Áine Brady (Kildare North, Fianna Fail)

I thank the Deputy for raising this matter on the Adjournment. The Government is fully aware of the importance of the construction industry in the Irish economy and equally aware of the difficulties being encountered by many subcontractors in obtaining payment from main contractors for work undertaken. The problem of non-payment within the construction sector is one which is readily identifiable but difficult to resolve. In seeking to alleviate this problem the Government is mindful to ensure the interests of the taxpayer are protected and that the best value for money is obtained when tendering for public capital works.

In terms of expenditure on public works, the Government has made substantial efforts to maintain its public capital programme in the current economic climate. Our Exchequer capital allocation for 2010 is still over €6 billion and by international standards represents a significant portion of Government spending. Our main focus is to ensure that Ireland has the requisite public infrastructure to facilitate a return to growth, which will assist sustainable job creation in the longer term.

The Government capital works management framework has been developed to ensure that the key objectives of the Government in regard to public sector construction procurement reform are achieved - namely, to bring greater cost certainty, reduce overall costs and help improve budget planning and project delivery. All of these reduce the costs and the risks facing the taxpayer who funds these projects.

Our public works contracts set out clearly that the State's relationship is with the main contractor. The main contractor is obliged to deliver the project and the State is obliged to pay the main contractor. If a contractor goes into receivership or examinership, then the provisions of company law apply. This is the case regardless of whether the client is a State body or is any other party, such as a private individual. If a State body has already paid the money it owes to a main contractor, and the firm goes into receivership or examinership, then that money comes under the control of the receiver or examiner. Company law prescribes how he may use that money. For example, one of his first obligations is to pay amounts due to employees.

If a main contractor goes into receivership or examinership before a State body has fully paid for work done then, in simple terms, company law dictates that the debt is still due. However, the debt is payable to the receiver or examiner, and can be pursued by him. The debt involved would be needed by him so that he, in turn, may fulfil his payment obligation under company law.

For as long as we are still obliged to pay the receiver or examiner for any amounts we owe to a main contractor then any other action could have adverse consequences for the taxpayer. For example, any proposal in such circumstances for the State to make direct payment to subcontractors or others would expose the taxpayer to the risk of having to pay twice for work done. Obviously we cannot open the taxpayer to the risk of having to pay twice.

However, there are some proposals in train which should prove useful in helping to avoid and deal with construction non-payment. The Deputy will be aware that on 19 May 2010 Senator Feargal Quinn introduced a Private Members' Construction Contracts Bill 2010 to the Seanad. In responding to the Bill, the Government supported the key elements and agreed to work with the Senator and to consult interested parties on the proposal.

The purpose of the Bill is to help address the issue of non-payment to construction sector subcontractors who have completed work on construction projects, whether in the public or private sectors. The Bill will create a regulatory framework for adjudication and resolution of payment-related construction contract disputes. The main purpose of the Bill is to provide a mechanism whereby prior notice of an intention to withhold sums from payments otherwise due to parties in a construction contract must be given, or else payments must be made in full. If payments are not made in full the party owed the money can suspend work on a project until payment is made in full. In addition, the Bill allows for an adjudication procedure to deal quickly with disputes about payments. The adjudicator's decision is binding and payment must be made to the party named in the decision. The Bill provides a remedy to parties operating at various levels under a construction contract when payments are not forthcoming down the supply chain.

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