Dáil Éireann díospóireacht -
Thursday, 3 May 2012

Vol. 764 No. 2

Construction Contracts Bill 2010 [Seanad]: Second Stage

Minister of State at the Department of Finance (Deputy Brian Hayes)

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

As the House is aware, the programme for Government contains a commitment to introduce legislation to protect small building subcontractors who have been denied payments from larger companies. In this regard, I have been working with Senator Feargal Quinn to develop the Construction Contracts Bill as robust legislation.

I regard this legislation as a Private Members' Bill which is unique for two reasons. First, all Stages were passed by the previous Seanad and it has now come before the Dáil. Second, although significantly amended from the original Bill, the legislation is most definitely the product of a bipartisan approach. It would not be where it is were it not for the diligence and initiative of Senator Feargal Quinn. I very much hope the spirit of co-operation the Senator and I have shown on this Bill will be extended in this House.

Construction is a very important sector of the national economy. It is widely acknowledged that well managed and successfully delivered construction projects can improve the delivery of public and private services. However, the economic downturn in the construction sector has highlighted the lack of formal contractual arrangements and bad payment practices in the sector. While there is strong anecdotal evidence of the practice of delayed or non-payment having escalated in recent times, it should be noted that the problem is not new. It is reported that many firms, mainly subcontractors, are experiencing serious difficulty in obtaining payment for work done. It is, therefore, important that, where possible, payment transactions within the sector should be facilitated to ensure prompt payment of the correct amount.

Apart from a small number of formal standard forms of contracts and conditions of engagement, the current arrangements for construction contracts and conditions of engagement are much too imprecise and informal. As a result, they do not offer a cost effective, timely solution for consultants, contractors, subcontractors and suppliers in the supply chain. The Bill before the House seeks to address the issue of non-payment to construction sector contractors, subcontractors and subcontractors of subcontractors who have completed work to the required standard on construction projects. The Bill will address these issues by providing statutory arrangements for payments under construction contracts, including providing for interim payments, thus reducing a payee's exposure to non-payment, and by introducing a new mechanism for the swift resolution of payment disputes through a process of adjudication.

The Bill does not purport to provide a response to all of the causes or manifestations of non-payment in the construction sector. This is a complex area and a comprehensive response to all of the causes of non-payment in the sector will not be provided in a single Bill. In particular, it is important to realise that many of the non-payment difficulties are linked to business failures and this Bill will not cut across the normal rules for company liquidation and receivership or prompt payment regulations.

In setting out the main provisions of the Bill, I am mindful that the Bill that passed the remaining Stages in the Seanad was not as complete as it could have been. In this regard, I sought a regulatory impact assessment of the Bill to give me the opportunity to examine the issue from first principles as the Bill introduces new rights, obligations and systems which will affect contracts and impose new regulatory requirements between clients, contractors and subcontractors across a broad sweep of construction operations in the State. In this regard, I will shortly set out the main findings of the regulatory impact assessment and give an indication as to the areas of the legislation that will be subject to amendment on Committee Stage.

For the information of the House, I propose to set out the main provisions of the Bill. Section 1 deals with interpretations and is standard. Section 2 concerns the scope and application of the Bill. It excludes certain contracts from the definition of "construction contract" and ensures the Bill will not apply to contracts below certain value thresholds. It also ensures that, in the normal course, the Bill will not apply to an ordinary individual who enters a contract for the building, extension or renovation of his or her home. He or she will not be required to comply with the new rules set out in the Bill. However, the section also tries to ensure that contracts concerning so-called "trophy homes" come within the scope of the Bill.

Section 3 sets out the rules to govern payments under construction contracts. All construction contracts will have to provide clearly for the amount and timing of payments. If a contract fails to specify these matters, the terms set out in the Schedule will apply. This section also ensures that "pay when paid" clauses, as they are known, will no longer be acceptable in contracts. This means, for example, that subcontractors or subcontractors of subcontractors will no longer be dependent on a main contractor being paid before they are entitled to receive their payments. This is a significant change.

Section 4 details the arrangements for a party to claim payments under a construction contract. It sets out detailed procedures for making a payment claim. In the event that the amount involved is disputed between the parties, this section works to ensure each of the parties is clear about the amount in dispute and the basis on which the dispute arises. This provides an important clarification which is not readily available to contracting parties. It then forms the basis for seeking a resolution of a payment dispute, through moving on to the adjudication process provided under the Bill.

Section 5 confers a new statutory right for contracting parties. A party who has not been fully paid - in accordance with the contract and the terms of the Bill - will have the right to suspend work under the contract for a period of up to two weeks. The section sets out the rules under which the suspension of work can occur. This provision was developed to help to rebalance the power between contracting parties, without unduly hampering the completion of a project. The existence of the right should help to ensure payments are made on time. Where a payment claim is still unpaid following the period of suspension, the appropriate path is for the parties to move on to an adjudication and seek resolution of the matter through that process.

Sections 6 to 9, inclusive, are related. They provide for a new process for the adjudication of payment disputes and set out arrangements for this new process. This is a critical aspect of the Bill and creates an important mechanism by which unpaid parties to construction contracts can have a relatively quick and cost-effective resolution of their payment disputes. Therefore, these sections deal with the right to refer payment disputes to adjudication; the right to suspend work for failure to comply with an adjudicator's decision; the selection of a panel of adjudicators; and the code of practice for adjudication.

Section 6 makes provision for a new system of adjudication. It gives contracting parties the right to refer a payment dispute to adjudication and sets out the arrangements to be followed. Importantly, it ensures a construction contract cannot be drafted so as to try to negate or reduce this right to adjudication.

Section 7 provides that if an adjudicator's award is not paid in full within seven days of the adjudication decision, the unpaid party has a right to suspend work under the construction contract. It sets out the rules governing this arrangement.

Section 8 sets out arrangements for the creation of a panel from which an adjudicator can be appointed to deal with a payment dispute. Section 9 gives the Minister for Public Expenditure and Reform the power to prepare and publish a code of practice to govern the conduct of adjudications.

Section 10 provides that parties to the contract may agree on a method to deliver notices referred to in the Bill. In the event that they do not agree, the Bill allows for delivery by a postal service provider. This is a common feature of legislation that provides for the delivery of notices.

Section 11 provides for the Short Title and commencement arrangements for the Bill. It provides that it may be cited as the Construction Contracts Act 2012 and that it will come in effect on such day as the Minister may by order appoint.

The Schedule to the Bill works together with section 3. The Schedule sets out default arrangements for contract payment terms. These will be minimum standards for subcontracts. This is a major innovation which should especially help sub-contractors.

In order to address the concerns raised about the current draft of the Bill, Senator Feargal Quinn and I arranged to meet stakeholders in the construction sector on 28 June 2011 to discuss the Bill. I also recognise the very helpful contributions of the main Opposition spokespersons, Deputies Sean Fleming and Mary Lou McDonald, on the regulatory impact assessment that took place on that occasion. I was delighted that they were able to join that discussion with the industry and make observations accordingly. This consultation highlighted a number of matters relating to the Bill that required further consideration. These have been taken into account in the regulatory impact assessment of the Bill, which was completed late last year and is available on my Department's website. It was published once we received it. That is important because we gave a commitment in the programme for Government to publish regulatory impact statements. It was a small part of the programme for Government, but it has now happened and is an important change to how legislation is formed.

The regulatory impact statement examined issues relating to payment practices in the construction sector and assessed the need for legislative intervention. It found that there were problems with construction contracts. The two main issues are as follows. The majority of construction contracts are carried out on an informal basis, with no written contract in place. That is typical, as we all know from experience in our constituencies. There are no minimum standards for payments and their timing. The sector is small, which means that where there is a contract, the bulk of the power rests with the main contractor. In cases where work is carried out on an informal basis, the subcontractor has no way of securing payment where there is a dispute. In the minority of cases where formal contracts are in place, the route to resolving such disputes - arbitration or the courts - is costly and time consuming.

In addition, the regulatory impact assessment examined the main proposals to amend the Bill raised during the Seanad debate and subsequent consultation. It found that there were merits to considering amending the Bill in a number of respects. I would like to go through these ideas and suggest how we might deal with them. On the question of thresholds, private contracts below €200,000 and public contracts below €50,000 do not come within the scope of the Bill as passed by the Seanad. The regulatory impact assessment examined the UK experience of adjudication, where the system has been up and running for some years, which showed that the majority of disputes the parties to which used such processes concerned contracts valued between £10,000 and £50,000. Therefore, it was concluded that these thresholds were too high and should be reviewed or removed.

The Bill provides that an adjudication award is binding, except where either party refers the case to arbitration or the courts. A key consideration in developing proposals is the need to strike a balance between ensuring the efficient operation of the construction sector in Ireland, both in terms of cash flow and the resolution of payment disputes, and the safeguarding of public moneys. The State is one of the biggest purchasers of construction contracts. The regulatory impact assessment found that as the Bill was drafted, the balance would appear to favour the payer. To resolve this issue, officials from the Department of Public Expenditure and Reform are developing a number of options aimed at making adjudication binding for both public and private sector contracts, while at the same time protecting the taxpayer. We have to get the balance right.

The regulatory impact assessment found that the inclusion of all suppliers would significantly broaden the scope of the Bill, as supplies make up a significant proportion of a construction contract; thus the arrangements to include numerous suppliers could create an unduly onerous process, which could create a barrier to entry for smaller enterprises. It concluded that supplies made specifically for a contract - bespoke supplies - could be included in the legislation, but it recognised that it might be difficult to interpret what was or was not bespoke. To summarise, it concluded that the best option was to proceed with the Bill, but to amend it to bring lower value contracts and bespoke supplies within its scope and to make the adjudicator's award binding. In general, it concluded that any such amendments should be formulated in such a manner that would protect the taxpayer.

There was intense interest on both sides of the House to discuss this matter. In fairness to Deputies, there has been correct lobbying to make sure we get the Bill through. I am now asking Members to put it through Second Stage, but I will indicate the matters on which I will be tabling amendments on Committee Stage in the light of the conclusions of the regulatory impact assessment. Since publication of the regulatory impact assessment, I have had the opportunity to develop proposals aimed at resolving these and other issues. While I am not proposing amendments today, I signal to the House my intention to bring forward specific Committee Stage amendments to deal with the following issues. First, in order to ensure the legislation applies to a majority of construction contracts, it is my intention to bring forward amendments to broaden its scope by reducing or removing altogether the current monetary thresholds contained in the Bill. Second, having examined similar legislation in other jurisdictions, I can see the merit of broadening the scope of the legislation to include bespoke construction supply contracts. I stress that it will be difficult to define what is meant by bespoke supplies, but I will attempt to do so on Committee Stage. Third, making adjudication awards binding for both the public and private sectors is complex. We have to get the balance right between giving this legislation the necessary enforcement provisions and ensuring its application is equitable and the taxpayer is safeguarded. Fourth, the two week time limit preventing contractors from withdrawing services in the event of non-payment where work has been carried out to a satisfactory standard seems insufficient and, therefore, will need to be amended.

I am aware of a number of other technical issues raised in relation to the Bill. These are being examined and, where necessary, amendments will be brought forward on Committee Stage. Given Members' substantial interest in the Bill, I will keep an open mind regarding issues they may wish to flag at this stage for consideration on Committee Stage. This is not my Bill; it is Senator Feargal Quinn's and I am strongly of the opinion that we must take a bipartisan approach to it. It is essential that the solution to this issue is balanced so as to avoid imposing unnecessary regulatory or cost burdens on parties in dispute, the State or others. I am very grateful to Senator Feargal Quinn for his commitment to the legislation and look forward to working closely with him to ensure we develop robust legislation to tackle the issue. I will, of course, give consideration to constructive suggestions made on Second and subsequent Stages.

An Ceann Comhairle

I call Deputy Dara Calleary who is sharing time with Deputy Seán Fleming.

Deputy Dara Calleary

I welcome the arrival in the House of the Construction Contracts Bill 2011. I join the Minister of State in paying tribute to Senator Feargal Quinn for the huge amount of work he has done, with Mr. Seán Gallagher. As a Minister of State, I had the privilege of bringing the Bill through the Seanad. If I can express one concern, it is about the length of time it has taken to bring the Bill to this stage. In the meantime, many sub-suppliers have gone under because of the environment in which we are operating or the lack of protection available. However, I thank the Minister of State, Deputy Brian Hayes, for being open with every Member of the House about the work being done on the Bill. Can we aspire to seeing it pass through the Houses before the summer recess?

Deputy Brian Hayes

I hope so.

Deputy Dara Calleary

There is not a Deputy in the House who has not spoken to a subcontractor in difficulty. The worst thing of all is when a subcontractor is let down on a State contract, whether with the HSE, a local authority or third level institution, that he or she thought was gold plated. If the Bill can be enacted before the summer recess, we will have done some service.

I cite examples of why the legislation is necessary and would like to move away from technical language what happens in to real life. Like all Deputies, I know of large household name contractors which have gone under in the course of carrying out a contract. We must stand back from the legislation and ask questions about procurement law and tendering processes that have encouraged the submission of the lowest price contracts and poor examination of what makes up a tender. In some cases, there was a poor assessment of a company's ability to deliver on a contract. The practice of using turnover thresholds, excluding companies under a certain level of turnover from applying for certain contracts, is also flawed. A contractor might have a large turnover from building large numbers of houses but be incapable of building a school or completing a large-scale engineering project. When the job has been done, the Minister of State might take a look at the issue of procurement which is, rightly, linked with a jobs strategy. We must ask ourselves if we are getting the best bang for our buck, in terms of what the Government is spending on job creation measures.

