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Dáil Éireann díospóireacht -
Wednesday, 20 Jun 2012

Vol. 769 No. 2

Construction Contracts Bill 2010 [Seanad]: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

As Deputy Catherine Murphy is not present, I call Deputy Seán Conlan who I understand is sharing time with Deputy Jerry Buttimer.

The Bill which was initiated by Senator Feargal Quinn does a great service in restoring a sense of morality and fair play to the building sector by providing for the eradication of a culture that spawned and was allowed to develop in the construction industry during the boom years, with catastrophic results for the sector, the purveyors of contracts, those employed in the industry, those supplying goods and services to it, their dependants and even extended families. This allowed a perverse culture to prevail, whereby a Department would enter into a contract, normally with a large construction firm, to undertake a substantial Government development project. The construction firm would co-ordinate the skills and services of a number of smaller companies to meet its contractual liabilities. This would be achieved through subcontracts, oral or written, often of a loose nature. Those involved participated in the knowledge that the contract was Government-backed and that payment would not be in doubt as long as the service was provided to the satisfaction of the Government employed architects overseeing the project. The project would be finalised, the works certified and the construction firm paid. In many cases, however, the firm walked off with the money, leaving those who had actually borne the cost of undertaking the project unpaid.

This travesty of justice was allowed to continue for far too long and Senator Feargal Quinn does everyone in the subcontracting sector a great service by raising this issue in the Oireachtas and seeking to have it addressed. Large contracting firms, many of which are household names, established separate companies for each project such that, although those delivering the service believed they were working for a reputable firm on a Government contract, they were actually working for a firm which had minimal share capital and been established to provide the parent company with an instrument to achieve payment and evade paying legitimate construction costs, while insulating it from liabilities arising from its reprehensible behaviour.

This occurred all over Ireland, but it had devastating consequences for many in my constituency where its proximity to the capital, coupled with the availability of employment, resulted in many experienced tradesmen establishing subcontracting companies to meet the needs arising in the construction boom. Thousands of young people could be seen in work vans travelling to Dublin each day and playing their part in enriching the State's coffers. This was co-ordinated and facilitated by the subcontractors who became experts in building, as well as recruiting, logistics, procurement, etc. They have been the engine driving an industry that in 2006 accounted for 25% of GNP. Even when the country was in deep recession in 2010, it accounted for 9% of GNP. It is a substantial part of the economy, yet the rot has been allowed to set in and it is endangering the industry's fundamental welfare.

This legislation, while better late than never, ought to have been introduced years ago when it would have protected the many decent, hard-working subcontractors who did not get to enjoy the high profit margins during the boom, but who were forced to absorb the cost of the collapse of building firm after building firm, with no recourse. I have met many such individuals in the past year. They have certified proof of the outstanding debts owed to them by building firms which have been paid in full for work exclusively carried out and funded in total by the people mentioned. The firms pocketed the payment cheques and refused to hand over even a small fraction of the amounts due. In many cases, they were Government contracts. In a few, withheld payments remained in the Government's possession, yet they could not be accessed on behalf of the people concerned.

I have witnessed the decimation of small building enterprises and the heavy toll it has taken on families. I have also witnessed the hurt and broken lives left in the wake of this phenomenon. This Bill will inject a sense of morality into the construction sector. More so, prompt payment and inexpensive and speedy dispute resolution facilities will lead to the creation of an environment within this sector that will provide the confidence and security essential to nurture the delicate shoots of recovery. The introduction of a regular payments system will bring to an end the opportunity for one person or company to reap the rewards of another's labours.

It will take time but I have no doubt the building sector will recover. The measures we put in place in this legislation will ensure that when it does, it will present as a healthier and more socially conscious model capable of delivering our construction needs without wreaking the mayhem which I have witnessed being visited on the decent subcontractors of my constituency. I never again want a system capable of visiting such destruction on hard-working people to be any part of our public building procurement model.

I wish to share time with Deputy Dara Murphy.

