendering and subcontracting and all that sort of thing. This is where the update certificate from an auditor who carried out a probity of conduct compliance test would come in. It would include a review of whether there were new employees as well as whether there was training of apprentices - that is, those who are in the course of becoming qualified tradespeople. One would then have a better and far-reaching understanding of the responsibilities of people in business in doing their business. This would be a first fail-safe with regard to the acceptability of a tender. The question should be who was signing off, rather than just a specific algebraic presentation of a tender that traditionally and heretofore has been price-based in the main. However, one would now be adding qualitative or soft-issue considerations, and the soft issue would begin with asking who is the tenderer anyway and what have those concerned done for the past couple of years. It is similar to how one can get a picture each year of how fit an athlete is and of the athlete's body mass index. In this case one would have a corporate mass index. Moreover, this would be less of a bureaucratic burden or obstacle for small to medium-sized enterprises and would be more relevant to their capability and competence to do what they state they intend to do. Questions such as when a business started up, how many employees it has, how it faced into the recession and whether it was completely unsympathetic to its employees or supportive would be suitable for scoring. Moreover, there would be an evidenced audit trail.

Because Deputy Lawlor was trying to touch on this type of consideration in his contribution, I am sorry to have heard that he could not avoid throwing a punch at Sinn Féin. That is silly stuff, and he did not need to say it, because his contribution was good until he said that.

I advise the Minister of State to beware of rigidity, maintain flexibility and to try to get a profile picture of who the tenderers are from the lead tender down to the subcontractor tenderers. With regard to the idea of having an annual soft issues, quality assurance on social probity and social responsibility of every business, why should it only be related to the debits and credits, profit and loss account and balance sheet, tax computation and all of that? That is a clinical exercise. It is a pathology of the business rather than the psychology and physiology of it. Perhaps a working party could be set up to address those matters, but the framework is good. It shows that we are trying to rebuild the country with the expenditure of €9 billion for public procurement, which is a big allocation of the overall €145 billion GNP or approximately €170 billion GDP. It would create a social awareness across society that this is where the Government is able to have an infusion into the quality of what is happening in terms of the delivery of public procurement goods and services.

It is important to talk in the language we all use at home. The use of percentages in the budget announced earlier in the week is like saying "my daughter grew by 3% last year" but the question is what height is she? The opening figure should be that last year we produced these goods and services and that the MNC FDI companies accounted for about €20 million which means that the indigenous GNP is the stated amount. We should explain that to the Peters, Susans, Joes and Marys. We should then say that out of the €146 billion of GNP this is what the Government's revenues are to provide services which cost so much and last year it was this amount and next year it will be that amount. It should be laid out on one sheet and it is possible to do that. That should be done instead of having this linear stuff of percentages and gobbledegook and the Government then trying to pat itself on the back. Our arms are not long enough to do that and that is reason it is not a good idea for the Government to do that. Those are a few of my thoughts. I hope they will be viewed as constructive and positive.

Minister of State at the Department of Finance (Deputy Simon Harris)

I found this debate very worthwhile. It has been quite constructive and we have had a good exchange of ideas but the issue is where we go from here in terms of progressing these ideas. The attendance of the chief procurement officer and some of my officials who are present at the Oireachtas Joint Committee on Jobs, Enterprise and Innovation this coming Tuesday is an important step forward in getting the views of all the parties and Independent Members on where next to go.

I want to respond to some of the Members' points. The key priority of Government, and I presume of every Member present, is to get people back to work. That issue that been raised a number of times throughout the debate. The Government has already launched the Action Plan for Jobs and Pathways to Work strategies which detail our plan to try to achieve this commitment. Since the launch of those strategies we have seen employment growth and the rate of unemployment is now 11.1%. It is still far too high but it is the lowest it has been in five years. Therefore, ongoing work is needed in terms of how we get more people off the live register and back to work and how we pick up on the points Deputy Crowe and others have made on apprenticeships and providing people with the skills they need. We recognise the need to do more.

The State spends a significant amount of money each year on procurement, as alluded to by many speakers. It is approximately €8.5 billion per annum on goods and services, which works out at approximately €23 million a day. I will refrain from using percentages.

Deputy Peter Mathews

Good.

Deputy Simon Harris

It is a good deal of money. A further €3.5 billion is spent on capital works projects. Understandably and quite rightly, when dealing with such large sums of money, there is a growing interest and attention in examining ways in which this expenditure can be used to deliver social, environmental and economic benefits within society. It is estimated that approximately 95% of this annual procurement spend goes to Irish suppliers. Public procurement is already, in effect, a significant driver of employment opportunities within the State.

