I move: "That the Bill be now read a Second Time."
Public Services and Procurement (Social Value) Bill 2017: Second Stage [Private Members]
I understand the Deputy is sharing time with Deputies Darragh O'Brien, Declan Breathnach, Dara Calleary and Marc MacSharry.
I welcome the opportunity to propose this Bill along with my colleague, Deputy Darragh O'Brien, who has done outstanding work in this regard in recent years, particularly during his time in the Seanad. In our view, it is very important to bring forward this Bill to help deal with the issues and anomalies that currently exist in regard to public service contracts going out to tender in a way that allows the SME sector to tender for them competitively and to have a level playing field. That is not currently the case in all situations and this Bill is purely motivated by trying to ensure the SME sector, which employs over 900,000 people in Ireland, can compete for these contracts and tender competitively with a view to, hopefully, winning such tenders within the EU framework guidelines for the Single Market, which is very important for the economy at the local, regional and national level.
The State currently spends approximately €12 billion on services, goods and works annually. That is a lot of procurement and it is, therefore, very important that as much as possible of this can be fed back into the economy and not haemorrhage from the national economy. The social value clause works exceptionally well in other EU member states such as Denmark, France, Italy and Germany. It is very important that the barriers currently in place in regard to the SME sector being able to tender for these contracts are considered with a view to having them taken on board in a positive way. For example, many businesses have contacted me, Deputy Darragh O'Brien and other colleagues to explain there are legal barriers and that limits on the value of the work the businesses have done must be reached before they can compete for a tender. In essence, when another company takes the work as the main contractor, the Irish company ends up working as a subcontractor, which can have a negative impact, as we all know from our experiences of industry.
It is important we work positively and collectively to progress this Bill and I hope it will get the support of the House. We are open to considering amendments, changes or technical proposals that may be put forward to strengthen the Bill. As recently as before Christmas, we found the libraries contract was not tendered in such a way as to allow the SME sector to compete for it competitively. It is a very good example. If a contract is put out in a way that will allow the SME sector to compete for it, Irish companies have a chance of winning it. Some €14 million of that contract went to a UK-based multinational which has a turnover of €2 billion. If that contract progresses, and it may, there is the potential for 50 job losses across counties like Kildare, Kilkenny, Dublin, Sligo and Limerick. That is very negative and is something we have to work to avoid in the future.
When we consider the potential 50 job losses and the possible business closures, we must also consider the negative impact in terms of lower spending in the local economy and the fact those people may have to draw social welfare and may not be able to keep up with their mortgage repayments, or may have to draw on the State to pay their rent through rent supplement. We ask that all this be taken into consideration in regard to assessing the real cost of these tenders from a practical perspective. For every job that is lost, there is a negative impact on the State and the economy, not to mention on the individual and the business itself. This is something we must move to address. We cannot have €27 million leaving the economy and going to companies outside the State, given that is the total figure in that sector for the past two years. This would not happen if the contracts were offered in such a way that Irish companies were able to compete for them competitively. That is what we are striving to achieve in this Bill.
I met a number of Ministers to discuss this issue with them and was disappointed with the response. I also recently met the Office of Government Procurement to discuss the Bill and it is looking to bring forward some proposals and suggestions, which we very much welcome. The main aim of the Bill is to support the SME sector, to support the local, regional and national economy, which we all agree is important, and to work together to make sure the SME sector, together with the economy, is growing and is supported in a positive way through job creation and supporting existing jobs. This Bill is motivated by the drive to ensure this can be done in a fair way within the current guidelines and the current regime.
I commend Deputy Frank O'Rourke for proposing this Bill. He has done much work in engaging with the various sectors affected by this issue. I looked back over the work of the last Oireachtas to find that the only Bill to pass all Stages in the Seanad was the Public Services and Procurement (Social Value) Bill 2015, which Senator Marc MacSharry co-sponsored. It was from that Bill that we decided to proceed with this Bill. In the intervening period, however, we have not made much progress, if any. That is a charge I would lay at the door of successive Governments. It is not a political charge against the Minister of State, Deputy Eoghan Murphy, or this Government but we have not done as well as our European colleagues do in this area, and the facts bear this out. Back in 2009, when I was Vice Chairman of the Committee of Public Accounts, the former Chairman, Bernard Allen, and I produced a report of the committee that compared procurement in Ireland and the number of contracts that stayed within the Irish State with the position in other European countries, and we were the second worst in Europe after Cyprus.
Some €12 billion a year of goods and services are procured by the Irish State. What we are talking about is levelling the playing pitch. Deputy Frank O'Rourke has said we are open to changes, amendments and additions to the Bill, which is as it should be. To have the Government accept the Bill on Second Stage would send a very clear message to indigenous businesses and the SME sector, in particular, that the Government and the Oireachtas are serious about having a level playing pitch. We are not talking about protectionism, Irish-only or anything like that. This is fully compliant with EU rules but it will give the Government a chance to be prescriptive about the guidelines. What it does is set down the social value. It will make sure that those who are tendering or offering a tender have to take into account when assessing those tenders the value of the contract to the area in which it is tendered, to that sector of society and the businesses involved.
Deputy Frank O'Rourke mentioned the situation in regard to the libraries contract. The four Dublin local authorities bundled the tenders, which meant that practically no Irish companies could even qualify to tender, and those that did were at a massive disadvantage as they were already taken out of the game. Those contracts are gone and over 50 jobs have been lost. I could give numerous examples like this. It happened in the printing sector, where Revenue procured printing in Switzerland and the Department of Education and Skills had printing done in Spain. It is not as if we do not have the right quality available here. This Bill will not stop that happening but what it will do is make sure that those in Government services and local authority services have to seriously look at how they put the tender offer together, and how they assess it when it comes back in.
I have spoken to certain sectors within the Government. More recently, in fact, two days before Christmas, as Deputy Frank O'Rourke did, I spoke to the education procurement service and told the officials how disappointed I was in the decision that they took, but there is no recourse. The appeal is only back to them. That is another issue Deputy Eoghan Murphy, as Minister of State, should look at. Someone, who went in for that contract and is not awarded it, can appeal it but it is appealed back to those who made the decision in the first instance. That is ridiculous. We can do a lot better.
We should do a lot better. The State spends €12 billion to €14 billion a year on goods and services. We do not support Irish businesses as others, such as the French, the Scots and the Welsh, do. Newer assemblies and governments than ours do much better that we do.
We have the expertise. Undoubtedly, we are building on the expertise in the OGP and procurement is not seen as something of an add-on. By accepting this Bill on Second Stage and expediting it to Committee and Remaining Stages after we have taken amendments on board, we will show that the Oireachtas is serious about what it is doing. I hope the Government accepts it.
I commend Deputy Frank O'Rourke for the work and engagement that he has had with all the various sectors on this. People are looking for us to do something. Now is the opportunity to do it. Let us agree it together, move this on at Second Stage and expedite it in the next eight or ten weeks, subject of course to the Minister of State remaining in his post if he is not elevated further. Either way, we would have a lot of confidence in the Minister of State, Deputy Eoghan Murphy.
We will print the Minister of State's brochure in Holland.
Absolutely. On a more serious note this is important legislation. It follows on from the work we did in 2015. Fianna Fáil has been consistent. We are asking the Minister of State to do what the Minister for Health, Deputy Simon Harris, did by accepting this Bill, but moving it on and bringing it into law.
I welcome this Bill. I commend those in the Seanad, Deputy Frank O'Rourke and the many who have tried to get the Bill to where it is today.
In the latter days of my career as a principal teacher, it got to a stage where one could hardly buy a role of toilet paper without looking to procurement. That was the reality. We have for some time needed legislation to encourage small and medium-sized business to compete for public procurement tenders. We need full transparency and compliance with the legislation on the procurement tendering process.
