Dáil debates
Wednesday, 1 December 2010
Adjournment Debate
Protection of Subcontractors
7:00 pm
Pádraic McCormack (Galway West, Fine Gael)
Link to this: Individually | In context
I thank the Ceann Comhairle for allowing me to raise this matter. I seek clarification where a main contractor carrying out State work on a school or for a local authority and contracts part of the ground work to a subcontractor. In the event of the main contractor going into examinership, receivership or liquidation, what protection is provided to the subcontractor who has carried out the work on the site? For example, a main contractor may have worked on the school building and the subcontractor may do the ground work. When the main contractor goes into administration, receivership or liquidation, someone is to be paid for doing the work. Either the main contractor, the school authorities or the school trustees are paid but the subcontractors who have carried out the work cannot get paid. A small landscaper doing work on the landscaping of the school site takes on the job believing it to be a blue-chip job because the Department of the Education and Skills is involved. He thinks there will be no difficulty getting paid for his work.
However, when the main contractor goes out of business, apparently the subcontractor is not paid. This can cause great hardship down the line for small subcontractors. They may employ people to do the ground work on these sites and the subcontractors may employ up to 60 people but if they do not receive money for a â¬200,000 job, they will go out of business and all of the staff must be laid off. The same applies to a landscaper or a painter, perhaps employing ten people. If he cannot receive â¬10,000 or â¬20,000 for his legitimate work, he will go out of business with 12 people on the dole.
As happened in County Galway, local authorities give contracts to develop pitches or playgrounds. In that case the main contractor went into receivership, administration or liquidation. The subcontractor in such cases is not paid for his work yet the local authority pays the main contractor for the work. What provision can be made so that it can be determined that everything is in order before money is paid to the main contractor? The people who did the work on the project should get paid rather than the main contractor, who may have done very little work on the site. What provision exists in law? What investigation take place to ensure the main contractor has not salted away his money or reinvested it? Subcontractors can be owed sums of money by main contractors, the Department of Education and Skills in the case of the school or the local authority in the case of work on pitches or playgrounds. It is hard for them, while awaiting payment, to see main contractors in big houses and travelling by helicopter or 4 x 4 vehicles passing their house every day.
A typical example of this occurred in the Taoiseach's constituency. The contract for two schools was awarded under public private partnership. It was part funded by the Department of Education and Skills. When Pierse Contracting went into receivership, liquidation or administration, despite the fact that it was found to be viable by a leading accountancy firm, the subcontractors who carried out the work on those schools will not be paid. I could give the Minister of State many examples of this happening in my constituency. The examples I have given are hard cases. The knock-on effect is that the subcontractor goes out of business if he is not paid. For large or small subcontractors, who may be exposed to several hundred thousands of euro, they may have to close their businesses. Two years ago a subcontractor had 100 people employed and he now has 40 people employed. He will go out of business. The same is true of the small landscaper who had ten or 15 people employed. He is now down to himself and his wife, trying to keep ahead but still he has not been paid his money.
Áine Brady (Kildare North, Fianna Fail)
Link to this: Individually | In context
I thank the Deputy for raising this matter on the Adjournment. The Government is fully aware of the importance of the construction industry in the Irish economy and equally aware of the difficulties being encountered by many subcontractors in obtaining payment from main contractors for work undertaken. The problem of non-payment within the construction sector is one which is readily identifiable but difficult to resolve. In seeking to alleviate this problem the Government is mindful to ensure the interests of the taxpayer are protected and that the best value for money is obtained when tendering for public capital works.
In terms of expenditure on public works, the Government has made substantial efforts to maintain its public capital programme in the current economic climate. Our Exchequer capital allocation for 2010 is still over â¬6 billion and by international standards represents a significant portion of Government spending. Our main focus is to ensure that Ireland has the requisite public infrastructure to facilitate a return to growth, which will assist sustainable job creation in the longer term.
The Government capital works management framework has been developed to ensure that the key objectives of the Government in regard to public sector construction procurement reform are achieved - namely, to bring greater cost certainty, reduce overall costs and help improve budget planning and project delivery. All of these reduce the costs and the risks facing the taxpayer who funds these projects.
Our public works contracts set out clearly that the State's relationship is with the main contractor. The main contractor is obliged to deliver the project and the State is obliged to pay the main contractor. If a contractor goes into receivership or examinership, then the provisions of company law apply. This is the case regardless of whether the client is a State body or is any other party, such as a private individual. If a State body has already paid the money it owes to a main contractor, and the firm goes into receivership or examinership, then that money comes under the control of the receiver or examiner. Company law prescribes how he may use that money. For example, one of his first obligations is to pay amounts due to employees.
If a main contractor goes into receivership or examinership before a State body has fully paid for work done then, in simple terms, company law dictates that the debt is still due. However, the debt is payable to the receiver or examiner, and can be pursued by him. The debt involved would be needed by him so that he, in turn, may fulfil his payment obligation under company law.
For as long as we are still obliged to pay the receiver or examiner for any amounts we owe to a main contractor then any other action could have adverse consequences for the taxpayer. For example, any proposal in such circumstances for the State to make direct payment to subcontractors or others would expose the taxpayer to the risk of having to pay twice for work done. Obviously we cannot open the taxpayer to the risk of having to pay twice.
However, there are some proposals in train which should prove useful in helping to avoid and deal with construction non-payment. The Deputy will be aware that on 19 May 2010 Senator Feargal Quinn introduced a Private Members' Construction Contracts Bill 2010 to the Seanad. In responding to the Bill, the Government supported the key elements and agreed to work with the Senator and to consult interested parties on the proposal.
The purpose of the Bill is to help address the issue of non-payment to construction sector subcontractors who have completed work on construction projects, whether in the public or private sectors. The Bill will create a regulatory framework for adjudication and resolution of payment-related construction contract disputes. The main purpose of the Bill is to provide a mechanism whereby prior notice of an intention to withhold sums from payments otherwise due to parties in a construction contract must be given, or else payments must be made in full. If payments are not made in full the party owed the money can suspend work on a project until payment is made in full. In addition, the Bill allows for an adjudication procedure to deal quickly with disputes about payments. The adjudicator's decision is binding and payment must be made to the party named in the decision. The Bill provides a remedy to parties operating at various levels under a construction contract when payments are not forthcoming down the supply chain.
Pádraic McCormack (Galway West, Fine Gael)
Link to this: Individually | In context
Will the Minister of State give way for a question? When will the Bill come before the Dáil?
Áine Brady (Kildare North, Fianna Fail)
Link to this: Individually | In context
It is in the Seanad at the moment.
Pádraic McCormack (Galway West, Fine Gael)
Link to this: Individually | In context
Will it come before the Dáil in this session?
Áine Brady (Kildare North, Fianna Fail)
Link to this: Individually | In context
I am sorry but I cannot say when it will come before the Dáil. Deputy McCormack will have to check with the Whips.
The Deputy will appreciate that this type of legislation is very complex and it is important that the final Bill is robust and effective. The Government recognises the good work the Senator has done in introducing the Bill and is working closely with him in developing appropriate amendments with a view to Committee Stage taking place in the Seanad before Christmas.
Our joint aim is to have a new system which will reduce the non-payment exposure of subcontractors and provide an effective remedy for them should non-payment occur. The Bill is being formulated with the aim of achieving this without placing an unnecessary regulatory or cost burden on the parties to the dispute, other parties involved in the project, or the State. We must strike the right balance between improving the position of construction subcontractors and safeguarding the position of the taxpayer.