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Public Procurement Tenders

Dáil Éireann Debate, Tuesday - 5 March 2019

Tuesday, 5 March 2019

Ceisteanna (40)

Jonathan O'Brien

Ceist:

40. Deputy Jonathan O'Brien asked the Minister for Public Expenditure and Reform the extent to which he has issued guidance notes or oversight of the regulation of abnormally low tenders since 2011; and if he will make a statement on the matter. [10673/19]

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Freagraí ó Béal (6 píosaí cainte)

How many guidance notes or oversight documents in respect of abnormally low contract tenders have been published by the Minister or his predecessor since 2011?

The awarding of public contracts is governed by the fundamental principles derived from the Treaty on the Functioning of the European Union as they apply to public procurement. These include transparency, equal treatment and non-discrimination, proportionality and mutual recognition. The European Union directives set out the legal framework for the award of contracts that exceed the specified monetary threshold for supplies, services and works. Under Article 69 of Directive 2014/24/EU, the EU directive governing public procurement, contracting authorities are obliged to require tenderers to explain the price or costs in a tender where tenders appear to be abnormally low in relation to the works, supplies or services. Contracting authorities must assess the response from the tenderer before coming to a decision as to whether they will admit the tender or reject it on the basis that it is abnormally low. Where the explanation provided by a tenderer does not satisfactorily account for the low level of price or costs, having taken into account the circumstances outlined in the procurement directives, the contracting authority may reject the tender, although it is not obliged to do so. When investigating what may appear to be an abnormally low tender, contracting authorities must take into consideration the possibility that the tenderer may be obtaining more favourable terms from suppliers and subcontractors than rival tenderers.

There is little scope for manoeuvre on labour rates since contractors are required by law to pay workers covered by the sectoral employment orders, SEOs, in accordance with the terms of the applicable SEO. More efficient methods, however, of working to reduce labour costs cannot be ruled out in assessing a tender. Notwithstanding this, there is nothing to prevent an entity from performing a contract at a loss, subject to it being compliant with labour, social and environmental regulations. Where the contracting authority discovers that the price is abnormally low because the tenderer is not meeting its obligations in the field of social, labour or environmental law, the tender must be rejected. Where works contracts are concerned, specific reference to unbalanced tenders and abnormally low tenders is made in section 8 of the standard template instructions to tenderers published under the capital works management framework. These documents, which constitute the rules under which a tender competition is run, must be used in all public works contracts and have been published since 2008.

In fairness, I know the law. It is contained in SI 284/2016, which deals with abnormally low contracts, but that is not the question I asked. Rather, I asked whether any guidance notes on the matter had been issued by the Department since 2011. While we are on the subject of abnormally low contracts and how they are meant to be addressed by the contracting authority, will the Minister of State explain why the contract for the national children's hospital was not considered an abnormally low contract? Perhaps the Minister of State has different information to me, but why were no discussions, as far as I am aware, entered into in respect of that particularly low contract?

On the national children's hospital, the Deputy will be aware from responses that have been given by the Minister for Public Expenditure and Reform that the National Paediatric Hospital Development Board sought, in advance of the contract being awarded, to apply for a derogation from the use of the standard works contract. This was established by the Government contracts committee for construction, which engaged in its work from May 2014 over a long period. Derogations are allowed in exceptional circumstances, where there can be a presentation to the Government contracts committee for construction, which is a separate entity, to indicate that the circumstances of the standard work contract would not suit the development of a particular piece of infrastructure which in this case was the national children's hospital.

With regard to available guidance, the Deputy has outlined that he is aware of the regulations as set out in the statutory instrument and the law itself. There are provisions of guidance and supports available to contractors in advance of a tender being submitted through the contracting authorities, which will clarify individual issues in advance of the tender being submitted, and through representative organisations. The small and medium enterprise committee within the Department of Public Expenditure and Reform, which I chair, has representative organisations from across the sector and I am sure they will be able to engage with the sector on that.

The derogation was to move away from the standard contracting practice to a two-phase practice, not to deal with the abnormally low contract price that came in. Why was the guidance and law related to the statutory instrument not adhered to and implemented with regard to this project when there was an abnormally low contracting price compared with the other prices tendered for? One of the individuals who sat on the development board and was responsible for that contract was put on the board because of his expertise and knowledge in this area.

The Minister, Deputy Donohoe, addressed that issue both in the committee and in the House. Where there are issues of abnormally low tenders, the contracting authority, whether a public body or State agency, does not have to accept the tender, and I have outlined the reasons for that. As well as that, once a contract for a tender is awarded, there is a dispute resolution mechanism. There can be issues with the tender after it has been awarded where there needs to be dispute resolution and issues arise that would not have been foreseen. On the issue that the Deputy raises, I am sure that the PwC report that has been charged with looking at all of this will enlighten all of us and the debate in its entirety. I cannot comment on an individual case because, regardless of the contract, it is up to the contracting authority, which is the National Paediatric Hospital Development Board, and its parent Department, the Department of Health, which has ultimate responsibility for it.

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