On my desk I have the case of a sub-contractor who started work on a health care facility. The main contractor went under and the subcontractor was left €150,000 short. He does not have that money. The promoters of the project went back to the HSE which retendered and the project is under way again. However, my constituent is still short his €150,000. He can hardly afford to buy the newspaper to see the project advertised, much less have the capacity to resubmit a tender. Another subcontractor is putting seating into a local authority theatre. The main contractor went under, having been paid by the local authority, but the carpenter was not paid. He was able to take that hit and started a second project. However, another main contractor went under, again on a local authority project, and the carpenter could take a second hit. Six workers were laid off and talented people whose skills we need have left the country. One assumes Government contracts are gold plated and have an insurance policy built in.

Sections 5 to 9, inclusive, of the Bill are crucial. The danger lies in informality in the sector and the "Dúirt bean liom go ndúirt bean léi" way of doing business. I hope the experiences of subcontractors in the last three or four years will get rid of that informality forever. It has led small contractors to depend on big names which never let them down but did not put anything in writing. If we implement the Bill, a health warning must be issued with it to the effect that these sections are being included because of people's experiences. Whatever the practices were, the language of the Bill must formalise the practices that may have served us previously.

Section 3 is particularly welcome. It strikes me as odd that subcontractors allowed amounts of money to build up. For example, €150,000 is a huge amount of money. In that case, the subcontractor probably thought "it would never happen to me". It is a huge amount of money to which to be exposed on a relatively small contract. The practice of "pay when paid" must be got rid of and the change must be enforced. Who will enforce the measures included in the Bill? We can make legislation, but enforcement and breaking what has been a culture for decades in the construction industry will be a bigger job.

The Minister of State's commitment to address amendments on Committee Stage is fair. I also acknowledge the contribution of his party colleague, Senator Paul Coghlan, who spoke strongly in the Seanad, particularly on the issue of thresholds. It is probably not possible to include every contract in the legislation, but the thresholds prescribed in the Bill are too high. Given the current cost of construction, contracts are now 40% or 50% lower than they were six or seven years ago, which is to be welcomed, but the thresholds envisaged in the legislation need to be changed to reflect this.

The question of supplies is complex. It is easy to go into a theatre and take out seats, but one cannot take out concrete. The Irish Concrete Federation has come up with an interesting definition and referred to suppliers of construction products and materials that are "irretrievable due to their incorporation in the structure of the building". That would cover much ground work, concrete and bricks that cannot be taken away as one can take away other things from projects.

Deputy Brian Hayes

It is like divorce law. It is irretrievable.

Deputy Dara Calleary

Yes, indeed. The Minister of State and his officials might give some consideration to that definition. It is narrow enough not to cause problems in the legislation the Minister of State envisages. I wonder whether the legislation is too late. I worry that the horse has bolted. The construction industry is, in effect, at a standstill. One hopes that when it comes back to some sort of normal level this protection will be in place. I do not suspect there is any possibility, given the lack of resources, of some sort of compensation fund for those companies that have been stung in recent years. Many genuine people have been stung. In the briefing notes to the legislation reference is made to bonds, insurance policies and suchlike, but unfortunately, they were not in place. Insurance is something one wishes one had on a rainy day, but one did not. Many good people have struggled to keep their businesses afloat. These are people who genuinely thought that because the HSE or local authority, for example, were responsible for a building they would pay the bills and that everything would be grand. The local authority or HSE discharges responsibility to the main contractor, but unfortunately the food chain down the line did not see any benefit.

I welcome the publication of the Bill. As the Minister of State, Deputy Brian Hayes, indicated, it is a tribute to Senator Feargal Quinn in particular that he has stuck with the Bill. He has done a lot of work on it. It would be beneficial if we could aspire not to go into another session with this work unfinished. I understand that many speakers will wish to contribute on Second Stage but there is no reason the Bill should not go through Committee Stage quickly. I suspect the Bill will have to go back to the Seanad. If we could complete it between now and the middle of July we will have done some sort of service to those who are very badly exposed in the construction sector at the moment.

Deputy Mary Lou McDonald

I wish to share my time with - or steal it from - Deputy Peadar Tóibín.

An Ceann Comhairle

Is that agreed? Agreed.

Deputy Mary Lou McDonald

This legislation is long awaited and desperately needed. I commend the Minister on the constructive engagement he has had with stakeholders and the Opposition in recent months. The Bill has the support of the entire construction sector, from house builders to general contractors, civil engineers, mechanical and electrical contractors, architects, building suppliers and the construction sector. It is now time for the Government and all of us to bring the Bill to a conclusion.

As the Minister of State, Deputy Hayes, outlined, Senator Feargal Quinn must be heartily commended on introducing this legislation in response to the desperate financial fall-out for subcontractors unable to secure payment for work completed. I do not wish to sound a dissonant note but I will do so anyway, it is to the previous Government's shame that big contractors and developers were glad-handed and small subcontractors have been failed so spectacularly during the previous Administration's time in office.

Part of the impetus around the campaigning work for the legislation is that it became apparent that big developers and contractors had more cushioning and protection at their disposal to protect themselves and their personal wealth, enabling them to continue in business or to pursue new ventures while small subcontractors were literally hung out to dry. The impact of that has proven devastating for many. Small businesses are left crippled by insurmountable debt arising is some instances solely from moneys owed to them by developers. I will follow Deputy Calleary's example and cite a real-life example of the challenges facing small subcontractors in the absence of the legislation we required to tackle non-payment.

The example to which I refer is not from my own neck of the woods. It relates to GG Roofing - a Mayo-based subcontractor - which successfully completed work for Westport Property and Construction on the Silverbridge shopping centre in Claremorris in July 2009 and invoiced the main contractor the balance of the moneys owed to the company of just over €29,000. Westport Property made a few small erratic payments from November 2009 to June 2010. After a protracted legal dispute the courts ruled in favour of GG Roofing in April 2011, yet one year later the company has still not been paid. The money owed to the subcontractor is clearly of little or no concern to Westport Property but for GG Roofing getting paid will keep the lights on - if not it could be left with no option but to shut up shop.

I wish to address some of the dilemmas and shortfalls in the Bill as currently presented. I will begin with thresholds to which the Minister of State referred. We must find a way to ensure the finished product in terms of the legislation is a robust mechanism that confronts the accepted practice of non-payment by big contractors in all its guises. The company to which I referred, GG Roofing, is the perfect example of why the minimum monetary thresholds that put private sector contracts under €200,000 and public sector contracts under €50,000 outside the scope of the legislation must be removed from the Bill. The thresholds are counter-productive and do not reflect the type of moneys involved for small subcontractors when it comes to issues of non-payment. The Royal Institute of the Architects of Ireland has warned that leaving the thresholds at such a high level would result in all kinds of anomalies. The Society of Chartered Surveyors is of the opinion that if the threshold is not removed entirely the legislation will be a complete waste of time. I am pleased the Minister identified thresholds as one of the areas for amendment.

On the issue of non-binding adjudication, it is broadly agreed that the legislation's failure to make adjudications binding in the event of arbitration is a real cause for concern. Adjudication is, as the Mechanical and Electrical Contractors Association correctly points out, a low-cost dispute resolution mechanism and is intended to deliver a result in a short timeframe. The legislation as it stands undermines that objective. Arbitration and litigation are time consuming and when it comes to the courts years can go by with little result for subcontractors. The regulatory impact analysis to which the Minister of State referred proposes a two-pillar approach to address this weakness with differing arrangements for public and private contracts. While it proposes that adjudication would be binding for both public and private contracts it suggests that such awards granted to public contracts should be covered by a bond in the event that the award is overturned at arbitration.

The Construction Industry Federation, CIF, has argued against this solution on the basis that it believes contractors will have difficulty obtaining such a bond thus leaving them unable to secure the award and, in turn, make payments to suppliers and subcontractors. Alternatively, the CIF proposes that the Bill would give the power to the courts to withhold enforcement of adjudicator's decisions where the court is satisfied that the payer presents the court with evidence that the payee is unlikely to repay the moneys in the event that the dispute is ultimately resolved in favour of the payer in litigation or arbitration proceedings. I accept there is no simple or immediate solution to the challenge. The purpose of making the adjudication binding is to provide an alternative to long, drawn-out proceedings as experienced by current arbitration and conciliation procedures which work against small subcontractors. Often, it suits large contractors with significant resources behind them to drag out challenges to non-payment through existing processes or through the courts.

Contractors are living with the reality that the value of the construction sector shrunk from €38 billion in 2006 to €9 billion in 2011. In equal measure, protective measures must be put in place. The capital expenditure budget has been cut by the Government, a decision that impacts on contractors, subcontractors and the wider economy. Small subcontractors simply want to be paid for their work.

The two pillar approach may not work. In other jurisdictions the adjudicator's decision is enforced and upheld by the courts in the interim. If we look to our nearest neighbour, in Britain only 300 out of an estimated 18,000 adjudications have been challenged in the courts.

The section in the Bill dealing with payment claim notices does not appear to include a provision dealing with an instance where a payer fails to respond to a payment claim. When this occurs, the amount to be paid should be the amount claimed. This would address the fundamental problem and also give the main contractor an incentive to respond to a payment claim.

I very much welcome the fact that the Minister of State referred to the issue of suspension limits. The regulatory impact analysis did not deal with the concerns raised about the suspension limit as set out and as such, I was pleased to hear the Minister of State articulate them. It is my party's view that the right to suspend work for non-payment cannot be time-restricted to two weeks. This will not act as a sufficient deterrent under the law. If the Government was to persist with the two week suspension limit, it would undermine the purpose of the provision. It would be unreasonable to ask subcontractors to go back to work after two weeks having still not been paid and to incur further costs. It is welcome that this is a matter on which the Minister of State will table an amendment and that we will address on Committee Stage.

On the inclusion of a trust clause, the Mechanical and Electrical Contractors Association has estimated that, in the case of the six largest construction companies which have gone out of business in the last two years, at least €500 million was left owing to subcontractors, which is astonishing. The reality for the tens of thousands of tradepersons employed by subcontractors is that €500 million worth of work went unpaid. It is on this basis that the association has proposed the inclusion of a trust clause in the legislation to ring-fence moneys paid to a main contractor to ensure payments due to subcontractors would be paid in full. The organisation argues that the moneys should be paid in trust to a main contractor for disbursement to subcontractors to safeguard payments to SME companies. There are trust provisions in some of the standard contract forms, but they are frequently struck out. On this basis, a statutory trust provision is required, as applies, for instance, under Canadian law. We must look at this issue of ring-fencing moneys paid by the payer to the payee for work completed by subcontractors.

In respect of goods and services, I support the assertion of the regulatory impact analysis that the scope of the Bill needs to be broadened to include goods and products specially manufactured for a project. The Minister of State mentioned bespoke supplies. I appreciate that there will be some work to be done to come up with a precise definition because, as has been said, the Irish Concrete Federation points out that products which are integrated into the fabric of buildings such as concrete blocks are irretrievable, a point on which we can agree. In its submission on the Bill Irish Asphalt notes that bituminous road materials are perishable which must be incorporated within hours of delivery. The suppliers of these goods and services need robust legislative protection against those who cannot or will not pay. Existing legislation does not fulfil this role.

These are my initial thoughts on the Bill. The manner in which we have gone through this process, certainly from the time I arrived in the Dáil, has been extremely productive. There is a significant degree of commonality in terms of the outstanding issues that we need to address. I look forward to seeing the Minister of State's amendments. It is welcome that he is so open to considering amendments and ideas others might bring forward.

Deputy Peadar Tóibín

Cuirim fáilte roimh an Bille seo agus roimh an obair iontach atá déanta ag an Seanadóir Quinn. Léirigh mo chomhleacaí, an Teachta Mary Lou McDonald, tuairimí mo pháirtí ar an Bhille. Gan amhras, lig an Rialtas deiridh agus rialtóirí an Aontais Eorpaigh do bhaincéirí agus forbróirí réadmhaoine dul amú. De bharr sin, tá ar oibrithe foirgníochta agus íocóirí cána an praghas is mó a íoc.

Over 160,000 jobs have been lost in the construction industry. The Central Statistics Office figures indicate that the construction sector accounts for 57% of all job losses since 2007. Its important to repeat that figure to take in the scale of the collapse. Almost 60% of the jobs lost in the economy have been lost in the construction sector. It is a staggering figure which represents a staggering loss of skills. It is a staggering tragedy for the families and communities concerned.

I am always angered when commentators and some Ministers refer to the scale of job losses as an adjustment, explaining away the figures as a natural modification. An adjustment is minor and quick. What the construction sector and those who work in it have experienced, in both economic and human terms, is catastrophic.

The boom in construction was promoted by a systemic failure to regulate bank lending and the loss of monetary powers by the State to the European Union. Continued over-contraction of the industry is the result of systemic failure and the pro-cyclical response by the Government. The focus has been on a fiscal strategy that removed €3.7 billion in the last budget and has driven demand downwards. This includes a cut in capital infrastructure spending of €750 million this year and a projected cut of €550 million next year. The Government's aspirational growth figures are not realisable in these circumstances. One cannot take €1.3 billion out of the economy over two years and expect this sector to grow. According to the Department's figures, it will result in 11,000 job losses.

At the same time as the Government has cut investment in the construction industry, the banks, despite being recapitalised from the public purse, have yet to deal with the problem of impaired loans to SMEs. The recent findings of the Central Bank are that 58%, the majority of loans to the construction industry, are not performing. The bank has also found that one third of all capital lent to SMEs last year went to construction, the vast bulk of which was in respect of the roll-over of existing loans. Private sector demand has fallen off a cliff owing to rising unemployment and the lack of capital. The sector remains hamstrung by debt and cannot gain access to credit.

The response of the Government has been to cut the level of public sector investment in physical infrastructure at a time when it is most required. The failure of the Government to deal with the problem has led to the situation where payments within the sector have been frozen. As Members throughout the House have stated, one business failure has a knock-on effect on suppliers, contractors and subcontractors. For all the talk of a possible contagion within the banking sector, it is rife within the construction industry.

