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Seanad Éireann debate -
Wednesday, 3 Apr 2019

Vol. 264 No. 13

Public Authorities and Utility Undertakings (Contract Preparation and Award Criteria) Bill 2019: Second Stage

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

I thank all those who contributed to the drafting of this Bill, especially David Dodd, Kate Butler and Kieran Mooney, and others associated with the Office of the Parliamentary Legal Adviser, who contributed to its drafting and ensured its legality in every line and letter. I thank the academics who have worked with me, particularly Deirdre Halloran from NUI Galway, Ciara Gaynor and Janet Horner from my own office who have done huge work to bring the Bill to this stage. I also thank my group for supporting me and I thank all those who have spoken to me over the course of the development of this Bill in the past two years about their experiences of procurement, either as procurement officials or as people on the receiving end of public procurement.

This topic may seem wide and abstract but public procurement affects every area of our lives, even the most intimate areas such as the food we eat in hospital, the surfaces our children fall on, the person on the other end of a phone line when we have called for help. It affects the landscape and the greatest infrastructural projects too. Our roads, streets, public spaces, schools, hospitals and all the buildings we share are part of the public procurement process in many cases.

There are areas where the public delivery of services is better than public procurement but where public procurement is used, it is vital we do it responsibly and that we design and sign contracts on behalf of the people of Ireland. When we do that, we have to ensure we get the maximum public benefit, including the social and environmental benefit.

My interest in this area dates back to 2014 when the current European directives were being introduced. In 2015 and 2016, when I was still a member of civil society organisations, we worked around the potential we saw in those directives and the scope in them for social, environmental and other considerations, a scope which has, unfortunately, largely been unrealised. My Bill is not simply more pressing in the context of recent controversies such as CervicalCheck and the collapse of school projects under Carillion and Western Building Systems.

It is not simply a response to the problems which need to be addressed. It is also about the potential to be realised, the fact we spend tens of billions on public procurement and that those tens of billions are an incredible source of leverage and potential benefit to all our people.

We turn to the subject matter of my Bill, which concerns public procurement. What it does is to try to join up the dots in the procurement process and put quality at the heart of that process. There are three ways that a contracting authority may decide to undertake procurement, three bases on which it can decide to make its decisions. It can decide on the basis of the price-quality ratio, the balance between price and quality, it can decide on the basis of life cycle costing, or it can decide on the basis of lowest price only. Lowest price only was what was used in regard to CervicalCheck. It has been shown to have serious consequences because it removes quality from the equation. If the decision is made to go with the lowest price only approach, it becomes very difficult to try to introduce quality later on in the process.

At the time the European directives were transposed, France and Scotland chose to exclude lowest price only altogether so that lowest price would not be an option for contracting authorities. I am not attempting to replicate that. Instead, my Bill focuses on the Dutch model, which respects the discretion of contracting authorities but seeks to change practice and culture. Under my Bill, the price-quality ratio, where price and quality are considered, would become the default and the norm. Contracting authorities have the discretion to decide they want to go for lowest price only, but if they go for lowest price only, that needs sign-off at a senior level and they must publish a rationale. Effectively, what this Bill does is to oblige authorities either to think about quality or to think about why they are not thinking about quality. I hope it will lead to a change in practice where lowest price will become the exception rather the rule.

In most areas, the Bill does not seek to prescribe the exact ratio between quality and price in a decision. It recognises that this may vary and, for example, it may be 30%, 80% 60% or 40% on quality. The one area where we do set targets, however, is in regard to the billions which will be spent under the national development plan. These projects are not like those where, if we sign a three-year contract, we can learn from it and make changes the next time. National development plan projects are once in a generation or once in a lifetime projects. We simply have to get them right. That is why the Bill sets a threshold or target of 50% minimum for quality on national development plan projects. Again, exceptions may be made but a sign-off at senior level is required and the rationale must be provided.

I want to clarify an important point. This Bill does not mean that procurement has to cost more. In the Netherlands, the model which we are following, 73% of contracts still went to a lower bidder but those lower bidders also had to prove themselves in terms of quality. What it means is that commitments and evidence in regard to quality were on the table alongside the proposals on price. It is very important to note that research from the construction industry and from academic institutions in the Netherlands found that the public benefit was 2.4 times higher where a mix of price and quality was used. What we saw was that for a little bit more thought earlier in the procurement process, almost double the public benefit was delivered.

What do we mean by quality? This Bill is not prescriptive. It recognises that what is quality in one area may differ in another. Sometimes it is about the track record, the performance and the materials that may be introduced. The Bill is not prescriptive. It largely reflects the wide space within the language of the directives in terms of quality. What it also does is to require ministerial guidelines to be put in place. Those guidelines will contain existing commitments and targets, that is, cross-cutting commitments made by Government and already signed off on. They are not ones I am adding in but ones that already exist. These would be in areas like climate, accessibility and inclusion. This will get people out of their silos when they are doing procurement and it promotes joined-up thinking. If I am designing a space and I look to the commitment in regard to, for example, Irish Sign Language accessibility, maybe I will build a space for an interpreter because I have become aware of that cross-cutting commitment. If we are using materials, we may think more about their sustainability and how they contribute to our emissions targets. It is joined-up thinking. Again, it is for contracting authorities to decide which elements of those guidelines they wish to take on board, but it requires they show they have thought it through.

In the Bill, I also put forward the human rights duty. Again, the human rights duty already exists for public authorities and they are required by law, including in the Irish Human Rights and Equality Commission Act 2014, to promote equality and human rights. What this Bill simply does is require them to report on how they are delivering on equality and human rights, and to build that in to their regular procurement reports, as required by the regulations.

