Tuesday, 1 October 2019

Questions (73)

Pearse Doherty


73. Deputy Pearse Doherty asked the Minister for Public Expenditure and Reform the extent to which his Department has issued guidance notes or made provision for the exclusion of economic operators in procurement procedures for public contracts in circumstances in which the economic operator has shown significant or persistent deficiencies or failures in the performance of a prior public contract; and if he will make a statement on the matter. [39623/19]

View answer

Oral answers (6 contributions) (Question to Public)

Our public procurement system is in need of urgent reform. We need a system that is green, promotes social justice and facilitates local wealth building. We need a procurement model that avoids the spending scandals that we have seen under this Government, most notably in relation to the national children's hospital and the national broadband plan. What provisions has the Department of Finance made, such as guidance notes or systems, to exclude contractors from public contracts if they have shown persistent failures in previous contracts awarded?

Public procurement in Ireland is governed by EU procurement directives and national legislation. Public bodies are obliged to act in accordance with these rules and must respect the general principles of EU law, including non-discrimination, the free movement of goods and services, equal treatment and proportionality and transparency in awarding public contracts. They must also ensure that procurement transactions and decisions are fair and equitable and deliver value for money.

Public procurement procedures require applicants to meet certain standards when applying for public contracts. The criteria upon which contracting authorities may exclude applicants from the award procedure of public contracts are set out in the directives and in corresponding national legislation. In addition, information on the circumstances in which a contracting authority may exclude applicants can be found in Public Procurement Guidelines for Goods and Services published by the Office of Government Procurement. These guidelines were updated in January 2019.

The circumstances that would lead to exclusion on the grounds of poor past performance are significant or persistent deficiencies in a prior public contract. Deficiencies must be material and have led to termination, damages or other comparable sanctions. A contracting authority cannot be merely dissatisfied; it must have taken steps to deal with the poor performance at the point at which it became evident by applying the provisions of the contract, up to and including termination where necessary. Where a contract has been terminated or damages successfully applied, a contractor may be excluded from subsequent tender competitions for up to three years from the date of the termination or the application of damages unless the contractor can demonstrate that it has taken the steps necessary to remedy its performance.

Earlier this year, a construction firm, Western Building Systems, was awarded a contract to deliver a 60-bed modular ward extension at University Hospital Limerick. The same construction firm was found to be responsible for structural defects in many of the 42 new schools that have been built in recent years. In August, the Minister for Education and Skills, Deputy McHugh, said that structural flaws had been identified in a further 17 school buildings which would require temporary works to be carried out in the following weeks. All of the funding for this is coming from the pocket of the taxpayer. Asked why this firm won the contract for the ward at University Hospital Limerick, the Minister for Health said that Ministers in Departments do not have a role in the procurement process, which has to be run in accordance with very strict national and EU laws. The Minister for Health does not seem to understand EU regulations or the procurement process because section 56, paragraph 8 of the European Union (Award of Public Contracts) Regulation, which was transposed here in 2016, is very clear. It says that a contracting authority may exclude from participation in a procurement procedure any economic operator "where the economic operator has shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract". Given the evidence that we have regarding the widespread defects related to this contractor, why under God did the Government not apply this provision and exclude it from bidding for and being awarded a further public contract to build a modular hospital extension?

The Deputy knows it is not the role of individual Ministers to get involved in determining who gets what work within the State. It is the role of independent authorities to determine the successful applicants in the bidding process and to decide who is best able to carry out the work. If I was determining who gets what work in this State, work that is often very valuable, Deputy Doherty knows it would create a whole other set of challenges and difficulties of which he would be rightly critical. In my answer to Deputy Cowen earlier I said we are examining if it is possible to make a broader assessment of whether work carried out by a company would influence other work it might get in the future. At all times, we must be mindful that companies might have difficulties with one project but might be successful in delivering many others. My recollection of the great difficulties that happened with school projects and school buildings earlier this year is that the Minister for Education and Skills and his Department went to great lengths to ensure the taxpayer was protected in dealing with the issues identified.

This should simply never have happened. We have a company here which was involved in serious deficiencies in building schools where our children are educated. It went on to bid for and was awarded a contract to build a modular extension to University Hospital Limerick. The rules are very clear. I have read them aloud. The European Union (Award of Public Contracts) Regulation, which was transposed here, is clear that we can exclude a company where it has shown "significant or persistent deficiencies" in the performance of a substantive requirement under a prior public contract. A failure to understand a paragraph of the regulation is not an excuse for the Minister failing to implement this. The Government must deal with this promptly. The provisions are there to protect the public purse and to make sure that entities awarded contracts for capital projects can fulfil those contracts and that we learn from past experience.

My party has also tabled the Regulation of Tenderers Bill 2019, which would contribute to this end by excluding abnormally low tenders from the procurement process. This reform was introduced by my party in the North and was updated in 2016. All of this is permissible under European law. As the Minister in charge of this area, will the Minister, Deputy Donohoe, ensure that these provisions, which are allowed under European law, are introduced and robustly implemented?

I referred to this earlier on. I am currently involved in reviewing the public spending code. I am looking at whether a different balance needs to be struck. I assure the Deputy that I am well aware of, and understand, all of the things we need to deliver in procurement policy. While I have acknowledged previously, as I have this afternoon, that which we have got wrong in respect of the national children's hospital and national broadband plan, many other projects across the country are being delivered on time and on budget. We have many examples of our procurement policy working very well. We are reviewing the public spending code in respect of very big projects. When I publish the public spending code in a few weeks' time, I will be in a position to update the House further.