That is why we welcome this Bill as a proposal to free up the flow of money within the construction industry.

However, there is more to be done if the Government is serious about getting construction workers back to work and developing the sector to a sustainable level. It should begin by reversing cuts to infrastructure spending and investing in shovel-ready programmes that will create jobs immediately as well as enhance the long-term competitiveness of the industry. Other steps that must be taken include investing in the roll-out of broadband, retrofitting of public and private buildings and facilitating new builds in the education sector. In the North there is 90% medium to fast broadband availability, but the equivalent availability in the South is a mere 4.6%. Increasing broadband availability by 10% leads to an increase in GDP of 1%. The Government is failing to take these steps to invest in our long-term competitiveness. The response, of course, will be that we are broke, but the same Government paid out more than €21 billion to the banks last year.

There are other issues that must be addressed in the construction industry. Procurement is of particular importance and something I have discussed with the Minister. There is a danger that the centralisation of procurement makes it less accessible to small businesses. It does not have to be that way. There are actions the Government can take which would ensure, even under a centralised system, that contracts remain accessible to all. Unfortunately, that is not necessarily the direction in which the Government is headed. We must have procurement guidelines that allow small and medium-sized enterprises to compete for contracts and which ensure that those winning tenders will enhance local employment and skills and purchase local goods and services. Operators who secure public contracts must comply with all conditions of the contract, including paying the recognised rates of pay. There is much anecdotal evidence of contractors and subcontractors on public contracts not paying the going rate and otherwise not respecting the entitlements of workers. Not only is this severely detrimental to the workers concerned but it also leads to an uneven playing field. The Government must ensure that the conditions attaching to public contracts are fully complied with if its own policies are not to be fundamentally undermined.

Ireland is fortunate to have global leaders in the construction sector. We have the necessary skills and we also have massive excess capacity in the sector. Those skills are in demand across the globe. Companies like Kingspan have demonstrated that it is possible for this State to create world-beating products. The Government must take action to maximise competitiveness within the domestic sector. It needs to tackle cartelism where it exists in order to drive down costs, particularly energy costs. Despite the increase in competitiveness in other sectors, high energy costs have served to maintain and increase construction costs. We must also tackle the black economy, which reduces revenues and fundamentally undermines the ability of legitimate businesses to function.

There is a range of policy options available to the Government in order to build a sustainable construction sector. To date, however, it has failed to bring forward effective proposals. That task has been left, in this instance, to an Independent Senator. This Government is apparently content to see skilled tradespeople leave Ireland, never to return. Last year, for example, some 76,000 people left the State, which amounts to nine every hour. I welcome this Bill as a necessary step towards building a sustainable construction sector.

Deputy Stephen S. Donnelly

I propose to share time with Deputy Mick Wallace.

Acting Chairman (Deputy Olivia Mitchell)

That is agreed.

Deputy Stephen S. Donnelly

I commend Senator Feargal Quinn for bringing this Bill forward, in the last parliamentary term, and the Government on its willingness not only to allow it to proceed through the Houses, but also to support it. I especially welcome the Minister of State, Deputy Brian Hayes's indication that a regulatory impact analysis was undertaken which deemed the Bill necessary and worthy and offered several useful amendments. What is notable in all of this is that it is so extraordinary for a Bill of this nature to proceed this far. The last Private Members' Bill initiated in the Seanad to make it into law was the Protection of Animals (Amendment) Act 1965. I urge the Government to continue on this path of taking a more open-minded approach to legislative proposals from across the floor of both Houses.

Regulatory impact analysis may sound like an obscure concept but it is essential for good policy-making. It helps to ensure that legislation coming before the Oireachtas is evidentially based and that we are all aware of the projected impact of its provisions on society, small businesses and so on. As the Minister of State observed, a commitment in regard to regulatory impact analysis is included in the programme of Government. However, at the end of last year, just over one third of Bills published by the Government were subjected to this type of analysis. Clearly, a greater degree of commitment is required in this regard. We had a stark example of this last week when the Minister for Social Protection indicated that no regulatory impact analysis had been done in respect of the Social Welfare and Pensions Bill 2012 and, moreover, that none was necessary. That is not how the Cabinet handbook reads to me. No poverty impact or gender impact assessment was done. I described this type of policy-making in an article this week as apparently based on a strategy of pressing different buttons to see what they do. I do not say that glibly, certainly not in a context where the guillotine was used at all Stages of the Social Welfare and Pensions Bill last week. In fact, research by the Technical Group shows that this Government has used it in the case of nearly 70% of legislation, despite its clear statement of intent to do otherwise in the programme for Government. Against that background, I welcome the Minister of State drawing attention to the importance of regulatory analyses. I hope the Government will make greater use of them in the coming years.

The Bill before us today is about protecting small businesses from the vagaries of the market and from some of the practices of large businesses. In preparing for this debate I was shocked to discover some of what goes on in the industry. I did not realise, for instance, that subcontractors and sub-subcontractors often rely on payment from the main contractor. That is an extraordinary environment for any business to operate in and I welcome its review. The Minister of State observed that in an informal industry like the constructions sector, legal protections for the smaller players can be undermined. There is an ongoing problem in that the payment and resolution process is carried out through the courts. We have seen in the case of the Internet copyright legislation, for example, that the courts are simply not accessible to most individuals and small businesses.

We are all aware of the pain that has been suffered by workers, individual contractors and small business owners in this industry. In introducing the Bill in the Seanad in 2010, Senator Quinn noted that more than 500 companies in the sector had failed in 2009, which is an extraordinary number. He pointed out that the State has an engagement process for the large developers by way of the National Asset Management Agency, with some of these people being paid very generous salaries to work through half finished properties in an effort to resolve their debts. However, there is no such engagement in respect of individual contractors and small businesses in difficulty. As I am sure is the case for many Deputies, over the past year I have met many people from the industry - carpenters, bricklayers, plumbers, electricians, architects, engineers and quantity surveyors - and they are in extraordinary levels of distress business-wise and personally. There are three issues many of them are dealing with at the one time. They have seen their incomes collapse, with little hope of them increasing again in Ireland in the near future. As we know, many people in the industry are having to emigrate. On top of this, they are self-employed and, as we know, the self-employed and small business owners, when they run out of work, do not have the same critical social protections as PAYE workers. Both issues are compounded by the fact many of those working in the sector bought houses during the bubble. They cannot now pay them off and they are in negative equity so they are faced with bankruptcy, repossession and little help from the State. That is not a criticism of this Government, it is a criticism of the system. We are guilty of hypocrisy in that we urge entrepreneurial activity and the taking of risks by small businessmen, but at the same time, it is implicit that for someone who fails, there will not be the same protection as there is for those who have not taken the same risks, the PAYE workers. We must address that urgently.

I have a sad example from my own constituency of a family-owned quarry in Blessington, which has been dealing with many of these issues. A further issue arose for the business with serious allegations of price fixing or cartel activity in the cement industry. In an article in the Irish Examiner, Michael Clifford said that if the allegations are true, the State has been defrauded out of hundreds of millions of euros, as the State is the largest buyer of concrete in the country. He said no State agency or court has ever properly investigated what goes into the market despite decades of complaints. He further pointed out that investigations in other jurisdictions revealed cartels and price fixing. I have no idea if there is cartel behaviour but the allegations are serious. Individuals have brought cases but the failure of the Competition Authority to conduct a meaningful investigation is surprising despite numerous complaints and the evidence of such activity in other jurisdictions over two decades. Successive Governments have not had the will to pursue this.

The Competition Authority is independent in the performance of its functions but in the Competition Act 2002, there is provision under section 30 for a Minister to order the authority to investigate a particular sector. It is my understanding the Competition Authority has very limited resources and has made the decision that it does not have resources to take this on based on the evidence that has been presented to it. I drove around this quarry in Blessington and the owners pointed out to me machinery that was idle and trucks that were being sold one by one to keep staff on. I spoke to them this morning and they told me that on Friday they had to lay off another four staff. Day by day and week by week, this is bleeding the country dry, so I urge the Minister to look at the executive authority he has under the Act.

There are two parts of the Bill that I particularly welcome. I welcome the breaking of the dependency on the main contractor being paid. That is very important in addressing a serious power imbalance in the sector. I also welcome the affordable process contractors and subcontractors can take so they do not have to risk money they do not have to go to the courts.

I urge the Government to keep focusing on this and to look at bringing in comparable social welfare protection for the entrepreneurs and small business people who really do take risks, putting their houses and savings on the line to create jobs. It must also ensure the Competition Authority has sufficient resources to investigate these serious allegations. The Minister is aware that the business rates being charged are killing small businesses. He should also take another look at upward-only rent reviews.

Deputy Mick Wallace

This is an interesting Bill and I am glad the Minister has an open mind on it. It is a good start. This is an absolute minefield and people do not appreciate how much trouble lies within it. There are a lot of problems in the industry. It is a crazy industry, and a huge one. It was not just big in the crazy times we have just been through. Construction will always be a huge industry in any country in normal times, although it got too big here. It will, however, always be a huge factor in any economy.

I have been involved in construction all my life. I was a subcontractor for years and I was a main contractor for 15 years. I know both sides. I have not studied the Bill as much as I should have but I will. It is interesting and there is much in it.

The relationship between the main contractor and the subcontractor has always been poor; the subcontractor was always in a weak position. My own business has collapsed and I owe subcontractors money. I also owe the Revenue Commissioners money. I do not, however, owe money to some of the suppliers that people would think need protection. Some suppliers need protection but those who supply products that get lost in a project, such as concrete, are not necessarily those who most need protection. I do not owe money to Roadstone, Kilsaran or any concrete supplier, and that is the case for most developers who have gone broke. They are not the companies that got caught. It was the smaller suppliers who got caught, such as small hardware providers. Deputy McDonald spoke about the amount owed to subcontractors following the bust, and the figures are frightening. There was a knock-on effect and many small suppliers did not get their money because the subcontractors were not paid. There is a domino effect.

As a subcontractor, I worked for one of the biggest builders in the country in my early days. I did £170,000 worth of work for him, labour only, and he gave me £150,000. I told him he still owed me £20,000 and he told me to go to hell, that he had given me enough. I thought this was not fair so I went through the legal process to get my money and discovered after six months that the same builder had a good legal team in place to deal with subcontractors and that I was just one of many subcontractors who had been treated in this fashion. After six months my solicitor told me it would take two years to get my money through the courts and that I would probably be doing well to get two thirds of the amount I was owed. That was a very unsatisfactory arrangement. I managed to obtain some of the money owed to me by taking a more unorthodox route, but I will not discuss the details of that matter here. It is a very good story which I will recount to the Minister of State on another occasion.

Deputy Brian Hayes

The Deputy should produce an amendment to that effect on Committee Stage.

Deputy Mick Wallace

There is an uneven relationship between subcontractors and main contractors which is most evident in cases relating to small subcontractors. The notion that contracts with a value of less than €200,000 will not be included in the legislation is a joke and will completely nullify the good the Bill might do. Most contracts are for amounts less than €200,000. Those subcontractors carrying out work on contracts valued at more than this amount have a far better chance of receiving payment than their smaller counterparts. Those who do general labour work, carpenters, blocklayers, bricklayers, concrete finishers and pavers are in an extremely vulnerable position and require the protection provided by the legislation. There would be no difficulty in extending its provisions to cover them.

There are so many problems in this matter that I do not know where to begin. In most cases where main contractors failed to pay subcontractors, rows or disputes did not erupt. All that happened was that the main contractor did not pay when the subcontractor wanted to be paid. I did a great deal of work for local authorities, most of it for Dublin City Council, with which I had an arrangement, whereby I would submit invoices at the end of the month for the work I had carried out. When I submitted an invoice, it had two weeks to deal with it. If issues arose in respect of it, it would communicate further with me. Once it had been agreed, however, it had a two further weeks in which to issue payment. This was a very fair arrangement. I was always treated well by the council in all the years I worked for it. It was a good, fair and honest employer. Sadly, private contractors leave much to be desired in this regard. There are some very wonderful and honest contractors. Unfortunately, however, there are many about whom one could not say this. For some reason, the industry has attracted a large number of rogues. There are many involved in it who do not behave in an honest fashion. More often than not, subcontractors and small suppliers are on the receiving end of their behaviour.

There is a need to put a new system in place. If a subcontractor or supplier submits an invoice, there must be a fixed period within which a main contractor must deal with it and issue payment. Such a system could mirror the arrangement I had with Dublin City Council. As previous speakers stated, the fact that many of the contracts used in this area up to now have been too informal in nature has given rise to problems. Therefore, formal contracts should apply for any jobs with a value in excess of €10,000. The threshold of €200,000 to which I referred is crazy. A contract with a value of over €10,000 should be protected under the Bill.

As stated, it is vital that formal contracts be put in place and that there be a set period in which payment must be mad. It must be recognised, however, that huge problem remains in the context of how to organise adjudication if there are disputes. I had a meeting in a coffee shop this morning with a barrister and a solicitor at which we discussed this issue and making progress on it is not going to be easy. However, there is a need for a system to operate independently of the courts. The legal process is too long, onerous and expensive and, in many cases, the small contractors to whom I refer cannot afford to go to court. I am not sure how an adjudication process, particularly one which would give rise to speedy resolutions, might be structured, but there is no doubt that such a process should be incorporated in the Bill.