I want to address a few questions and concerns that have been raised with me over the course of my conversations with different parties. Who is involved in the sign-off? In the Bill, I set out Accounting Officers, accountable officers and Ministers as sign-off. Having engaged with the Government and listened to the concerns that were raised, however, it is my intention to remove Ministers from that sign-off process on Committee Stage, and I have engaged the Office of Parliamentary Legal Adviser, OPLA, on amendments to that effect. It will be Accounting Officers and accountable officers, usually at Secretary General level.

Will this require more red tape? The answer is "No". What this Bill does is save us from complicated processes of repair later on in the procurement process by making sure things are done in a clear and transparent way from the beginning. It is empowering legislation. It empowers procurement officers to think about quality. I have spoken to those who feel nervous about using quality because they feel they would have to get permission from above. Now we know they can think about quality and they can do a better job. In the same way that, for example, the fines being added in terms of data protection empower data protection officers, this Bill empowers procurement officials to think in creative and positive ways about the benefits to society.

The Bill has wider benefits. It rewards and allows for the recognition of those companies, usually SMEs, that are delivering higher standards, that have records and that have done the work in terms of quality. It gives SMEs from whichever European country a potential comparative advantage. It also has the wider benefit that when the State, as the largest customer in Ireland, raises the standards, it raises standards right across the board.

I thank all of those who have supported me on this Bill. I believe it can be a game changer in terms of the landscape, culture and practice of public procurement. If successful, I believe it will have ripple effects across every area of our life together.

I thank the Minister for attending. I formally second the Bill and commend Senator Higgins on bringing it forward. It is an incredible Bill that will have an immeasurable impact on people's lives through how the State engages in the public procurement process. It is a testament to Senator Higgins and her drive for positive reform in this sometimes complex and technical area.

I pay tribute also to Ciara Gaynor and Janet Horner in our office for all their work to get the Bill to this point.

Getting the process by which the State tenders, vets and awards contracts to companies in the private sector for the provision of State services right is important in many areas. Ethical, fair and balanced public procurement is key to fostering public confidence, ensuring the State leads the way on the use of procurement to advance human rights and equality and ensuring we do not take a short-term perspective for a short-term financial saving which, in fact, ends up costing more and more in future. Procurement may be a complex process in itself, but the end result impacts on the lives of citizens in incredibly intimate and important ways. While the Bill may involve a great deal of jargon and appear, on the surface, simply to change the balance in assessing the ratio across price, cost and quality, it is actually about immeasurable improvements in the real lives of people who interact with the firms we contract through public procurement. The Bill is not prescriptive about who should be awarded contracts. Rather, it sets the philosophical underpinnings according to which those choices should be made. As such, we say quality, accessibility for disabled persons and sensitivity to the experiences of minority communities, including migrants, LGBT people and Travellers, are just as important as financial costs and just as valuable in the achievement of excellence and confidence in our public procurement process. This area may be full of complicated processes and various oversight and accountability measures but at its heart, it is about people and making their lives and experiences better and safer while providing higher quality services. That is why the Bill is so important. It seeks to create a shift in culture where we end the race to the bottom and start to think about public procurement in a new way.

The Bill is not about simply saving ourselves money for the coming budget but about a commitment to valuing the quality of goods and services. If the State cannot be everywhere and do everything, it is the people we choose and the goods we select through public procurement that will make up the foundations of our motorways, food for our schoolkids and the processing of our most personal and private data. Public procurement cannot and should not just be about how to spend as little money as possible in the here and now. It should be about building a process that can look 20 years into the future when assessing costs while learning from past mistakes to ensure procurement processes grow and develop. In the procurement process for once-in-a-generation projects such as those under the national development plan, we must set ambitious targets in the weight we give procurement quality. We will not get a second chance. Price should not be the be-all and end-all when decisions are made as to who will build our schools and hospitals, feed our kids in schools and administer important parts of our health service. Personally, I do not want the only thing to matter in who we choose to be how low they dared to bid for a contract. I want to know that when a procurement officer decides who is to get a contract, he or she has the well-being of my children in mind and is thinking about our domestic and international human rights and equality commitments, not seeking only to make an immediate saving for the Exchequer. I want officials to take a long-term perspective and to consider properly the importance of the quality of the services being tendered.

At the briefing on the Bill in the audiovisual room yesterday, it was stated that everyone who had been involved in public life or the provision of services in Ireland would have many examples of bad public procurements which they wish could have been avoided. They would not have proceeded if they had known how they would turn out. I am sure the Senators present can think of examples. Could they have been prevented by a Bill like this? Could the CervicalCheck errors have been avoided if a Bill like this had governed the public procurement process that outsourced those checks? Today is the first anniversary of those errors becoming public knowledge. Could the lives and health of the women involved have been safeguarded if quality of procurement had been mandated as of equal importance as cost? I sit on the education committee where we investigated the failings by Western Building Systems, which led to 42 schools being assessed in respect of their structural safety. My daughter was a student in one of those. I want my daughter to go to school in a building that is warm, comfortable and safe, not one that was built as a result of a race to the bottom for the lowest-cost bid and which may simply fall down. Could the building errors have been avoided if quality was given as much weight as price? We will never know. However, the Bill will go some way to safeguarding against catastrophic errors like this in future. Even when it comes to the food served in schools, hospitals, direct provision centres and our prisons, I do not want contracts awarded on the basis of the lowest cost. Nutrition is an important area where even small increases in cost can result in huge increases in quality. I want to know considerations like this are required to be factored into a procurement process.

I thank Members who are supporting the Bill and pay tribute to Senator Higgins again. It is a great Bill and it will improve people's lives. I commend the Bill to the House.