It was only in 2015 that a local businessman in my own area of Dundalk, Mr. Paddy McCusker of Cusken Limited, celebrated a significant victory in the Supreme Court against the Government. He was one of ten small businesses which took the Commissioners of Public Works in Ireland to the High Court over the validity of the public service procurement process which resulted in agreement with seven specified firms to manage print services, thereby excluding others from the tendering process. This meant that small businesses were precluded from even tendering for the contracts and the local public servants, including school principals, were unable to choose for themselves the best firms to service their needs. Mr. McCusker won his case in the High Court but the Government appealed it to the Supreme Court. Happily, the Supreme Court threw out the Government's appeal and awarded victory to my constituent in the long-running saga. The victory was of considerable benefit and helped secure hundreds of jobs in small firms around the country and saved businesses from going to the wall. I take some credit in encouraging them to do that.
There is a need for more training in the tendering process, delivered through the local enterprise boards which are already doing it, but it is important that some of this training be delivered on-site in these firms which are trying to secure the tenders. Smaller firms need to collaborate in the tendering process and apply as a bigger unit. For example, I had a recent case where procurement was needed for machinery and a tractor firm wanted to compete but could not because it had not got somebody in the truck business and somebody in the car business. Such collaboration is greatly needed.
There should be more feedback, not only to the successful bidders but, more importantly, to the unsuccessful bidders, with guidelines on how to improve their applications on the next occasion. There should be full transparency and the same guidelines applied to bidders from outside the jurisdiction as inside, particularly in light of Brexit where many contractors from Northern Ireland are carrying out works for local authorities and other Government bodies south of the Border. We need to have a fair playing field where all companies tendering for contracts could be subject to the same rules and regulations. I refer to insurance costs, the issue of wages and all the matters associated with it.
The introduction of this Bill makes sense. I look forward to its implementation and further improvement for the small firms which would greatly benefit from it.
Like my colleagues, I welcome the opportunity to make a few points on this Bill. My party made a similar attempt through the Seanad, as Deputy Darragh O'Brien mentioned, in 2015. Now, through Deputy Frank O'Rourke, we have an opportunity for the House to collectively move this issue forward.
In our wish to be good Europeans, we have been penny wise and pound foolish. The Committee of Public Accounts, in the report that was prepared by the Minister of State's colleagues and Deputy Darragh O'Brien some years ago in the Administration before last, proved that far from being at the top of the class in doing our business in a smart way we were among the bottom of the class with Cyprus. I will use this House as an example. For generations, the uniforms of ushers in this House were produced in County Sligo, all with Irish materials, through the master tailor, Mr. Joseph Martin junior - he being the third generation. He was asked to maintain the tender price so that it could go for public tender. It did, and now those uniforms are manufactured in Belgium and distributed through an Irish agent.
In recent years, in the Dail restaurants we have had a change and upgrade in delph and other things and a cursory glance at the back of the plates will show that they were manufactured in the United Arab Emirates. I submit that if one were in the German Parliament or the French Parliament, or the Flemish Parliament, or the Parliament of the Belgians and the parliaments of other member states throughout the entire EU 27, one would not see that. As I said, in our relentless approach as being the best Europeans, we have been among the worst of Irish people.
We need to be smarter about how we do our business. We have been consumed with the cost and price, always overlooking the value to the economy. Under existing rules, even in advance of this Bill, the economically most advantageous clause that one is supposed to consider was never given the appropriate weighting that it deserves. Deputy Frank O'Rourke's Bill provides an opportunity for the Government. We will win this, whether the Government supports it or not - there is a rumour that the Government intends to vote against it on Thursday. With the support of Sinn Féin, the Independents and others, we will win this.
Let us progress it to pre-legislative scrutiny. Let the Government embrace the potential, as Deputy Frank O'Rourke outlined, for us to welcome amendments to improve the Bill. Above all, let the Government give a taste of the €12 billion in Irish expenditure, much of which is currently going to other countries needlessly when there are small and medium-sized enterprises in this country which cannot do without it.
I commend Deputies Frank O'Rourke, Darragh O'Brien and Marc MacSharry for bringing forward this Bill and the work they have done.
In 2017, a presentation was made to the then Joint Committee on Enterprise, Trade and Employment by the Irish printing sector about the application of the rules at that time and one of the examples given was that the Fáilte Ireland brochures for 2008 were to be printed in Holland because of the manner in which the contract was advertised and awarded. The then Chairman of the committee, Deputy Willie Penrose, is not normally shocked, but the shock on him that day led us to drive that as an issue on the committee.
In fairness, the Office of Government Procurement, OGP has brought much more organisation and focus to the matter. However, just when I thought we might be getting out of the mess, Mayo County Council issued a circular at the end of last autumn to every operative on its staff stating that they could not buy anything from any shop in Mayo and they had to go to a preferred supplier in County Roscommon. They could not even buy a shovel, a piece of equipment or a biro. It had to come from the preferred supplier. What are the rate payers in Mayo, who pay the bills to keep Mayo County Council but cannot get a slice of the action, to make of that? That is the only action available in many rural economies at present. As bigger companies choose not to locate, we have to look at other sources of business. Procurement, which, as Deputy Declan Breathnach stated, could involve schools, local authorities or Government offices, is the only business in town and businesses in that town are being excluded because of the current way we conduct it.
There is so much detachment from the theory and wish of the Government in regard to policy and the reality. I do not refer to the Minister of State but rather the permanent government. This is one of the clearest examples where the wish is that procurement is used for small businesses but the practical reality is as I outlined, where companies are increasingly being excluded.
The comments of Deputy Marc MacSharry have reminded me of another point. Previously, school contracts, including various construction contracts, were awarded, but it was a complete race to the bottom in getting the proper price. Subsequently, we found that schools were coming back to us to lobby for extra money for add-ons and jobs which had not been done. In several cases, a large number of construction companies had made bids that were far too low. Companies went to the wall and contracts for projects were torn asunder.
We need to be serious. The Minister of State has referred to theories and plans for rural development. I must find out where the plans were printed. We have had plans for small business and everything else. At least, this measure is practical. We can bring this Bill forward. We can take the ball and run with it. We can make it work in a way similar to measures that work in Scotland and Denmark. Let us put social contracts in place and allow Government procurement to become an enabler of a proper sustainable rural economy with rural suppliers. What must it be like for someone like Deputy Declan Breathnach, formerly a school principal, to have to go around to look for sponsorship? When it comes to giving business as a school principal, they are restricted because of some silly Government rules.
The Government does not oppose the Bill. In fact, we have never opposed it. I am not sure to what rumour Deputy Marc MacSharry is referring. We have always sought to work constructively on this matter because we value social clauses and access for small and medium-sized businesses to public procurement.
I commend Deputy Frank O'Rourke for bringing forward the Bill. I also commend the work of his two colleagues in the last Seanad on getting the issue on the agenda and making progress.
A total of 95% of the State's procurement spend is with firms within the State, the majority with small and medium-sized enterprises. Significant work has been undertaken at national and European level to support SME participation in public procurement and ensure SME firms can compete on a level playing field with larger companies. These initiatives include the division of public contracts into lots, for example, by sector, region and value, where possible; the acceptance of consortia bidding to allow SMEs to participate in procurement procedures where they do not have the relevant capability or scale to bid as sole tenderers; and the use of less onerous turnover and insurance requirements as part of the selection process.
There is a perception that lowest price is the most important factor in competitive processes. That is not the case. The best quality over price ratio is used in the majority of cases, with quality being the most important factor. The Office of Government Procurement engages with InterTrade Ireland and Enterprise Ireland to actively support go-to-tender workshops, meet-the-buyer events and consortia training.
