I move: "That the Bill be now read a Second Time."
The Minister of State, Deputy Ossian Smyth, is very welcome to the House. I thank him for his engagement on this legislation. As many colleagues across the House will be aware, procurement is an issue with wide implications. To give a sense of the Irish position, in 2019 we spent €12 billion on public contracts for goods, services and works. Over the next few weeks, the expenditure will increase very significantly. As we heard earlier this week in the Seanad, from the Minister for Public Expenditure and Reform, Deputy Michael McGrath, there will be at least €116 billion in capital works expenditure planned under the new national development plan. How we spend that money and the way we do the procurement really matters, and we owe it to members of the public to be sure we are getting the best possible outcomes from their money when we spend it.
If we cut corners, it can cost more in the long run. We can see this in scandal after scandal and in many of the smaller disappointments and missed procurement opportunities, many of which may never get headlines but which each of us will have encountered and of which we will have many examples. It is not enough that we respond to each new controversy; it is about changing the policies, systems and practices around procurement in a meaningful way.
This legislation is not just a very strong instrument to avoid some of the mistakes we made in the past; it is also a very positive proposal on how we can raise the level of ambition, do more and derive wider public benefits of every kind from how we spend our public money, be those benefits social, environmental or associated with innovation. The key to that is making quality the heart of the public procurement process and strengthening the way we think about quality in public procurement.
This is an issue I have been very passionate about since I worked with the National Women's Council of Ireland. There I worked with 180 organisations. They were very different. Some were service providers and some were service users, and others were unions or business groups. There were so many examples of frustration with procurement. Very often, people were told that is just how it is, that it is a matter of EU law and that there is little that can be done. I decided to investigate. We found there is a large amount of space in the EU directives on procurement. There are many opportunities. There is space to do really positive social and sustainable procurement. That has now increased and it has been increasing since the 2014 directive, which recognised explicitly procurement as a key economic tool in delivering the Europe 2020 vision of smart, sustainable and inclusive growth and achieving the EU's collective goals in areas such as education, the environment, poverty reduction and equality. The EU directive states: "This Directive clarifies how the contracting authorities can contribute to the protection of the environment and the promotion of sustainable development, whilst ensuring that they can obtain the best value for money". The mandate from the EU is, in fact, to do more and to be more ambitious about procurement. This Bill is not just compliant with the EU laws; it will, in its implementation, bring Ireland closer to the spirt of those laws.
At the time of transposition, there were opportunities that Ireland did not choose to take. One example is that under the EU procurement laws, contracting authorities, when they prepare a call for tenders, must decide whether they will be awarding the contract on the basis of the lowest cost only, whereby the lowest bid will get the contract, on the basis of the best price-quality ratio, whereby both price and quality are thought about when making the decision on awarding the contract, or on life cycle costing, whereby one thinks about the input, the life cycle and the disposal of what one is buying. Life cycle costing is very often combined with the best price-quality ratio. At the time of transposition, the EU directive recognised that there are dangers when we opt only for the lowest cost, and member states were offered the opportunity to exclude lowest cost only arrangements. Ireland chose not to take that opportunity and to keep all three options open. However, what we have seen in the past seven years, unfortunately, is the lowest price being used time and again, far too often, and not enough weight being given to quality.
I address this in a few ways in my Bill. There are four very practical measures, the first of which is limiting the use of lowest price only contracts by making the best price-quality ratio the standard practice, either on its own or combined with life cycle costing. Let me give an idea as to where and why this matters. Having regard to the CervicalCheck scandal, the Scally report directly identified the fact that a lowest price only contract was one of the reasons quality issues were not identified early enough. We have seen examples of where companies with very high risk ratings are given public contracts.
That is because as a result of that early decision the contracting authorities did not give themselves the space to prefer a better quality option since they had decided it would be lowest price only and they did not have the grounds to refuse a company that displayed clear dangers in terms of its risk rating.
The Minister for Public Expenditure and Reform has acknowledged that more thought earlier leads to better outcomes. This Bill tries to put that into practice. We do not exclude lowest price only as an option. The discretion of contracting authorities is still respected. However, if they go for lowest price only, they need to publish an explanation from a senior official that states why. That is incredibly reasonable. That is also part of our accountability to the public. Effectively, what the Bill does is say that one needs to either think about quality or think about why one is not thinking about quality. That is the least that the public can expect from those spending their money.
This is based on Dutch legislation which is incredibly successful. Their projects are coming in on time and benefiting. A review of that 2016 Dutch legislation which does exactly this had two interesting findings. The first is it is not always that more expensive. A total of 73% of contracts still went to the company that had made the lowest bid but that company had proven itself also on quality. They had won on two dimensions. The other interesting finding was that the cost was 3% higher at the early stage of the procurement process but the benefit was 2.4 times more - doubling the benefit from public money - by getting those extra dimensions in. The core of it is that switch or shift in culture in what we do first.
The other part is that we need to do even more on the large national infrastructure projects. We cannot afford to get it wrong. Regarding the children's hospital, it was 75% on price and only 25% on quality and an underbidder won it with a visibly unrealistically low bid. My Bill would say that when we spend in excess of the EU public works threshold of €5.35 million, we should have a minimum of 50% quality criterion. I would like it to be higher. Many would like it to be higher. Often it will be, but that should be a minimum. That is really important. The discretion is still there to go, on a €5 million project, with price only but it will require a senior level explanation.
The final two provisions in my Bill relate to how do we help the procurement office because I see this as empowering legislation for those doing procurement. It is around the Minister providing guidelines, not only the information note that we have from the Office of Government Procurement, OGP, but around the other parts of public policy and how, if one were designing a tender, one might want to fit them in, for example, the UN Convention on the Rights of Persons with Disabilities. This would be a tool that would support contracting authorities to ask how they think about that when they are putting out a contract for a public park and how they reflect that. It would be an evolving guideline that would help. That has been done very effectively in Scotland.
It is important to remember quality is not only about sustainability and the environment. It is also about design and, for example, delivery dates and employment. The EU directive is clear that there is a wealth of ways to measure quality. They are concrete and measurable. It can be done and its being done elsewhere.
My legislation would ensure that the public duty on equality and human rights, which is an obligation of every public authority and every Department, would be reflected by them in their public procurement and that they report on how they are reflecting it in their public procurement.
I will get to respond to the debate. I look forward to the Minister of State's engagement. This is a constructive and positive proposal. It is long past time for the State to send a signal about what it values, what it recognises and what it rewards in best practice.