I welcome the thrust of the Bill albeit there are aspects of it around which I have concerns. The Bill is about getting the most economically advantageous tender and how that process should work. A fundamental point, to which Senator Higgins referred, is that one cannot have the final decision-maker involved in any way in the process. Section 2(4)(b) of the Bill provides that "In applying subsection (2), contracting authorities shall not include a best price–quality ratio in a case to which the National Development Plan relates where the price criteria is greater than 50 per cent". Ultimately, we have to get value for money. I do not fully buy the argument that one can absolve contractors on the basis that there was not enough emphasis on quality in a tender process. If one is building, one should be building to standard. There are regulations in place according to which one must build. Therefore, I am nervous that if one brings the issue of price down to 50%, one may not actually get value for the taxpayer. It is something I am concerned about.

The Senator said there was an exemption in section 4, which relates to departing from the contracting criteria. Section 4(1)(b) provides that "The requirements of paragraph (a) do not apply where the chief decision maker of the contracting authority or contracting entity concerned is satisfied that there is no material difference in quality between the potential options". Once again, whatever criteria and weightings apply should be dealt with in their entirety. One might now have a situation where a person says that in fact the bulk of the criteria can be parked because they are all the same and simply go back to price. It might undermine the Senator's argument about it not being solely around price.

A review is ongoing between the Department and stakeholders around the best way to get value and around social considerations. I place the matter in a local context for myself. When we had the regeneration projects under way in Limerick, I would have liked to see more local workers involved. Typically, however, projects had to go on eTenders under the public tendering process to which anyone could apply. However, a requirement was later brought in that 10% of people had to be employed locally, which I supported strongly. I understand that Senator Higgins has met the Minister and that there are discussions taking place. I fully understand the import of the Bill but I will always look for unintended consequences. As such, I do not particularly like the fact that the Bill prescribes that not more than 50% of the decision on a contract can relate to price. The worry is that those other aspects could be open to abuse. I suggest we come up with some other basis. Decisions cannot be solely on price because that has given rise to unintended consequences too and there may have been a race to the bottom, albeit we do not know if that is the case, and a review is ongoing.

Value for money is also important. I do not want a situation to emerge where contractors come in who are aware of the process involved and who kick the value for money issue down the road. We are taking money from taxpayers and we have to spend their money wisely. I understand the point of carrying out public projects, but we can never get away from the fundamental point that if people are paying income tax or if they are on social welfare and are paying VAT on the goods they buy, we have to ensure we spend their money wisely. That point is often lost in the process. When I speak about taxes, I am not referring to taxes paid by people who are working but rather all taxes, including income tax, companies paying corporation tax, VAT and stamp duty. We have to ensure we get value for money. This is an important matter, and I welcome the discussion, but I do not support much of the detail proposed. I support the social aspect of it, but I will let the Minister put the Government's view. I regard this as a working document.

I thank Senators Higgins and Ruane for introducing this Bill. I am happy to tell them that Fianna Fáil is happy to support it through to Committee Stage. That is not to say that it is perfect as it is - we all acknowledge that it is a work in progress - but the idea of examining public procurement and public authorities and utilities under the contract preparation and award criteria is a very timely topic to be discussing in the context of issues such as the national children's hospital. I do not want to be party political about it, but we are all wondering how an initial figure of €650 million seems likely to rise to €2 billion. Equally, the national broadband plan for rural areas, which is the scheme the State has been promising since 2012 or 2013 and which intends to deliver to areas that do not have high-speed broadband, is associated with high costs. There are implications around how we will deal with that. This is not just about the cheapest way to do things. We need a quality product. Technology is changing by the week or month in terms of what can be delivered and how it can be delivered, and there are questions as to whether we should use fibre optics or wireless systems or alternatives. These things are all very important.

We probably all know the adage that if something is too cheap to be true, it probably is not true. The saying "buy cheap and buy twice" is equally true. I have often seen scenarios where people have been presented with a list of contractors for a school building project, for example, or any kind of commercial contract, having been told that they must select the contractor offering the work at the lowest price. They end up praying that particular contractors do not come in with the lowest price, because they know that particular contractors have a history of coming in low, finding fault with everything, making many changes to the plans, and then charging enormous prices. They end up being thankful that particular contractors do not get the tender or feeling that they are in trouble because the contractor did get it because, although they tendered at the lowest price, it is well known that it will require far more management and attention to ensure that problems do not arise and costs do not escalate. There are many reputable contractors, but they are not all as good as each other. There are those which are better and there are those which have a bad track record of delivering the projects they promised to deliver. There is certainly merit in looking at a system which does not say that the lowest tender always has to be accepted, regardless of who the contractor is or their track record. There is scope to change that. Perhaps, as the Bill is teased out, there are ways in which we can deal with that.

We have the Government Procurement Office, and it is the case that many areas, including the 400 voluntary secondary schools, have schools procurement units which advise schools on how best to procure things, such as negotiating with the ESB or for gas or any other items schools require. If a security alarm contract or a burglar alarm contract can be negotiated, there are savings that can be made. Nobody has to pay over the odds.

CervicalCheck was mentioned by a number of people as an example of another scandal. I am not sure that this Bill would automatically solve the problems that arose around CervicalCheck, but it is certainly timely in that it looks at how we procure and how we look at the initial tender. We faced issues about mobile phone licences years ago and the weighting that went to various things. People were on the committee that decided how those weightings would be allocated. Almost by default, once a level of subjectivity is introduced, we enter an area that can possibly be manipulated. It can be coerced in a particular way to favour one person or another, and I do not know if that can be legislated for. It is something we need to be careful of. As Senator Higgins develops her Bill, we must ensure that there is a significant level of transparency involved. People may not like the CAO system, but at least it is transparent. Once interviews are brought into processes, it becomes likely that people will meet others that they know directly or through other people. It will all be transparent, but there will be a level of subjectivity involved. Sometimes it is useful, but problems arise over how the process is handled, the personnel on the board, who selects the tender and whether they have any conflicts of interest. All of those points have to be considered.