I welcome the opportunity to speak on this important Bill. The Minister is correct that it is absolutely important we protect small building subcontractors who have been denied payment from larger companies. The basic tenet of this Bill is that we must protect the small person. As the Minister knows from his work with the Office of Public Works and through his constituency work, many of the people in question - subcontractors - are struggling, their income is decimated and, as they are self-employed, they do not have the option to go to social welfare. In many cases, they are beaten for work because the tendering process is not fair or transparent. They also have problems with bank lending.

It is important we protect the people at the very heart of the construction sector - the small building subcontractor. It is also important this Bill is progressed and we get a positive outcome. I commend the Minister and Senator Quinn on the work they have done on it. Over recent weeks I have met many subcontractors and their representatives in Cork through Mick O'Brien. They have impressed upon me the urgency of this legislation to assist them in ensuring they are paid. This Bill goes a long way towards that.

As Deputy Conlan said, many subcontractors have been treated shamefully and reprehensibly. This has an effect on their personal morale and esteem, as well as their family life. It also affects the economy because many provided employment, but because they were not paid properly, they have had to lay workers off, which in turn means less of a contribution to the Exchequer. This legislation is a new start. The Government is committed to introducing new legislation to protect our small building contractors. If the Minister does nothing else in his term of office, this legislation will ensure he left a positive legacy to the construction industry and ensured the small subcontractor cannot be denied payment. This is an important Bill which must be progressed quickly. This is a great step forward for ordinary subcontractors who are the lifeblood of our economy.

I welcome the opportunity to speak on this important Bill. It has been a joint effort with Senator Quinn who brought it through the Seanad. It is an important part of the programme for Government and I welcome the work done on it. As Deputy Buttimer said, there is an urgency in getting this legislation through the House in order that the net benefit can be seen by those who work in this sector. One hopes it will be a measure that will stop the negative domino effect of consecutive non-payment between businesses by bringing in strict regulations.

Steady progress has been made to date by the Government in introducing regulations and guidelines that help businesses. This measure will help the construction industry. Attracting foreign direct investment and reform of the public sector are progressing favourably. The indigenous small and medium-sized enterprise sector requires ongoing work, as does the banking sector. The construction sector will benefit from this Bill's measures. More work can be done in reforming the planning sector to allow those with ready construction projects to be brought to contract stage. The length of time An Bord Pleanála can take on granting planning permission needs to be amended. A reduction in development levies at local authority level is also vital.

The issue of eurobonds has been much in the news recently. While it may be down the line a bit, progress should be made in this area. We must watch for Structural Funds from Europe for shovel-ready structural projects which will benefit the construction sector which has such a high level of employment.

I support this Bill but I believe its provisions should not be confined to the construction sector. If one talks to anyone in business, they will say their recurring problem is how difficult it is to get paid. There is a culture around that which makes it a problem in keeping businesses viable. There are elements of this Bill which need to be amended such as the thresholds. However, there are also other ways of doing things in the construction sector.

When I was elected to Kildare County Council in the 1990s, I spent most of my time picking up the pieces after the crash of the 1980s. We need to do things differently if we are to avoid repeating the same problems. Systems need to be put in place to reward good behaviour. There are some good developers in the construction sector but there are some awful ones too. We need to put systems in place that make it difficult for them to function. In 1989 Australia adopted housing legislation which introduced a licensing system for building and development, a move I favour. For example, there is a small contract for any work under AUS$5,000 and a full contract for any work over AUS$5,000. The system ensures any construction company applying for a tender must show warranties. If a construction company is pursued in the courts for non-payment, its licence could be withdrawn in addition to fines and penalties. This system makes the consumer the king.

Under the current system here, one has more consumer protection if one buys a table and chairs than if one buys a house. We do not need to re-invent the wheel but look at best practice in other countries. In Ireland all one needs is the money to start up a construction company. We have seen the likes of Priory Hall where it is individuals or the public purse which has to deal with the aftermath. We need to start learning lessons from that. It would be well worthwhile if the Minister examined Australia's 1989 Home Building Act. It provides a cooling-off period for the company offered a tender. The contractor cannot subcontract work or function unless it has a licence. I use New South Wales as an example but if a company is building in Germany, there must be several elements in place before it is permitted to build.

