Mr. John O'Brien:

I am grateful for the opportunity to make a presentation to the committee. While Mr. O'Reilly and I are representatives of the copiers and suppliers group, we believe the points we will be making apply generally to small businesses across the country which supply various types of equipment. The issues arising are not limited to the processes and procedures in which we participate. We represent a group of businesses based all around the country, including in Dundalk, Galway, Leitrim, Kilkenny, Tipperary, Cork and Dublin. The group formed in 2012 in response to the actions of the National Procurement Service, which we believed would have a severe impact on the people we employ, our own futures and the very survival of the businesses in which we are involved. As we felt we had to react to the position in which we found ourselves, we created the group and worked on the issue from there.

The Office of Government Procurement defines an SME as a company with 250 or fewer employees and a turnover of not more than €50 million. It is our sincerely held belief that this definition is not appropriate in an Irish context. The Central Statistics Office defines micro-companies as employing up to ten staff, small companies as employing between ten and 49 staff and medium companies as employing between 50 and 250 staff. Based on that definition, SMEs employ nearly seven out of every ten people who participate in the Irish workforce. A total of 90.8% of SMEs are micro-companies, employing 27% of the workforce. A further 7% of SMEs are small businesses, employing 22% of the workforce. Thus, 49% of the total workforce in this State are employed in companies with fewer than 15 employees. A total of 1.3% of SMEs are in the final segment of companies with 50 to 250 employees, which, as I noted earlier, I do not regard as appropriate or relevant to the definition of an SME. Companies in this category none the less employ a significant proportion of the workforce, at 19%.

We want to know why micro and small SMEs are being excluded from tendering for public procurement contracts, even at a local level. I will use Mr. O'Reilly as an example in Cork to explain what this means in practice. Even though he has serviced the needs of a small national school for 20 years while providing a level of service and good value to his client over the period, because of the actions of the Office of Government Procurement he will be excluded from even offering a proposal. It is not a question of being unable to compete; he is not allowed to compete. We argue that this is due to a slavish adherence to the concept of aggregation and centralisation. Aggregation is to do with how the Office of Government Procurement has taken responsibility for the requirements of the State, as it sees them, in specific sectors. This does not affect copiers exclusively because, as I noted earlier, it also has an impact on other businesses.

I have seen RFTs that relate to janitorial services, ICT consumables, paper and stationery, motor vehicles, etc., and the same rules apply. By aggregating the needs of the State, it artificially inflates the requirements of smaller individual organisations that might well be subject to this tendering process. A tender would be placed on the European e-tenders website and as a result of inflating the size of various contracts, a series of pre-qualification criteria would be applied. In effect, 97.8% of all businesses in the State are excluded from even responding to a request for tenders in the first place. If one is going to aggregate all of the State's requirements, one should centralise the procurement processes in order that all of the purchasing will be by a specific source, but that is not the case. Do one or the other, but one cannot have one's cake and eat it.

In its new persona of being SME-friendly which involved a series of statements and circulars issued earlier this year the Office of Government Procurement has maintained that small businesses should create consortia. At a previous meeting of the committee, attended by me and Mr. David O'Reilly, we were clearly advised by a representative of the Competition Authority that for us to sit in the room and discuss the equipment we supplied in terms of price or location would not only be a breach of common law but also a breach of criminal law. Therefore, we would be colluding on price, which is called creating a cartel. At that very meeting we also asked both the representative of the Competition Authority and a representative of the Office of Government Procurement to define how we could legally create a consortium that would enable us to respond to tenders, but we did not receive a reply. In our belief, there is no such thing. As we understand it, there is a precedent in respect of companies that have been brought to court. They ran the risk of incurring heavy fines and terms of imprisonment; therefore, it is not something we are taking lightly.

I have one more point that links with the next slide, of which the Office of Government Procurement is totally aware. If one reads any request for tenders that it issues, it may make reference to consortia. Ultimately, however, what has to be clearly identified in a request for tenders is a main contractor and subcontractors. My next slide refers to the potential impact this has on my business and similar businesses that have to act in that way. The point I am clearly making is that acting as a subcontractor to a main contractor does not constitute acting as an equal partner in a consortium. In fact, it is quite the opposite. As a subcontractor, my turnover would be decimated or reduced significantly. The main contractor would have to employ front-office staff to receive calls and need to employ back-office staff to fill orders. In addition, they would need to have collection staff to obtain money, bill for and take care of everything. I would simply take instructions from the main contractor to undertake specific jobs for which I would be paid a set fee.

The upshot of taking the main contractor-subcontractor route being put forward is that it would be called a consortium, which clearly it is not. The main contractor, that typically would be outside the State, would have to increase in size and employ my staff to meet the demands of the tenders secured. As a direct response, the size of the subcontractor would have to contract, dropping jobs to reduce the number of employees. Turnover would also be significantly reduced and, in turn, profits would be reduced.

At a previous meeting of the committee, a representative of the Competition Authority was clearly asked what a SME could do to survive in this environment. His comment was: "You have got to consolidate." When I asked him what he meant by this, he said: "You have got to merge with the people you deal with. You have got to create a brand new organisation that has no links to previous ones."

In his view an acquired merge or to acquire a third party was the only way we could legally advance the process outside of the main contractor-subcontractor route that I have just identified that we found so inappropriate.

Our group has incurred legal fees of €206,000 to date in undertaking a judicial review of the actions of the Office of Government Procurement. We are small businesses. We did not undertake that process lightly. We want to clearly flag it was an act of last resort. We had no choice given the processes and procedures we saw in front of us, other than trying to protect ourselves in that manner. I am not going to comment on the individual vagaries of the case but simply refer to it. That is what we have had to spend to date. I can only imagine what the State had to spend in the process and yet from our simple perception, small businesses are basically being ignored as part of this overall process.

What do small businesses need? We are a copiers suppliers group but could just as easily be a group of stationers, janitors or supplies companies, ICT consumer supplies, paper suppliers, all of which have been impacted by various requests for tenders that have been issued by the State in the past. What we need is a level playing field. All we want is an opportunity to quote for local business.

Mr. David O'Reilly would like the opportunity to retain the business he has which he has nurtured and looked after for the previous 20 years to gain additional business with the local companies and schools or State offices in his area. I simply ask that we be given an opportunity to tender. By all means, the State should do whatever it can to ensure it secures best value; that includes benchmarking price. At the end of the day small businesses have to compete. We compete with the larger businesses on a daily basis and we do that by offering value, price and quality of service so it is not as if the two processes can be mutually exclusive. Our clear requirement is for a level playing field, removal of artificial pre-qualification criteria, an opportunity to tender for local contracts and an inclusive approach. I wish to state clearly that we support the Office of Government Procurement in its attempts to secure best possible value for the State but that cannot be at the expense of closures of hundreds of small businesses, which is what we firmly believe is at stake, and the subsequent loss of thousands of jobs. That is before one considers any potential loss of further revenue to the State in respect of main contractors being outside the State.