It is difficult to arrive at resolutions of disputes relating to construction contracts. For example, a contractor might state the relevant work was not done in the way it was supposed to be. I accept that this sometimes happens. On a number of occasions as a main contractor I gave subcontractors jobs and it turned out that they were complete chancers. They were bad calls on my part. If the work was done wrong in cases such as those to which I refer, I was obliged to pay someone else to do it again. There was no way I would have given the first individual a second chance, particularly as he was not able to do the work on the first occasion. There is a major problem in this regard. How does one prove one is more in the right than a subcontractor who has not done the job required? If an adjudication panel is going to be established, it must not only have a legal aspect to it but some of its members must also be able to understand the construction industry. Such individuals must have a knowledge, for example, of carpentry and how concrete and steel are used in construction. In other words, a broad cross section of individuals with engineering experience and with a background in the various trades must be involved.

The adjudication panel must be in a position to bring disputes to a speedy conclusion. However, its decisions must also be binding because it will otherwise be just wasting its time. If decisions are not binding, major contractors will go to the courts in order to delay matters for God knows how long. That was the position with regard to the individual to whom I referred who was determined not to pay the money he owed to me and dragged me through the courts for two years. Subcontractors who are owed large amounts of money and brought before the courts will simply not survive. They will go out of business long before the legal process reaches its conclusion. There is no need for me to refer to all of the knock-on effects when someone goes out of business, except to say there is no end to them.

Am I correct in stating, in the context of the withdrawal of services provision, that if the main contractor does not agree to the adjudication and does not pay the money owed, there will be a right to cease work on the project or close it down?

Deputy Brian Hayes

It can be closed down for a period.

Deputy Mick Wallace

However, the Minister of State is not introducing-----

Deputy Brian Hayes

It is a cooling-off period.

Deputy Mick Wallace

If there is a dispute and a subcontractor is not paid, is it the case that he will not be able to stop work on the site before the matter is adjudicated on?

Deputy Brian Hayes

No, he cannot do so.

Deputy Mick Wallace

Therefore, the matter must be referred to adjudication before work can be brought to a halt.

Deputy Brian Hayes

The objective is to encourage the parties to become involved in discussions to resolve the matter before adjudication is necessary.

Deputy Mick Wallace

If a contractor does not agree to adjudication, can the work be stopped?

Deputy Brian Hayes

Yes.

Deputy Mick Wallace

This is a dangerous area. I would be the first to admit that culpability often lies with the main contractor. This is sometimes not the case, however, because on occasion the main contractor could be getting a raw deal from the subcontractor. For example, such a subcontractor might not do the work right and could then state he was not going to do any further work until he was paid. If there is going to be a period during which the adjudication panel will try to ascertain where the truth lies and who owes what to whom, it would not be fair to bring work to a halt during that period. The contractor should not be allowed to get someone else to do the work until the matter was resolved. If, for example, the subcontractor involved was a carpenter taken on to put in doorframes and hang doors and if there was a dispute, the contractor should not be allowed to contract someone else to finish the work until the dispute had been resolved. We would be looking for trouble if we were to allow other subcontractors to come on site in such situations in order to finish off particular jobs.

Deputy Brian Hayes

Perhaps the Deputy might join us for the Committee Stage debate on the Bill. His observations would be extremely useful.

Deputy Mick Wallace

Okay. Deputy McDonald raised the issue of a bond. I agree it is too expensive and too difficult for the small subcontractors to get one. If every subcontractor were to need a bond, the price of them would go up. There were times when subcontractors could get a fair deal on bonds which were needed for doing State work. It was an uneven game, however, and requiring them for all work is a step too far.

Procurement is a different area but needs to be examined. In Dublin city five large public private partnership projects, such as the regeneration works in Inchicore and Dominick Street, fell through with one builder. It had reached the stage that this builder was the only one who could tick all the boxes in the procurement process for the last few years of the good days. This builder got all the jobs he wanted, and more than he could do. Those five large regeneration projects fell through when the property market fell and the figures changed, resulting in the builder walking away from them. The reason he had so much on his plate was that no other builder could compete with him in tendering for all these projects as he ticked all the required boxes. The procurement system is poor and needs to be examined. I accept this may be outside of the scope of the Bill but it was raised by Deputy Calleary.

People seem to think the entire subcontracting area ran into problems because of the recession. The problems existed long before the recession. I can go back 20 years and speak about problems in the relationship between the subcontractor and the main contractor. Under no circumstances is this a new issue.

There has to be protection for suppliers, in particular the small supplier. There is no point in legislating for the large concrete suppliers which have the most clout. The small supplier has suffered the most in the past four years. It is he or she who got paid the least from the contractors when the trouble arrived.

Deputy Donnelly raised the issue of whether a concrete cartel exists. If anyone is wondering if there ever was a concrete cartel in this country, he or she can take my word for it there was. I could not break it and I used to deal with many different concrete suppliers. Were they doing business together? They sure were. No one had the power to break them. Anyone in the industry is familiar with the concrete cartel, and it is a difficult issue to tackle.

The issue of contractors getting jobs from local authorities but not being able to finish work, resulting in subcontractors failing to get paid off for State projects was raised. It is a known fact that not all local authorities have behaved in an honest fashion. I have said previously that I found Dublin City Council to be honest and I was treated fairly by it. Around the country, however, it is not always so clean and upfront. Most of the time builders got work from local authorities through power, influence and contacts. The relationship between Fianna Fáil, which has ruled the country most of my life, and the building industry has left much to be desired. This has led to many problems in cases where contractors got work from local authorities when they should not have. A lot of underhanded stuff went on.

The need to address the wider issue of local government, which I hope the Government will do, will capture some of the problems in this area which is seriously entrenched in the way local government operates. For all practical purposes, as Members know, we have no local government in this country when compared to the European model, aside from the fact local government here gets only 20% of the average funding a local government in Europe gets, the people elected to local government are not put in positions of decision-making, leading to more problems, and it is run by an executive. Who gets the county manger's job and how he or she gets it determines many other matters further down the tracks. I hope the Government will address this wider issue.

I thank the Minister of State, Deputy Brian Hayes, for his patience. I look forward seeing how the Bill transpires; it is certainly a good development.

Acting Chairman (Deputy Olivia Mitchell)

I call Deputy O'Mahony who is sharing time with Deputies Fitzpatrick and Jim Daly.

Deputy John O’Mahony

I welcome the Construction Contracts Bill 2010 which has taken a long time to get to this Stage. I compliment the Government on bringing it forward and Senator Feargal Quinn on initiating it. It is one of the most overdue Bills and is needed for many reasons. It is a pity it has not been in place since 2007 when the crash came in the construction industry. There is much talk on all sides of this House about the pain inflicted on the industry with up to 160,000 jobs lost. There are many human stories behind these job losses. This Bill will prevent much of the pain that people have suffered in recent years from happening again.

The only difficulty is that subcontractors, and those who work for them, are still being destroyed by receiving no payments when a main contractor goes out of business. Only last week, Mayo County Council had to take control of two sites, the new library in Swinford and Park View estate in Charlestown, as only 95% and 99%, respectively, of them were completed. The main contractor had been paid up to date but went out of business leaving 40 subcontractors high and dry, losing large amounts of money. I spoke to several of them this morning to understand more about what happened. One informed me that because this large contractor in the west had gone out of business last year, the sub-contractor has lost €266,000. That is unsustainable for a subcontractor and cannot be justified. Although this Bill is too late for such subcontractors, I hope it will provide certainty for subcontractors in future. No big business could sustain losses like that, never mind a small subcontractor business.

We often discuss how people are unable to get jobs and although the subcontractor has plenty of offers to price jobs now but he cannot take the risk as his business has been destroyed by the losses he has been forced to take. For many subcontractors, if they are employing two or three workers and have seen business contract over the past few years, at least the workers would get social welfare if they are laid off. The subcontractors would be self-employed, meaning there is a double whammy as they have no social welfare entitlements at all and are facing utter ruin as a result. I want to concentrate on the positive aspects of this Bill but it is a live issue; I do not know how long it will take to enact the legislation but that time cannot come soon enough. It would have been beneficial to have had it in place three years ago. We should fast-track this through the legislative procedure.

I understand this will not cover where materials have been supplied to building sites and I hope that can be reconsidered. If a concrete company supplies thousands of blocks, it would be hard to retrieve them if they were put in a wall, and it would be difficult to recover the value. The Bill in the Seanad only considered contracts under €200,000, and I welcome that we are examining that again. Most of the cases I am aware of would be in the lower bracket of the amounts discussed, and if the €200,000 level remained, it would exclude certain cases, which would not be good.

I welcome the Bill overall. There is much work to be done by the Government and this Bill should be put into law as quickly as possible. Many subcontractors have made the point to me that although many main contractors are slow in making payments, they continue to get Government contracts. They may even get those contracts if they fail to pay subcontractors completely, and that should be considered by this Government. We should not hand out contracts to companies which treat subcontractors in such a way.

Deputy Peter Fitzpatrick

I welcome the opportunity to discuss this Bill, which was introduced following the demise of the property industry and with its resulting casualties. Quite often these casualties were not just the larger, well-known companies, but the smaller contractors which had neither the resources nor the capital to sustain the loses they were ultimately to endure.

This Bill will predominantly address the problem of non-payment in a balanced manner that would avoid imposing unnecessary regulatory or cost burdens on parties in dispute, the State or others. It will neither impose a cost or risk exposure on the Exchequer or taxpayer by requiring the State to support unpaid businesses or to underwrite their risk of non-payment nor reverse the considerable reforms achieved for the Exchequer in public sector construction procurement, particularly the reformed contracts and terms of engagement for public sector construction projects introduced just a few years ago. The Construction Contracts Bill 2010 was introduced by Senator Feargal Quinn and passed Committee and Remaining Stages in the Seanad on 8 March 2011. The Bill now before that Dáil was developed after several months of work with the Attorney General while keeping in close contact with the Senator.

The purpose of the Bill is to help address the issue of non-payment to construction sector contractors and subcontractors which have completed work on construction projects. The Bill achieves this through providing statutory arrangements for payments under construction contracts, including providing for interim payments. That will reduce a payee's exposure to non-payment. The Bill will also introduce a new mechanism for the swift resolution of payment disputes through a process of adjudication.

The Bill provides for a new statutory right to interim, periodic or stage payments, making clear when the payments become due, their amount and a final date for payment. There would also be a new statutory right for a payee to suspend performance where a "sum due" is not paid by the final date for payment; the prohibition of arrangements that make entitlement to payment conditional on certain events, such as "pay when paid" clauses, which delay payments until the payer has, in turn been paid; and a statutory right for parties to a construction contract to refer payment disputes to adjudication. There would also be a new adjudication procedure to deal quickly with disputes about payments and to result in a binding decision, under which payment, if any, must be made to the party named in the decision. An adjudicator would be selected on an agreed basis, by the parties to a contract, or else to be appointed from a panel to be set up by the Minister. These aspects of the Bill are particularly important and far-reaching, offering a platform for dispute resolution and a mechanism to prevent the escalation of construction and building-related disputes.

During my work I have personally encountered numerous builders, contractors and subcontractors who have come upon great financial and not to be underestimated personal crises as a result of the construction decline. From Laytown to Drogheda, Ardee and my home town of Dundalk, I have spoken with and met copious amounts of small contractors in payment disputes. Perhaps I am in an elevated position to assess and uncover the problem having in a former role run a business that was indirectly related to the construction sector. Perhaps that is why I am continually meeting people who wish to share their difficulties with me. Perhaps my previous role allows me to fully understand the pain and anguish that people are suffering, as I have experienced it myself.

This Bill is not the complete solution and it may be too late for some in the construction sector. However, this Bill is proactive, far-reaching, and most of all, it is a step in the right direction and will provide a channel for the much maligned small contractor to seek recompense. The programme for Government commits to introduce new legislation to protect all small building subcontractors that have been denied payments from bigger companies; this Bill addresses that issue and I have no hesitation commending it to this House.

Deputy Jim Daly

I am thankful for the opportunity to speak on this important Bill before the House. I have previously mentioned in the House a trip I took to Brussels a couple of months ago, where it was stated that 23 million people are unemployed across the EU, with 23 million small to medium enterprises registered across the Union. It is vital that the Government focuses on small to medium enterprises and supports them in every possible way. This Bill has an important role to play in the support of many sole traders in all our constituencies, with implications for employment.

We all know the sad history associated with the construction boom from the so-called Celtic tiger era, when up to 25% of GNP was taken up by the construction sector. That was an inflated figure and has brought a significant cost on our economy. In 2010, it was estimated that 9% of GNP, or close to €12 billion, was taken by this sector, which gives an idea of its importance to the overall economy. As legislators, we must ensure its survival and support it in every way possible. The image of many builders was tarnished and brought into disrepute by the actions of a few at the top while many down the ladder worked away at the same pace throughout the Celtic tiger years and are now struggling to support the industry through which they have built a livelihood. It is important not to tar everybody with the same brush.

While it is late in the day to introduce this legislation, this highlight the difficulty with legislation. Much of its must be reactive and this is an example of us having to react to circumstances as we are made aware of them in our constituencies. Many large builders can rely on NAMA but sole traders and subcontractors are often the silent victims. They do not generate headlines and many column inches in the newspapers but, nonetheless, they are important employers and contributors to our economy.

I welcome the Bill, which proposes State intervention by creating a regulatory framework to provide for minimum contract terms regardless of whether the contract is written or oral. It also provides for a speedy review and resolution of construction contract payment disputes as they arise. The Bill has by and large been welcomed by both Houses. Many small companies will be delighted when it is enacted. Many households would have been saved from severe hardship in recent years if these legislative provisions had been implemented at the time.