There are a range of issues that could be considered. The Australian model is not the only example but it is pitched under the department responsible for fair trade. This matter is about fair trade and giving people who operate as they should be in business - or their competitors and partners - a fair chance. The Australians have a complete department dealing with these issues in areas other than and including the construction sector.

It has recently been brought to my attention by several people that there has been a re-emergence of directors who may have gone out of business. This happened in the 1990s as well. Such people return to business to trade, having made people redundant, in what is almost a seamless process. I am concerned the Office of the Director of Corporate Enforcement does not have the capacity to keep up to speed with this, and the area should be examined if we are to reward good behaviour. I do not believe we legislate for liquidators or those who can carry out that work, for example, and that should also be examined. I do not know if one can get a friendly liquidator or if these people require a particular skill set.

How we do business matters to the people we are talking about today who are down the food chain. They do not have the wherewithal to end up in court getting the kind of judgments that big creditors can get. There is more of a need for us to ensure such people are protected. After all, they are almost exclusively indigenous small firms and they only have to be bitten once or twice before they go out of business.

I am supportive of the legislation, although the limits are too high. It makes sense to change the arrangements if somebody is affected by an issue more than once. It makes sense to change such provisions as we want workable legislation. This is not the only legislation required, especially with regard to the construction sector, and we must change how things are done. Otherwise, the same group of people will re-emerge the whole time, and these are not necessarily the best people to have in the sector. We must reward good behaviour, as there are good developers out there who pay their contractors. One cannot label an entire sector in a negative way but there is a cohort within the construction sector who must be regulated.

I am delighted to have an opportunity to speak on the Bill. As the Minister of State is aware, this Bill was initially introduced in the Seanad by Senator Feargal Quinn and the Government at that time gave every support to him. We made the unusual decision - and a relatively unusual decision even in this Dáil - that the Government would support a Bill from an Independent Senator, giving help and access to the advice from the Attorney General, etc. in the development of the legislation.

I regret we are talking about this Bill now because I had hoped it would have been passed earlier last year. I understand there were many technical difficulties that had to be overcome and legal advice had to be sought. It shows nevertheless that there are difficulties in our system when it takes this long for legislation to get through. If there are issues that take a year to resolve while other parts of legislation can proceed quickly and have a significant impact, we are better to go ahead with the part that is ready. We could come back a year later with the difficult issues and make amendments to the primary legislation if necessary. That is in preference to holding up the entire process for a year while trying to get the issue absolutely right.

We must consider what we are talking about. To a certain extent in the context of this downturn, we are closing the stable door for many people after the horse has bolted. We know how the construction industry works. Even if we are talking about a State contract, the top contractor gets the payment. This is the party with whom the contract is signed. That contractor feeds down through a food chain of subcontractors and their subcontractors, etc. The money, in many cases, was not getting to various subcontractors down along the line, with the result that people who had run perfectly good businesses and paid all their creditors found they were not being paid. Such people would have been pushed out of business or survived with significant bad debts on their books. When those in the middle found they were not being paid, those dependent on them in turn also found they were not being paid. It is fair to say many went out of business not because of anything they did but because they had been trusting on payments.

This Bill is a significant step in the right direction. It is very important we protect the small operator at the end of the food chain. I know there was pressure, when my party was part of the Government, to have higher limits, but €40,000 or €50,000 is a significant sum for small operators. They must be protected from losing such amounts and it is an important provision in the Bill.

There are very ambitious timescales for adjudication, with which I agree, but we must ensure they are adhered to. There is a saying that justice delayed is justice denied, and I am a great believer in it. In too many sectors we may be seeing inordinate delays while decisions should be made. If we look across Departments and even at organisations like the Ombudsman, we can see this happening. It is ironic that one of the roles of the Ombudsman is to deal with delays in the public service. It is legitimate to make a complaint to the Ombudsman because the administration of a process is delayed. Some of us could complain to the Ombudsman about the delay in the Ombudsman's office in making decisions recently. It seems that queue is getting longer, and I hope that phenomenon will not be repeated in this legislation.

