Dáil Éireann Debate, Thursday - 2 March 2017
2. Deputy David Cullinane asked the Minister for Public Expenditure and Reform to outline the details of the review of public procurement oversight his Department has undertaken in view of the significant disclosures of material non-compliance with procurement rules involving contracts worth €500,000 or more that have been reported by the Comptroller and Auditor General in his annual report 2015; and if he will make a statement on the matter. [10495/17]
Amharc ar fhreagraI am inquiring as to whether the Department has carried out any review of public procurement rules. I have done some research into this issue and as a member of the Committee of Public Accounts, I can tell the Minister that non-compliance with public procurement rules comes up repeatedly. The Comptroller and Auditor General has reported on this consistently as a difficulty, particularly in the health area. Is the Minister aware of the levels of non-compliance?
Public procurement is governed by EU and national rules. The aim of these rules is to promote an open, competitive and non-discriminatory public procurement regime which delivers best value for money. It is a basic principle of public procurement that competitive tendering should be used other than in justifiably exceptional circumstances.
Under Department of Finance Circular 40/02, Accounting Officers of Government Departments and offices are required to complete and submit an annual report, signed off by the Accounting Officer, to the Comptroller and Auditor General in regard to contracts in excess of €25,000, exclusive of VAT, that were awarded without a competitive process.
The circular states that contracts awarded or purchases made without a competitive process should be subject to an internal review by an internal audit unit, or by a senior officer independent of the procurement process. The Accounting Officer, in his or her annual report to the Comptroller and Auditor General, sets out the reason for not using a competitive process for each contract. Current procurement rules recognise that there can be legitimate reasons for awarding contracts without the use of a competitive process, for example, in extreme emergencies or unforeseeable circumstances. Therefore, such procurements may not constitute breaches of the public procurement rules.
The Corporate Governance Standard for the Civil Service and the Code of Practice for the Governance of State Bodies also identify procurement as one of a number of activities requiring special attention in promoting good corporate governance. It is the responsibility of Departments and State bodies to satisfy themselves that they adhere to the requirements for public procurement.
The Office of Government Procurement provides guidance notes, documentation and a customer service function to support public bodies undertaking procurement directly themselves. In addition, template, tender and contract documents have been developed in conjunction with the Chief State Solicitor's office and the Office of the Attorney General to assist contracting authorities involved in carrying out routine, non-bespoke and low to medium risk procurements. These are available on the national public procurement website www.etenders.gov.ie.
Public bodies are subject to examination by the Comptroller and Auditor General regarding their adherence to EU and national rules on public procurement. The Comptroller and Auditor General works with the Committee of Public Accounts in reviewing those accounts on an annual basis.
There are extraordinary circumstances in which Departments may not comply with rules and the circumstances are set out. We have many reports by the Comptroller and Auditor General which flag up a lack of compliance with the rules. These are flagrant breaches of the rules. All those documents from the Comptroller and Auditor General should be examined. It seems that all a Department has to do is flag non-compliance. There are no sanctions or penalties and, as a consequence, there is no change. Unless they are forced to change, we will continue to be told there is nothing they can do. The Comptroller and Auditor General also found that the levels of non-compliance in the HSE were so high that the problem was systemic, after carrying out an audit in 2015 where 30% of the samples were found to be non-compliant with procurement rules. It was systemic not just in the HSE, but right across the system. There is a real problem here and we will see more of this unless we have rules in place that involve some level of sanction.
It is important to understand that the reason we know about these instances of non-competitive processes taking place is because they are completed by the Accounting Officers themselves under this Circular 40/02. That is how we come to see exactly what has happened in this space. We need to recognise that while we should always hope to see competitive processes, EU directives allow for non-competitive processes in circumstances where special equipment has to be procured, and one could understand how that might happen for defence. There might be an extreme emergency and that has come up with regard to emergency fit-out for special accommodation centres, where a change of supplier might oblige a contracting authority to acquire supplies with different technical characteristics. That can come out as well. There might be an opportunity where there could be a bargain purchase available. It is worth noting, despite the cases listed by Deputy Cullinane now and in previous debates, that we have the lowest level of non-competitive procurement in the EU at less than 1% of the €12 billion of procurement undertaken by the State.
Reading from the Comptroller and Auditor General's most recent reports, he states that it should be noted that the level of non-compliant procurement may be higher due to under-reporting. He went on to state that the HSE, for example, does not have adequate systems to capture instances of non-complaint procurement and accepts that it is unreported at this level. He also found that all testing of HSE procurement in 2015 involved testing of procurement in five locations. Some 30% of the samples were found to be non-compliant and in 2014, 47% were found to be non-compliant. He went on to conclude that non-compliance with procurement requirements in the HSE is systemic. Not only that, there were many organisations for which he cited similar problems. The Minister of State correctly says that we are only aware of this because of the Accounting Officers informing us of non-compliance. The problem is that nothing changes because there is no sanction. There are a number of issues here. There is no sanction and there are potentially levels of under-reporting as well. All I ask for is a review. Can we review what is happening here and see if we can get changes? In the health service alone, it amounts to €1.6 billion of the €14 billion spent on health in terms of the purchase of goods and services.
This is constantly being reviewed by the Office of Government Procurement, which is a new office. Its role in this area is to bring about the standards for compliance and the standards to be set for a competitive or non-competitive tender, and to liaise with the contracting authority, which might be a State agency or might be a local authority, about best practice. I spoke earlier about the work that has been done there with the Comptroller and Auditor General's office and the Chief State Solicitor's Office to try to achieve that. As the Deputy will know from his role in the Committee of Public Accounts, it is the responsibility of the Accounting Officer under section 19 of the Comptroller and Auditor General (Amendment) Act 1993 to answer for those financial management aspects. There is an internal audit function within the Department that will look at where a non-competitive process has taken place. It is then declared by the Accounting Officer under Circular 40/02. The Minister and the Accounting Officer are then responsible to the Committee of Public Accounts insofar as the Comptroller and Auditor General's external audit of that Department has taken place. That is the mechanism whereby this is reviewed and where accountability is held. The role of the Office of Government Procurement in all this is to bring about these reforms and better standards so that we can see what has been happening to date and we can drive further reform and improvement into the future.