Last November I briefed Opposition spokespersons on public procurement and last December arranged a similar briefing in Leinster House for Members of the Oireachtas and their special advisers. We are now taking this approach to local level. Earlier this month I arranged an event in UCC at which we met local Deputies, Senators and individual SMEs. We listened to their concerns. In turn, we explained the various measures the Office of Government Procurement was undertaking to ensure SMEs were able to compete on a level playing field with larger companies during public tendering. This exchange was useful for both sides and I have arranged a similar event in Galway this coming Friday.
Under the programme for Government, I chair quarterly meetings of an SME working group, at which the representative bodies of the SME sector, including ISME, the Small Firms Association, IBEC, the CIF and Chambers Ireland, are given an opportunity to voice concerns about public procurement and provide input into policy development in this area from an SME perspective. Through this forum I have canvassed the views of representative bodies on the proposed legislation. They have expressed concerns about the blanket approach formulated and the adverse effects it could have on the SME sector. We can work on this issue.
Overall, the Government supports the principle of social clauses and sees significant merit in developing an effective approach to their use. Any legislation and guidance in this area must, of course, comply with the fundamental principles of EU law, including the free movement of goods and services, equal treatment, non-discrimination and transparency. Conditions of social clauses must be made known to all interested parties and not restrict participation by contractors from other member states or geographical areas. Once a decision has been taken by a contracting authority to use social clauses, they should be clearly signalled at all stages of the procurement process, from business case and specification through to selection and award stage, as well as through to contract implementation and monitoring.
Challenges in the deployment of social clauses in public procurement arise from the need to ensure the clauses cannot be discriminatory; value for money is not adversely affected; additional costs are not placed on domestic or smaller suppliers relative to other potential suppliers; social clauses are linked with the subject matter of the contract; and the targeted benefit is capable of being measured and monitored during the execution of the contract.
Social clauses have, or are, in the process of being rolled-out by a number of public service bodies, even without primary legislation. I bring to the attention of the House a number of these projects. The devolved schools programme is a pilot project that was administered by the National Development Finance Agency. The aggregate capital value of the contracts was approximately €70 million and work was completed at the end of 2015. A total of 50 long-term unemployed and 18 apprentices or trainees were hired during the course of the programme as a result of the use of social clauses. I am also aware that the new national children's hospital project includes an ambitious and wide-ranging community benefit programme for all construction contracts and that Dublin City Council is developing social and community benefit clauses for use in works projects. I am bringing these examples to the attention of the House because there are valuable lessons to be learned from the experience of these projects, both good and bad. In respect of the latter, I understand that, in some cases, contractors have found that the requirement to take on additional workers has meant having to let others go. In such cases, social clauses are simply leading to job displacement with no net benefit to the economy. The upturn in the construction industry also means that unemployment in this sector is less of an issue; in fact, there is a shortage of trainees and apprentices. Market forces are reducing the need for Government intervention and the use of social clauses in the sector.
It is clear that the implementation of social clauses in all of these projects is resource intensive in money and labour terms and requires a co-ordinated multi-agency approach. The scale and duration of projects are also key factors in considering whether to deploy social clauses. Typically, training and employment targets are best suited to projects lasting at least 12 months, while experience in other member states suggests social clauses are best suited to larger scale works contracts.
The Government sees certain difficulties with the Bill as formulated. The Bill is proposing social clauses that would be of specific benefit to local areas targeted at tackling local unemployment and benefiting local SMEs and subcontractors. This, however, would run contrary to EU public procurement rules designed to remove barriers to trade between member states. Clauses that are perceived to restrict entry to local contractors and local unemployed people would be open to legal challenge from unsuccessful Irish and European tenderers, as well as the European Commission. Moreover, from a practical perspective, we need to ensure the introduction of additional requirements does not simply increase bureaucracy and paperwork. In fact, the SME sector is keen for us to simplify and streamline processes for suppliers.
From a contractor's point of view, there is a risk that by imposing extra rules we run the risk of losing sight of the need for the efficient delivery of goods, services and works. An analysis of the costs and benefits of social clauses to the community and the taxpayer must be weighed against the business objectives of the public body or contracting authority. This will place additional work on the contracting authority in terms of design, implementation and enforcement. This additional work cannot be understated. Let us suppose the social clause states the employees of the company must be from a given local area, for example, Dublin 3. Is it fair that employees in neighbouring areas would be excluded from working on that job? In addition, there would be difficulties in verifying the addresses of employees. What would happen if an employee moved address? What if the company was to move address? These questions highlight the practical difficulties in implementing social clause provisions in a blanket way.
Additional burdens would arise for contracting authorities. Would a small contracting authority have the capacity to assess the life cycle costs or innovation in a tender? In the case of the Dublin City Council initiative on social clauses to which I referred, it is envisaged that additional dedicated resources will be required to implement the social clauses, for example, an employment co-ordinator and a contractor liaison officer? The support of staff from a nominated Intreo centre will also be required. Contractors would face all or some of the direct costs of extras hires, as well as the additional administration costs of maintaining the relevant work records for inspection on regular basis. That is why they envisage social clauses being aimed at works contracts above €5 million. Scale is an important consideration. In Northern Ireland social clauses only apply in buildings contracts above £2 million and civil engineering contracts above £4 million.
The Bill is being put forward as a way to enhance the ability of SMEs to compete for public procurement tenders. As stated, however, we have canvassed the views of the SME representative bodies which have indicated concerns, including the concern that social clauses would place additional costs on SMEs and put them at a comparative disadvantage to larger companies which would be in a better position to absorb the extra costs.
While the Government does not oppose the Bill, work needs to be done before it can become viable legislation. Social clauses impose additional costs on the State and suppliers, both in meeting their requirements and demonstrating and verifying compliance. Further debate and discussion are required to put in place the correct policy approach to facilitate the effective use of social clauses. Any legislation and guidance in this area should afford individual contracting authorities sufficient flexibility to design social clauses relevant to the needs of their specific contracts and that will allow them to decide how and when to use them.
I am agreeable to working closely with the Deputy and proposing consultation on the application of social benefit clauses, with a view to adopting a similar approach to that taken in other jurisdictions. The approach should encourage public bodies to consider non-discriminatory social clauses. It should evaluate the specific requirements of a labour market or specific social or environmental requirements at the time the procurement process takes place to ensure the best outcome. The approach should judge the ability of SMEs to absorb additional costs. It should assess the additional cost versus the benefit of any social clause to the public body. Comprehensive guidance is already available to public authorities on the use of environmental clauses in the action plan on green public procurement, published in 2012, as well as the green procurement guidance for the public sector, published in 2014. In addition, the Office of Government Procurement is finalising practical guidance to assist contracting authorities in using social clauses, where appropriate.
A copy of the Private Members' Bill has been forwarded to the Attorney General's office with a request for views on the text of the Bill in terms of its compliance with the directives and EU treaty principles. Government amendments to the Bill will be tabled on Committee Stage.
I again commend the Deputy for bringing forward this important measure and I look forward to working with him and others to build on the measures already in place to promote SME access to public procurement and to developing appropriate social clauses.
Despite the presumptuous comments of Deputy Marc MacSharry, Sinn Féin will be happy to support the Bill. We have a number of issues with the Bill and it has flaws but, as I have said when I have supported previous Bills, especially Bills proposed by Fianna Fáil, if we support the principle and logic of a Bill we will support it even if we see flaws in it. We will allow Bills to proceed to Committee Stage and air the difficulties then. The same respect is not afforded to us when we propose Bills, but that is a matter for Fianna Fáil.
It has been once or twice.