Deputy Peter Mathews

The Minister used the word "per cent".

Deputy Simon Harris

I do not have time to translate that one for the Deputy.

Deputy Peter Mathews

It is €8 billion.

Deputy Simon Harris

A key policy focus for Government is to sustain competition in markets as well as working with other Government bodies to support fully and encourage smaller businesses in competing for Government businesses. These reforms are fundamental in their nature and, being truthful, they will take time to implement and bed-in. In my engagement with stakeholders to date, and I attended a stakeholder meeting with the OGP and have had a number of bilateral meetings with stakeholders, they have told me that they like what is in the circular but they are concerned about consistency of implementation. This leaflet, effectively, is the circular summarised. It must be the Bible in terms of how we look at small and medium enterprises, SMEs, engaging with procurements. It deals with many of the issues that have been addressed, including eTenders, the size of lots, encouraging consortia and trying to provide the upskilling that SMEs might need.

The next Meet the Buyer event will take place in Belfast on 22 October and in Dublin on 12 November. It is free, one can register to attend online and it is primarily aimed at those in SMEs. They will meet buyers and public sector people to whom they can pose questions. Members should encourage people in their constituencies to attend but Members should also attend. I plan to attend the event on 12 November. It is a useful exercise to see the engagement that takes place, what works and what one thinks might need to be done better.

The guidelines in the circular set out positive measures to promote SME involvement in a manner that is consistent with principles and rules of the existing public procurement and regulatory regime. In addition, some relevant measures contained in the new EU procurement directives are accelerated by inclusion in this circular. The guidance, for example, encourages procurers to break larger tenders into lots which can enable smaller businesses to compete for tenders. It reduces the recommended thresholds for turnover to twice contract values and sets out pragmatic insurance requirements. In general, it is fair to say that this initiative has been warmly welcomed by many stakeholder representative groups.

In regard to social clauses, it is important that any policy instrument that is developed affords the State the necessary flexibility to design social clauses that are relevant to the needs of the specific contract and do not disadvantage the wider economy. The Government supports the principle of social clauses and I have heard widespread support for that across the House.

Deputy Peter Mathews

The banks need to hear it.

Deputy Simon Harris

EU law leaves the member states the option to take social consideration into account provided the general principles of EU law, in other words, the free movement provisions and the principles of equal treatment, non-discrimination, mutual recognition, proportionality and transparency, are respected. The appropriateness of social clauses in procurement projects will vary from contract to contract and they are likely to be most suited to works and service contracts. The use of social clauses should be implemented therefore in a targeted manner. It is critically important to identify the variety of social clauses that can be targeted to meet specific social and other requirements, the scope for wider use of such social clauses across the public service and their effectiveness and economic impact.

We want to learn from the practical experiences of where social clauses are currently being piloted as well as from the experience in other jurisdictions. I pointed out that the Government is already engaged in a number of initiatives designed to encourage social clauses. I look forward to seeing the outcome of those pilots. I take on board the comments and will review the issues raised by Members today. I want to see greater involvement of SMEs and I believe the development of that sector will drive growth in employment and training opportunities.

The issue of displacement arose during the debate and it is one that has been discussed on many occasions. I want to be clear on this, what I am referring to in relation to it is a genuine concern about displacement. There are many companies in this country which have held on to existing workers in really hard times rather than letting them go. They have managed to keep them in employment and just about in some cases. It is important that any social clause we introduce does not inadvertently penalise those people. I know that is not the intention of any Member but it is a legitimate concern that we have in regard to not providing flexibility within the system.

I look forward to following the debate at the Joint Committee on Jobs, Enterprise and Innovation on Tuesday. I also look forward to the pilot project group and the social clauses group reporting backing in June of next year, the Meet the Buyer event in November and to continued engagement in this House. I thank Deputy McDonnell for the opportunity to discuss this issue.

Deputy Mary Lou McDonald

I thank the Minister of State for his response. I also thank each of my colleagues present for engaging in this debate and with this Bill in such a spirited way, albeit for one moment in a slight rancorous way.

There is a commonsense logic to all of this. The fact that we are all supportive of the concept of social clauses reflects that fact. It simply makes good sense that for every public euro spent and invested we leverage the maximum positivity for the economy, society and our people. As I said in my opening remarks, it is about being really smart and considered in terms of knock-on benefits for the economy and society. The legislation and idea of social clauses are based on that premise. A healthy economy and a healthy society lock in together.

