Friday, 17 October 2014
Social Clauses in Public Procurement Bill 2013: Second Stage [Private Members]
I welcome the opportunity to debate the Social Clauses in Public Procurement Bill 2013 and I thank Deputy McDonald for providing me, as Minister of State with responsibility for the Office of Government Procurement, with this opportunity. I echo Deputy McDonald's call for the debate this morning, and indeed the ongoing discussion we must have on procurement, to be constructive and to involve Members from all sides of the House. In my new role as Minister of State I hope to be able to foster that culture of constructive co-operation, including constructive criticism where it is merited, and to take and explore good ideas and try to build on them. With that in mind, the Government will not oppose Second Stage of the Bill.
The Bill is timely. Procurement in Ireland is changing and evolving. I agree with Deputy McDonald that the role of procurement must move beyond simply achieving a bottom line of value for money. In fairness to my colleagues in the Office of Government Procurement, they have undertaken a number of projects, measures and outreach exercises to try to involve the small and medium enterprises, SME, sector. In fact, when I visited the National Ploughing Championships this year - I am sure representatives of Sinn Féin also visited - there was a very interesting tent in which SMEs, farmers and everybody else could find out how to tender and how to register for eTenders. There is a new text message service. We are intent on trying to reach out to as many sectors as possible. It is in everybody's interest, including the Office of Government Procurement, and it is certainly in the interest of the Government to have the SME sector as involved as possible in public procurement.
The Government is committed to driving an ambitious reform programme designed to modernise the public sector and improve service delivery. Public procurement is seen as a key element of this programme, not only in terms of the potential to deliver much-needed public services in a more efficient manner but also as a platform to facilitate policy in areas such as employment, training and sustainability.
The Government sees significant merit in developing a social clauses framework, and there are currently a number of initiatives in which social clauses are being developed. In June, as Deputy McDonald mentioned, the Minister for Public Expenditure and Reform, Deputy Howlin, established a social clauses project group led by the Office of Government Procurement. This group is charged with proactively looking at public contracts in which social clauses could be deployed to contribute to employment or training opportunities for the long-term unemployed. The expected outcomes from this pilot project will be as follows: the identification of suitable policy priorities to be addressed through the insertion of social clauses in public contracts; guidance relating to suitable candidate project types and spending areas; examples of suitable contract clauses developed in conjunction with the Chief State Solicitor's Office; and the design of a monitoring and reporting framework which can be applied to future projects where social clauses are to be used.
The group has met twice to date - in June and September, if memory serves - and it is due to have its next meeting in November. It is important to acknowledge that a significant amount of work is ongoing within Departments and State offices in advance of the group's next meeting in November.
On the composition of the project group, the nominees are from a number of Departments and organisations. They include a representative each from the local government sector, the Department of Jobs, Enterprise and Innovation, the Department of Social Protection in connection with the role of the Intreo offices, the Department of Education and Skills in connection with the role of SOLAS, the Health Service Executive, the National Roads Authority, the National Development Finance Agency, Pobal, the Office of Public Works and the Office of the Chief State Solicitor which is providing legal assistance. The priorities of the working group will be the long-term unemployed and training and apprentice opportunities. The Department is seeking tenders to promote these priorities in pilot goods and services contracts.
It is important to adopt a targeted approach to the use of social clauses, one that is focused on contracts where employers are likely to hire additional workers to deliver the contract. This is likely to mitigate the risk of displacing workers already in employment, while offering the opportunity of assisting with labour activation measures for the long-term unemployed. Two examples of this approach in progress are the Grangegorman development and the devolved schools building programme. With regard to the latter, a clause has been included in the public works contracts which requires that 10% of the aggregate time worked on site must have been undertaken by individuals who have been registered on a national unemployment register within the European Union for a continuous period of at least 12 months immediately prior to their employment on the project and that 2.5% of the aggregate time worked on site must have been undertaken by individuals who are employed under a registered scheme of apprenticeship or other similar national accredited training or educational work placement arrangement. While it could be argued that these requirements are modest in terms of the percentages involved, they are a signal of intent on the part of the Government.
The Department of Social Protection, through its Intreo offices, is providing support to the contractors in meeting their obligations under the contract by providing suitable candidates to match the skills requirements from long-term unemployed construction workers. To date, approximately 48 long-term unemployed persons have been hired across the 15 sites in question out of a total workforce of about 440. The purpose of the project is to get people back to work and the public and private sectors are working together and providing real information on the types of people and training requirements they need for employment in the relevant sectors.
Overall, we want to ensure that we learn from the practical experience arising from contracts in which social clauses are being piloted. We are proceeding with caution as we need to develop a robust social procurement framework that is effective.
Deputy McDonald referred to the European Union context. It is important to acknowledge that EU rules on public procurement encourage social inclusion and I do not contend otherwise. However, the use of social clauses in public procurement is a complex area. Public procurement is governed by EU rules, national legislation and World Trade Organisation agreements. The aim of these rules is to promote an open, competitive and non-discriminatory public procurement regime. To be compatible with EU law social clauses must be made known to all interested parties and must not restrict participation by contractors from other member states. These requirements constitute an important legal reality. It would be a breach of these rules for a public body to favour or discriminate against particular candidates and legal remedies are available that may be used against any public body infringing these rules.