Many employers got into genuine difficulty and were let down by banks and so on midway through a contract. However, there was also rampant abuse of subcontractors by people and companies who withheld payments from them. Many of them were supplied with large volumes of material, which cost a multiple of the labour required for a job. We often think of labour but forget to consider the value of materials provided for a job. This has a domino effect as this not only affects the subcontractors but also the suppliers of the materials used by them. This can have huge consequences for businesses struggling in difficult times. The bill probably falls short in the protection it offers to material suppliers who may not have a formal contract with the contractor. For example, the trucks of concrete readymix suppliers deliver product to site in a short time and the value of the delivery is thousands of euro. The legislation could be strengthened to offer more protection to the material suppliers. Once a product such as concrete is laid, it is worthless as the supplier cannot retrieve. The contract has to have expired as soon as the concrete has been delivered because it is only use for a specific purpose on a site. The supplier of such a product cannot seek to reclaim his material as it is worthless to him.

I welcome the provision detailing the timeframe for dealing with disputes. Currently, such disputes take years and significant energy and money and effort on the part of those involved and that will be welcomed by all concerned.

Deputy Robert Troy

I wish to share time with Deputy Browne.

I am grateful to contribute to the debate on this important legislation. I have asked the Taoiseach on many occasions on the Order of Business when it would be introduced and I am pleased it has been introduced today. I compliment the Minister for State for bringing it before the House. He is one of the less partisan Ministers at times. He made it clear that he regards the legislation as a Private Members' Bill and he recognises that Opposition Members and Government backbenchers have valuable contributions to make.

Deputy Brian Hayes

That is based on having spent a long time on the Opposition benches.

Deputy Robert Troy

It is a signal of more to come and I hope the Minister of State will in future accept other Private Members' Bill, especially when they have the unanimous support of the House. For example, I refer to the family home protection Bill introduced by my colleague, Deputy Michael McGrath, prior to Christmas. It is a worthwhile Bill and I hope the introduction of this legislation is a sign of things to come because we are all democratically elected and we can all play a constructive role in trying to rebuild our economy and putting the country on a better footing and trying to reach reasonable solutions to the many problems facing people. The construction industry has a negative name, undeservedly in certain regards. As in every other profession and walk of life, rogues worked in it but it is an important sector in our economy and it has provided great employment down through the years. Most people in the industry do an honest day's work for an honest day's pay.

The Bill will address the issue of payments between employers, contractors and subcontractors and it is welcome. Its main aim is to improve the payment practices within the construction industry by providing for a range of statutory rights for contractors and subcontractors supported by the ability to refer disputes to a fast track adjudication process. The legislation applies to contracts, whether oral or written, relating to construction operations, which are broadly defined and will include all construction and engineering works as well as professional construction services. However, it will not apply to construction contracts with a residential occupier or those that may be specifically excluded from its operation by the Minister for Finance.

It is right and proper to acknowledge the work of Senator Quinn and the former presidential candidate, Seán Gallagher, on this Bill. It is a pity that it took so long to come before the House but I would like to acknowledge the strident work of Mr. Gallagher. As a member of Westmeath County Council I received copious documentation from him regarding his endeavours in this regard. Given the current economic difficulties faced by the country, it is important to put supports in place in the construction industry. Sustainable businesses in the industry find it increasingly difficult to access credit, which is another issue the Government must pursue vigorously. Earlier this week, my party leader highlighted the lack of provision of mortgage credit by financial institutions. Many people with good credit histories are finding it difficult to secure mortgages, which is also having a knock on effect on the construction industry. In addition, these institutions are using the fact that housing estates have not been taken in charge by local authorities to refuse mortgages, despite fact that, in some cases, 95% of the houses are occupied. That is having a depressing effect on the domestic economy and this issue needs to be tackled as a priority.

Deliberate non-payment or delays in payment are common in this industry and it is difficult for compliant builders to match the prices of non-compliant builders who price jobs knowing they will never fulfil their obligations to subcontractors.

None the less, they are able to get the contract on day one, although someone will be burned at the end of the day. It is very difficult for the honest to God, compliant contractors who are trying to compete.

The Bill proposes State intervention by creating a regulatory framework to provide for minimum contract terms regardless of whether the contract is written or oral. It allows for a speedy review and resolution of construction contract payment disputes as they arise to ensure prompt cash flow and thereby improve efficiency. It is important, given the stagnant domestic economy at present, that we keep cash in circulation and ensure speed in paying our bills.

Before I finish, I wish to identify some possible improvements to the Bill, although I did not hear all of the Minister's remarks. It is very important the scope of the Bill is widened to include a provision that would guarantee payment on a construction contract, perhaps through the use of a financial instrument such as a bond or designated trust account. It is important to remove the minimum monetary thresholds that put private sector contracts under €200,000 and public sector contracts under €50,000 outside the scope of the legislation. Will action be taken to bring them within its scope?

We also need to broaden the scope of the Bill to include goods and products specially manufactured for a product, namely, concrete, and to include the suppliers. I have heard many stories of incidences where construction companies, large and small, have left suppliers with large bills and walked off with a nest egg. These people are competing for contracts but are undercutting compliant contractors who fulfil their obligations to their subcontractors, to Revenue and to suppliers but who are unable to get jobs because the non-compliant contractors are not fulfilling their obligations. At this stage, the Minister should consider broadening the scope to include suppliers under the remit of the Bill.

Although it is not primarily connected to this legislation, the Government should examine the awarding of State contracts. Onerous requirements are being put in place in regard to the previous year's accounts and turnover. Many small, viable businesses which, due to the downturn in the economy, did not have the normal level of activity in the previous year are precluded from tendering for specific contracts in the current year. We must examine this situation. Many small family businesses and medium-sized enterprises have the necessary capability and tax clearance, have met their requirements to their subcontractors and are totally compliant but, because of the reduction in turnover from previous years, they are not even allowed to tender. While it is a little away from the issues dealt with in the Bill, the Minister should consider it in the not too distant future.

Deputy John Browne

I welcome the opportunity to speak on the Bill. It is an issue which I, like Deputy Troy, raised on many occasions with Ministers when we were in government but they were slow to recognise the need for such legislation. The Minister has moved quickly in this regard and I also compliment Senator Feargal Quinn, who pushed this legislation very strongly in the Seanad and got wide support for it among the parties. The Bill has gone through the Seanad and many amendments, changes and suggestions for change have been made. I welcome that the Minister of State, Deputy Brian Hayes, said in his opening speech that he was prepared to consider further amendments and prepared to listen to suggestions from Members on this side of the House and from the Government parties with regard to how the Bill could be improved.

All of us have evidence of how subcontractors were treated over the years by main contractors and by developers, particularly in recent years. During the building of the main county hall in my county, the main contractor gave untold hardship to subcontractors, practically on a daily basis. The main contractor might have been in financial difficulty itself but I am sure it was aware of its financial position before it ever applied for the contract on the Wexford county hall or for the contract for the new library in Wexford. Practically on a daily basis, I and other politicians had subcontractors contacting us to get us to talk to the county manager to find out why they were not being paid. The county manager and the council would tell us the main contractor was being paid on a regular basis, as per the agreed contract, but subcontractors were left high and dry.

Eventually, both the company building the county hall and the company building the new library in Wexford went into receivership or examinership and they disappeared. As a result, many subcontractors were left in a position where they were due hundreds of thousands of euro. Many had no choice but to go out of business, with a consequent loss of jobs and payments to their workers. This should not happen again. Overall, many of the country's largest developers and contractors felt the problems of the downturn in the building industry.

The purpose of the Bill is to improve payment practices within the construction industry by providing for a range of statutory rights for subcontractors, supported by the ability to refer disputes to a fast-track adjudication process. The Bill should not, however, be viewed as an alternative to undertaking appropriate due diligence of the project in which contractors are to be involved, the contract terms under which they are to perform work or provide services and the financial stability of the key players involved.

The construction industry was always characterised by a degree of informality. We had very strong, solid construction companies for many years, 99% of which would have honoured their commitments to subcontractors. Then, in the Celtic tiger or boom era, many new developers and building contractors entered the arena, many of whom had no experience in the construction industry. In my area, there were solicitors, barristers, accountants and farmers moving into the construction industry who, in my opinion, were not equipped to deal with the situation. Many of them set up shelf or shell companies, or whatever kind of company it was, and, as a result, they did not deal directly with the subcontractors and contracted out the building of the housing schemes or commercial buildings to a building contractor, who, in turn, hired in huge numbers of subcontractors.

There was also a situation where many hundreds of people were employed in the construction industry through agencies and had no contract with the developer or the person building the houses. They were dealing with an agency, they were paid a wage and, in some cases, the workers did not get paid either because of the loose arrangements that existed. Let us consider the main building contractors in Wexford in recent years. Despite the downturn in the economy and the low level of building of houses or commercial developments they are still hanging in because they have been part and parcel of the construction industry, they have a good reputation and a good name. They are able to look after subcontractors and their workers.

Unfortunately, unlike other industries when a construction company goes into liquidation there is no legal entitlement for a subcontractor to remove the goods that have been paid for. In some cases concrete blocks, plastering, plumbing, painting and the goods of electrical and kitchen contractors form part of a building and, therefore, cannot be easily removed. As a result, when a company goes into liquidation or receivership, the subcontractor has no rights whatsoever. When a developer or main contractor goes into liquidation, the liquidator effectively confiscates the subcontractor's goods and sells them off as part of a house or apartment to pay off the developer's debts, which are largely to the banks. In the majority of such cases subcontractors do not get paid. In many cases subcontractors have borrowed money from the same bank to purchase the materials supplied. They continue to owe the bank for the goods that the banks have effectively sold off because the subcontractors have already paid their staff and suppliers. As a result they are forced out of business. We have seen this take place on many occasions. Many subcontractors who have gone out of existence in my county point out that the Revenue Commissioners have the first say, the banks have a say, the examiner or the person overseeing the receivership gets paid, the legal people called in to advise get paid, but, unfortunately, they are left high and dry.

This is the reason the Bill is before the House. As I stated at the outset, the Bill should have been enacted years ago. However, unfortunately during the boom years no Minister in my Government or any previous Government saw fit to do so. For this reason I compliment the Minister of State, Deputy Brian Hayes, for taking on the Bill and moving it through the Seanad first and now through this House. I welcome the assurance of the Minister of State that he will seriously consider amendments. There are other ways and means of improving the Bill.

There are four main, interconnected proposals. They would have a fundamental effect on the impact of the legislation. These proposals were raised in the Seanad debate and as part of a consultation process. The proposals are a provision that would guarantee payment of a construction contract through the use of a financial instrument such as a bond or a designated trust account; the removal of a minimum monetary threshold for private sector contracts of less than €200,000 and public sector contracts less than €50,000 from outside the scope of legislation; to make the adjudicator's award binding on both parties, regardless of whether the dispute goes to arbitration; and to broaden the scope of the Bill to introduce goods and products, especially those manufactured for a given project, for example, concrete or some of the other products I referred to earlier.

There has been significant and justifiable criticism of the lack of accountability on the part of the regulators during the recent banking crisis. Similarly, firms specialising in liquidation and receivership are racking up hundreds of thousands of euro in professional fees per case. The poor subcontractor is left high and dry. We cannot reverse the plight of many who have suffered from the fallout of the collapse of the construction sector. This should not deter us from doing what we can to put in place appropriate legislation and enforcement procedures to ensure that such problems are prevented from recurring. The Government is certainly moving in the right direction on this issue. I am pleased that all sides of the House are supportive of the Minister of State. This legislation should be passed quickly. A strengthened and enhanced Construction Contracts Bill could have a lasting effect not only on people's lives, jobs, and businesses but on the wider economy. It will help the wider economy and help to underpin the foundations of a sustainable construction sector in the years ahead.

Unfortunately the construction industry fell out of kilter in recent years. It is important for the economy that we get back a reasonable construction industry. It is important to build houses for the people, especially those on council housing lists throughout the country. This is probably the quickest way to create jobs with a reasonable construction industry rather than the madcap building industry of the Celtic tiger era. We should get back to building a reasonable number of houses for our people. The Construction Contracts Bill will certainly enhance the construction industry in future.

Deputy Olivia Mitchell

I wish to share time with Deputy Tom Hayes. I am pleased that this Bill is back before the Houses. I understand it was the last tranche of legislation dealt with by the last Seanad. There is almost unanimous acknowledgement of the need and the urgency to introduce legislation to regulate payments and disputes in the construction industry. We have seen and heard evidence of contractors who have failed to pay their subcontractors. It is not only a matter of the headline cases we hear about in the media; smaller cases arise as well. There are small contractors who, for whatever reason, do not pay their subcontractors, these subcontractors do not pay their subcontractors in turn and so on. It cascades throughout the sector. This is still going on in the current recession. Some people have suggested it is too late for this legislation but this is not the case because it is still occurring. Inevitably in a time of recession people are slow to pay. As a consequence, the subcontractors are forced to continue to supply and carry out work in the hope that they will be paid. They extend more credit as well. Eventually, the are very exposed when the inevitable happens.

We should bear in mind that it is not simply a matter of builders, contractors and subcontractors who fail to pay. Often, the client fails to pay as well, especially nowadays, whether it is a hotelier or other client. The previous speaker referred to people who got into the business during the Celtic tiger years and who knew nothing of building and perhaps knew even less about business. Anyway, they imagined it was the right business to be in. The most reprehensible of cases, some of which have attracted media attention, are those in which the client pays the contractor but the contractor pockets the money or delays payment so that the subcontractors are forced out of business while the contractor declares insolvency or sails off into the sunset.

Although the legislation has been introduced against this background, whether in good times or bad, late payments and constant disputes are characteristic of the building industry. The disputes are time-consuming, costly and often involve going through all the industrial relations procedures of conciliation and arbitration and, finally, the courts. Often, such cases have continued for years. The system that has been in place has not served anyone's interests, whether the client, the builder, the developer, the subcontractor or the taxpayer. Simply put, the risks of non-payment, late payments and possible litigation was built into the pricing of contracts. Consequently, the price of building in Ireland was extraordinarily high during the Celtic tiger years. This was not the only reason but it was at least part of the reason.