Mention was made of An Bord Pleanála and the four month statutory objective in making decisions. There has been more of a breach than observance of that provision. I understand that if somebody is building a major piece of infrastructure, with much technical information, more than four months might be required for a decision. If an appeal relates to a single house, which should be fairly simple to resolve one way or the other, why does the process go over four months? I have seen that happen time and again. When in government I made a suggestion to some colleagues, which may not have been taken up but which I will make again. Perhaps this Minister of State will take it on board. We should amend the Act relating to An Bord Pleanála in order that all decisions would have to be taken within four months unless a specific time extension was given by the Minister. The Minister would have no say in the planning decision but he would have a say in permitting the extension of time, for which there must be a justification. If there was a complex development with a lot of EIS material, the Minister could give the extension but if An Bord Pleanála came back after four months seeking an extension for consideration of a simple one off house, the Minister could instruct it to make a decision.

I am convinced that if that was introduced, like in all deadlines situations, the number of extensions being sought from the Minister would be minimal because it would mean work for An Bord Pleanála and 90% of ordinary planning appeals would be decided within four months. Local authorities do it within eight weeks and, in most cases, they do a fine job in making planning decisions. I would argue their planning decisions are no more flawed in terms of county plans than those of An Bord Pleanála. I ask the Minister to consider this because this Government should look at every timeframe for decision making within our system. For so many people, no matter if it is an application for a social welfare benefit or something to do with the courts, the systems are gummed down completely by delay.

Construction has become a dirty word in Irish society. At times we go from one extreme to the other, we go from an extreme where we see an industry as being the answer to all problems to a point where we think that everything the industry does is wrong. We certainly had too much construction in this country, it was unsustainable, but at present we are at the other extreme. I am a great believer in the mathematical statement that to every action there is an equal and opposite reaction or, as I call it, "the bungee jump effect". We were way too high in the beginning but when the line tautened, it went too low. Eventually it will wind up somewhere in the middle. The sector is important in terms of employment because the unemployment figures are to a great degree made up of people who worked in the services and construction sectors. We must get construction back to the long-term sustainable level. I looked recently at house building numbers. For a long time we could build and needed 30,000 houses per year. The figure at the top of the boom of 90,000 was way too much. There are areas of the country, however, that will run short of houses in the near future. It is important we create a sustainable construction industry as quickly as possible.

It is important the industry is reformed and this is part of the reform process. There will now be an implicit contract between every contractor and subcontractor and the subcontractors will have certain rights no matter if the contract is verbal or written. There will be strict rules on when a contractor can withhold payment and he must give notice to ensure there can be no excuses for non-payment.

There is great talk about a major investment package. I hope it comes, I look forward to it. I hope President Hollande manages to get this investment package but we must have a debate on how we would spend €3 billion tomorrow. Would we spend it, as everyone says, on schools and hospitals, where there is a 100% State spend and once the money is spent there would be important social infrastructure but its effect in stimulating the economy would be limited? If, however, we invest by leveraging other money, the money becomes self-sustaining. A common phenomenon when I was a Minister was there would a list of investments but when they were added together, the Exchequer provided all the money. I calculate that if the State offers a 35% to 40% grant for any investment, and if the rest comes from private sources, not the State matching the State, financing becomes sustainable within its own terms. The 40% the State puts in will be returned in savings in social welfare, and in income from VAT, PRSI payments and income tax. Having spent the money, it has all come back and can be spent again. When it has been spent again and returned, it can be spent again. When we look at capital investment we must decide what will be the mix. Will it be 100% State spending? If so, the money is gone. Will we look at more constructive and innovative ways of investing money to ensure it does what it is meant to do - stimulate the economy to the maximum extent and create a return to the Exchequer.

One thing is certain; we need to invest. I have said again and again, and if one rubs a stone for long enough it becomes shiny, that an obvious area for investment is in the improvement of the thermal quality of our buildings. The last shock we suffered was a banking shock and the next shock could easily come in the form of hikes in energy prices. If we want to reduce our vulnerability to energy shocks, we must get ahead of the game and ensure all of our buildings have good thermal qualities. We must try to reduce this huge import bill for gas, oil and hydrocarbons in general that costs us so much. It is a huge drain on the economy and leaves us vulnerable to a sudden rise in the cost of hydrocarbons. I am convinced we have only scratched the surface of BER and investment. A 35% grant would be sufficient and should not be limited to the small cash amount the State is spending at present. It would be enough to get people to do the necessary work on their houses while we could also look at public buildings and commercial properties. The State would get 100% of its investment back through reductions in the numbers unemployed, lower social welfare payments and increased tax.

