Michael Moynihan
Question:57. Deputy Michael Moynihan asked the Minister for Public Expenditure and Reform his plans in relation to public contracts and low-balling firms as stated in Dáil Éireann on 12 February 2019. [8037/19]
View answerTuesday, 5 March 2019
Questions (57)
Written answers
The period immediately following the introduction of the public works contracts in 2007 was marked by a severe contraction in construction output in the wake of the financial crisis of 2008. In addition to a number of high profile insolvencies tender, prices dropped by 30% as contractors competed to win the remaining work available.
In 2014 the performance of the public works contracts was reviewed and, given the challenging tender environment preceding the review, the issue of price and its impact on the award and performance of the contract was identified. The report published in 2014 set out a series of recommendations and specifically highlighted the need for much greater definition of a project’s requirements so that those tendering can adequately price the project and the contracting authority can properly evaluate the prices returned in the tender.
With the increase in activity in the construction sector in recent years, tender prices are recovering to a level that more realistically reflects current construction costs. Indeed inflation in the sector is well ahead of that in the economy generally. The challenge for Government in this context is to maintain a competitive tension in tenders to ensure that value for money is delivered for the taxpayer. This challenge should not be underestimated given the increased investment in the sector both in terms of the NDP but also private investment.
The measures that have already been introduced since 2016 to ensure contracting authorities have a better understanding of the price returned in a tender include:
1. The standing of the bill of quantities was increased for the traditional contract type. This measure increases the focus of the design team in preparing more comprehensive design information that can be accurately measured for pricing purposes. With a comprehensive price breakdown it is easier to establish where unsustainable rates may be applied.
2. A mechanism to directly tender specialist works was also introduced so that these critical work elements are priced directly by the specialist market thus reducing the extent of the contract sum for which the main contractor has overall price responsibility.
3. The greater use of the Most Economically Advantageous Tender (MEAT) was also a recommendation in the report and while this measure does go some way to addressing the issue of low pricing, where a public body is dealing with a strong field of competent contractors their scores for quality will not vary significantly unless a targeted approach is taken with respect to the quality criteria, otherwise price will end up being the determinant.
These measures will be further enhanced by requirements for the adoption of Building Information Modelling once these are finalised by the Office of Government Procurement and implemented on a phased basis across the public capital programme.
In order to avail of the long standing provisions that are set down in the EU procurement directives for dealing with abnormally low tenders it is vital that projects are adequately defined so that a proper analysis of the constituent elements of the project can be undertaken. Ambiguity in the project requirements can easily result in a price that may adequately cover the tenderer's interpretation of the tender documents but that may not not necessarily align with the contracting authority's expectations.