Nowadays, construction activity is only a fraction of what it was. The problem now is not high prices but, perversely, prices are too low. Such is the anxiety of builders and contractors to get work and so intense is the competition that firms are pricing projects at unsustainably low prices. Naturally, this increases the likelihood of their going out of business or the collapse of the business as a result as well as the likelihood that subcontractors will not be paid in turn.

A contract for State payments such as that provided by this legislation as well as a cheap and speedy dispute resolution mechanism will help to normalise prices. This will benefit everyone as well as protecting subcontractors. The temptation to increase tender prices is not as likely as risky and late payments are now less likely under the new legislation, and the temptation to offer ridiculously low prices in tenders is less likely also as the inability to pay will quickly become obvious due to the stage payments arrangement.

I congratulate Senator Quinn for bringing forward the original legislation. It has been delayed but the consultation period and the impact assessment will produce better and more effective legislation. The original legislation, which had a very high threshold of €200,000 for private contracts and €50,000 for public contracts, removed from the protection of the legislation the very firms that probably need it most, namely, the small businesses which would have only a small number of contracts on hand at any one time. I am glad to see the Minister will amend the Bill accordingly to lower the threshold.

It was also suggested in the original legislation that the adjudication decision will not be binding but it is clear that would be useless because if the parties could agree about a payment there would not be any need for adjudication. The real danger is that the new adjudication process would be used as another time waster before one got to conciliation and so on, postponing court appearances for as long as possible.

The Minister is more than aware of submissions from the interested parties in the course of the consultation and I mention two with which I have particular sympathy. The first refers to a situation where the public contracts go to adjudication and a decision in favour of an award is made. The suggestion is that to safeguard taxpayers in the case of public projects the payee, rather than accept the award, must purchase a bond to guarantee they will be able to repay the money if the court subsequently reverses the decision. That is not a bond such as the one somebody would get at the start of a building contract. In this case the full amount must be lodged. Effectively, that wipes out the value of the legislation for public contracts as the award is cancelled out by the necessity to lodge the bond. In fact, the situation will be worse for contractors doing public work than it is now because their subcontractors will be covered by the legislation, including stage payments, dispute resolution and so on, but they will not be covered.

The suggested alternative coming from the industry, and which is probably a good idea, recognises the need to protect taxpayers' money but that the payer would go to court when they wish to withhold enforcement of the adjudicator's decision. However, they must establish that there is a genuine likelihood that the money would not be paid. That is an acceptable and reasonable solution. It does not penalise all public contractors and to do so would only increase the cost of contracts to the public purse and to the taxpayer because the cost of it would be built into tender prices.

The second submission, which many speakers mentioned it, is from the Irish Concrete Federation whose members fear they will not be covered by the term "bespoke supplies", in respect of which the Minister intends to table an amendment. It is clear that manufactured concrete goods and poured concrete by their very nature are unable to be retrieved, resold or reused in the event of a non-payment and therefore that should be covered.

I welcome the legislation but the need for a review of this area must be built into it. Much of the legislation we are introducing is in the aftermath of a crisis and, inevitably, the type of measures we put in place are influenced by our own mindset in the aftermath of a crisis. It is important, therefore, that we review legislation such as the legislation before the House to ensure it is robust in good and bad times and testing the adequacy and efficacy of the measures is vital. We must include in the legislation some provision that there would be gathering of the type of data necessary to review and analyse the impact of the legislation.

Several speakers mentioned the need for other legislation and an examination of other aspects of this industry, including possible collusion in the concrete industry. I do not know about that but it is something the Competition Authority should be asked to examine to determine if there is evidence of that. Any builder or construction firm one speaks to raises the problems associated with the fixed price contracts introduced in the context of the Celtic tiger where projects ran over by huge amounts in many cases and the response was the fixed price contract which probably went too far in the other direction. That must be examined because from having been in a situation where builders could name any price at one stage they are now not paid for extras or any changes the client may make. There is a need to strike a balance and examine that legislation again. It was introduced in unusual times and we may need to examine it in a calmer time.

Deputy Tom Hayes

I am grateful for the opportunity to speak on this Bill. Like many Deputies in the House I have consulted with a number of subcontractors in my constituency on this matter. I appreciate it is a matter of great importance and something they have sought for a long time. It will give a great deal of assurance to many vulnerable people who were left unpaid in many different areas.

I thank the Minister of State, Deputy Brian Hayes, for all his work on this issue. As someone who was in contact with him on this matter on a regular basis I appreciate the openness he has shown in taking on board the many suggestions, responding to queries and being so open in accepting those queries.

I thank also my colleague, Deputy Olivia Mitchell, and commend Senator Feargal Quinn for his openness. He pursued this issue from the outset and his work has not gone unnoticed. People regularly refer to this legislation as the Feargal Quinn Bill, and he must be commended for all the effort he has put into this subject.

As many of my colleagues noted during the debate, there is not a Deputy in this House who has not been contacted by a subcontractor in recent years. The pressure they are under is incredible, and this Bill is badly needed to provide some support for them. In recent years a culture of people not paying appears to have developed, and that is a serious issue. The reason they cannot pay is understandable. They are in extreme difficulties. People can be short of finance and under pressure, and there is nothing as difficult than that. I understand the reason those people cannot pay but the culture of non-payment is something we must address because it should not be acceptable or allowed.

The purpose of the Construction Contracts Bill is to improve payment practices in the industry, and to allow swift resolution of payment disputes by way of adjudication. That will allow projects to be completed without wasting time and money in litigation.

The level of non-payment facing subcontractors and suppliers is shocking. The most important function of this Bill is to address that problem. The extensive time between payments on a project is simply too long and it often leaves companies vulnerable to serious loss of revenue.

There is a balance to be struck between protecting subcontractors and imposing unnecessary cost on the taxpayer. The challenge the Bill must overcome is finding a way to protect the payments of subcontractors without imposing a system that would require the State to support unpaid businesses or underwrite their risk of non-payment.

On the costs imposed on taxpayers, significant progress has been made through the introduction of a new contract regime for public works. This change allows for the appropriate risk transfer from public bodies to contractors and consultants by costing for risks as a fixed price lump sum. For years we constantly read stories about Government projects running way over budget. Many of these overruns resulted from a contract system under which a price variation clause was included in many public sector contracts. I welcome the elimination of such clauses and note that their abolition has resulted in a €300 million annual saving. This is a major step forward. The Minister of State should consider addressing similar cases involving local authorities which engage subcontractors. In recent weeks Deputy Mattie McGrath and I have dealt with a case in Carrick-on-Suir in our constituency where a project has stalled and contractors have been left high and dry. While this is outside the scope of the debate, the matter should be addressed in the not distant future.

On the contents of the Bill, I welcome, in particular, the efforts made to address the issue of non-payment. The legislation provides for the introduction of regular interim payments which will reduce a payee's exposure to non-payment. On a similar note, the introduction of a new mechanism for the swift resolution of payment disputes through a process of adjudication is welcome.

The Minister of State will be aware of a number of concerns expressed by experts in the industry and others I have identified from a reading of the legislation. For example, the thresholds included in the Bill are set much too high. The €200,000 threshold to apply to public sector contracts will exclude many subcontractors and, as a result, fail to protect those most in need. I commend the Minister of State for identifying the thresholds as an issue and have no doubt he will introduce amendments to reduce them on Committee Stage.

My second concern relates to the possibility of broadening the legislation to include bespoke supplies. Again, I note that the Minister of State has spoken on this issue and highlighted a number of problems that may be faced if he decides to address supplies and suppliers under the legislation. I also recognise that the regulatory impact assessment states the inclusion of bespoke supplies made specifically for a contract could be examined. I hope this matter will be addressed on Committee stage.

I hope the House does not miss the opportunity provided by this legislation to address the problems faced by suppliers in the construction industry. Perhaps we should consider better defining what supplies could be protected. I ask the Minister to consider protecting suppliers of products that cannot be retrieved from a construction site owing to their nature. For example, concrete blocks cannot be taken back by a supplier if he or she is not paid as they form part of a structure. I expect and hope we can better define supplies in order that they can be included in the Bill.

I have no doubt the Minister of State will consider these and other suggestions when the Bill comes before the select committee. It is a strong and robust Bill and if we incorporate some of the changes I propose, it will be made even stronger. It will also result in a much more honourable way of doing business and afford much better protection to many small companies and subcontractors. Those affected by non-payment tend to be vulnerable and include the families of workers who experience non-payment. Subcontractors have been badly affected by the problem of non-payment, especially in recent years. I thank the Government for introducing legislation to change the position.

Deputy Dessie Ellis

At the height of the boom 269,000 people were working in the construction industry. This figure has since fallen to approximately 100,000, a major decline that has delivered a massive blow to the construction industry which is clearly on its knees and needs a major stimulus. The potential to provide more jobs is considerable, although I accept employment in the sector will never return to the levels encountered during the so-called boom. Jobs in construction have a large spin-off effect in terms of employment in industries that support the sector.

Local authority housing waiting lists are growing, as is demand for proper affordable housing. The Government's policy of not supporting social housing and its refusal to provide capital funding is contributing to the current housing crisis. It is making a mockery of plans to end homelessness through its unwillingness to provide sustainable, affordable social housing and appropriately supported follow-on housing. Instead, we have emergency accommodation bursting at the seams.

More than 100,000 families are on housing waiting lists and rental subsidy is costing more than €500 million per annum. This scandal speaks very clearly to the failure of a policy which no one in his or her right mind believes could solve a housing crisis. If the ghost estates that litter the country were brought into play, they would alleviate, albeit not solve, the current crisis.

Many contractors, subcontractors and subcontractors of subcontractors were left high and dry by unscrupulous firms which declared bankruptcy or were taken into the National Asset Management Agency. Some of their directors received a healthy salary as reward for their complicity in the downfall of the economy. In my constituency of Dublin North West I have encountered many small family firms which were owed thousands. Some of them went to the wall as they sought what was rightly theirs, while in other cases the owners sold their homes to pay staff rather than default on their responsibilities. Others still have emigrated rather than face the prolonged agony of fighting for their entitlements. It is important that employers and employees live up to their contractual obligations.

I welcome the provision in section 6 to introduce a right of adjudication and the stipulation that this right cannot be negated by any contract. I also welcome the right afforded to contractors to cease work if seven days pass without payment subsequent to a judgment being issued in the adjudication process. The appropriate Oireachtas committee, in conjunction with the Minister of State, should have a greater role to play in the appointment of the adjudication panel.

I am concerned that the value thresholds provided for will mean that those affected in many of the cases where the protection provided by this legislation may be required will not be eligible to the entitlements established in the Bill. While small contractors may not deal with large contracts, the sums they are due are just as important as the sums due to large contractors as they seek to keep their businesses afloat and pay their workers and those they owe arising from the routine costs of business. The high thresholds are a major oversight which render the legislation much less valuable. Greater clarification is required to establish the rationale used in setting the thresholds. I acknowledge, however, that the Minister of State has indicated amendments are to be introduced in this regard and look forward to changes being made on Committee Stage.

In general, I welcome the Bill as it makes a start in dealing with the outstanding issues arising from the construction collapse. I thank Senator Feargal Quinn for the work he did in drawing it up and I am grateful to the Government for facilitating it in the House.

An Ceann Comhairle

I call Deputy Dowds, who is sharing time with Deputies Spring and Kyne.

Deputy Robert Dowds

I am glad to be able to speak on this Bill, and in particular I am glad that a Bill which was drafted by an Independent Senator has seen the light of day in this House. I commend Senator Feargal Quinn for his work on this Bill and I commend the Minister of State, Deputy Hayes, on taking the Bill forward. I look forward to the Government taking on board more constructive and reforming Bills from the backbenches, irrespective of which or any party they come from.

I have been raising this matter on the Order of Business for some time. I am concerned that this Bill may have come too late for too many small contractors, as Deputy Ellis has stated. The fault for that can only rest with the previous Government, as Senator Quinn's Bill was ready before it collapsed. Had measures such as this been in place before the property bubble burst, thousands of jobs would probably have been saved, which would have been most welcome.

I have been approached by several constituents who are owners of small businesses and who were victims of exactly the type of situation which this Bill seeks to prevent from occurring. The first time I was approached, I was absolutely staggered that a small contractor could be so ill treated by a major contractor. In the particular case of which I am thinking, the major contractor used any money he got to pay some of his own debts rather than pass on money that was due to the sub-contractor. Unfortunately, all I could say at that time was that the Government intended to bring forward this Bill. Sadly, it is too late for them, but it is very welcome that this Bill is before the Dáil.

I very much welcome the dispute resolution process in the Bill, which I believe has proved to be very effective in dealing with disputes in the UK. Any situation where courts can be kept out of the resolution of disputes is welcome. I hope people in the construction business would welcome a situation whereby they could avoid going to court. However, I agree with Deputy Wallace when he says the minimum level of a €200,000 contract to be covered under this Bill is too high. The Bill is designed to protect the small business person, who by definition has smaller contracts. I am sure the Government has some reason for having it so high, but I ask Minister to reconsider this issue.

Interestingly, section 2(1)(a) provides that if one of the contracting parties is a State entity, the minimum level will be €50,000. As Deputy Wallace said, however, there is a far greater danger to small contractors from other private contractors than from State entities. I certainly hope that is the case in any event. If a €50,000 minimum level is set for the State, then a €50,000 minimum level should be set for the entire industry. To do otherwise is just leaving the door open for smaller contractors to continue to be bullied by large private contractors and would defeat the whole purpose of the Bill. I welcome that the Minister of State acknowledged in his speech that the regulatory impact assessment has recommended that this provision be either removed or reviewed. I hope this can be examined again at a later stage, and Deputy Tom Hayes made this point.

