Paul Connaughton (Galway East, Fine Gael)

I thank the Acting Chairman for the opportunity to contribute on this important Bill. I commend Senator Quinn on his work in introducing this considered and timely legislation. His background in business is evident from the attention to detail in the Bill, which looks set to be the first Seanad-initiated Bill to be passed by the Oireachtas for quite some time.

Even in 2010 post the construction crash and during a period when many people were of the opinion that construction was not contributing anything to the economy, construction was still accounting for 9% of gross national product. This was well down from the peak in 2006 when construction accounted for a quarter of gross national product. Hindsight is always 20:20, but having a quarter of the national economy centred on building houses was always going to end in disaster once supply exceeded demand, with that quarter of the economy not producing a good or service that could be sold outside the country. In the first quarter of 2011, the construction sector still employed 118,100 people, a significant number.

The Bill's aim is to help subcontractors to secure their rightful payment by introducing an interim payment of money due, statutory rights and a new adjudication system to arbitrate where disputes arise. It introduces a mechanism whereby prior notice of an intention to withhold payment must be given to subcontractors or else the payee can suspend works or services until payment is made.

The recent financial crash, allied with an implosion in the construction industry, has seen many subcontractors ruined financially because they remained unpaid while those they were working for often received their money. To add to their difficulty, they were unable to access State benefits because they were self-employed, leaving them destitute. Subcontractors who will benefit from the Bill include architects, engineers, plumbers, electrical contractors and carpenters.

Previously, many developers set up separate companies for different projects. When subcontractors remained unpaid, they could not take action against the assets of the developer. The difficulties caused stretch far beyond financial implications. Many families have been destroyed by the considerable emotional and psychological problems caused by these massive unpaid bills.

The problem of subcontractors remaining unpaid is prevalent. In recent months, I have been contacted by a large number of subcontractors from east County Galway, many of whom were left out of pocket by vast amounts after completing work on State contracts. They were the subcontractors and not the main contractors involved. The State has a duty to ensure that subcontractors are paid before large contracts are signed off. To do otherwise is counterproductive, as it will be the State that ultimately pays for the difficulties involved, either through social welfare or the additional health services required to deal with the health problems that ensue for family members. For many businesses, court action is not an option because it is too costly and the wait is excessive at a time when credit is not available to tide them over the interim period. Essentially, this Bill aims to improve cash flow for small businesses at a time when cash is king by allowing overheads to be paid and businesses to remain open. It also aims to ensure that disputes are dealt with promptly and in a manner that is not too costly for small and medium enterprises.

However, while the aims and objectives of the Bill are commendable more work needs to be done to ensure subcontractors on contracts worth less than €200,000 receive payment, particularly where the contract involves State projects. Another issue that needs to be addressed is the high cost of arbitration in disputes. Data from the UK show that adjudicators charged an average of between £151 and £175 per hour in 2008. The rates charged in Ireland are believed to be even higher. With hundreds of law graduates out of work, there is no reason for such excessive charges. Many of these out-of-work graduates would relish the opportunity to get involved in arbitration, even if it meant upskilling in the area of construction contracts. By bringing these individuals into the arbitration process, important job opportunities would be made available for law graduates and small and medium businesses could also look forward to lower costs.

This Bill is a step in the right direction thanks to the innovative attitude of Senator Quinn but we must continue to focus on ways to make business life easier for the owners of small and medium enterprises across Ireland.

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