Discussions in which Sinn Féin has engaged north and south of the Border on social clauses in public procurement contracts have always taken account of EU directives. At no stage has Sinn Féin suggested a discriminatory process, or one in breach of the treaties and competition law, be introduced. This is because, however one feels about such laws, if one does not pay heed to them, one will fall foul of the courts. We are mindful that it would be a road to nowhere. Therefore, the Bill we are discussing takes account of the wider legislative framework.

The word "flexibility" has been used and I understand how it is meant. Indigenous industries, micro businesses and small and medium-sized enterprises, SMEs, must be dextrous, adaptable and flexible; that is a no-brainer, but I must sound a word of caution. We cannot confuse the idea of flexibility with a system that is so porous and ill-defined that it is not properly enforced and implemented. My anxiety on this issue stems from a point raised by my colleague, Deputy Seán Crowe. There is an ongoing dispute between JJ Rhatigan and subcontractors centred on a school site in Lucan, but I understand the issue is broader than this. Workers have been forced to take subcontractor status and paid less than the minimum wage, which gives cause for concern. They are angry and something that should have been positive - being back at work - has gone horribly wrong. They are involved in an ongoing dispute and, despite the interventions of different players, the matter has not been resolved. These men - I understand they are all men - are construction workers who have placed themselves in terrible financial difficulties by partaking in the dispute. The issues of the black economy and welfare fraud can be associated with the bad practice in question. The State sets the standard in terms of what is expected on behalf of taxpayers and it must set the gold standard of best practice through strict adherence to the law. When an entity that wins a State contract openly tramples on the law of the land, it must be stopped - it is as simple as that. The notion of enforcement and the associated appeals mechanism contained in the legislation are an expression of this necessity. There is little point in having mandatory social clauses if an entity that wins a State contract faces no consequences for breaking the law. As legislators, none of us could countenance such a scenario.

I was interested in the mention of meet-the-buyer events - it made Deputy Peter Mathews refer to the film "Meet the Fockers". I assure him that the two are entirely different.

Deputy Peter Mathews

Will "Meet the Buyer" be as amusing?

Deputy Simon Harris

It will be much more entertaining.

Deputy Mary Lou McDonald

Who is to know?

The Minister of State, Deputy Simon Harris, mentioned the Grangegorman project, which is, in many ways, the flagship project of this Administration and located in the heart of my constituency in Dublin's inner city. It is a large-scale project and there has been much disquiet locally among unemployed people, those hoping to complete apprenticeships and small local businesses as they feel ostracised from the State's largest public investment project. As I understood a meet-the-buyer event might focus on the project, will the Minister of State advise me as to whether that is still the case?

The issue of SMEs accessing contracts is broader than the concept of social clauses and related to things we have discussed here for a very long time such as unbundling contracts and turnover thresholds. It goes beyond anxiety about social clauses because all of the SMEs I know of are important in their local communities. I have never detected resistance from SMEs to the concept of social clauses - I think SMEs find that such clauses complement their relationships with local communities. The major issue is that SMEs tend to find that the scale of a contract is too big - the same applies to lots. When the turnover requirement is too high, they cannot even tender for, much less win, the contract. We must focus on this element and get it right.

Deputy Anthony Lawlor

We will see about it on Tuesday.

Deputy Mary Lou McDonald

I am aware that the committee is due to deal with these matters on Tuesday, which is to be welcomed. The Committee of Public Accounts has paid attention to them also and I have done considerable work on them in recent years, with other colleagues. I acknowledge and welcome the work of the committee.

Deputy Peter Mathews

You could have the annual public procurement probity-----

Acting Chairman (Deputy Seán Kenny)

Comments must be made through the Chair.

Deputy Mary Lou McDonald

I am not arguing that everything is signed, sealed and delivered in the North, but the former Northern Ireland Minister for Regional Development, Mr. Conor Murphy, MP, successfully unbundled contracts and introduced social clauses. I do not mean to bleat about the excellence of Sinn Féin, I only offer an example to show that there is experience in the North on a range of procurement issues. Ms Jennifer McCann, MLA, has been critical of some EU standards because they lock SMEs out of the game. My argument is that we can learn from each other as public procurement is a huge area of public policy. There can be massive gains in the public sector, while I also believe in private commercial international procurement. We must learn and get the legislation right.

I look forward to working with the Minister of State and other colleagues in bringing forward legislation. I am not precious about the fact that this is my legislation - I am realistic enough to know that it will be Government legislation - but I want to be reassured that this issue will not be shuffled to committee level and then forgotten. This is an urgent matter that deserves urgent attention.

Question put and agreed to.

Dáil Éireann debate - Friday, 17 Oct 2014

Social Clauses in Public Procurement Bill 2013: Second Stage [Private Members]

Dáil Éireann debate -
Friday, 17 Oct 2014