This is an important element. There are practices in the construction industry that had probably existed for a long time that must change dramatically. It is important we see this as one small step in reforming the sector and that we look at the entire industry to find out how we can have a good, efficient and high quality construction industry. It is something we need and a good employer that will deliver quality buildings. We must learn from the mistakes of the past and get ourselves into a better space.

We are often great at pointing out the mistakes, which is important.

There is no point, however, in pointing out mistakes if one is not going to do anything about them and ensure they are not repeated. There is a huge onus on the Government to continue with the reform started by the previous Government and Senator Quinn to deal with it.

I refer to the retention of title issue. Many suppliers of goods retain title in order that if they do not get paid, they still legally own the goods and can get them back. The cement industry has made strong representations in this regard. When cement is laid in a foundation, one cannot get it back. Whatever chance one might have of getting a window or door back or the tiles off a roof, there is no point in delivering the cement back to the manufacturer.

We are looking into this.

I understand it has not been dealt with but something must be done about this. This will not favour a particular industry but will address a self-evident problem where if cement, tarmacadam and so on are delivered and not paid for, there is no getting it back. It is important to examine this and come up with a solution.

The one thing we do not want to see is that people who have genuinely provided goods in order that society can function and who run their businesses well become the innocent victims. One cannot always expect payment prior to delivery. When I ran a co-operative, we had 30 days, and in some cases 60 days if we were lucky, to pay bills. However, one could not work on the basis of payment on delivery. Credit is part of business but the problem with cement is that once it is delivered, it cannot be returned and there cannot be retention of title. It is important, therefore, that people can give credit because if credit is taken out of business, much of the lifeblood of business will be taken. We have to protect those who, in good faith, give credit because, currently, if anything goes wrong, it is almost impossible for them to get their money back.

I wish to share time with Deputies Marcella Corcoran Kennedy and John Paul Phelan.

I am delighted to have the opportunity to contribute to the debate. I compliment Senator Quinn on highlighting this issue in the construction industry and on getting the Bill to the House. As has been said previously, we are to a certain extent closing the stable door after the horse has bolted but it is important to get this right for the future to ensure a similar scenario does not arise again.

I have met several subcontractors who are experiencing difficulty because they have not been paid that to which they feel they are entitled. They feel hurt, annoyed and angry that the system has let them down. They were the principal skilled tradesmen in the industry such as block layers and tilers and those who do the ground work on building sites. They have the skills that are essential to ensuring we have a construction industry. They feel very much let down and they feel the system must be improved to ensure this does not happen again. It has been suggested that a simple way around this issue is to subject main contractors, who tend to continuously win contracts for State jobs and other large jobs, to a stipulation whereby if they have not paid subcontractors in the past, it would be included in the pre-qualification documents for a tender in order that their behaviour would catch up with them. They would be ruled of winning future contracts if they did not pay what they should have in the past. I understand that may not be practicable but it should be examined for the future. Subcontractors have skills and they must have security of payment. They buy materials and pay their staff every week and this money goes back into the community. Unfortunately, many of them are on the dole and are trying to find work.

The Bill is a step in the right direction to ensure what happened in the past will not be repeated in the future. It will ensure the most skilful in the industry will be protected in the future. I compliment the Minister of State for bringing the legislation, which I very much support, to the House.

I welcome the opportunity to contribute to the debate on this legislation, which will protect small building contractors, subcontractor and sub subcontractors. I also welcome the fact that the Bill was initiated and developed by Senator Quinn and it is similar to existing legislation in Great Britain. It is about time clarity was brought to this issue. Public representatives are well aware of the many subcontractors who were caught out for no reason other than they did their jobs well. They were subcontracted work on private and public contracts by larger companies and found themselves abused by the bigger players. Many young people starting out in careers such as plastering, carpentry and so on were employed to do two or three jobs by a large developer and found they were left high and dry. Meanwhile he moved on to another group of young people trying to start out. This abuse of young people in the industry was appalling and it is time this was addressed.