It is important that we allow Bills to pass Second Stage and be properly scrutinised on Committee Stage. That is the reason there are several Stages in debating legislation.
Before dealing with the parts of the Bill I disagree with or about which I have concerns I will focus on the provisions with which I agree and which are the reason I am keen to have the Bill proceed to Committee Stage. Its overall aim is one we share, which is to allow public bodies to have regard to the economic, social and environmental well-being in connection with public procurement contracts and, by doing so, increase competition in public procurement tendering by enhancing the ability of SMEs to compete for tenders. The Bill will do this by requiring public procurement contracts to contain a community benefit requirement, with the definition of community benefit to include employment sourced locally as well as allowing the involvement of locally sourced services via SMEs. We have called for this in the past. In fact, we have proposed similar Bills in the past, although in the social clauses we included a requirement to recognise trade unions, a stronger commitment to apprenticeship where feasible and a stronger commitment to employ people who are currently on the live register. It is welcome that the link between public procurement contracts and local community benefit is to be given a statutory footing, and I welcome the Minister's comments in this regard. We can argue over the definitions and methods on Committee Stage, but at this Stage it is enough for us to vote for the Bill and see it progress towards enactment.
However, there are problems with the Bill. First, the link between community benefit and SMEs is quite weak. SMEs are to be treated as one of a number of interested parties, not as potential bidders which are in danger of being shouldered out of the process by multinationals. As long as multinationals commit to training, recruitment and youth employment the awarding body can ignore local SMEs. There is no specific legislative commitment to local SMEs in the Bill, not least a commitment that would see their local status to carry more weight than multinationals in being awarded a contract. The Bill could easily facilitate multinationals hoovering up public procurement contracts by simply throwing a couple of apprenticeships on top of what would be a sop to community development. Furthermore, the definition of what constitutes community development is left to the Minister to decide. At present, a friend of privatisation and multinationals, the Minister for Public Expenditure and Reform, Deputy Paschal Donohoe, is the Minister with responsibility. In fact, the Bill is so weak in giving a statutory footing to locally based SMEs over multinationals that it reads more like a well-meaning motion than a legislative measure.
This leads to the second problem I have with the Bill. Before we discuss improving and bringing additionality to the current public procurement rules, we must first look back on how public procurement rules work in practice and what levels of compliance and non-compliance exist in the public sector. The Bill ignores the serious problems with the public procurement process as it stands. To put it bluntly, the rules are ignored. Public procurement involves the purchase of billions of euro worth of goods and services by the State. While there are rules and guidelines, there is insufficient oversight and sanction.
The Comptroller and Auditor General has consistently pointed to breaches in public procurement rules. The Comptroller and Auditor General sets out the rules as follows: EU directives set out advertising requirements and tendering procedures for contracts above certain thresholds that must be applied by all public bodies involved in procurement; for contracts or purchases below these thresholds or values, the following national procedures apply - supplies or services costing less than €5,000 in value may be purchased on the basis of verbal quotes from one supplier or competing suppliers; contracts for supplies or services between €5,000 and €25,000 in value should be awarded on the basis of responses to specifications sent by fax or e-mail to at least three suppliers or service providers; and goods and general services sought that are expected to have a value of €25,000 or more should be advertised publicly on the eTenders website. The Comptroller and Auditor General reports that public bodies are expected to comply with the relevant rules as a condition of their public funding. In general, they are required to confirm annually that they have been compliant. Where there has been a material level of non-compliance with the rules, they are required to disclose that fact in their statement on internal financial control, SIFC, and to give an outline of the steps taken to remedy the situation. In general, the Comptroller and Auditor General draws attention in his audit certificates to disclosures of material non-compliance with procurement rules only involving contracts worth €500,000 or more.
The problem is that there is no sanction, penalty or consequence for a public body that breaches the rules. All the body must do is state in its audit that there is non-compliance. Then nothing happens and nothing changes. That is a serious problem. The Comptroller and Auditor General has reported on the level of non-compliance over many years. I will list the breaches in 2012 and 2013. In Vote 6 for the Office of the Chief State Solicitor there were seven contracts with a total value of €720,000 in which there was non-compliance. In 2012, there was non-compliance relating to goods and services with a total value of €663,267. In Vote 13 for the Office of Public Works in 2013 contracts worth a total of €1.3 million were non-compliant and in a contract in excess of €500,000 in 2012 there was non-compliance. In Vote 20 for An Garda Síochána in 2013, in 56 contracts with a total value of €5.9 million there was non-compliance and, in 2012, there was non-compliance in 50 contracts with a total value of €5.3 million. In Vote 21 for prisons, there was non-compliance in 13 contracts with a total value of €786,764 and in 2012 there was non-compliance in ten contracts with a total value of €959,000. In Vote 39 for the HSE, there were 116 cases of non-compliance with a total value of €17.8 million, and in 2012 there were 32 cases with a total value of €3.3 million. There are also examples in the Courts Service, the Department of Education and Skills, the Department of Foreign Affairs and Trade, the Department of Agriculture, Food and the Marine and the Department of Social Protection. The list goes on and on.
There were also audit certificate references in 2012 and 2013 in other State bodies which showed non-compliance, including the National University of Ireland Maynooth with eight contracts worth a total value of €824,000, Athlone Institute of Technology with eight contracts worth a total of €1.7 million, Limerick Institute of Technology with nine contracts with a total value of €5.1 million, the institute of technology in Blanchardstown, St. Patrick's College, Drumcondra, Dublin Docklands Development Authority, Bord na gCon, Horse Racing Ireland and the Central Bank of Ireland. The list is lengthy.
The Comptroller and Auditor General also reported on failings in 2015, in which he again referred to non-compliance with public procurement rules. These involved the Health Service Executive, Tusla - Child and Family Agency, St. James's Hospital board, the Road Safety Authority, Dublin City University, Institute of Technology Tralee, Dublin Institute of Technology, Ollscoil na hÉireann Gaillimh, University College Cork, Coláiste Mhuire gan Smál Ollscoil Luimnigh, Trinity College Dublin, Limerick Institute of Technology, the Institute of Technology Tallaght, Dundalk Institute of Technology, the University of Limerick, St. Patrick's College of Education, the National University of Ireland Maynooth, University College Dublin, the Dublin Docklands Development Authority, the Nursing and Midwifery Board of Ireland, the Commission for Communications Regulation and the Foyle, Carlingford and Irish Lights Commission, the Loughs Agency and the Lights Agency, in 2012.
These are examples of non-compliance, which means there was insufficient competitive tension in many of these contracts worth billions of euro. The Comptroller and Auditor General points out that if there was sufficient competitive tension and proper adherence to the rules, there is the potential to save tens of millions, if not hundreds of millions, of euro.
I am loath to interrupt the Deputy, but the subject matter of the Comptroller and Auditor General's reports is really not relevant to the Bill before us which deals with the issue of social value in public procurement. I fail to understand the relevance-----
That is the Ceann Comhairle's problem.
It is the Deputy's problem that I am in the Chair.
A Second Stage speech allows us to deal with a broad range of issues about a Bill, and the Ceann Comhairle is long enough in the House to know that. I understand the point that the Ceann Comhairle makes. I am simply saying that we cannot look at new inclusions in how we deal with public procurement if we do not deal with the failures of the past. We have a Bill before us that talks about making changes, which I support, but the big problem which the Comptroller and Auditor General has reported on over and over again is not being looked at. I am using my Second Stage speech to highlight this to the Minister of State in a very forthright way, detailing the list of failures. I believe it is my right and my entitlement to do so. Whatever way I choose to use my 15 minutes for my Second Stage speech, with respect to the Ceann Comhairle, is a matter for me because I am talking about public procurement.
It is not, actually.
It is, actually.
