I thank the Chairman and the committee for the opportunity to make an opening statement on Chapter 8 of the Controller and Auditor General's annual report for 2009 on public procurement by central government. As is set out in the report, the value of the overall procurement spend for 2009 was €16.3 billion. Of this, €7 billion relates to capital works and €9.3 billion relates to goods and services, of which the central government spend is in the order of €2 billion.
As the committee will be aware, the National Procurement Service, NPS, was established in the Office of Public Works in early 2009 on foot of a Government decision. The NPS, along with all public sector procurers, is charged with ensuring best value and cost savings deriving from procurement. The NPS has a lead role in modernising procurement practices for goods and services across the public sector. Accordingly, I will restrict my comments to goods and services only. An aim of the NPS is to raise the level of professionalism among public service procurers. In approaching its work, the NPS is guided by the previous findings of this committee and the various writings of the Comptroller and Auditor General. Chapter 8 of the Comptroller and Auditor General's report commences with an examination of the role and initiatives of the NPS in public procurement.
The NPS groups its work around three main strategic goals, namely, strategic sourcing; education, development and guidance; and e-procurement. During the past 12 months it has been involved in extensive activities to further each of these goals. I intend to deal with each of these in turn.
In regard to strategic sourcing, the NPS has identified the importance of professionally targeted purchasing based on the analysis of data, trends and Government policies across the public sector commensurate with what the Comptroller and Auditor General has been saying. Mindful of this, we have, for the first time in the public service, completed a major exercise to identify the top procurement spend categories across the entire service. This analysis gives the NPS and the wider public service a clear focus on categories of procurement that should be targeted for intervention. During the past year the NPS has launched major procurement campaigns in areas that could be best described as being among the most important "big ticket" items. These are areas of procurement that have a reach across the majority of the public service and, therefore, afford an opportunity for heightened levels of collaboration and also promise the possibility of maximum return on investment. These important areas would include energy, office supplies and equipment, vehicles, plant and equipment.
In setting out these targeted areas for procurement, it is important to raise an issue that has received some public comment in recent months, namely, the number of non-domestic suppliers winning public procurement contracts in Ireland. The European Commission released its statistic suggesting that 17% of contracts by number awarded in 2008 went to suppliers outside the jurisdiction. This statistic must come with a health warning, however, as it is based on incomplete data relating only to above threshold procurements where contract notices were published and the nationality of the winning tender was disclosed. When compared with the value, as opposed to the number, of contracts going to non-Irish companies in 2008, the figure amounts to less than 5% of the overall public spend on procurement. It should also be noted that the figures quoted by the Commission do not distinguish between companies in the UK and those based in Northern Ireland, so of the contracts going abroad, many may have stayed in the island of Ireland. The European Commission agrees that an alternative interpretation of its figures is that "about 95% of all procurement by value was from domestic suppliers." I think it appropriate to avail of this opportunity to set that record straight.
In the current economic climate everyone will be conscious of the plight of businesses, especially small and medium-sized enterprises, SMEs. We are aware that industries such as the print industry have been particularly badly affected by the downturn. The NPS is careful not to adopt a one-size-fits-all approach to procurement. Where possible and within national and EU law, the NPS will facilitate the breaking up of contracts into lots as well as encouraging collaboration between smaller SMEs. One particular example of initiatives in this area is where the NPS invited applications from print suppliers to be included on a panel from which public authorities could request tenders or quotations by way of less formal procedures for smaller contracts. We are in that space, as the Comptroller and Auditor General has said, in regard to framework contracts as well.
Without doubt the most significant development in the area of facilitating the SME sector has been the publication in August of circular No. 10 of 2010 from the Department of Finance. The NPS engaged with that Department in the preparation of this document which aims to address significant concerns the SMEs have in regard to access to public procurement opportunities. The new arrangements include greater open advertising of opportunities — the threshold isnow €25,000 in the area of goods and services; a reduced requirement for paperwork, accounts, etc. at the early stages of tendering; an instruction that suppliers are not to be charged for access to tender opportunities; an assurance that all criteria used would be appropriate and proportionate; and an instruction that insurance levels would be set at proportionate levels. It is important to note all of these actions are consistent with the recently published EU commissioned research on SME access to and participation in public procurement opportunities.