Relevant points were made about Carillion and Western Building Systems. Both companies appeared before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach to discuss the collapse of Carillion. We heard how contracts are awarded and how the main contractor gets the work. I know many people who have done work for the State having got the job as a subcontractor to a main contractor. The main contractor was paid by the State, but the subcontractors got treated very badly in some cases by that main contractor. I know some of these people, and they are very good business people who were very good at the work they did. These people thought they were doing work for the State, whether for the Garda or the courts system, but they were caught out because the main contractor and subcontractor fell out, leaving the subcontractor in a very difficult position. The main contractor benefited from that difficulty. All of those things must be looked at when we are dealing with State money. It is not fair that anybody who does the job they signed up to do does not get paid. Equally, it is not fair if people do not do the job they are being paid for.

This is useful legislation. I have a couple of concerns that the Minister of State may be able to address when he makes his contribution. It may not be possible to allow a money Bill to be introduced by someone who is not a member of Government. I will be interested to see if the Minister of State considers that this is legislation that will require a money message at some point. If it does and it is not going to get one, this could be the most wonderful idea but it will go nowhere. I hope that is not the case, but perhaps the Minister of State could address that.

In terms of procurement and contracts generally, whether broadband or the national children's hospital, there is a need to shine a light on how this is done. I do not want to repeat the valuable contributions made by Senators Higgins and Ruane, who covered many of the points I might have made were I introducing the Bill. I wish it well on Committee Stage. We have concerns but we are happy to tease it out further on the next Stage. I congratulate the Senators and their group for introducing the matter.

I thank Senators Black, Kelleher, Ruane and Dolan for introducing this Bill.

I believe it is a good Bill on the whole. There are some issues that might need to be teased out but they need not be teased out here today as we will have opportunities to so do during the various stages, including Committee Stage.

Senator Horkan made a valuable inquiry about the money message. The Minister of State might address the point at this stage. I hope he will allow the Bill to proceed to the next stage. It is a good Bill and I hope the Government will support it at this stage.

I thank the proposers. In particular I wish to thank Senator Higgins, who effectively came around the Houses, briefed people and took time. That is really important when a Senator is trying to get legislation through. It is important to take time out of one's schedule in advance of the day. She did that to explain the Bill to the Independent group. That was really helpful and I wish to acknowledge that. The Bill has my support subject to the further discussion on Committee Stage and possible amendment.

I wish the Bill well. In essence what the proposers are trying to do is good and strong. It will add to our legislation. I would be interested to hear what the Minister of State has to say, especially with reference to the money Bill. Does he envisage a problem? Has he been cautioned in any way? Does he perceive or think this might be a problem?

The eight minutes is time allowed and is not a target. Anyone who comes under time is welcome. Senator Conway-Walsh has eight minutes.

There is much to commend in this Bill, including the effort to improve the public procurement process. It aims to improve the quality of procurement, as well as protect the construction sector from a system that at times focuses predominantly on price at the expense of the construction sector, particularly subcontractors. The Bill focuses primarily on improving the weighting of price and quality and on enhancing the guidelines on social considerations.

I will offer some observations on the Bill. It gives further effect to the 2014 EU directives on public contracts and utility contracts. Its primary purpose is to mitigate the use of pricing as the exclusive grounds for contract award criteria.

Section 2 relates to public authority contracts, while section 3 deals with utility undertakings but it deals with them in much the same way. The Bill details the most economically advantageous tender, MEAT, criteria under which contracts may be awarded, noting that these criteria include elements such as price, quality, social and environmental considerations and so on. However, the way these elements are weighted is not specified in law and is for the contracting authority to decide.

Section 2(4) specifies that contracting authorities shall not use price as the sole award criterion and that contracting authorities shall not weigh price above 50% in the contract award criteria. This applies unless, as per section 4, the contracting authority does not believe quality would make a material difference to the public work or undertaking and issues a declaration to that effect to the Office of Government Procurement. Such a declaration should then be published on its website.

Identical provisions are given for utility undertakings in section 3. A number of comments could be made in this regard. There are times when price being given a predominant weighting in the awarding of a public contract makes sense. One example is when there is little scope for differing quality among the bidding economic operators. At other times, such as in the restoration of a heritage building such as Leinster House, it is advised that quality be given the predominant weighting. It is universally acknowledged by industry that the use of price as the determining criterion in the awarding of public contracts has a number of negative effects. Lowest price tendering leads to lowballing in the tender bids which inevitably leads to cost escalations. We saw this with the national children's hospital. The lowest price can compromise quality and lowest price favours large companies over small and medium-sized enterprises, since they possess large enough cash flows in their business to adjust for low bids. For this reason, the Bill's attempt to restrict the use of price only in contract award criteria or in its weighting at over 50% is welcome. However, there are some deficiencies. In particular, the declaration that must be given to the Office of Government Procurement by the contracting authority, as per section 4(1)(b), is not fleshed out. What must the declaration include? On what grounds can it be rejected?

Section 6 provides for the issuing of guidelines on social considerations concerning qualitative, environmental, social, human rights and equality considerations. Contracting authorities would be obliged to compile a record of compliance with any of these obligations. The Minister would then issue a revised set of guidelines or a report justifying why compliance is not required. Any consideration of these social clauses is welcome, and, while we support it, we would also welcome legislation that hardwires principles of social justice and equality within the procurement process. One example of this is the Social Clauses in Public Procurement Bill 2013, initiated by Deputy McDonald. That Bill provided, among other things, that one long-term unemployed person should be employed for each €1 million comprising the value of a public contract. We would like to see such principles hardwired within the procurement process. My party colleague, Deputy Jonathan O'Brien, is currently working on this.