The construction industry is a vital part of the economy and, therefore, checks and balances must be put in place to protect smaller contractors. Recently, I attended the opening of two secondary schools in County Offaly which were built via State contracts but the celebrations were marred because many subcontractors who worked on the projects had not been paid by the main contractor who was awarded the contracts. He did not fulfil his obligations and deprived these fine businessmen of cash flow when they needed it. It is appalling that they had to be driven to protest on an important day for students, teachers and their parents. We all felt bad for the subcontractors who, in good faith, did the work but were, unfortunately, not paid for it.

I welcome a number of the Bill's provisions, including the code of practice on adjudication. This will be helpful in avoiding a lengthy legal process in disputes. The proposal for interim payments will reduce the exposure of smaller companies and individuals because cash flow is vital to businesses. I am concerned that contracts with value in excess of €200,000 will not come under the scope of the legislation. I acknowledge it is the figure agreed by the Seanad but a number of small contractors in my constituency have raised this matter with me. They exercised their right to outline their feelings on it and many of them would like the threshold reduced to €50,000 because one man and two man operations will not win large contracts and giving them the opportunity to avail of the protection provided via a lower threshold would be only fair. I do not know how "pay-when-paid" clauses ever emerged, as they are most unfair. The practices that were introduced when the industry was booming were appalling because the big players won out and smaller contractors were left exposed. Many of them ensured their staff and suppliers were paid and they went without.

I add my voice in support of the Bill. References were made to the horse having already bolted and so on, but the proposal is nevertheless very welcome. There was ample opportunity for something like it to be put in place at any time in the past 15 years, but it was not done. I welcome the legislation as a means of helping to address that failure.

I welcome the opportunity to contribute to the debate on this Bill. I do not recall whether I spoke in the other House on the occasion of its introduction by Senator Feargal Quinn some years ago. I commend the Senator on his achievement in bringing it through the Upper House and to the Dáil. Several speakers observed that there is an element of closing the stable door when the horse is gone. However, it is never too late to do the right thing and it is proper that legislative provision is made to ensure persons who have legitimately carried out work are paid for it.

A properly functioning construction sector is important in any economy. At the same time, whatever action future governments take, we must ensure we never again find ourselves in a situation of over-reliance on one sector of the economy. While seeking to avoid any recurrence of the construction bubble that featured in the latter years of the Celtic tiger, it is important for any normal economy to have an operational construction industry. The Minister of State, Deputy Brian Hayes, includes within his remit the Office of Public Works, which is engaged in construction-related matters throughout the country. This legislation goes some way to ensuring a fairer and more sustainable industry into the future. Deputy Marcella Corcoran Kennedy mentioned a recent case in her constituency where the completion of a public project was marred by protests at the lack of payment for work completed to certain subcontractors. I am entirely in agreement with Deputy Pat Deering's suggestion that we should ensure no future public contract is awarded to large contractors which have withheld payment in the past from subcontractors engaged to carry out specific works. That is a reasonable proposal.

I take this opportunity to highlight the difficulties experienced by many people who worked formerly in the construction sector in terms of accessing benefits and payments. I am aware that the Minister for Social Protection is reviewing this issue. Thousands of people in the sector are now unemployed, many of whom have left the country. Many others, however, are not in a position to leave because of commitments in this country. For the self-employed, access to any benefits is a minefield and provision in this regard is completely unsatisfactory. I urge the Minister for Social Protection to introduce changes to make the system fairer for previously self-employed persons, in the construction sector and elsewhere, who subsequently find themselves out of work.

There has been a huge increase in recent years in black market activity in construction. We have all, for example, heard anecdotal evidence of people who continue to work as carpenters, tilers, blocklayers and so on but must compete for business against others who can afford to charge lower rates because they are simultaneously claiming benefits. It is unacceptable that people who are legitimately striving to keep businesses afloat are being undercut in this way. It is not, unfortunately, an issue that is easily addressed. I had a long discussion last week with a constituent who formerly employed eight or ten carpenters and is now reduced to operating as a sole trader. This individual is struggling to stay in business while competing against former employees of his who are undercutting his prices while continuing to draw welfare benefits. People who are obeying the law and striving to meet their costs on a weekly basis are competing on a far from level playing field. There is significant work for the Government to do in this area.

