Aengus Ó Snodaigh
Question:43. Deputy Aengus Ó Snodaigh asked the Minister for Public Expenditure and Reform if his attention has been drawn to underbidding by companies awarded public procurement contracts. [3063/13]
View answerWednesday, 23 January 2013
Questions (43)
Written answers
The procurement of public contracts should be conducted in an open, objective and transparent manner and the principles of all EU and national public procurement rules should be adhered to. A tender which might be regarded as abnormally low or below cost may not be rejected without investigation and consideration of the relevant elements that gave rise to a particularly low bid. Such elements might include an innovative technical solution or exceptionally favourable conditions available to the tenderer. The tenderer should be given the opportunity to explain the basis of the tender. Under Article 55 of 2004/18/EC; the EU Directive governing public procurement, contracting authorities are obliged to consider the constituent elements of a tender before it may reject a tender on the basis that it is abnormally low. Having carried out an investigation on the constituent elements of the tender, should it consider the tender to be abnormally low, the contracting authority may reject the tender but is not obliged to.
There is an acknowledgement that the construction industry has seen the greatest decline in activity and with it the highest rise in unemployment of all sectors in the economy. The collapse in construction output from the high and unsustainable level of almost 25% of GNP (€39 billion) in 2006 to just 7% of GNP in 2011 (€8.7 billion) has been accompanied by intense competition resulting in a reduction of tender prices across the construction sector. When investigating what may appear to be an abnormally low tender for a public works contract, contracting authorities must take into consideration the possibility that a contractor may be obtaining more favourable terms from suppliers and subcontractors than rival tenderers. There is little scope for manoeuvre on labour costs since, under the public works contracts, contractors are required to pay workers covered by the Registered Employment Agreements the rates and additional costs set out in those agreements. However, more efficient methods of working to reduce labour costs cannot be ruled out in assessing a tender. Notwithstanding this, there is nothing to prevent firms from performing a contract at a loss, providing the contracting authority has satisfied itself that the contractor has the financial capacity to absorb that loss.