John McGuinness (Carlow-Kilkenny, Fianna Fail) | Oireachtas source

I join the previous speaker in his view in public private partnerships and link it with the failure rate and cost of projects already delivered. I will focus on the SME sector. A considerable number of these public private partnerships exclude the SME sector in this country and as a result, the bigger players in the market are awarded contracts because smaller businesses cannot meet the criteria set out in the procurement process. For example, a company might be required to have a turnover of €8 million or €10 million over several years. Those in the construction business from 2007 onwards would not have had that kind of turnover unless they were quite a large company. The market is limited and the State is not getting value for money. Where there is value for money, one finds that the larger contractor gives a price but is screwing the subcontractors. We have seen so many of these larger firms go broke and it is the smaller businesses that pick up the slack and carry the debt, so that several of them have gone out of business. They cannot afford the type of hits they have endured from losses of revenue because they are not covered in these contracts.

Similarly, in the construction of roads, contracts are awarded which are generally subcontracted to smaller companies or there may be a number of subcontractors involved in the scheme itself. Should the main contractor go broke, the small business invariably suffers. There must be some rules within the procurement process that protects SMEs. The contract might stipulate payment regulations, such as how and when they should paid, and there should be a hold in the Department or the local authority on the payment sums being made to the main contractor, so that there would have to be proof of payment to the SMEs, and proof of efficient payment, which might limit the amount of money that could be lost should the main contractor go broke.

Until Government changes that, we will continue to see SMEs under threat from bigger contractors which make their profits on the backs of the SME sector. That is what is happening. The State is not getting a good price, and it is certainly not getting a good social dividend for SMEs, it is getting a risk-based price, and the risk is being carried by the small businesses that become involved with the contractor.

The Government should not turn a blind eye to what has happened recently in terms of future contracts. It should change the contract and its emphasis. I ask that it examines the value for money element of PPPs. The Comptroller and Auditor General wrote a report some time ago which was discussed by previous Committees of Public Accounts. It seems that the figures bear out that the management of these PPPs, up to their end, can cost up to 43% extra in the actual cost of the project. I would like to see house construction return to the local authorities, for example. How was it that when our country had little or nothing in the 1950s and 1960s that we built huge housing schemes? Over the years, the people living there formed strongly based, sustainable communities, where neighbours looked out for one another. That is what happened. One does not have that now. I ask that the Government examines procurement through local authorities at a local level, delivering the number of houses that are required by each local authority area. There are 3,500 people on the list in Kilkenny. I do not anticipate that will fall much given Government policy on housing construction because the houses are not being built. Looking around the country, it seems that the councils do not want to build houses; they have no interest in doing so. They certainly have no interest in carrying out repairs. They continue to bring in guidelines and so on for tenants.

These guidelines dictate to the tenants that once they get the house, everything else is their responsibility and that, as a landlord, the council is going to stand back and do nothing for them. It will collect the rent and do nothing. That seems to be the position of county councils on this issue. I ask the Minister of State to look the possibility of changing the procurement and funding model so that, as I have said, we can have a sustainable plan and strategy in place to ensure the delivery of housing schemes and their sustainability after they are constructed without a cost to the State.

To return to PPPs and recent events, I tabled questions to the Minister regarding the subcontractors who were caught out in respect of the schools being constructed, particularly the one in Carlow, although there are many more around. There are suppliers to those schools who have, for example, already supplied furniture. The schools are ready to open. They will be using the furniture manufactured or purchased by these small businesses. The latter may not have been paid sums of as much as €250,000. How can the Government stand by and watch that happen? How can it watch a small business being threatened with the possible loss of jobs? How can it stand back and say that it is not really its responsibility and that these businesses should go away and try to deal with the original contractor knowing full well that they will not be paid? Something has to be done.

Next week in Kilkenny or Carlow there will be a meeting of all the subcontractors involved with one of these contracts. They will tell the Minister of State, if he listens, that while they are caught on this contract, there is a high risk of getting caught on similar contracts. They will say that they will not be paid and that they are turning to the Government for support. Will the Minister of State address that matter in his response? Will he address the possibility of the Government introducing something retrospective to ensure that these businesses are paid something or to ensure that the new contractor brought in to complete the job will look at the existing contracts and ensure they are paid? Otherwise, the Minister of State risks the possibility of an action being taken to prevent the takeover or use of schools that are completed and furnished because subcontractors are waiting to be paid. The students or pupils in these schools may be sitting on seats and working on desks which have not been paid for. That is simply wrong. We have seen too much of it in this country and we have seen too little from Government in the context of the protections required to protect small businesses and the jobs they create in the sort of communities that the Minister of State and I represent. It is a simple thing to do. It is a contractual matter.

After that, the Minister of State must look at the procurement process and go back to the old way of doing things, which is to do them directly. For example, in the case of those contracts that involve management after handover, no one can change a light bulb. The manager must be called out to do it. No one can do anything within the school unless the management company is engaged. The Minister of State should look at all of the costs attached to that. He should also look at the schools built in the traditional way. The community input into those schools saved the State the cost of management.

We are moving towards a situation in which the Government and the politicians in this House will be proved wrong in respect of obtaining value for money. This is because we have stuck our heads in the sand and ignored not only the results to date in this country but also those in other European countries where this PPP system has failed. It has failed the public sector and the small and medium enterprise sector and the figures have proved that it will result in a huge cost to the State in the end. Procurement is important. Getting value for money is important. However, sustaining jobs and looking at the figures are also important. If the Minister of State looks at the figures, he will have to accept that there is a need for radical change in this area.

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