We are keen to see greater transparency and accountability in procurement practice. Deputy Jonathan O’Brien recently initiated the Regulation of Tenderers Bill in the Dáil, which provided for the disqualification of abnormally low tenders and the disqualification of badly performing contractors from the tendering process. Any Bill that seeks to improve the Government's lacklustre and costly procurement strategy should be welcomed.

I thank Senators Higgins, Ruane and Black and the others involved in bringing forward this Bill. We look forward to the Bill going to Committee Stage.

Senators Norris and Nash are next. I understand you want to share your allocation of eight minutes by taking four minutes each.

Yes. We will share the time equally.

First, I congratulate Senator Higgins on this Bill. It is a timely response to a series of catastrophes that have occurred. I think it is important that Seanad Éireann shows a leading role in this area.

Senator Higgins has indicated that she is prepared to be flexible and she recognises that this Bill is not perfect in its present state. She indicated that, as a result of discussions in the House, it will be amended in certain ways. She has already indicated some ways in which it will be amended. This is a good parliamentary approach.

My good friend and colleague, Senator Kieran O'Donnell, talked about value for money. What is value for money? It is patently not value for money if we take the lowest price but the company collapses. That is not value for money. It may be the lowest possible cost but it is certainly not value for money in any way that we understand.

That is not what I was saying.

I understand, but it could be interpreted in that way, as I chose to do.

We are governed in this area by European Union law. Under this law, a public contract is defined by who is doing the purchasing, what the person is buying and who the person buys from. The various directives also set down minimum time limits. That is fair enough because it gives companies from other countries in the European Union the opportunity to put in a tender. Under the 2014 directives contracts are required to be awarded on the basis of the most economically advantageous tender, known as MEAT. Again, I would argue that "most economically advantageous" also implies some degree of quality control in place. I would have thought that was absolutely essential. Member states had the option of restricting the use of lowest price or lowest cost standards but Ireland failed to do so. I do not understand why we did not do so. This is something we certainly should have done at the time.

We did not do that and Senator Higgins's Bill provides that contracting authorities should award contracts based on best price quality ratio, BPQR. That is important because it puts quality right at the centre of the argument and gives quality a clear role in procurement instead of just taking the lowest cost involved. I understand that this is based on the Dutch approach to this area. The Dutch experience is reassuring according to the briefing I have received from the Senator because it might be assumed that if this quality system was introduced, then the lowest priced bidders would be ruled out in many cases but this has not turned out to be the case because in-----

Senator Norris interpreted it in that way.

Please allow Senator Norris to finish.

Yes, I am a great interpreter. In the Netherlands, 73% of contracts were awarded to the lowest bidder. We still have a situation where the State is getting the best price but is also getting good quality, and that is very important for the taxpayer. Senator Kieran O'Donnell spoke about taxpayers but we all pay tax. Even the most penurious old age pensioner has to pay tax because he or she pays VAT and this, that and the other. We are all taxed to death practically in this country.

The Bill is significant in that it acknowledges the fact that there may well be situations in which the lowest price is the best. It is significant that discretion is allowed here and one is not tied into a contract in a rigid way. The parties that award the contracts are allowed significant discretion. Other Members referred to various situations which call for a parliamentary response. I refer to matters such as the Scally report where it was clear that part of the problem was opting for the lowest possible price and that created a significant problem. Then there is the Carillion issue. This work was outsourced to a British company, despite the fact that it was widely known that it had a high risk rating, but the State took the lowest price possible, not worrying about the question of quality. Then we have the question of the construction of the children's hospital. This is quite extraordinary. There was a low quality rating and 75% of it was awarded on the low cost and 25% of it on quality. That is ridiculous, particularly when the lowest bid was €130 million less than the next one. That is a margin of 20%, which is unheard of. There might be 5% or 10% flexibility but when it reached 20%, questions should have been asked and if this Bill were in operation, such a situation would not continue to occur. I applaud Senator Higgins and her group for introducing this Bill and I look forward to its passage through the House.

I thank Senator Norris, particularly for his remarks on MEAT. We have heard a lot about MEAT but what Senator Higgins is trying to achieve here is the addition of the two vegetables, which is a balanced diet and a balanced approach to public procurement because quality needs to be put at the heart of public procurement policy.

The Labour Party is pleased to support this Bill. It is a modest proposal and if taken on by Government and if it passes through the various stages here, and subsequently in the Dáil, it could deliver a paradigm shift in tendering and procurement processes. There is an onus on us in this Legislature to ensure that the State operates best practice and leads from the front in the power, influence and leverage that the State has in terms of it and us being the largest procurer of services, products and so on. We have significant power and leverage that we do not often use in promoting best practice in labour standards, environmental standards and achieving quality design standards and aesthetics in public buildings, for example. Some of the public buildings that have been constructed in the State in recent years and recent decades - and I acknowledge that design is a subjective matter - leave a lot to be desired. It should be ensured in our public procurement processes and in tendering and design standards that quality and aesthetics are at the very heart of them because the development of public buildings and public projects should be an expression of who we are and demonstrate who we are and what we want to be as a State. At the heart of this Bill is an ambition to achieve those kinds of aims.

State procurement should always aim to have a high standard of labour practices at the heart of everything we do. At least in theory there is an obligation on those who successfully obtain public contracts to ensure that high labour standards are maintained and that labour and employment standards are maintained, respected and complied with but that is not always the case. For example, in 2017, following an investigation that I established, it was found that a number of cleaning contractors which were used by the HSE were not paying the employment regulation order rate. In one case it was in a hospital in the southern part of Ireland, not too far from Senator Kieran O'Donnell's base. All the HSE did was to insist that the rate be paid to staff but the contractors got away with breaching and being non-compliant with an employment regulation order with absolute impunity. Anyone in breach of employment and labour standards and in breach of our laws, whether they be tax laws, employment laws or whatever the case might be, should immediately lose the contract. Unfortunately, that is not the case.

