Clare Daly (Dublin North, Socialist Party)

The idea of protecting subcontractors and ensuring prompt payment is an exceptionally worthy one to which we all ascribe. However, the issues we need to grapple with in the context of the Bill are very much who it covers, at what level people can get access to this protection and how it will be implemented in the most effective way. Everybody would admit we are not quite there yet with the legislation but these are some of the issues we need to highlight now. We very much have to put it in the context that there is no doubt many subcontractors have been left in dire straits as a result of the lack of adequate protection at present. This is also the case for many suppliers, not those who have been doing a great deal of lobbying such as Roadstone, Kilsaran and the concrete industry, which are well protected and none of which has gone to the wall in the crisis. However, many of the smaller suppliers and suppliers which feed to subcontractors and hardware stores need protection and have been left high and dry. The spotlight needs to be put on this.

We are speaking about how to devise a system for dealing with disputes. We must register that many of the instances about which we are speaking are not genuine disputes. They are very much on the basis of a refusal by the main contractor to pay the subcontractor. Many key contractors have built up their businesses on an approach such as this. It is fair to say the likes of McNamara Construction, which is in receipt of many State contracts, made a great deal of its money on the back of intimidating, bullying, dragging out payments and not paying subcontractors. There are many examples of this. There are even cases of companies which have gone to the wall recently, such as Pierse Construction which was awarded a huge amount of State work, having the spotlight put on them by the Judiciary.

It is obvious that this company, before it folded, was engaged in bleeding subcontractors. It had them out on the motorways on cold winter nights to get the motorway service area projects finished. The subcontractors were working up to midnight, under lights in the middle of winter, at a time when the company knew it would fold and that it would not pay them the money for the work done. The judge in the case pointed to the fact that the company moved €47 million out of its accounts before folding and leaving a queue of subcontractors high and dry. It was quite scandalous, but the National Roads Authority, NRA, still paid the company the money. It was the subcontractors further down who lost out. Huge numbers of subcontractors are trying to chase money through the National Asset Management Agency, NAMA, but they are being told to go to the courts and that NAMA can do nothing as they do not fit in on the scale.

The issue of State work is crucial. Many State contracts have been awarded to main contractors who have deliberately manipulated the lack of protection so they can fleece subcontractors. There was an example of this in my area of Fingal. Fingal County Council employed SIAC to construct a waste water treatment plant. Towards the end of the work SIAC ended the contracts of some of the subcontractors, when they were due to get their second last payment. It offered spurious reasons, such as that the work was not done properly. As a result, the subcontractor had to let its ten workers go and engage in a battle to get paid its money. Effectively, SIAC orchestrated a situation where the bulk of the work was done before it axed the subcontractors at the end, knowing that they did not have the wherewithal for a legal battle, could not survive and might accept a few bob less, in other words, cut the price.

The tendering process is where much of the rot starts, and much of this problem is rooted in it. The State has a responsibility in that regard. What we have seen is a race to the bottom in the construction sector. The lowest quote always wins. However, there must be a better examination of it than that. The lowest quote is not always the best. Often the low quotes are based on a situation where the main contractor is probably factoring in that it will lean on the subcontractor later on and force them to take a reduction of 20% to 30% by virtue of the fact that they cannot hold out and wait for the money to be paid. The low quote is based on exploiting the subcontractor further down the line. The procedures we should put in place should put the emphasis on ensuring high quality work. The cost to society is better served by us putting in the standards early in the process. We must examine this issue.

In all areas we see State decisions being ignored. We see Government and semi-State bodies ignoring judgments from the Labour Court and employment rights decisions. If the State is doing that, presumably the private sector will do the same. The binding nature of decisions and how we implement them is very important.

It is clear that a better arbitration process or panel is necessary. That would be a good thing but careful consideration will have to be given to its composition and its power. We cannot have a panel that comprises only representatives of the Construction Industry Federation and legal personnel. Those people do not have the expertise to adjudicate on matters of dispute. If the panel is to be in any way meaningful, it must be composed of representatives and members of the trades as well. If there is a dispute where one party is claiming the work was not done or was not done properly, there must be a mechanism to adjudicate whether the work was done correctly. In that context I believe it will be necessary to define who will be on the panel. It must contain architects, mechanical, electrical and structural engineers, quantity surveyors, carpenters, plasterers, bricklayers, form workers, steel fixers, concrete finishers, pavers and painters. That might sound a little unwieldy and if they were all sitting in a room it would be a large body, but there must be the ability to call on those skills to adjudicate and make a decision on whether the work was done and to issue a finding.

I agree with other Deputies that this process is absolutely pointless unless the decision is binding and unless a mechanism is put in place for a speedy hearing. In this situation the small operators cannot wait. It must also be constructed in such a way that it does not facilitate early running to the normal courts. There must be a mechanism for a binding decision. I also agree with the point that they must get paid first and argue later. That is the most common sense option in that regard.

Like other Deputies, I believe the amount quoted in the Bill is far too high. It must be lowered substantially. Figures of €10,000 and €5,000 have been mentioned. The latter might sound quite small but we must factor in people other than subcontractors. There must be a mechanism whereby the professions are covered. A huge number of engineers, architects, landscapers and so forth, whose skills have been employed by contractors, have been left high and dry without their money. It might be €5,000 or €10,000, which might not seem large but for a small architect's office employing one or two people, it is a huge amount of money. There must be some provision for such people to get their money.

Consider cases that have received a great deal of attention such as Terminal 2 at Dublin Airport. The subcontractors and suppliers are still engaged in a battle to get the moneys owed to them. If that can happen with one of the State's premier projects, what hope is there for other people down the line? While many subcontractors were owed up to €1 million in that case, a number of them would not be protected by the level provided for in the Bill. It must be lowered. That case raised an interesting scenario. The State, through the Dublin Airport Authority, DAA, repaid the retention money to Mercury Engineering, the main contractor, in the knowledge that the main contractor owed the subcontractors massive amounts of money. The argument was put forward that there should be a mechanism whereby one could get access to the retention money. It would not go to the main contractor but instead be passed on to the people further down the line who were basically bled dry, rather than the State and the taxpayer facilitating the payment of money to such individuals.

It is great to have the opportunity to examine this issue. We must fine tune the who, the how and the level provided for, but it is good the Bill is before us. I look forward to Committee Stage.

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