The information provided by the library and research service highlights an area for possible amendment in the Bill by way of the introduction of a payment system based on bonds or trust accounts. This is particularly relevant in the context of the significant number of unfinished housing estates throughout the country. What we currently have is a highly unsatisfactory system where local authorities are drawing down bonds for the completion of necessary works on unfinished schemes, particularly in regard to safety issues. The problem is not just that these estates are unsightly but that many of them present significant dangers to residents. Our antiquated system means it takes far too long before work can be done to make these sites safe. There have already been tragic accidents in several estates. I could show the Minister of State schemes in my constituency where it is only a matter of time before disaster happens. If the legislation is to include provision for bonds and trust account payments for subcontractors, we must take on board the fact that the current system of bonds in respect of the construction of residential estates is unsatisfactory. The whole area should be reviewed in its entirety with a view to securing a satisfactory result for the owners of properties in the hundreds of unfinished housing estates throughout the State.

I support the provisions contained in the Bill for making the construction industry more viable into the future and fairer for those who are working in it.

I welcome the opportunity, at long last, to contribute to the debate on this Bill. We are having a useful Second Stage debate in this House after the lengthy and comprehensive discussion in the Seanad. I welcome Senator Feargal Quinn to the Chamber and thank him for his initiative in bringing forward the legislation under Private Members' business. Without his work, we would not be having this discussion today. I hope we will see further examples of Private Members' Bills making it through the Houses and being signed by the President. What is most important, however, is that any legislation, once enacted, is implemented and monitored. The function of this House is to pass law and regulations; it is not our function to oversee their implementation on a daily basis. There is a major difference between passing legislation and ensuring its implementation. Failures in this regard are part of the reason we are here today discussing problems in the construction sector, where, in many cases, agreements were put in place but were simply not adhered to.

Deputy Marcella Corcoran Kennedy mentioned that the opening of two schools in Offaly was marred by protests at the failure to make payments to certain subcontractors. I suspect the same contractor was involved in two other schools in Portlaoise. What got to me about the contract was that it was a State one. It is an example of what is approved in the House and what happens on the ground. I said publicly some time ago - it was in the local newspapers - and I will say it in the House now if I have not done so before, the contractor who got that major multi-million euro schools construction project, subcontracted part of the work and the subcontractor subcontracted work to others. On several Thursday mornings, many workers came to work in their good clothes. They had a cup of tea in the canteen and then the contractor bussed them all up north to collect social welfare and bussed them back to the site in the afternoon. That was a fraud on the taxpayer. It resulted in other people not being paid for work for which they should have been paid. That may not be covered here but it should be part of this legislation. I raised the issue with the Secretary General of the Department of Education and Skills at the time and the matter was investigated.

I have other examples of that particular issue. I also have an example of where people who were covered by registered employment agreements could not get work block laying on a site even though they knew some of the people on the site were claiming social welfare. They called in the National Employment Rights Agency, the social welfare officers and the Revenue Commissioners to inspect what was happening on the site. Needless to say, the Garda were called in to deal with them because they were causing a nuisance to the contractor, but that is life. Those concerned continued to make improper payments but two years later, I understand there was a settlement between one of the subcontractors and the Department of Social Protection for having people on the site who should not have been on it.

That led on to the question I asked about who was implementing the registered employment agreement because the subcontractors to the contractor were not doing so. I was told by the Secretary General and Accounting Officer of the Department of Education and Skills that it was a matter for the architect because he or she certifies the work done. I was at the opening of an activity funded partly by the HSE and the local enterprise board last weekend. The architect complained to me that he was being asked to check payslips and pay rates and that was not his job. He openly admitted he had no knowledge or expertise in that area. Obviously, he must certify that the job is done in accordance with the registered employment agreement. He said he was not being paid to do that. That person does not have the ability to do that, so we must have a system in place in order that when the State pays the full registered employment agreement rate for a job, the people on the job get the rate. If they do not get the rate, two things happen. The person who is getting the reduced rate could be claiming social welfare as well, which is costing the taxpayer money, but more to the point, the underbidders could have a claim somewhere along the line, knowing that work was not carried out in accordance with the tendering process which specified the rate.