I was interested in Senator Horkan's remarks on disputes that arise between subcontractors and main contractors in construction. They are damaging disputes and many subcontractors went under in recent years because of the behaviour of large contractors. Back in 2016, I appointed a panel of adjudicators under the Construction Contracts Act 2013, which emanated from this House under the guidance of former Senator, Feargal Quinn. That legislation was nuanced and finessed by me and the then Minister, Deputy Howlin. That panel of adjudicators is in place now and I understand it is working well. It is an important protection for subcontractors who are employing many thousands of people in dealing with the vagaries of that industry because the reality was that in some cases a lot of subcontractors would have to go to the superior courts to get satisfaction and to get money that was owed to them returned to them. Now we have this clear process in place that is very effective, from a cost point of view as well, to vindicate the rights of subcontractors.

I thank Senator Higgins in particular for her engagement with me and my Department over the past while, not only on procurement but on other issues. I will try to respond as best I can to some of the points that were made. Reference was made to the Government's lacklustre procurement policy. I remind Senator Conway-Walsh that I have never had a single proposal from her on anything to do with procurement. If the Government is lacklustre, we would welcome any suggestion that she has in the same spirit as we have welcomed Senator Higgins's proposal.

Public procurement is a key part of my portfolio and an integral part of the Government's overall reform agenda. The Government acknowledges that the Bill is well intentioned with many good points raised and we appreciate, in particular, that Senator Higgins has engaged with my officials and those of the Office of Government Procurement in the development of the Bill. However, as she will be aware, the Government has concerns regarding the Bill's impact on the ability of the State to seek value for money and the implications for Ireland with respect to EU public procurement directives.

Several Senators referred to the issue of value for money and some railed against it. I am sure the Comptroller and Auditor General would not support some of the comments made. I will address them shortly, but, first, I want to place the Bill and the Government's concern in the context of its public procurement reform programme. The reform of the public procurement programme is and remains driven by the need to obtain value for public money in procuring goods, services and works. The Office of Government Procurement and the procurement policy were put in place at a time when the country had literally run out of money and was banjaxed. It is essential that the achievement of value for money is not adversely affected by the inclusion of overly prescriptive requirements and increased administrative and reporting burdens, which I know is not Senator Higgins' intention. Public procurement is essential for the sustainable delivery of much needed public services. The State spends approximately €12 billion per annum on goods, services and works and procurement is a powerful tool in spending public money in an efficient and sustainable way. Contrary to some of the commentary to the effect that the Government is spending nothing in Ireland, 94% of the €12 billion is spent in the economy, of which approximately 54% is spent in the SME sector, to which the State is a large contributor. Better managed procurement can lead to significant savings in public budgets and more investment. How public authorities purchase directly affects an economy, through competitiveness, economic growth, levels of taxation and innovation, as indicated by Senator Ruane when she correctly said the State was the largest procurer in the country. Public procurement also represents a huge business opportunity for all businesses, large and small.

It is essential that the public service operate in a co-ordinated and effective way to deliver value for money and sustainable savings for taxpayers. Senator Norris who is not present questioned what is value for money. I am sure if he took down any report of the Comptroller and Auditor General, he would find a succinct definition of what it is and, more importantly, what it is not. Significant progress has been made since reform of the public procurement programme began and the Office of Government Procurement, OGP, commenced operations in 2014 under the then Minister, Deputy Brendan Howlin. Together with four key sectors – health, defence, education and local government - the OGP has been driving the achievement of value for money, enabling compliance, promoting business participation in procurement, increasing communication and guidance, professionalising the service and driving transparency. It is doing so in the context of the EU directives specifically set out for procurement.

While the OGP has made significant progress in driving implementation of the reform programme since 2014, this is an opportune time to reflect on the progress made and the challenges that remain and to consider the learnings, with a view to identifying the future direction and shape of public procurement and how best to achieve it. It is something I have asked my officials to initiate in conjunction with Government colleagues and others to see what suggestions can be made. I have said it previously in this and the other House. It is welcome that Senator Higgins has taken up the opportunity to do so. If there are others who wish to do so to bring forward proposals without using words such as "lacklustre", I would welcome them. A consultation process is under way to ensure all elements of the reform programme will be aligned. I have sought the views of Ministers, their Departments and bodies under their aegis, as well as SME representative bodies via the SME advisory group. I chair the group which meets regularly and reflects the leadership of small and medium-sized enterprises across the country. All suggestions made in the group are considered and many of them have been implemented by the Government. The feedback from the consultation process will help to shape future public procurement policy and operations aimed at having a more efficient and accountable public procurement process. I do not think any Senator is suggesting it is anything other than accountable.

My Department recently launched a consultation process with construction industry stakeholders to develop the next generation of public capital works management framework, to which reference was made. Both the Minister, Deputy Donohoe, and I are very conscious of the construction industry specifically. While several references were made by Senators who are no longer present to the construction sector, not everything is falling down. Not every hospital is falling down and not every school project is over budget. Not every process is failing. The vast majority are totally within budget and of very good quality and we never hear about them. That is probably true in the case of 99% of them, but that is a separate issue.

A specific issue to be addressed in the consultation process is the consideration of creating a revised quality-to-price balance in the award of public works contracts. It will address the use of MEAT, most economically advantageous tender, an unfortunate acronym that I do not particularly like to use, and the words "lowest price" in contract evaluation. It would not be appropriate to be prescriptive in primary legislation in that regard. The Bill proposes that contracting authorities should award contracts on the basis of the most economically advantageous tender, rather than price only, unless sanctioned by a Minister or the Accounting Officer. While I appreciate the concerns raised by Senators about the use of price only in procurement processes, such a provision would be disproportionate and add to the administrative burden in buying generic, commonly acquired goods and services. I think the Senator also acknowledged this.