It is not, but the Deputy may continue.
If the Deputy wants to have a discussion on the matter afterwards-----
I have no difficulty with having a discussion, but everything I have said is in the context of public procurement and this is a Bill on public procurement. I will choose what I want to say and how I deal with my Second Stage speeches. As long as I am dealing with the subject matter, which I am doing, I fail to see-----
The point is that the Deputy is not dealing with the subject matter.
I am, with respect. The references I cited do not include cases where a disclosed level of non-compliant procurement is below €500,000. This means that the potential non-compliance is even greater. It should also be noted that the level of non-compliant procurement may be higher due to under reporting. For example, the HSE does not have adequate systems to capture instances of non-compliant procurement and accepts that it is unreported at a level. The Comptroller and Auditor General has reported on auditing testing in the HSE. The office found that audit testing of the HSE procurement in 2015 involved testing the procurement in five locations, to a total value of €26.9 million. Some 30% of the sample was found not to be in compliance with procurement rules. It was 47% in 2013. If there is a situation where the HSE has been found to be in breach of non-procurement rules for 30% of what was captured in an audit in one year and 47% in another year, how then are SMEs or other businesses which this Bill wants to include going to get a fair crack of the whip? That is the point. There is a much bigger problem here which must be addressed. My party will table amendments to this Bill to deal with a lot of the failures in non-compliance, which we are entitled to do, and in that context it is reasonable for me to outline to the Minister of State the absolute failure of non-compliance, especially in the HSE and in many other organisations also. I am putting this House on notice that we will be tabling amendments to deal with the levels of non-compliance and to strengthen public procurement in the context of this Bill.
The Comptroller and Auditor General reported on what he saw as the reasons there was such high levels of non-compliance and I think the Minister of State should examine this. He said that public bodies did not have a procurement specialist to advise on the procurement process. He found the need to acquire goods or services to deal with an urgent matter; an extension roll-over of existing contracts, including in some cases for many years; existence of historical and local supplier arrangements where a previous competitive process could not be identified; expert or recent satisfactory experience with supplier; the purchase of branded goods and services, especially in ICT and medical equipment; only one suitable supplier being identified; security considerations in some Departments; and multiple repeated low value purchases with an aggregation or due to a greater workload than originally anticipated. We can see that there are major issues with non-compliance.
We have brought forward similar Bills in the past. I support the logic of this Bill, and we all support the idea of social clauses and social contracts and a community dividend. I hope when this Bill goes to Committee Stage we can iron out all the other problems. In the interests of proper transparency and accountability, I appeal to the Minister of State to examine all the reports from the Comptroller and Auditor General which have highlighted very significant failures in compliance that are potentially costing this State hundreds of millions of euro every year. As the Government put together budgets every year, I am sure that every penny that can be saved which can be put into hospitals and schools and front-line services would be welcome rather than being wasted in terms of non-compliance with existing guidelines.
We support the Bill. I am taking the middle ground on this one because the Minister of State's response has been quite generous in that he seeks to consult the proposer of the Bill, particularly around the area of the social clauses. When one looks at section 4 of the Bill, there are legitimate questions as to how one would define a social clause and I take the Minister of State's critique of section 4 in regard to the community benefits. I have a question as to whether one can define a social clause in a legally definitive way. I look at community benefit from the point of view of smaller local contracts. Taking the Scottish example, a route 1 example is of relatively low value, low risk and non-repetitive while a route 2 example is between £50,000 and the EU upper tier. It is important that if one can define or create an atmosphere that ensures that where an entity is going to tender for a project, where possible, it would seek to meet the needs of the community benefit requirements around training and recruitment, the availability of subcontracting opportunities, the facilitation of involvement of SMEs and the promotion of innovation and youth unemployment.
I understand what the Minister of State is saying when he asks how prescriptive we are going to be and if we are to bring it down to a geographical area, using the example of Dublin 3. Is there a compromise somewhere in between that allows us to have robust legislation that stands up to scrutiny down the line, speaks to the spirit of the legislation I spoke of and ensures that as many local people as possible can bid for local contracts, thereby maintaining regional, local economic growth.
The Minister of State referred specifically to the devolved grants scheme. I contend that the devolved grants scheme as it relates to the schools building programme is largely a good scheme, and we oversaw that during the lifetime of the last Government, where we gave either educational and training boards, ETBs, or individual schools a degree of autonomy over building projects. However, in one instance, I witnessed a scenario where smaller subcontractors under those schemes were left high and dry having completed works, and they had no recourse to law or to the originators of the scheme, that is, the schools boards, and this represented a serious flaw in that scheme. I can see the merit of using the devolved schools programme as a pilot project administered by the National Development Finance Agency. The projects were worth approximately €70 million in total, but threw up some exceptions around subcontractors which were stiffed when it came to getting paid for work that they had carried out and very good legitimate companies in that context.
The Minister of State has offered a degree of consultation and he has said that a copy of the Bill has been forwarded to the Office of the Attorney General with a request for views on the text to see if it complies with EU directives and treaty principles. That is worthwhile and we would agree with it. I hope that consultation could be widened if possible.
I commend the Minister of State for his public engagement on the issue of public procurement. He has travelled throughout the county to engage with businesses and the SME sector. I believe him to be genuine in that endeavour. I hope the feedback from that community will find its way into a framework that ensures the local businesses that sustain our communities, including intergenerational family-owned businesses which are competing on these tenders, will feel they have a shot at tendering for public services and do not feel sidelined because they are not operating at the right types of economies of scale or they do not have the right kind of in-house tendering capacity. We need to ensure they do not have to expend too much of their resources when it comes to tendering particularly for smaller projects within the overall procurement offering.
Perhaps when the Bill goes to its next Stage the Minister of State will provide a critique or give us his opinion on the Scottish model of procurement, which was referenced by Deputy Dara Calleary. It has three particular routes. It has gained momentum and is used as an example. Obviously, Ireland is a similar country and perhaps it could be used as a potential model. I will leave it to the Minister of State to respond to that in due course.
I am hopeful the Minister of State might come back to us on whether it is possible to provide a robust legal definition of social clauses. The Minister of State has already critiqued section 4 of the Bill. There is nothing in section 4 that is objectionable in trying to get the best of the procurement process back into the communities that we serve. If the Bill intends to improve the economic, social and environmental well-being of communities, it is not bad. I am sure there can be a meeting of minds and compromise on the legislation. We support the legislation and look forward to the Minister of State's response.
For us procurement represents privatisation through the back door. Services that could be and should be delivered with direct labour employed by public bodies with trade union rates of pay and conditions are being shifted via procurement in many cases to precarious private sector employment.
Ireland is a leading country in PPPs and outsourcing. The most definitive report on this was Public Capital Investment and Public Private Partnerships in Ireland 2000-2014: A Review of the Issues and Performance by Eoin Reeves. That report states: "In international terms, Ireland is ranked among the countries with the most extensive use of the PPP model for procuring infrastructure." It stated that Ireland has been ranked "with countries such as Greece, South Africa and the United Kingdom where PPP accounts for between 5-10 per cent of the total investment in public infrastructure". It goes on to state that PPPs accounted for "7.6 per cent of spending under the Public Capital Programme over the period 2002-2013." I understand that 80% of this was for motorways.
Outsourcing is extremely inefficient. Using direct labour would cut out time wasted on the tendering and procurement process. The Reeves report states:
This slow rate of project completion was attributable to a number of factors including the relatively complex procurement process that applies under PPP. Reeves et al (2013) estimated that the average tendering period for Irish PPPs has been 34 months with durations ranging from 22 months (social housing) to 58 months (waste to energy). These lengthy tendering periods, which are similar to those observed in the UK, highlight some of the challenges that arise in implementing an extensive PPP programme. Lengthy tendering periods increase transaction costs and reduce the scope for achieving value for money...
