David Stanton (Cork East, Fine Gael) | Oireachtas source

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.

It is essential that the public service operates in a co-ordinated and efficient way and delivers sustainable savings for the taxpayer. That is why the Office of Government Procurement, OGP, was established. There is a dual role for the newly established OGP, namely, to drive fair, transparent and open competition in the marketplace but also to continue to work with business to ensure Government procurement policies are business friendly. The reforms are fundamental in their nature.

The State has immense purchasing power, spending in the region of €12 billion per annum on goods, services and works. This level of expenditure affords significant business opportunities for firms that can supply the products and services that are required by public bodies. The OGP estimates that approximately 95% of this annual procurement spend goes to Irish suppliers, the majority of spend is with the small and medium enterprise, SME, sector. It is clear therefore that public procurement activity is already a significant driver of employment opportunities and economic growth within the State.

It is also important to remember that open tendering is a two-way street and that it provides Irish companies with opportunities to compete abroad. The public procurement market in the European Union is estimated to be valued in excess of €2.4 trillion per annum. The open market regime offers opportunities for Irish companies to win business abroad. EU studies indicate that many Irish businesses are successful in this regard. Reforms are being carried out in a manner that recognises the clear importance of small and medium-sized enterprises in this country’s economic recovery.

The Government recognises that public procurement offers an additional and powerful policy instrument, alongside more traditional instruments such as regulation, policy direction and economic mechanisms like taxation, to promote wider economic issues such as SME access to public procurement, innovation, the green agenda and social inclusion policy such as addressing long-term unemployment and the training of apprentices. The key proposals of this Bill will assist the Government in the further debate and discussion required in the formulation of a proactive and balanced policy approach regarding the enabling social value clauses, while remaining mindful of the need to maintain flexibility and adapt to changing circumstances.

The appropriateness of including social clauses in procurement projects will vary from contract to contract and are most likely suited to large-scale works contracts. In Northern Ireland, for example, as the Minister of State said, social clauses are only considered appropriate for contracts above £2 million in the case of works and above £4 million in the case of civil engineering projects. Challenges also arise from the need 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, and the targeted benefit is capable of being measured and monitored during execution of the contract. The award of public contracts has to comply with the principles of the Treaty on the Functioning of the European Union, and in particular the free movement of goods, freedom of establishment and the freedom to provide services, as well as the principles deriving from these, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency. Basically, public procurement cannot discriminate or exclude businesses from participating in tender competitions on subjective grounds. Failure to comply may result in legal challenges from unsuccessful tenderers or the European Commission.

There would be a fundamental problem in linking procurement expenditure with a general requirement to employ or train additional staff. The State purchases many supplies and works that have a minimal impact on employment. Examples would include the purchase of land, electricity, vehicles, heavy machinery, planes, ships, defence equipment, pharmaceuticals and legal services.

The Government is not opposed to the principle of social clauses and sees significant merit in developing a social clauses framework. It favours a targeted approach to the use of social value clauses focused on contracts where they are linked to the overall contract objective, and where there are appropriate monitoring processes in place. It is essential that we remain mindful of the need to maintain flexibility and avoid any blanket or across-the-board approach which may cause us more difficulties than it solves.

I was present in Cork when the Minister of State and his team arrived to consult SMEs and I found it a very fruitful and beneficial engagement. I am delighted that such engagement will be carried out by the Minister of State in different parts of the country. He is listening to what small businesses are saying. That engagement is a two-way street and it is very valuable to do that.

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