When debating the issue of procurement, a lot of attention is focused on the award stage of public procurement processes. What many do not realise is that there are a number of stages in the process that can be used to develop and assess the quality of commonly acquired goods or services that make them suitable to be assessed on a price only basis. A lot of work goes on in the Office of Government Procurement specifically on this issue in the development of frameworks that can be used in the procurement of individual products. For example, the specifications and requirements in the procurement of office supplies, books, electricity, fuel, consultancy and recruitment services and a range of other products can be set out clearly in tender documentation, leaving the buyer room to judge the primary difference between suppliers, which is the price. It has to be acknowledged that public procurement facilitates the State in being in a position to provide much needed public services in a sustainable manner. Therefore, reducing the public buyers’ choices in assessing tenders could impact on the sustainability of such service provision. The existing model reduces considerably the burden that would otherwise be carried, for instance, in respect of bureaucracy, if we had to treat each procurement process as separate.

Under EU law, the method used in evaluating tenders must be set out clearly at the start of the process. The proposed legislation would, therefore, require a Minister or an Accounting Officer to become directly involved in developing the strategy for numerous procurement processes. This would not be practical, as the Senator said. It would not be possible to intervene at award stage because the methodology to be used in marking would have been decided and published as part of the tender documentation. I think everybody accepts that if a Minister or an Accounting Officer was directly involved, it could lead to a situation where he or she would be wide open to allegations of improper interference in the procurement process. While I know that is not the intention, it could, as Senator Horkan noted, be an unintended consequence. It would not be realistic to expect a Minister or an Accounting Officer to be in a position to develop detailed award criteria for all processes. It would invariably lead to questions about the integrity of the process and political interference, perceived or otherwise, in individual spending decisions. Therefore, a Minister should not be involved, as proposed in the Bill. While I understand and appreciate the Senator intends to remove that provision on later Stages of the Bill, having Accounting Officers or accountable persons involved in the development and sanctioning of individual procurement processes raises similar issues. These posts require a level of independence in order to be able to gauge and question the activities of officials reporting to them. Everybody accepts that they have to be above reproach. If they were required by law to be directly involved in procurement processes, this reporting line would be broken, creating a potential gap in accountability. The legislation is not entirely clear on the reporting or declaration arrangements for the utilities sector which is largely privatised.

The Government is exploring the scope for the inclusion of social considerations in public contracts such as environmental sustainability, disability access and training for young or disadvantaged persons. This arises specifically from an issue that was raised with me a number of months ago by former Senator Kathleen O'Meara which I took on board. It is because of that very positive engagement with the former Senator that we have started to explore the inclusion of social considerations. There might be an opportunity for me to update the House on what we are doing in that regard. A cross-departmental social considerations advisory group has been established. It brings together relevant officials from policy departments and procurement practitioners to promote and facilitate the incorporation of social considerations into public procurement projects.

This was done with the support and leadership of three Ministers of State, Deputy David Stanton, Deputy Finian McGrath and myself. The group will give practical assistance to public buyers that wish to use public procurement to enable wider public policy considerations. It held its first meeting on 12 March 2019. Membership of the group is drawn from the Departments of Employment Affairs and Social Protection, Communications, Climate Action and Environment, Rural and Community Development, Justice and Equality, Health, Business, Enterprise and Innovation, Housing, Planning and Local Government, Transport, Tourism and Sport and Education and Skills for guidance on training issues. The group's functions include the identification of social policy objectives that could be advanced through public procurement; matching some of those identified social objectives with suitable procurement opportunities, to be trialled on a pilot basis; and advising on the appropriate method for incorporating social considerations into frameworks and contracts.

The group will consider monitoring and reporting arrangements, which can be applied to future projects where social considerations are to be incorporated. It will also advise on the development and implementation of strategies to communicate its work across the public sector, including any policy and training implications therefor. If opportunities arise this framework and group provide a means of exploring them.

Public procurement in Ireland is governed by EU and national law and national guidelines. The EU treaty principles of equal treatment and non-discrimination, transparency, mutual recognition, proportionality, free movement of goods and services and the right of establishment must be observed on all tenders. All public procurement processes must comply with national legislation. There is, therefore, no need to restate the requirement to comply with the European Convention on Human Rights Act 2003 as this is already the case.

Two articles in the directives also cover human rights issues. Article 18 of the public procurement directive provides:

Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X.

Senator Nash rightly referred to this provision in his contribution. He legitimately raised cases where people have been unfortunately mistreated in the public sector. This is not unique to the public sector or to Ireland. We must all work collectively to stamp this out.

In addition, Article 57 gives contracting authorities the right to exclude an economic operator where it has been the subject of a conviction by final judgment in a number of areas, including child labour and other forms of trafficking in human beings as defined in Article 2 of directive No. 2011/36/EU. Extensive general guidance on conducting procurement in line with legal requirements is available to public authorities on the Irish portal for public procurement and the website of the OGP.

Staff involved in public procurement processes are required to be aware of the provisions of the various Acts, directives, regulations, policies and procedures that relate to their procurement area. Moreover, the OGP has developed standard template tender documentation which sets out obligations for the successful tenderer. This strong regulatory regime, combined with a consistent application of procurement practices through the use of standard template documents, ensures that human rights are fully considered in a public procurement process. That is notwithstanding the concerns that Senator Higgins raises. However, I am sure she will accept that a lot of what she has raised could be covered in other legislation.

I understand that the Bill, which deals with the fundamental aspects of how the State procures, has not undergone a regulatory impact assessment. In answer to Senator Hopkins' query, the Government's view is that this Bill would require a money message. The Bill places an additional administrative burden on contracting authorities and limits options open to the State in seeking value for money on commonly acquired goods and services. The measures proposed in it would call into question the audit trail of individual procurement processes and restrict the State's ability to provide services that represent value for money.

