That leave be granted to introduce a Bill entitled an Act to provide that abnormally low tender bids for construction works with a contract equal to or above the EU threshold for public works are regulated, and disqualified if their low level is not adequately explained to the relevant authority, and that performance in prior public contracts be grounds for exclusion from participation in a procurement procedure.
I seek leave to introduce the Regulation of Tenderers Bill 2019. This Bill would regulate for the issue of abnormally low bids for capital projects. Members will be aware of the recent controversy around the national children's hospital. Sinn Féin has looked at low bids which have been submitted for several capital projects. We submitted parliamentary questions to all of the Departments about overruns in their respective areas. In the Department of Justice and Equality, two particular projects had cost overruns of 47% and 39%. In the Department of Education and Skills there is an average overrun of 6% across all capital projects. That may not seem like much, but the combined figures show a significant cost overrun for capital projects. These overruns arise for various reasons. I am not saying it is due to any one particular reason. There were changes to some of the contracts as they were rolled out. However, there is no doubt that there is a growing concern here. There are more and more instances where abnormally low contract bids are an issue.
This Bill seeks to rectify that. It is based on EU regulations which are already in existence. It identifies what an abnormally low bid would be by providing that where four or more tenders for a public capital works contract are submitted, an abnormally low bid is one that falls 15% below the adjusted average. Whatever the average of the four bids is, if a bid is 15% below that it is considered an abnormally low contract bid.
There is no onus on the contracting authority to reject that bid automatically. That is not what we are suggesting. We are putting in place a mechanism by which the contracting authority can discuss the tender and examine all of the issues. If there is a valid reason for the bid to be so low, the contracting authority can accept it. We are only proposing that if this is done the bid must be registered with the Office of Government Procurement and the contracting party must state its reasons for accepting an abnormally low bid. In recent weeks a Secretary General actually stated in one of the Oireachtas committees that there is a difficulty around not accepting the lowest bid for fear of litigation and ending up in the Four Courts. By putting this into primary legislation we are providing a mechanism by which we can reject abnormally low contract bids.
The Bill's other proposal, in section 3, is to introduce a mechanism to examine the past performances of companies which have successfully bid for public works contracts. If a company has consistently been unable to meet the tender price it has originally submitted for capital projects, this can be taken into consideration when the bids are adjudicated.
This is a system which works in other jurisdictions. It is currently in place in the North. The provisions for abnormally low contracts work very well up there. This primary legislation is based on the European regulations which currently exist to deal with abnormally low contracts.
I recognise that the European regulations were transposed into Irish law through a statutory instrument. I believe Deputy Howlin was the Minister in charge when we brought that in but it is clear that the current European regulations are not being implemented. There is a major fear on the part of contracting authorities not to accept the lowest bid under any circumstances for fear of litigation. We have seen where some companies have taken contracting authorities to court and have been successful, therefore, we are seeking leave to introduce this Bill.