Patrick O'Donovan (Limerick County, Fine Gael) | Oireachtas source

I have met Deputy Scanlon on this issue before. Having grown up in a household which depended for its income on construction, I have told him frankly that the activity to which he refers is intolerable. Deputy Cahill has raised another couple of issues relating to procurement of goods and services in general and I can address those separately and in summing up. He makes a number of points to which I want to reply.

Unfortunately, these are not new developments, nor, as the Deputies said, are they confined to State contracts. Deputies Scanlon and Cahill have raised cases and I will gladly take the details from them when I leave the Chamber. The cases cited stem from a failure on the part of a main contractor to pay for work that has been carried out by a subcontractor. Former Senator Feargal Quinn's Construction Contracts Act was developed in consultation with industry to address these poor payment practices. The Bill was introduced in the Seanad in 2010 when the late Brian Lenihan was Minister for Finance. His Department spearheaded the Bill and it received cross-party support in both Houses. It was enacted in 2013 and applies to all construction contracts that were entered into after 25 July 2016. That small and medium enterprises are still not in receipt of payments due on construction projects was unacceptable then and it remains so today. It is all the more galling when it arises on a public works contract as it is the State that pays the main contractor what money is due. The State always pays when the money is due.

The conditions of most construction contracts in use between construction clients and building contractors in both the public and private sectors require that payments be made at defined intervals, which is to say in staged payments, and that payment is contingent on work being completed to a predetermined standard. Once that payment is made to the main contractor, there is an expectation that it will, in turn, pay its subcontractors. This is set out also in contract law and is not something unique to this situation. Usually, there is no contractual obligation in this regard in the contract between the construction client and the main contractor because the matter is left to the commercial arrangements between the supply chain members. This point was raised at the time of the debate, namely, that there is a commercial relationship between each of the principal and subcontractors down the line. That is where the problem arises. The issues identified by former Senator Quinn during the development of the construction contracts legislation highlighted an absence of formal contracts in many cases along with sharp payment practices by some, even where a formal contract did exist. The Deputies have raised this again today.

Now enacted, the Construction Contracts Act 2013 imposes payment regulations on all construction contracts, public or private, whether they be written, oral or otherwise, and provides the tools necessary to enforce payment. These include a maximum payment interval of 30 days and a requirement to honour payment requests within 30 days for subcontractors, a right to suspension for non-payment and a right to refer a payment dispute to adjudication. The legislation also outlaws the practice of pay-when-paid provisions which were prevalent in most forms of subcontract.

Whilst much of the interest from industry surrounding the Act was centred on the introduction of adjudication, it is the discipline that the legislation imposes on payments that would appear to be have been largely ignored - this is the point that the two Deputies have made so comprehensively. Arguably, these are the most important provisions in the Act but they require the subcontractor to enforce their entitlements with the contractor pro-actively in the manner prescribed in the legislation, which enjoyed all-party support at the time, for payments that are due.

The Act does not cut across the normal rules for company liquidation or receivership to which Deputy Cahill referred and where this arises there is no avenue for recovery. This point is laid out in law as well. However, the magnitude of the exposure that many subcontractors and their families currently face upon the insolvency of a contractor would not arise if the provision for payments were insisted upon and the remedies available were exercised where payment is not forthcoming. I understand the reasons and I am not averse to it because I grew up in a house that was directly affected by this kind of carry on.

The issues raised by the Deputies would suggest that subcontractors are not exercising the rights provided for in the Act. There may be a reason for that. To be quite honest about it, I can understand why that is so. While I appreciate a certain reticence to engage in the manner prescribed in the Act for fear of risking business relationships, subcontractors need to question whether it is worthwhile doing business.

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