In regard to education, development and guidance, the importance of having a sufficiently knowledgeable and skilled cadre of public sector procurement purchasers is essential to the efficient and effective maintenance of the public service procurement environment. The NPS has embraced this challenge through a number of initiatives. These include the establishment of the first ever cross-sectoral education and development work group to identify specific training needs for procurement officials in the public service; the launching of a series of educational seminars on excellence in public procurement for buyers; and the launch of an accredited diploma programme for all NPS officials and the funding of attendance at the MBS in strategic procurement, a course which is taught in Dublin City University. Apart from formal training courses, the NPS has been very active in the area of providing guidance to Departments and Government offices which are either involved with or embarking on especially complex procurement projects.
The NPS is also very mindful of the need to ensure suppliers have access to a level of training and guidance because public procurement is complex. To date, in excess of 400 SMEs have benefited from workshops and presentations on public service procurement. This is ever growing and is changing constantly. We work in collaboration with InterTradeIreland, Enterprise Ireland and ISME. Owing to the reaction from those involved, it is planned to continue with this initiative into 2011.
Another area for streamlining processes is to reduce barriers to entry for suppliers and to mitigate legal risks on the part of the public service. We have undertaken with the Chief State Solicitor's office and the Attorney General a major initiative to standardise tender and contract documentation relating to procurement. These documents are out for observation and comment with various employer representative groups prior to roll-out across the public sector.
We have also moved to establish public service procurement networks. The NPS has recognised that before real progress can be made on the issue of public service-wide contracts, there needs to be a significantly increased level of communication and awareness between the key players within the public service. We are seeking to address this through the establishment of important networks and relationships. They include a procurement liaison officers' network representative for each of the 34 local authorities; a third level education procurement working group to identify areas for efficiencies and increased value for money in that sector; and a close working relationship with the Government contracts committee.
Recognising the necessity for the NPS to have access to the best of national and international advice on procurement and supply chain management, a procurement advisory group was established in 2010. To date the advisory group has met twice and has provided the NPS with valuable insights based on the members' experiences. I take this opportunity to acknowledge the generous support that each one of those members has given since the commencement of the group.
The NPS maintains the www.etenders.gov.ie website which is a critical part of the national infrastructure for public service procurement. This is where suppliers find out what is available for procurement. It is an extremely efficient site with some 4,300 public service buyers registered and a very significant 61,000 suppliers registered. A particular feature of the website is the level of transparency it affords suppliers who have an interest in public sector contracts by automatically e-mailing them alerts when tenders of interest are published. Those above the threshold of €25,000have come down so they will be on e-tender and suppliers will be aware of open tendering on these as well. While we are in the middle of the process of undertaking an upgrade of the site which is due for re-tender, there is no diminution in the service being provided. The Comptroller and Auditor General mentioned there has been a delay. We have had legal issues but there is no diminution in the service available on the e-tenders. It is scheduled for 2011, and it will also have significant enhancements and efficiencies for buyers and suppliers.
The Comptroller and Auditor General has noted in his report that from a public accountability viewpoint procurement must meet two criteria: to achieve value for money and to be conducted in an open, transparent and competitive way. We fully support this view. Through its efforts in central purchasing, organisation of collaborative arrangements and its initiatives to upskill buyers and suppliers, the National Procurement Service, NPS, aims to significantly increase the effectiveness of public procurement.
In all of our work we recognised the need to strike a balance between value for money for the taxpayer, the importance of a healthy and competitive supplier base, and the acknowledgment that many Government policies can be furthered through the public procurement process. We are very conscious that none of these issues are wholly mutually exclusive. In fact, sometimes objectives can appear to be in conflict. In approaching the market it is important that we give due consideration to all these tensions, and perhaps conflicts.
I thank my colleagues and counterparts throughout the public service for the assistance they have afforded my officials in the past year and look forward to their continued co-operation in the future. I thank the Chairman and the members for their attention and will do my best to answer any questions they may wish to raise on chapter 8.