At 9 o'clock on the morning of the opening of a motorway financed by the Exchequer, a quarry owner arrived on site with half a dozen lorries and refused to move until he got a cheque for €2 million because he had not been paid. Further along on the same motorway, the N7 heading south, subcontractors threatened to dig up the motorway and take back some of the tar, or some of the bespoke products, because they had not been paid. They ultimately got settlements but the cheques bounced. The motorway is open but people have not been paid. The country is littered with bad examples of what happened in the past.

As somebody said, the harsh lessons are no good unless we put something in place. We have missed the boat in terms of the last construction boom but some fine day, there will be further good construction. There is still much work going on under the capital investment programme, whether in education, health, transport or other areas. There will always be new contracts, so it is important we put something in place.

It is two years since I visited the Department of Finance when the Bill was going through the Seanad but my main concerns are not all dealt with by the legislation. People at local authority level gave out contracts even though they knew when they were quizzed that they were granting contracts to contractors who had not paid local suppliers, because they knew the contractors had done this on other jobs. They said they had the bond and that the tender and every bit of paperwork was correct. They knew in their hearts there would be grief but they had no option other than to give the contract because the price was right. Some of that arose because contractors put in what I would call contract prices less than the legitimate cost of the project. I know there is scope for contracting authorities to say they do not believe a contractor's price is right but if the contractor keeps it a little under and not too far out, they may hope to get the difference back on the extras. Perhaps they do not and are looking for cashflow to keep the business in operation. As was said to me, contractors and subcontractors should provide references and the previous payment history should be taken into account.

Another mechanism is causing problems for some people. Those in the construction industry have told me that some contractors front-load. When they price a contract, there is much labour and materials involved so they front-load the labour content of the contract in the tendering process to increase the percentage of payment that will occur early in the project. They put in a large labour element into the early part, so they get a good cashflow in the beginning. I understand why people do that but it has a knock-on effect in that the person coming in at the end of the project will be squeezed because the cashflow has got tight as the majority of the cashflow came early on in the process rather than later on.

I thank the Minister of State for being involved in the regulatory impact statement. I was pleased to have been invited to his Department last summer to participate in that and to give our input along with all of those involved in the industry. The process was improved as a result of that. I understand the Minister of State is considering some amendments. The first amendment we will table, if it has not been tabled by the Minister of State, relates to the threshold. There must be some threshold but €200,000 is ten times too high. We will discuss that on Committee Stage.

The Minister of State is considering the question of adjudication and whether it will be legally binding. We need to tease out precisely how it will work on Committee Stage. The Minister of State also mentioned the two week time limit. A large contract will go on for 18 months. So what if one subcontractor pulls out for two weeks. He will have to crawl back on day 15. That is no good and that subcontractor is probably in a worse position crawling back on to the site to resume the work. That must be re-examined. Matters of a financial nature do not always need to be dealt with and completed during the course of construction. There are always issues at the end of contract to be sorted out. I would not like to see health or education contracts being brought to a halt by people coming off site. I would like to see a mechanism which would keep the project moving in the interest of the taxpayer.

I thought the word "bespoke" referred to a suit. I do not like that word. We all know of the concerns of the people involved in quarry and concrete businesses. I do not understand why they cannot be dealt with. I know there is a problem with a definition with which we will have to deal. Some of the key players have been involved with people from whom one cannot retrieve the product, so that must be dealt with.

The question of bonds arises about which I was confused. There is a performance bond for the main contractor to ensure he finishes the job. There is a payment bond, which occurs in other countries and which may possibly be introduced. The applicant who got planning for the project must lodge a bond with the local authority to ensure it is completed. Deputy Phelan referred to the unfinished estates. There are a plethora of bonds and some of them might not apply to the contractor where a public body has obtained the planning. We are talking about contracts in the private sector as well.

Debate adjourned.
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