Marcella Corcoran Kennedy (Offaly, Fine Gael) | Oireachtas source

The knock-on effect of the collapse of the Sammon Group on small subcontractors who are owed significant amounts of money is very worrying. This case also highlights a more widespread problem in the operation of public contracts, in this case the National Development Finance Agency, NDFA, which contracted for the work on behalf of the Department of Education and Skills. We must question the manner in which public contracts are designed in respect of the apparent lack of protections for subcontractors who are retained by the main contractor to carry out works on public projects, particularly when the NDFA, with Enterprise Ireland, participated in a meet the buyer event to provide information on supply chain opportunities for small and medium sized, SME, companies, in effect encouraging them to avail of these opportunities.

The liquidation of the Sammon Group is very regrettable, particularly for the 200 staff and their families. However, given the number and size of the projects undertaken by Sammon in recent years, the fact that it employed only 200 people directly demonstrates its dependence on subcontractors to undertake most of the construction work on its projects. In my constituency, Sammon recently completed the construction of a brand new school at Tullamore College at a cost to the Government of more than €12 million. I am extremely concerned to learn that a number of subcontractors who worked on the school have been left out of pocket owing to non-payment by the main contractor. In one case, more than €40,000 is owed to a small contractor who spent many months working on the site. This contractor tells me he cannot sustain this level of debt and he will have no option but to cease trading. I have received a large number of representations from local contractors who have been left badly out of pocket by this particular contract and other contracts. History appears to be repeating itself. In 2010, Pierse Construction collapsed leaving subcontractors without payment. They had no option but to protest at the official opening of schools in counties Offaly and Laois, notably in Ferbane and Banagher where I was in attendance.

The Government has a duty to ensure that when large sums of taxpayers' money are being paid to the main contractor on public contracts, this money makes its way to the subcontractors who are carrying out most of the work. Most of these small businesses have secured specific lines of credit for the purchase of materials on the strength of their retention on public contracts. These small businesses are then unable to pay their staff and suppliers and the negative consequences continue. The Government is committed to investing in large infrastructural projects under Project Ireland 2040 and we must ensure this results in a positive economic stimulus for the local economy and that subcontractors are not afraid to avail of these opportunities on the basis that they may not be paid.

The construction industry was hit very badly by the economic crash. Now that it is recovering and the volume of work is expected to increase significantly in the coming years, it is vital that the State put in place better protections for subcontractors who are the backbone of our local communities. We have to look at the main contractors' track records on previous contracts before they are awarded further public work. If the main contractor has a poor track record of looking after its subcontractors, we must not continue to reward it with lucrative public contracts. Lessons must be learned from the past. From my discussions with contractors, some have suggested that the problem with the business model is that the contract is awarded to the lowest tender and subcontractors are left to bear the risk of non-payment by using their overdraft facilities to fund the work.

In additional, subcontractors have asked who will provide the warranty for the work already carried out if only part of the job is completed by whichever company has been awarded the contract to finish the jobs to ensure the affected schools are open in time for September.

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