The Government appreciates the intention behind the Bill. We have discussed it at length. However, for the reasons I have set, it will abstain in the vote on the Bill. This allows an opportunity to examine other options. We appreciate the work that the Senator and her colleagues have done and the genuine and significant concerns that have been raised. However, we have raised issues that could prevent the passage of the Bill. I will abstain on it. When it proceeds to further Stages, there will be an opportunity for us to have a discussion on it line by line.

Many of the contributions rightly stemmed from some procurement processes that have gone pear-shaped. People often form their own analyses, thoughts and reflections on things that go wrong. There is an awful lot about the current processes that goes right, particularly our engagement with representative organisations of the small and medium enterprises, SMEs, that are doing this work throughout the country on a daily basis.

Issues pertaining to construction have recently been raised. The Minister for Finance, Deputy Donohoe, and I are acutely aware of that. We are working on the medium-term review of the construction works management framework. Reference has also been made to costs arising from the national children's hospital. I accept that point. However, nobody is suggesting an issue concerning quality. Quality was referred to in one of the contributions.

The Government will abstain on the Bill so it will probably proceed to Committee Stage, which will give us an opportunity to discuss it further. As I outlined earlier, we are in the middle of a review of procurement processes in a range of areas. We have sought the views of Departments and State agencies. We are going to engage with the lead spokespersons of the Opposition as part of that. Anybody is free at any stage to bring forward a detailed Bill on these issues, as Senator Higgins has done. Not everything we do is wrong. Throwing glib comments around in the Seanad or the Dáil about how the Government spends money on behalf of the taxpayer will not get us anywhere.

I thank the Minister of State and all other contributors for their engagement. I am grateful for the support many have given to the Bill. I wish to address a few of the points that arose. I appreciate that if the Bill passes today we will have further opportunities to engage on it.

It is important to be clear that quality is not balanced against value for money. Rather, it is a part of value for money. As the Minister of State mentioned the Office of the Comptroller and Auditor General, I took the liberty of checking its definition of value for money. It is interesting to note that finding the lowest price is only one third of it. The definition of value for money used by the Comptroller and Auditor General includes spending less, but spending effectively and wisely is equally important. This Bill is an attempt to ensure that spending well and wisely is placed alongside spending less. Those considerations are not in contradiction of the need to spend less, but alongside it, which is important. This week, two or three committees are discussing procurement issues where problems were encountered. These problems could be avoided if time was taken for a little more thought earlier in the procurement process.

I wish to briefly address a couple of concerns. There were questions regarding the criteria. To be clear, there is no scope for the criteria to be discretionary. They must be measurable, objective and clearly applicable to all who apply. There are currently constraints on how criteria are applied and there is not much scope for discretion.

There is concern that this would be used or manipulated. Mention was made of tenderers who may be aware of the process. At the moment those who are aware of the process know that all they have to do is tender an unrealistically low bid and if that is the lowest quoted cost, the contracting authority will be legally obliged to give them the contract. As was described eloquently by Senator Horkan, this is despite the officials in the room knowing that it is not a quality bid. This Bill seeks to address these issues upstream before any companies are involved and before there is a call for tenders. It would take effect at the design stage of the tender to ensure that space to reflect on those issues is provided later when the call for tenders goes out and companies have applied.

I had already indicated that I intend to remove the reference to Ministers. The Minister spoke of Accounting Officers being involved in detailed processes. They would not be. It would only be in what I would call exceptional cases, where lowest cost is being used in a very simple way, which will not be detailed, that an Accounting Officer would be involved. In that case they would be involved simply in signing off on that decision. It does not involve them in the process and they are not required to be involved. Where quality is being used it would sit with the procurement officer. I have talked with procurement officers who want to use quality measures, and sometimes feel nervous about whether they would be allowed to do that. This would empower and encourage the appropriate level of procurement officers to go ahead and use quality measures in the right way. It is an empowering piece.

The provision is at pre-call for tender and no companies are involved, so I do not believe there is the concern about company A, B or C. This is before any company has bid, before the process is finished and before any involvement from an Accounting Officer has begun.

We are aware of the unintended consequences: we have seen them at lowest cost. There is 2.4 times the benefit, which is back to the value for money issue. This is what we have seen. It is double the public benefit. There were a few other issues but I will skip over most of them.

On the question regarding the Office of Government Procurement, it would not be in a position to reject a declaration but at least the rationale would have been published because the decision must sit within the discretion of the contracting authority.

I welcome that the Minister has indicated there is a national conversation under way on this. It is very important. The Minister referenced many of the stakeholders and I suggest that he may add another stakeholder. As well as the companies and the contracting authorities, I would add the users of services to the list of stakeholders to ensure the users are heard, consulted with and given an invitation to talk about what it means to use adult diapers, to use a playground, to try to access a building and so on, and that this is reflected. There is a real opportunity there.

Other Members have spoken about potential areas of exclusion such as poor employment standards, the non-payment of subcontractors and tax evasion. That is another part of the procurement landscape, as are social clauses. The Bill, which deals with design and criteria, will sit very well alongside proposals that other parties may bring around social clauses, social considerations and exclusions. It does not attempt to do everything. It is not attempting to intervene at one point in the process but I believe it will change the landscape, the practise and the culture. It could change the experience of the public in a good way, as my colleague, Senator Ruane very eloquently noted, in respect of the trust the public has that their concerns and experience are cared about in procurement in Ireland. I thank all Members who have supported this Bill.

Question put and agreed to.

When is it proposed to take Committee Stage?

Committee Stage ordered for Tuesday, 9 April 2019.
Sitting suspended at 2.05 p.m. and resumed at 2.50 p.m.