Another point I wish to raise is the issue of including suppliers under the Bill. As the Minister of State mentioned it in his opening speech, I know this issue also arose under the regulatory impact assessment. The reality is that given the nature of the business of construction, the majority of supplies are bespoke. How can we seriously facilitate a situation where a supplier is expected to get a court order to have its materials returned? This would mean going onto a construction site and tearing out the plumbing or the windows. The Minister of State argued in his speech against including all suppliers by claiming that arrangements to include numerous suppliers could create an unduly onerous process which could create a barrier to entry for smaller enterprises. I believe suppliers to the construction industry should be entitled to the cover of this Bill, irrespective of whether the process is onerous.

Deputy Arthur Spring

Previously I worked for banking institutions in Ireland and I noticed those who were drawing down funds for the purposes of paying subcontractors and suppliers did so in a fashion which in some cases was not as regular as it could have been. I will not make allegations against individuals, but there is a practice that has gone on heretofore that needs to be stopped. I think there is a solution to this, and it is called wrapping. I have spoken to Senator Quinn, to the Ministers, to the Construction Industry Federation and to a few others on this issue.

I will give an example of how this happens. A quantity surveyor would act on behalf of a bank while another quantity surveyor would act on behalf of the main contractor. The main contractor would seek to draw down the funds with great urgency, in many instances up to €1 million at a time. That money could be sent to another bank rather than drawn down in cheques to pay subcontractors and suppliers. If that fund is put into a deposit account in another bank and if the main contractor has many different contracts, that person could have a float of about €10 million at any given moment. There is a 30 day lag with credit, but we have often heard stories of people waiting for 60 days or more to be paid. If we leverage the €10 million at 90% LTV, the main contractor could ultimately be in a position to become a speculator, with €100 million at his disposal. That bank would not know where the €100 million was coming from, and the contractor would have the potential not only to be a builder, but also a developer and a speculator as well. Therein lay the great problem. I believe we need amending legislation to allow for the provision of funds that are granted by banks for the purposes of working capital only. If we do that, the money that has been deemed appropriate for the project by the surveyor should be ring-fenced at all times for the subcontractors and suppliers. This should be the case particularly for those contracts under €200,000, as Deputies Wallace and Dowds have pointed out.

I know of a big contractor who won a major State contract. He had 75 subcontractors working on the project, which is a phenomenon that has become known as "subbie bashing". When there are small groups of people working under one contractor, their access to the legal profession and to the courts is not as enticing as it might seem. The idea of losing €30,000 through legal fees as opposed to taking the hit the first day and staying away from that main contractor thereafter was a real dilemma faced by many people throughout the country.

I know we have been approached by many lobby groups on this issue, and we should commend Senator Quinn on trying to solve this problem. I am delighted to have been elected to this House and to have a say on how the Bill goes forward. I appreciate the Minister of State's advisers will take this on board. The people with contracts less than €200,000 need to be protected. Deputy Heather Humphreys and I organised a presentation to be given by MABS in which we were given an example of this. We heard of an architect who had sought advice from the MABS because his financial status was making it difficult for him to carry on his business. He is owed and owes money and it becomes a scramble thereafter. This is not an issue for upper level businesses. It relates to day-to-day life, the very survival of a business and the stress communicated throughout society.

The Bill is a step in the right direction, but more needs to be done. I would like to see a working group in the Dáil examine the issue of the protection of small businesses, particularly construction businesses. I do not know how one can legislate for contracts that were signed in the past, but I would like to see an end to the practice I have described, of funding being drawn down, leveraged and used for other purposes. I imagine NAMA has a great deal of property on its books for which loans should never have been granted because the equity provided initially was contributed for the sole purpose of giving a contract the capacity to be realised and to be passed on to subcontractors.

There is overwhelming support for this initiative. The current level of lending is 9% of what it was at the height of the boom, or the craziness. That will extend again. With the availability of credit, there must be better regulation and knowledge of what we are trying to achieve. Loan to deposit ratios in Ireland might be reflected in some areas, but that is not true of all. When people draw down funds and use them for a purpose for which they were not intended, there is a problem in society.

I also make a recommendation to builders. Builders are best at building, not at speculating and developing. The idea that a speculator can look at a town or county development plan and then seek to lean on politicians to achieve his or her own purpose will have to be written out of existence. Tribunals have flushed out much of the craziness in this regard.

The Bill is a step in the right direction, but more needs to be done. Therefore, I welcome suggestions from non-Government parties and Independent Deputies.

Those on the very smallest of contracts must be protected. The €200,000 limit must be looked at again. With regard to retrieving supplies, owners of small quarries must also be protected. We should also have shorter contract terms. Working capital facilities should have sole designations, in the supervision of which for the banks quantity surveyors might have a role. I would be happy to work with individuals in the Cabinet and throughout out the House to make this a better Bill.

Deputy Seán Kyne

I am delighted to have the opportunity to say a few words on the Bill. One of the most startling aspects of the economic crisis is the way some large construction or property development companies conducted their business. Emboldened by irresponsible members of the banking sector, some property developers did not repay substantial loans but merely rolled them over into new loans. There was, effectively, a house of cards which needed only one non-payment to cause the system to collapse, with serious negative consequences for the parties involved. Unfortunately, these included small community-sized contractors and subcontractors.

Because of the financial pressures and not forgetting the gambling nature of some developers, payments for services provided by subcontractors are being withheld or delayed. Such a practice is abhorrent and shows a lack of regard and respect for other businesses and the people behind them. It is impossible to plan properly or meet one's own payment requirements if there is uncertainty over the delivery of payments owed to one's own company. In the light of these difficulties, Senator Feargal Quinn introduced the Construction Contracts Bill 2011 during the dying days of the last Seanad. The Bill, unfortunately, remained static because of the political climate until its swift reintroduction following the general election. It aims to ensure prompt cash flow, thereby protecting jobs and facilitating the swift resolution of problems and issues in a non-judicial setting. It has many positive features and will, in so far as is possible, be cost neutral to the State, which is important at this time. Lack of resources does not mean positive constructive legislation cannot be enacted.

The Bill will inject a sense of fairness into a sector that has received considerable criticism and bad press. It will set out proper and clear payment procedures which, in all truth, should feature in every industry and business transaction.

Another positive aspect is the embracing of an alternative dispute resolution mechanism. The courts system is expensive for businesses and individuals, for reasons that are part of another debate. Companies under financial pressure can ill-afford the risk, at times, of entering the courts. Furthermore, the judicial process can heighten tensions and deepen problems, as opposed to mediation and non-judicial resolution mechanisms which can be calmer, less divisive and more constructive.

The Government demonstrated support for the positive aspects of the Bill and broadly tackling and reforming problematic areas by commissioning a detailed regulatory impact analysis of the Bill. The analysis outlines three possible courses of action, the first of which is to do nothing. That would place no extra financial burden on the State, but it is not an option. The market, as the analysis notes, is not working. This is leading to delays and disputes and is an inefficient use of our scarce resources. We all know the trouble doing nothing about regulation and oversight can cause.

The second course of action is to introduce the Bill, as it stands. I have outlined its very positive elements which will benefit all involved in the industry by safeguarding and formalising payments.

The third option is to introduce the Bill but with certain amendments. One amendment is necessary to strengthen the spirit of the Bill. As it stands, it will not apply to a contracts in respect of an individual dwelling which is appropriate, given that its thrust is to assist subcontractors and small contractors. However, as others have stated, the stipulation that it will not apply to contracts worth less than €200,000 poses a problem. It effectively excludes significant swathes of contracts that, correctly, would be viewed as the bread and butter contracts for most companies in the construction industry. The Bill is also out of step with the experience of the industry in the United Kingdom which places a high value on the setting of a lower threshold. It would be shameful, therefore, to allow the Bill to pass without amending the threshold level and extending its applicability. It would go against the stated objectives which are to help small and medium-sized business and contractors in the industry. I would also like to see a measure, as the regulatory impact analysis highlights, to protect the suppliers of goods and materials, particularly of supplies tailored for individual construction contracts.

One likes to believe fairness and fair play underpin business transactions and in the majority of cases they do. However, we have a duty, as legislators, to step in and provide support to uphold these principles when they are endangered. The Construction Contracts Bill 2012, subject to a number of amendments, particularly the lowering of the threshold figures, will achieve this objective.

Deputy Mattie McGrath

I am delighted to be able to speak to the Bill. I was never as excited about a Bill being brought before the House as I was about this one. I compliment the Minister of State, Deputy Brian Hayes, his staff and Senator Feargal Quinn on the work they have done on it. I particularly compliment the Minister of State on the bipartisan approach he has taken to it. He has been prodded and nudged by all of us because all Members can tell horror stories from their constituencies. The Minister for Finance is also aware of these cases and I am glad he is present in the House to hear the debate.

The Minister of State has accepted Senator Feargal Quinn's Bill, but it does not matter whose Bill it is, as it is long overdue and eagerly awaited. Unfortunately for thousands of small companies, it has been introduced years too late. I condemn the previous Government for not advancing it when Senator Feargal Quinn introduced it. We thought the construction industry was great, but inside that greatness there was a cancerous rot.

I compliment all speakers but especially Deputy Arthur Spring who brought his financial expertise gained in a former life in banking to bear on the issue. Many of the people who have lost their businesses, cannot educate their children or pay their bills and are in Stubbs Gazette and in hock to Revenue would not be in that position if the money provided for contracts had been ring-fenced. I welcome Deputy Arthur Spring’s suggested amendment and proposal that a working group be set up in the Oireachtas to deal with the matter.

Funny money was being moved from A to B to Z and nobody knew where it was. Money that was provided for a construction contract could have been used to buy land, not the site of the contract in question, or to speculate on other matters. The banks did not know where the money was going. They could not follow it. The people who were responsible were able to do it. We now know that they should not have done it because it was to the cost of many of them but also to the cost of the country and the taxpayer.

I will never forget the morning I came to the House during the term of the previous Government when 550 contractors connected with Pierse Construction were meeting in a hotel on the outskirts of Dublin. They all went out of business. If that was not a prod to the then Government to act, nothing was. That is only one of many companies that has since gone out of business with hundreds of small companies left high and dry. It is shameful. All of us who were Members of the Dáil at the time should hang our heads in shame because we should have dealt with the issue, yet we did not.

The Construction Industry Federation, CIF, must come in for a lot of blame as well because it sat around the table during negotiations with the social partners when everything was being divvied up in the good times. It was comfortable and happy with the situation. It was also happy to squeeze – I hate to use the word "screw" but that is the word I should use – the small business people. The small man was kept down. We thought when we achieved independence in this country and got rid of the British that we would have fair play but we got more greedy than they were. We were happy to keep the small man down. The CIF negotiated lucrative rates.

The minimum wage has been an issue. I did not support the cutting of it. I welcome that the issue has been raised. The minimum rates of payment that were negotiated for some sectors in the trade were ludicrous. Since I built my house in 1984, the cost of blocks has not even doubled in price but the cost of laying them has increased tenfold. We got carried away. Time was a factor as there was pressure involved given completion date clauses in contracts. The Construction Industry Federation has not stepped up to the plate and dealt with the matter. It is crying halt now but in the good times it got carried away. It was not interested in the small business man or the small one-man or two-man operations which are the backbone of this country.

I shouted across to the Tánaiste today that he should change the record. I welcome the job announcements. We need them, but small businesses are the backbone of the economy. We must be aware of what it costs to entice foreign direct investment companies to set up in this country. I welcome them all but we must bear in mind the costs involved. The small businesses to which I refer are based on initiatives that came from people who went to the local technical school and then got their trade qualifications and extended them to become builders. I agree with Deputy Spring that most of them should not have become speculators. Most of them did not, but some of them did and we have a mess as a result. They must be supported and allowed to work. The Bill is of the utmost importance to them because they must get paid for their work.

The threshold of €200,000 and €50,000 is totally off the wall. I welcome the fact that the Minister said he would examine the issue. The threshold must be reduced to €2,000 or €3,000 or certainly it must be reduced to €5,000. If one has given one's time laying blocks, plastering, doing carpentry and possibly supplying materials, a few thousand euro is like a million euro to a big company. Such a small business man or woman needs the money to put bread and butter on the table to feed himself or herself and his or her family, insure a van and meet all the health and safety requirements. Sums between €2,000 and €5,000 are more important to such a person than a million euro to the big companies. That must be recognised. The small men are caught all the time. They are paying their way, paying VAT, PRSI and taxes, and are not a burden on the State. What is worse is that in spite of having paid all their taxes, VAT and PRSI, because they were stung by the reckless trading of big companies that did not want to pay them in the first place, now they are not entitled to social welfare payments having paid their own PRSI. The Minister for Social Protection, Deputy Joan Burton, is examining the matter, which I welcome. Those people are the lifeblood of the economy and we must protect them.

Deputy Tom Hayes referred to a regeneration project that is currently ongoing in Carrick-on-Suir in the Ballylynch housing estate. It was built 30 years ago and it is in a terrible state of decay. Previous Deputies, including Deputy Hayes, and Ministers worked for years, as I did, and it was finally announced that €4 million would be allocated for the project. As is happening with almost every contract now, local, well-renowned, quality builders in each county – in my area there are the Hally's, the O'Gorman's and the Morris's who have been operating for decades - that are responsible for the finest monuments and public works and cannot get a chance because companies are coming in and trading recklessly.

The company in Carrick-on-Suir was involved in four different projects, all paid for by the State. I accept there was a bond but no bond covers the contractors. Thank God the bond covers the local authority. The company in question has left the project high and dry. It has gone bust and left a trail of destruction after it, including unpaid bills. Ordinary, decent, hard-working people who gave services and supplies cannot get paid. Thankfully, the council has the bond which, according to the town manager to whom I spoke, ensures the bondholders can send in a company to certify the work carried out to date is structurally safe and appoint a new contractor to continue the work. However, that is of little good to the small contractors who have provided the machinery to dig out the foundations, supplied blocks and concrete, the craftsmen and tradesmen who have laid blocks, those who supplied and put in the windows and put on the roof, and the painters and plumbers.

