Dáil debates

Tuesday, 27 November 2012

Topical Issue Debate

Schools Building Projects

5:40 pm

Photo of Patrick O'DonovanPatrick O'Donovan (Limerick, Fine Gael)
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I thank the Ceann Comhairle for selecting this issue for debate. As the Minister is probably aware, this issue is pertinent and has come to our attention again in the past week. In my constituency, a new long-awaited school building project was interrupted last week when some subcontractors, desperate for some sort of resolution to their problems, went into a school in Kilfinane in County Limerick and tried to remove material from the school. The issue of whether they were right or wrong to do that is an issue for another forum.

The situation has caused significant distress among the school community, the parents, teachers, management and pupils, who have been waiting on this new building for a long time. The situation has also created a momentum with regard to dealing with the issue of subcontractors. These people entered into contracts in good faith to provide building services for State sponsored buildings.

They have been left high and dry on more than one occasion. Indeed, the provision of the school in Kilfinane, County Limerick, has been delayed before. The people have had a previous false dawn. The stimulus package that was recently announced by the State allows for up to 80,000 new school places to be provided. I know from reading the Official Report that this is not the first time the House has considered the issue of subcontractors being left high and dry after working on schools or other public facilities like council houses and State buildings. I am aware that the Construction Contracts Bill 2010 is about to be considered on Committee Stage. I suggest that the Department of Education and Skills could set out provisions to be applied during the tendering process. For example, it would be simple to require a bank account to be opened for the sole purpose of the project at hand. That would enable us to ensure that cheques and moneys from the Department of Education and Skills or the school's board of management - it depends on whether it is a devolved grant - are lodged into the bank account of the project in question. The only invoices that should be drawn on that bank account are those relating to the project. The problem at the moment is that contractors are getting paid by the State for work being done by subcontractors. The contractors are using that money to pay for other work that has already been done and that other people are waiting to be paid for.

There are no winners in this instance. The subcontractors did not want to do what they had to do. The parents did not want to do what they had to do. At the end of the day, there is a community in the middle of this. When due diligence is being attached to the awarding of these contracts by the Department of Education and Skills or by local boards of management, there needs to be a greater level of input from quantity surveyors to ensure the race to the bottom, whereby a contractor submits a price which we know in our hearts and souls is below the cost at which the project can be delivered, is not successful. It is also hugely important for consideration to be given to anecdotal evidence of the history of these companies. I am familiar with cases - for example, in the south east of the country - in which contractors have left subcontractors high and dry and local authorities are making retention payments in the full knowledge that the subcontractors have not been paid. The State has an obligation to intervene in such cases. I appreciate that the Construction Contracts Bill 2010 is ready to be debated on Committee Stage. There are things we can do in the short term to ensure subcontractors and, ultimately, school communities are protected.

5:50 pm

Photo of Jan O'SullivanJan O'Sullivan (Limerick City, Labour)
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I am responding to the Deputy on behalf of my colleague, the Minister, Deputy Quinn. I will convey the suggestions made by the Deputy to the Minister. The Deputy will be aware of the context in which decisions on meeting the accommodation needs of schools must be considered over the coming years. Total enrolment is expected to grow by approximately 70,000 students between now and 2018. This equates to more than 45,000 students at primary level and 25,000 students at post-primary level. Second level enrolment is expected to continue to increase until at least 2024. The five-year programme that was announced last spring by the Minister, Deputy Quinn, will provide more than 100,000 permanent school places, of which over 80,000 will be new school places. The rest of the places will be provided by means of the replacement of temporary or unsatisfactory accommodation.