Very little independent cost-benefit analysis has been carried out on PPPs but one in-depth analysis of a school's building PPP by the Comptroller and Auditor General estimated that the PPP worked out at 8% to 13% more expensive than under traditional procurement. Factored into the contracts are the profit margins for the private companies. This is a direct transfer of public funds into private hands.
Procurement is increasing the level of low pay in society and widening the gender pay gap. Outsourced public services have considerably worse terms and conditions for their workers than direct public sector employment. CSO statistics show that employment has increased in health care while public sector health-care employment has fallen. We have seen the outsourcing of home support workers to private firms that pay minimum wage and privatisation of nursing homes.
The Bill does not go far enough in broadening the conditions that can be stipulated when the State is tendering for contracts. We far prefer the type of outlook that was summed up in the submission to the Government by the Irish Congress of Trade Unions on the transposition of EU legislation in 2016. It called for certain mandatory conditions to be put into the legislation regarding workers' rights, including compliance with health and safety; collective bargaining rights; the ending of mandatory price-only and cost-only assessments; and mandatory payment of a living wage. We would go further and call for all workers employed through public procurement to be on the same pay and conditions as those in the public body outsourcing the work. The ICTU also requested that there be regard to the impact on local employment, employment of people with disabilities, disadvantaged people, etc. Companies or their beneficial owners that have a track regard of breaching workers' rights, environmental standards, health and safety standards etc. should be barred from procurement contracts.
The ICTU focused in some detail on the issue of tax compliance. There are many companies with public contracts headquartered in offshore tax havens which are used to avoid tax and transparency in terms of their ownership and profits and to avail of laxer reporting requirements.
I want to be consistent. The areas the Deputy is dealing with are all very interesting but, as with a previous speaker, they are not particularly relevant to the Bill before the House.
They are in the sense that there are sins of commission and sins of omission. There are some sins of omission of a rather serious, perhaps mortal, character in the Fianna Fáil Bill and that is what I am focusing on.
We are required during Second Stage debate on a Bill to focus on the Bill and make passing reference only to what might be in the Bill or other extraneous matters that are related to the Bill. The Deputy might as well conclude.
The proposed legislation attempts to weaken the very narrow conditions in procurement legislation, which emphasise low-cost and low-price tenders. The Bill is very weak and vague and does not explicitly protect workers’ rights, as shown by the examples I will give now with regard to the comments of the Irish Congress of Trade Unions. What it said about tax compliance was there were many companies with public contracts headquartered in tax havens. Greyhound Waste has been operating Dublin City Council’s waste collection since 2012. The city council only discovered it was owned by an Isle of Man holding company after the contract was awarded. Dublin Street Parking Services, which operated Dublin City Council’s clamping service, is owned by Quinlan (Raglan) Limited and Quinlan (Morehampton), which are both based in the Isle of Man. GoSafe, a company that operates speed camera vans on behalf of the State, is owned by a parent company headquartered in the Isle of Man. I could go on. We had the strike in Rhatigan's in Lucan, which lasted for six months, a couple of years ago. It had a contract from the Department of Education and Skills to build a school. Its union, Unite, reckons the workers were being paid €5 an hour. They got around the REA and the minimum wage regulations by forcing people to be self-employed but in reality it was bogus self-employment. The State asked no or very few questions. Unfortunately, that is all too common.
Our view is there are huge issues to be tackled here and the Bill does not go very far in addressing them. The Bill is quite weak, almost to the point that we are considering whether we might abstain on it because it is of such little value. If we do vote in favour of it on Thursday, it will be an extremely critical "Yes" vote.
As far back as 2012, the Department of Public Expenditure and Reform issued a circular to all public bodies on the importance of maximising the value for money achievable when procuring goods and services. The public service managers were told that the Office of Government Procurement and the National Procurement Service were designed to optimise benefits to the public service through the strategic aggregation of its buying power. Public bodies were reminded that such central procurement was targeted at securing best value for money and facilitating contracting authorities to deliver services within their budgetary constraints. The managers were also told that certain centralised procurement frameworks would be mandatory. Public bodies were told that central buying would bring cash savings, administrative savings, greater purchasing expertise, improved consistency and enhanced service levels and legal certainty. One will search in vain for a reference to social value or to the impact such a policy would have on local communities and local business. It was all about saving money. The Government was strapped for cash so such a policy might have been understandable at the time but now it is penny wise and pound foolish.
To illustrate the folly of this approach, let me take the example of the local school. The local school is not just a provider of education for our children, it can also be an important economic driver in our towns or villages. The school spends money on stationery, printer ink, cleaning services, electricity, books and IT services. Suppliers of services to schools can be former pupils or employees of former pupils. Local suppliers are easily accessible and provide a fast and effective service.
There is often a symbiotic relationship between schools and suppliers who are part of the school community and they are often called upon by schools to sponsor school activities or to assist with fundraising. This does not mean that contracts should be awarded because there is a close and supportive relationship with the institution or the school. It is perfectly possible to have competition between suppliers locally. That is the way to ensure good value for money and social value. There must be proper tendering processes and the concept of value for money is essential but we must also add the concept of social value in deciding with whom the contract should be placed.
Under central procurement, the stationery and printer ink supplier probably has no connection with the school and the company may be a large multinational that nobody has heard of. That is why the concept of social value is very significant so that public bodies, as the Bill states, have regard to economic, social and environmental well-being in public services contracts. Public authorities should consider wider social and environmental benefits when they choose suppliers, rather than basing commissions solely on price and quality.
It is not enough to enact the legislation incorporating social value into public service procurement; we must ensure the public bodies implement that legislation. I support the Bill and commend Deputy Frank O'Rourke for bringing it forward.
I commend and compliment Fianna Fáil for bringing forward the Bill. It is very important. Every day of the week, we see ordinary businesses that help in the local communities. They want to assist and might have family members going to a particular school or have long been associated with a school. It is very important when the tendering process is going on that we give them a chance and that they are not ruled out by certain procurement rules and regulations. This has crept in here in the past few years.
I had many robust debates with my former colleague Martin Mansergh, when he was Minister of State with responsibility for the OPW. This issue needs to be looked at because if school sports or a play is on, the school goes around to the local suppliers for the spot prizes and other support and yet much of the time they are denied the chance to tender. The stuff is being taken away from them. Some of the stuff is coming from the lowest cross-tender. We heard of it happening in Cork yesterday on the radio with a new development. They got in the lowest tender - they have a habit of that - and now the contractors want to add €20 million on to it. That is happening. It is a race to the bottom. We are not getting the best quality.
As Deputy Michael Harty said, we need a social return. We need some kind of assessment of the social good done by local suppliers being in local communities. There is nothing underhand done. It is good, honest, decent trading and many times it is through the back door with credit. When schools do not have the money and are waiting for the next subvention, the suppliers give credit. These other companies come in, cut everybody, blow them out of the market and some of the quality of the equipment we get is very poor.
I will hand over to Deputy Danny Healy-Rae.
I will give the Deputy one minute.
He has said I am alright for one minute. I am just making the point. We need to re-evaluate this year. We have big contracts here. The French are very creative. They divide them up into small segments and they get under these EU rules. We need to take off the blinkers. It is not all wonderful in Europe. We should show them we care about our local businesses. They pay their rates and taxes and give employment and social benefit.
Will Deputy Danny Healy-Rae give us the view from the kingdom?
One of the biggest things hurting rural Ireland today in places such as County Kerry is pre-qualification tenders in which previous years' turnover are taken into account before a company is allowed to tender for many of the public works that happen around our county. Massive sums of money are required - €10 million or €20 million. Local companies, which actually finish up doing the work for the bigger company that gets the job, cannot meet the exorbitant rates that are required to allow them to tender. Something needs to be done about this.