What happened was disgraceful. Rip-off Ireland was never better. Some of those companies knew they would never pay the subcontractors. That is what happened. I am a subcontractor myself but, thankfully, I have not been caught for years. I did get caught on a big project in Clonmel. My wife manages the business and any time some of those companies rang looking for me to do work, she did not even tell me they called. She wanted to keep away from them because a lot of them were fly-by-nights. They had big names and everything else but, as Deputy Spring said, they were spending the money elsewhere and they had no notion of paying the contractors.

If a company goes into receivership, one will only get a couple of cent in the euro. The subcontractor is the last person to get anything. The banks and the Revenue will get money but the small suppliers and self-employed people who are the backbone of the economy will not get a cent. It is an outrage. When Pierse Construction went into liquidation 550 small companies were affected. Since then, thousands of small businesses have been affected. Some of those involved have been driven to suicide, unfortunately, because they are honourable people who pay their way, paid their workers and everything else. They got left high and dry. In some cases it was downright blackguardism that they were caught out because the cowboys who were doing the big jobs never intended to pay them anything in the first place. The rot must be weeded out and sorted out because it is a disgrace. It is a shameful practice that should not be allowed.

I welcome the provision of an alternative resolution mechanism because we cannot go to the courts. It could cost €15,000 to get a case into the Circuit Court and then one only might get a judgment in one's favour. Even if one gets a judgment, one still has to get the money. It is a waste of time which is only making fat cats fatter in the High Court and Circuit Court. That is another racket.

The biggest racket I wish to expose is that of receivership. It is the newest industry in town. I appeal to the Minister in that regard. I could add NAMA to it. Between receivers and NAMA, they are the biggest show in town. It is the biggest con-job in town. The rates receivers charge are astronomical – hundreds of euro per hour. If a company goes to the wall for whatever reason leaving many suppliers waiting for money, they will not get a cent but the receivers in many cases are heartless, relentless gangsters and chancers. They are getting their money from the sweat and blood of ordinary people. It is outrageous and it has become an entire industry. One sees the firms involved on both sides. They act as advisers in many cases.

When NAMA was set up I described it as a wild animal in the forest and that we would not know where it would end up. My words are coming true because that is what it is. It is another big boys club. Rogue developers are involved in it and are getting healthily paid by NAMA after they banjaxed the country along with the bankers, the regulator and some politicians. One could ask whether we are ever going to learn.

This is going on and we must introduce a Bill with the utmost urgency to regulate the receivers because it is the biggest industry in town and it is cronyism. I do not have words to describe it because it is so bad. It is so hateful and merciless how they treat people and families. They have no interest whatsoever in the ordinary suppliers and workers. Rip-off Ireland is doing well with those industries and with this carry-on. It cannot and must not be allowed to continue given the times we are in.

I mentioned company turnover levels. I accept there is a bond for public buildings but there should be a second bond to cover subcontractors and suppliers. I understand that is the case in the United States, England and other places to ensure these fellows cannot come in and hire all the subcontractors, get them in first at rock-bottom prices, operate a break-neck, cut-throat business and then have no notion of paying them.

There should be a bond to cover subcontractors and suppliers. The situation in Carrick-on-Suir is disgraceful. People are waiting for their estate to be done up. They are out of their houses and living in rented accommodation. The place is a mess. Thankfully, the local authority had a bond, but some of the subcontractors will not receive a shilling. Is that fair in this day and age? The building work will recommence, probably with different subcontractors, but those who have done the work on this occasion will receive nothing.

I question the term bespoke goods. This is another minefield for the wigged gentlemen in the High Court who will define it. The Bill concerns all materials used. The foundations are the most important part of any development, that is, the concrete used which is a raw material. It cannot be taken out. Neither can one take out the blocks and mortar and the plumbing used. We must, therefore, get away from the clause about which the Minister of State is concerned. The concrete suppliers' federation has lobbied hard on the issue. They must be entitled to get the money they are owed because it costs a great deal to generate a contract. Deputy Stephen Donnelly from Wicklow mentioned the quarry company in that county. There are similar companies are all over the place which cannot get the money they are owed. I worked for a number of companies 30 years ago, some of which are still operating, but many of them are not. The best of companies are on their knees.

I salute road builders such as Sisk & Co. They have fine expertise and paid everybody. Some projects were carried out perfectly, managed properly and completed on time and within budget, but in other instances the cowboys took over. There are cases where things were done right and we can see the fruits of people's labour. I use those roads every day. As a result I will be able to travel home this evening in two and quarter hours, whereas it would have taken four hours ten or 20 years ago. There are good cases, but there are also many cowboys in the industry who give everybody else a bad name.

What are bespoke supplies? Will there be endless arguments among lawyers in the High Court to define the term? The Minister of State should cut out the nonsense by including all supplies used. He also should include an amendment to ensure all subcontractors who should be bonded will be paid because without them building work could not go ahead and projects would not be completed.

The Bill has been well put together. I am interested in hearing whom the Minister of State consulted. With whom did he consult? I will be told it was the Construction Industry Federation and others, but he must consult at a lower level. The farmers contractors association was only set up a number of weeks ago. In fact, I was at the launch. They are also contractors who are being caught, left, right and centre. Ordinary small builders must be consulted, those who do not have the money to join the wealthy man's club of the Construction Industry Federation where we have seen a great deal of money go astray. I hope the matter will be fully investigated in time, but that is another issue. They all got around a table and got cosy.

Section 7 provides that if an adjudicator's award is not paid in full within seven days of the adjudication decision, the unpaid party has a right to suspend work under the construction contract. The section sets out the rules governing this arrangement. This is a vital component. However, one has one's hand in the dog's mouth. Where a subcontractor supplying machinery, for example, tells his or her company to stop, the main contractor will get Johnny down the road to do the job for less. As the subcontractor is afraid he or she will never get what he or she is owed, the bill gets higher and higher and the subcontractor is led a merry dance and then left high and dry. It is important that one has rights in that instance.

Section 9 gives the Minister for Public Expenditure and Reform the power to prepare and publish a code of practice to govern the conduct of adjudications. However, a code of practice is as useless as a piece of paper in dealing with the cowboys. We have seen this happen in the case of the Competition Authority which has no funds and no power. We are aware of the cartel in the concrete sector, to which Members referred. Millions of euro have been lost to the taxpayer. The Competition Authority is toothless and powerless to act. There is inertia which stemmed from high places. There were cosy deals negotiated with a nod and a wink.

It is welcome that there was a regulatory impact assessment and that there will be further consultation. There is too much legislation passed here without any impact assessment being made. This is an issue which must be addressed. The Technical Group looks forward to the making of amendments on Committee Stage and considering the rationale for Government intervention. There must be a good reason to intervene, but intervention is needed. While the Bill is long overdue, it does not cover all areas, but no doubt we could put another Bill side-by-side with it to deal with the money trail and the funny money.

We must insert amendments to bring down the thresholds of €50,000 and €200,000, respectively, to €1,000 or €2,000 and €5,000, respectively. The figure of €3,000 or €5,000 is as or more important to the small man working and paying his way than the figure of €1 million, €2 million or, for that matter, €10 million to the big guys because it is his livelihood, his bread and butter, to provide an education for his family. It is keeping him in employment and off the dole. The small subcontractors are the ones we must support because they offer us hope of recovery.

I welcome this legislation. On Tuesday I spoke to different legislation to which I was opposed because it was providing for another layer of bureaucracy to be put in the way of small hauliers and others who were trying to survive in stringent economic times. We need many more items of legislation, but it is vital that this Bill has a speedy passage through the House. We should make amendments to it on Committee Stage to ensure it is enacted into law before the summer recess. On another Bill, somebody asked this morning who would police it. We do not want another quango, but we certainly want to create fear among rogue builders, in other words, gangsters, that they will not be able to get Government contracts at ridiculously low prices. Government agencies and local authorities must look at their track records on other projects and put in place a bond for subcontractors, alongside the one put in place for projects, because people are merely being used, abused, blackguarded, threatened, intimidated and whatever else - I could not use strong enough words for it.

I look forward to a robust debate on the Bill and compliment the Minister of State because since he took office he has taken many imaginative steps. He has had the first regulatory impact assessment published by a Government and is a man who is interested in accepting Bills from the Opposition. There have been at least five Private Members' Bills presented by the Technical Group since the Government took office and each one has been blindly rejected. I had one dealing with scrap metal. I thank the Minister of State for the magnanimous way in which he has accepted and agreed to work with this Bill which he called Senator Feargal Quinn's Bill. It does not matter what it is called. What is important is that it is passed and made court-proof. Let us keep it away from the courts. Having a code of practice is nonsense. There are too many codes of practice and too many cowboys who merely pay lip-service to them. I, therefore, look forward to the passage of the Bill.

Deputy Bernard J. Durkan

Like other Members, I am delighted to have the opportunity to speak to this important legislation. I compliment the Minister of State on paying attention to the issue, bringing the Bill into the House and following up on the legislation initiated by Senator Feargal Quinn. Of course, I also compliment other Members of the two Houses who have an interest in this issue.

Sadly, the experience of the Celtic tiger years, to say the least, leaves many of us with mixed emotions. Lessons were learned, some them bitter. One of them was that, even before the squeeze, the fittest had set out to survive at all costs and squeezed those below them. That was particularly true in the construction sector. Once it was recognised that things were going to get tougher and tighter in terms of the availability of finance, there was a clear attempt by some to exclude subcontractors and leave them penniless. People in this country have been left destitute and forced into bankruptcy as a result of that type of scurrilous behaviour. It is high time that order was imposed and a common understanding restored that such behaviour will not be tolerated. This is one of many innovations required in the aftermath of the Celtic tiger to ensure we do not end up in the same place again, with people paying the ultimate price in the form of intolerable debt and the economic and social difficulties associated with that. Such ill effects can endure for many years.

This Bill reflects the particular nature of the construction sector and was considered the right way to go about addressing the difficulties that have arisen in that industry . However, its provisions could be applied to all types of contracts right across the board and will probably have a knock-on effect. The problem common to all contracts is how to address a situation where one party enters into it with all good intent but another party has no intention from the very beginning of honouring it. That possibility makes it extremely difficult for people to have trust in the whole system of contracts and to have any reassurance that they can expect a reasonable return on their entrepreneurial efforts. This legislation is testament to the fact that many people have fallen victim to that scenario. As I have stated in respect of every Bill that is brought before this House, legislation is fine so long as it is observed in the spirit and in the letter and provided it is enforced. Unfortunately, many legislative provisions and regulations were not observed or enforced during the construction boom. We are all paying for that now as we discover the extent to which the quality of work suffered as a result. This is where the contract applies to the consumer in that he or she is entitled to expect that the standards set out will be delivered. In other words, a contract should do what it says on the tin. Unfortunately, too often that was not the case during the economic boom we enjoyed or suffered, as the case may be. In so far as we are now seeing its effects in this and other sectors, it is certainly a question of suffering.

The Building Control Act 2007, useful as it was, did not address some of the issues that have emerged in the meantime. Many consumers entered into contracts to purchase property which ultimately proved to be structurally inferior and to have associated financial difficulties in that the contract did not offer adequate protection to the purchaser. The State has a duty of care to ensure contracts entered into, under whatever aegis and whether in the public or private sector, adhere to prescribed quality standards. Those who provide a service to the required standard are entitled to be paid for it and those purchasing that service are entitled to a certain quality of service, whether in regard to a house, bridge, road or whatever. During the Celtic tiger, however, a type of attitude developed that can be summed up in the phrase: "Sure, won't it do?" Priory Hall is the most notable example of developments in respect of which the quality of work would not stand up to scrutiny. Such failures to deliver the required quality standard amount to a breach of contract. Somebody always ends up paying for that and, unfortunately, in most cases, it is those at the end of the line who do so. That is not a reference to a particular socioeconomic status. Regardless of a person's wealth or poverty, he or she is entitled to an expectation that a contract will be delivered in accordance with the specified quality standards. We are all entitled to expert a fair return and delivery. In recent years, however, consumers seem to have been somehow persuaded to expect a watered down version of their rights and to accept, moreover, that those rights should only be applicable and available to those who have sufficient influence and resources to pursue them. That is not how it should be.

What we are dealing with is the notion that no matter what, irrespective of developments, issues and outcomes, the main contractor will get paid and, if needs be, the unfortunate subcontractor can go whistle. This is a serious breach of the law of procedures and practices. Deputy Mattie McGrath referred to the quality of work and the quality of inputs. I recall an incident some years ago where a clerk of works indicated to a local authority that the materials being supplied by a serious player in the construction business for a particular building project were inadequate. This was reported to the engineer who, without any ado, ordered that the materials be tested. The clerks' suspicions were proved correct, the contract was suspended and the work had to be done all over again. That is a simple procedure which worked perfectly well 25 years ago. There was no difficulty with accountability and no confusion as to what should be done in that situation. Clerks of works knew what they were supposed to do, their superiors in turn knew what they were entitled to do and, by so doing, were able to protect consumers in an effective way and ultimately protect the taxpayer.

This is relevant in the context of the legislation before us and in seeking to cope with the bitter reaping of the whirlwind of the boom era that has taken place in recent years and will continue to play out for several years to come. The bottom line is that a simple expedient to all of these ills would have been to apply the old-fashioned rules instead of tolerating shortcuts, cutting of corners and little chats which involved persuading people to agree to things that were not in order. The rules should simply have been applied as they were intended to be applied. If that had been done, we would not have been necessary to introduce these provisions.

Debate adjourned.