Although the Department of Education and Skills is the primary funding agency, it is generally not the contracting authority on school building projects and therefore has no legal authority to intervene in legally binding contracts involving third parties. A school building project is a complex arrangement of contractual relationships between the client, the main contractor, specialist subcontractors, domestic subcontractors, suppliers of materials and suppliers of plant etc. In general, all subcontractors employed on school building projects are employed directly by the main contractor or indirectly by the main contractor through other subcontractors. It is a matter for all subcontractors to agree terms, conditions and payment schedules with main contractors as their direct employers. As contracting authorities such as schools and VECs have no control over the subcontracts entered into by main contractors, they hold no information relating to those subcontracts. As such, no responsibility or power rests with them to resolve contractual issues relating to those subcontractors.

With regard to the recent cases highlighted in the media, the Minister for Education and Skills is satisfied that all moneys due to be paid under the terms of the main contract on each project have been paid to the main contractor. If an allegation of non-compliance with pay and conditions of employment arises, the allegation should be reported to the appropriate statutory dispute investigation and resolution mechanisms provided by the State. The main statutory agency charged with this function is the National Employment Rights Authority, which has the remit, resources, experience and statutory powers to investigate and resolve these matters in the most efficient and impartial manner. If serious breaches are alleged, it is possible to refer the matter directly to the Labour Court.

The main aim of the Construction Contracts Bill 2010 is to address the issue of non-payment to construction sector contractors, subcontractors and subcontractors of subcontractors who have completed work to the required standard on construction projects. As currently drafted, the Bill seeks to address these issues by providing statutory arrangements for payments under construction contracts, including interim payments, thereby reducing a payee's exposure to non-payment. It also proposes to introduce a new mechanism for the swift resolution of payment disputes through a process of adjudication. I assure the Deputy and the House that departmental officials will continue to liaise with the school authorities and are monitoring progress on these projects.

Photo of Patrick O'DonovanPatrick O'Donovan (Limerick, Fine Gael)
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The Minister of State said in her reply that "the Minister for Education and Skills is satisfied that all moneys due to be paid under the terms of the main contract on each project have been paid to the main contractor". I suppose that is the problem. I think the Department of Education and Skills should be required to retain the final payment until it has sought and received certification from the subcontractors that they are happy for that payment to be made to the main contractor. This could be done very easily. I do not think the final 30% or 40% of contract moneys should be paid to the main contractor until all of the subcontractors have signed off on it in this way. I do not doubt that the Department is committed to this approach. If the problem in Kilfinane is replicated all over the country, there will be no winners. This is a particular problem for children and teachers.

I accept the Minister of State's assertion that the Department "has no legal authority to intervene in legally binding contracts". However, I remind the House that the Department has a role in the formulation of those contracts. As I have said, the race to the bottom means that the Department is not prepared to consider the previous history of these companies. There are characters in the wild west that I would not compare to some of those involved in these companies. The people in question have no interest in providing a decent level of service. They are trying to undermine everybody else as part of the race to the bottom.

I urge the Government to introduce a system whereby 20% or 30% of the final payment is retained pending a certification process to be invoked by the Department. The last tranche of finance should not be paid until the Department is satisfied that genuine subcontractors - plumbers and electricians, etc. - have been paid. In his initial statement, the Minister said that these school projects would stimulate local economies. The local economy in south and east Limerick has been left absolutely devastated by this difficulty, which is being dragged into the public arena for a second time. The Minister of State knows the areas in question. I am sure she knows some of the people concerned. Neither the subcontractors nor the parents wanted to do what they had to do. In the middle of the whole thing is a contractor who has just walked off. The whole thing stinks to high heavens. We need to make sure it does not happen again. As a way of going forward, I have suggested that we provide for a process of certification, with a suitable amount being retained.

Photo of Jan O'SullivanJan O'Sullivan (Limerick City, Labour)
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I am familiar with the situation in Kilfinane. The Minister, Deputy Quinn, wants to do everything he possibly can in this area. As the Deputy knows, and as I said in my main response, the Department is not generally the contracting authority. There are legal restrictions in that regard. The Deputy has made some specific suggestions to be considered while we wait for progress to be made with the Construction Contracts Bill 2010 before it is passed by the Houses of the Oireachtas. I will convey them to the Minister. I know he will want to do everything he possibly can.