I should have said at the outset that I was involved in a small way in a plant hire business.
We have heard that before.
As is mise.
This system is hurting many small companies in that they are not allowed to tender for contracts but they end up doing the work for the larger company that comes into the local area to supply the contract. Ten companies in the country are running the contracts involving all the jobs now. The local traders are only left with the crumbs. They do not get the proper value out of the jobs that come into an area because often people from outside the area are awarded the contract but that does not benefit the local community. The local business man, be it a builder or a plan hire operator, gets very little benefit from it. The contract can be awarded to a person from far outside the area and if this issue is not addressed, it will continue to hurt rural communities.
I ask the Minister of State to take cognisance of what is happening. It is the local man who finishes up doing the work involved in these contracts. As Deputy Mattie McGrath said, the local poor trader is asked to contribute to or to sponsor local events, be it a carnival or a field day, and were it not for those sponsors many of those events would not be held, given the cost of insurance and other costs, yet it is those events that keep communities going. We as Members of this House need to address this issue. The current system is hurting all the small operators who have stood the test of time, but this new system is blowing them all out of existence.
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.
It is essential that the public service operates in a co-ordinated and efficient way and delivers sustainable savings for the taxpayer. That is why the Office of Government Procurement, OGP, was established. There is a dual role for the newly established OGP, namely, to drive fair, transparent and open competition in the marketplace but also to continue to work with business to ensure Government procurement policies are business friendly. The reforms are fundamental in their nature.
The State has immense purchasing power, spending in the region of €12 billion per annum on goods, services and works. This level of expenditure affords significant business opportunities for firms that can supply the products and services that are required by public bodies. The OGP estimates that approximately 95% of this annual procurement spend goes to Irish suppliers and the majority of spend is with the small and medium enterprise, SME, sector. It is clear therefore that public procurement activity is already a significant driver of employment opportunities and economic growth within the State.
It is also important to remember that open tendering is a two-way street and that it provides Irish companies with opportunities to compete abroad. The public procurement market in the European Union is estimated to be valued in excess of €2.4 trillion per annum. The open market regime offers opportunities for Irish companies to win business abroad. EU studies indicate that many Irish businesses are successful in this regard. Reforms are being carried out in a manner that recognises the clear importance of small and medium-sized enterprises in this country’s economic recovery.
The Government recognises that public procurement offers an additional and powerful policy instrument, alongside more traditional instruments such as regulation, policy direction and economic mechanisms like taxation, to promote wider economic issues such as SME access to public procurement, innovation, the green agenda and social inclusion policy such as addressing long-term unemployment and the training of apprentices. The key proposals of this Bill will assist the Government in the further debate and discussion required in the formulation of a proactive and balanced policy approach regarding the enabling social value clauses, while remaining mindful of the need to maintain flexibility and adapt to changing circumstances.
The appropriateness of including social clauses in procurement projects will vary from contract to contract and are most likely suited to large-scale works contracts. In Northern Ireland, for example, as the Minister of State, Deputy Eoghan Murphy, said, social clauses are only considered appropriate for contracts above £2 million in the case of works and above £4 million in the case of civil engineering projects. Challenges also arise from the need 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, and the targeted benefit is capable of being measured and monitored during execution of the contract. The award of public contracts has to comply with the principles of the Treaty on the Functioning of the European Union, and in particular the free movement of goods, freedom of establishment and the freedom to provide services, as well as the principles deriving from these, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency. Basically, public procurement cannot discriminate or exclude businesses from participating in tender competitions on subjective grounds. Failure to comply may result in legal challenges from unsuccessful tenderers or the European Commission.
There would be a fundamental problem in linking procurement expenditure with a general requirement to employ or train additional staff. The State purchases many supplies and works that have a minimal impact on employment. Examples would include the purchase of land, electricity, vehicles, heavy machinery, planes, ships, defence equipment, pharmaceuticals and legal services.
The Government is not opposed to the principle of social clauses and sees significant merit in developing a social clauses framework. It favours a targeted approach to the use of social value clauses focused on contracts where they are linked to the overall contract objective, and where there are appropriate monitoring processes in place. It is essential that we remain mindful of the need to maintain flexibility and avoid any blanket or across-the-board approach which may cause us more difficulties than it solves.
I was present in Cork when the Minister of State and his team arrived to consult SMEs and I found it a very fruitful and beneficial engagement. I am delighted that such engagement will be carried out by the Minister of State in different parts of the country. He is listening to what small businesses are saying. That engagement is a two-way street and it is very valuable to do that.
Is Deputy Frank O'Rouke responding on behalf of Fianna Fáil?
There are three of us who will contribute.
No. There is only a response to the debate at this stage.
No. We have three speakers for the 9.30 p.m. timeslot.
No, the Deputy does not.
It is an expanding party.
The position is very clear. The Government has responded and now it is for Fianna Fáil to respond and that is the end of the debate.
I can share my time.
On a point of order-----
What is the point of order?
It is an expanding party as my colleague, Deputy Pat Casey, knows and the members of the party need more time.
Deputy Frank O'Rourke can share his time.
What is the summing up time?
We will share our time among Deputies Fiona O'Loughlin, Pat Casey, Kevin O'Keeffe-----
What about Deputy Stephen Donnelly?
Does Deputy Frank O'Rourke wish to begin or to conclude?
No. I will conclude. Is that in order?
I support my colleague Deputy Frank O'Rourke and my other Fianna Fáil colleagues in bringing forward this Bill tonight to ensure that Irish SMEs have a level playing field with their larger and foreign counterparts in bidding for public procurement contracts which provide huge significant social benefits in the communities in which they are delivered. There has been a paradox in that while the Government sets out a vision of economic growth and job creation, it has failed to introduce legislation such as this and that has resulted in the loss of potentially thousands of local jobs in the SME sector. We must insert social clauses to enable the State to consider the social benefit for the local or regional areas such as local jobs or taking on local apprenticeships. Job creation and its sustainability is one of the key issues facing the country. The independent retail sector provides 100,000 jobs in local communities around the country and many are battling for survival. The business community in our country has helped to sustain our population through recession and has proved to be hugely resilient. We have to do everything we can to help and this is one such measure.
Our legislation will require public bodies to have regard to economic, social and environmental well-being in connection with public service contracts being put out to tender. This Bill is designed to compel a public body, local authority or other public organisations to consider many social clauses when planning, initiating and completing a public procurement process. These include training and recruitment, the availability of subcontracting opportunities, the promotion of innovation and the facilitating of the involvement of SMEs.
The Government is the largest purchaser of goods and services in the economy. A total of €12 billion is spent on goods, services and works.
The European Union rules on tendering and public procurement permit the use of these clauses that promote social considerations. We cannot stand still; we must move forward.
I welcome the Bill and commend my colleague, Deputy Frank O'Rourke, for his excellent work in bringing forward this important legislation. Changes in public procurement procedures, in particular, the inclusion of social clauses, do not immediately strike many people as vital, considering the chaotic times in which we are living, but a more careful analysis will show that the Bill is crucial to the reset needed if small and medium-sized businesses are to remain an essential part of the economy. As we all know, the SME sector is the lifeblood of the economy, employing over 900,000 nationally. As a businessman I know that it is the bedrock of the economy in counties Wicklow and Carlow. In towns and villages small and medium-sized enterprises are the only economic barrier between communities and total devastation.