The EU procurement directives primarily envisage that social considerations may be included as contract performance conditions provided they are not discriminatory and are included in the contract notice or contract documents and relate to the performance of the contract. In 2010, the European Commission documented a long list of possible policy issues which might be taken into account within the framework of a socially responsible public procurement policy. The list ranges from the promotion of employment opportunities for various groups of employees and promotion of decent work to compliance with social and labour rights, support for social inclusion to the encouragement of human rights and consideration of ethical and fair trade principles. The proposed legislation clearly goes beyond this by seeking to include certain mandatory social clauses in public contracts. These issues can be discussed in greater detail.
The revised EU directives, when transposed, will provide greater scope and legal clarity on the use of social criteria in the context of an open, competitive and non-discriminatory public procurement regime which delivers best value for money, while taking into consideration the factors I have highlighted. The new rules will contribute to the implementation of the Europe 2020 Strategy for a more social, innovative and inclusive economy. The rules are not obligatory and it will be a matter for contracting authorities to decide if they want to take advantage of the new possibilities placed at their disposal.
I note the Bill contains a number of provisions on employment law and its enforcement. Procurement procedures already require all applicants to meet certain standards when applying for public contracts that come within the EU definition of social clauses. As part of the standard terms and conditions of a contract for service, the contractor is required to provide the services with good industry practice and comply with all applicable laws, including employment legislation and health and safety regulations. My colleague, the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, has primary responsibility in these areas and, as such, procurement contracts are not the best place to deal with these issues. Furthermore, the Office of Government Procurement is not the appropriate office to enforce employment law.
The National Employment Rights Authority, NERA, is responsible for enforcing minimum statutory employment rights and entitlements in the State. In undertaking this role NERA carries out a range of functions, including the provision of employment rights information and the inspection of employment related records. It operates a system of risk based inspections in sectors where there are identifiable risks. Inspections are also carried out in response to complaints received and routine inspections are undertaken as a control measure. Companies that have been awarded State contracts are also required to provide access to certain information. This information should allow the authority to assess compliance with employment legislation consistent with the requirements of EU and national law. Any subcontractors employed are also required to adhere to these conditions.
The reform of the public procurement function continues to be driven by the need to obtain value for public money in procuring works, supplies and services. It is essential to ensure that value for money is not adversely affected by the inclusion of social clauses or that additional costs are not placed on domestic suppliers relative to other potential suppliers. I stress the need to have a conversation about what is value for money because the role played by small and medium enterprises, SMEs, in villages, towns and cities is of value to the economy. In acknowledging this benefit I emphasise that the Office of Government Procurement, the Government and I are not solely interested in the bottom line. Procurement has a bigger role to play in this regard. I am concerned, however, that merely inserting clauses that require additional employment or train additional staff could give rise to increased public procurement costs because of higher input costs imposed on suppliers. We need to be careful in respect of social clauses and ensure we do not inadvertently disadvantage small and medium enterprises in favour of larger companies which can absorb the additional cost involved. We must also avoid displacement of the current workforce as the economy would not obtain any net employment gain were displacement to take place. I hope Deputies will agree that the use of social clauses in public procurement contracts must focus on creating additional employment, returning the long-term unemployed to the workforce and ensuring it does not inadvertently impact on existing workers.
For these reasons, the proposal that all public procurement contracts include a requirement that a quota of long-term unemployed be employed in their delivery poses a number of significant risks. In the current economic climate and bearing in mind particular difficulties in the construction sector, rather than taking on employees, businesses in some areas have been reducing their existing workforce for obvious reasons. Consequently, it is likely that, where a business is awarded a public contract, in particular a small-scale contract, the work will be carried out by the existing employees of the business in question. In such circumstances, a social clause requiring that a number of long-term unemployed be employed in delivering a public contract could either impose an additional cost on the business in question that it may not be able to afford or result in an employee of the supplier being let go in favour of a long-term unemployed person. I acknowledge that this is not the objective Deputy McDonald seeks to achieve but it is an issue that requires discussion.
Likewise the blanket monetary values included in this legislation would not be effective as the State purchases many supplies that have a minimal impact on employment. Examples include the purchase of land, electricity, fuels, pharmaceuticals, vehicles, heavy machinery, aeroplanes, ships and defence equipment. Such purchases would not be suited to a blanket provision based on the value of the works or services.
The Bill includes a provision that requires the main contractor to contribute to sustainable development. Considerable guidance on the use of sustainability clauses is already available to contracting authorities in the documents, An Action Plan on Green Public Procurement, which was issued jointly by the Ministers for Public Expenditure and Reform and Environment, Community and Local Government on 18 January 2012, and the guidance document on green procurement, which was prepared by the Environmental Protection Agency in collaboration with a number of State agencies and Departments and published on 11 September last. The Office of Public Works, through the State architect, is completing a green public procurement for construction guidance document for issue in quarter one of 2015. This document will provide staged guidance that is relevant to all construction projects, from site selection through design and construction to post-construction operation, and will include restoration and refurbishment. Core and comprehensive criteria are explained, combined with optimal and effective strategies to achieve clear and verifiable results. For each area of guidance, environmental criteria are defined and guidance is given on how they may be achieved using relevant examples.
The Government does not oppose the Bill. As Deputy McDonald acknowledged, however, considerable work needs to be done before it can become viable legislation that provides the necessary flexibility to procure the wide variety of works, goods and services necessary to deliver vital public services. Further debate and discussion is required on the correct policy approach to enabling social clauses. We need to be mindful of the need to maintain flexibility to reflect changing circumstances. As I stated, Deputies should take a constructive approach to this matter.
I would be delighted to assist Deputies, particularly Opposition Deputies, in accessing information from the Office of Government Procurement or meeting relevant officials as we continue the pilot project and the working group. I will continue to keep the House updated on its progress.