While I accept that open procurement policies are necessary, with more than €12 billion worth of Government business available every year, it is a fact that too many small and medium-sized businesses have been frozen out of bidding for too many public contracts. I would not go so far as to suggest the public procurement rules put in place by the Government have deliberately benefited a few big players while excluding many smaller companies. That has been their effect. I know of many companies in counties Wicklow and Carlow that have been swamped by the paperwork and bureaucracy involved under public procurement policies. Not only have companies in County Wicklow been excluded from bidding for public contracts in their local areas, but even attempting to bid for them has resulted in some of the companies losing scarce financial resources. For example, during the recession, when many businesses were struggling to survive, the only contracts available in the construction industry were public contracts. However, time and again, small and medium-sized construction companies were frozen out when seeking to avail of this lifeline by procurement rules designed to favour larger companies.
The Bill will allow social clauses to be included in procurement guidelines, as happens in Scotland where SME builders can be involved in public contracts. Given the need for the State to be centrally involved in the building of housing, it is vital that small and medium-sized businesses be allowed to compete for this business, thus creating a level playing field. This is a win-win for anybody who wants to defend SMEs, ensure balanced rural development and have a transparent procurement process. Other European countries have already introduced such social value clauses and it is time for Ireland to follow suit. I trust that everyone in the House will support the Bill.
I call Deputy Kevin O'Keeffe and remind him that Deputies Eamon Scanlon and Frank O'Rourke also need to contribute.
The Ceann Comhairle is costing me more seconds.
I thank my colleagues, Deputies Darragh O'Brien and Frank O'Rourke, for bringing forward this Private Members' Bill. I feel compelled to speak because one of the biggest issues I faced, like I am sure did all other Deputies, during the 2016 general election campaign, as we canvassed in the towns and villages in our respective constituencies, was the impact the recession had on small and medium-sized businesses. The respective parties may have differed in their election manifestos on how best to help, support and grow many small and medium-sized businesses, but there was consensus among us that we needed to do more. Let me make it clear. This Private Members' Bill gives the House and us, as politicians, the chance to keep the promises we made during the general election last year to help and support small and medium-sized businesses. I intend to keep my promise by voting for the Bill.
The Office of Government Procurement has done good work and tried to make progress in allowing SME companies to tender for public procurement contracts. I also acknowledge that the Minister of State, Deputy Eoghan Murphy, has done his utmost to listen to the small and medium-sized businesses most affected by procurement rules. I was glad to see him in UCC on 3 February to listen to and discuss the issues in public procurement. Representatives of many SMEs in my constituency of Cork East attended the briefing and welcomed that fact that at least their concerns were being listened to. However, despite the progress made, many public bodies and Departments are refusing to reform their procurement processes. They often hide behind EU law as an excuse not to engage on the issue and this must be stopped. lreland's public procurement market is worth billions of euro annually; as such it is an important market for SMEs to access. However, public contracts have been difficult for SMEs to win because the tender process tends to favour the larger and financially better off foreign companies that have more resources. By failing to introduce legislation to rectify this, we have completely undermined SMEs which have been left disadvantaged compared to their EU counterparts. I have learned about an individual in my constituency who was reprimanded by the Government agency for which he works because he had bought in his local shop a box of biros for staff instead of ordering them through the normal source. That is ridiculous and just one example of many.
There is a growing sense among Irish businesses that EU procurement laws have not served Ireland well. The system does not function fairly. However, in saying that, our continental neighbours and competitors manage to support their small businesses in a way that Ireland does not. EU member states such as Austria, Belgium, Denmark, France, Germany and Italy allow for social clauses to be incorporated into their procurement processes. The Bill provides for that to happen here and it is vital that it does so to put us on a par with our European competitors.
I call Deputy Eamon Scanlon to make a brief contribution.
I am grateful to have the opportunity to speak to this very important Bill and thank Deputy Frank O'Rourke for bringing it before the Dáil.
Following an initial period of fear in the aftermath of the Brexit vote, small business owners in Ireland are entering an extremely uncertain cycle. Considering that more than 900,000 people are employed nationally in SMEs, every support and incentive must be given to sustain job creators. This is a crucial time in promoting investment and growth among start-ups and small industries. SMEs are the lifeblood of the economy and without easy access to credit and State contracts and tenders to support business, we risk cutting off the oxygen that sustains and grows the indigenous sector.
International research shows that developing a strong SME base will increase competition in public procurement which, in turn, will provide the Government with better value for money and increase efficiency in public procurement. The bottom line is that the national procurement system must be designed with a long-term vision and from a "think small first" perspective, a concept recommended by the European Union. This legislation will assist in increasing the number of jobs and the profitability of the small and medium-sized enterprise sector, as well as delivering additional value for money and social value for the economy and society. The Government has failed to introduce such legislation which has resulted in the loss of potentially thousands of local jobs in the SME sector. By failing to introduce this type of legislation, the Government is undermining SMEs which have been left disadvantaged by different tendering rules from those of their EU counterparts.
Most European countries have introduced social clauses to enable the state to allocate jobs to the local unemployed or take on local apprentices to undertake contracted work. This is a challenging period for small and medium-sized business owners as they face uncertainty in the marketplace. Small, medium-sized and micro businesses properly nurtured, cleverly supported and carefully encouraged will generally grow to become businesses that create, expand and employ. The legislation will require public bodies to have regard to economic, social and environmental well-being in connection with public service contracts being put out to tender that have the potential to increase the number of jobs and profitability in the SME sector. The SME sector is the backbone of the economy and measures such as these will encourage enterprise and start-ups to create jobs. The €12 billion the State spends each year on goods and services generates a significant amount of business. While it is not always possible to award contracts to Irish companies, the objective of the Bill is to achieve a level playing field.
Will the Deputy give way to his colleague, Deputy Frank O'Rourke, to wrap up? We are already over time.
I apologise. I will give way to my colleague.
The Deputy is very good and I thank him for his co-operation. I call Deputy Frank O'Rourke to wrap up briefly, even though we are over time.
I appreciate the Ceann Comhairle's flexibility in allowing me to sum up. I will be very brief.
I thank the Minister of State, Deputy Eoghan Murphy, for his support for the Bill and for allowing it to be passed on Second Stage. I appreciate the co-operation we have both shown to each other in the discussions we have had up to now on the issues surrounding the Bill which we have discussed it in detail. We are on the same page in that we want the right thing for the SME sector, the local economy, the national economy, etc. We want to make sure we do it in a positive way, by engagement, interaction, working together, making changes and bringing foward amendments, where needs be, to strengthen the Bill and move it in the right direction. We are already open to this and look forward to working together to ensure the Bill is progressed in a speedy and positive way.
I also thank Deputies Sean Sherlock and David Cullinane for their support for the Bill and all of the other Deputies who spoke in support of it.
I do not agree with the Minister of State when he says it is negative for the SME sector. We have had several engagements with stakeholders in the SME sector who see this as a very positive move to further assist in the good work being done by the OGP in helping them access on a level playing pitch, and tender for, these public contracts in a competitive way, which is not fully the case now. We must move to close the loophole and assist them.
As my colleagues said, the SME sector employs 900,000 people and €12 billion worth of public service tenders are offered annually. It is incumbent on us all to work collectively and responsibly to ensure we offer and tender these contracts in such a way as to allow the SMEs compete fairly within the framework and guidelines, without favouritism, in order to keep that money in the local economy, which supports local businesses and jobs and feeds back into the Exchequer.
I thank everyone who contributed to this debate and the officials in the OGP office whom I met and who were very supportive. We look forward to the Bill progressing speedily.
I point out for the general information of Deputies that those wishing to contribute need to watch the monitors and be aware of the rate at which the debate is progressing. They need to be here because the flexibility we have shown this evening would not normally be shown and we will not show it in the future. It is Members' responsibility to know when their slots are coming up. I thank Members for their contributions.