Jackie Cahill (Tipperary, Fianna Fail)
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The concept of tendering for State contracts is, in principle, a worthwhile one. There is an obligation on the Government to get the best possible value for taxpayers' money. However, a number of issues are arising on foot of the manner in which the State's procurement process is being implemented. Ireland has a small, open economy and has vulnerabilities other EU countries do not share. The size and scale of the economy is putting Irish contractors at a distinct disadvantage. The fact that the low threshold for all State contracts is €135,000 means virtually everything a State controlled body does falls into the public procurement system. The local Irish supplier of goods and services who is not, in general, on the same scale as multinational companies is loaded with the huge costs of preparing a tender. In some cases, it can take a staff of dozens to fulfil the obligations of the tender process.

I turn to the example of a supplier of fruit and vegetables to the Garda College who had been supplying the college for decades but had his application turned down on the basis that he had no written plan in place as to how he could continue to trade in the event of major flooding or storms. Does that make the Minister of State feel comfortable about the process? I can given him numerous other examples where bureaucracy has superseded common sense. Local businesses, whether small, medium or large, are being frozen out of the system. We are losing jobs in Tipperary because of it and I am sure it is the same right around the country. The only avenue left open to local businesses is to act as subcontractors to the companies which are awarded the main tenders. It is at this point that local companies find themselves cornered and disadvantaged. Another company in Tipperary was subcontracted into a State-contracted construction project. The main contractor had one employee on site while the local subcontractor had 12. The local company was carrying all the responsibility for employment contracts and health and safety but was not benefitting from ownership of the main contract. In fact, the main contractor could not complete the contract, went into liquidation and left the local company with a huge outstanding debt.

The Minister of State must agree that it is unacceptable to put Irish companies at risk like this. Surely, something must change. In another example, block-layers and plasterers were subcontracted into another local authority construction project. Within weeks, the main contractor went into liquidation leaving the block-layers and plasterers with no payment for work done. I checked with the local authority and found that it had paid the main contractor €400,000 and was happy that its engineers had confirmed that €400,000 worth of work had been completed. The local authority had no legal option other than to pay the money to the main contractor while the subcontractors had funded the €400,000 worth of work. This is hard evidence that the current rules are not working. They allow multinational companies to tender for work with competitive pricing on the backs of local companies. We are losing jobs because of this and it is, ultimately, costing the State a fortune. Any analysis will surely show that there is little gain on one side of the balance sheet while we are losing a fortune on the other. The status quois not an option. There must be some protection for local Irish companies.

Eamon Scanlon (Sligo-Leitrim, Fianna Fail)
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I have a solicitor's letter regarding a company which presented in the High Court with a petition for examinership on 16 January. On 3 May, the scheme was approved by order of court with an effective date set as 14 June 2018. Four companies have been in contact with me in regard to moneys owed. The Minister of State and I met a gentleman from that part of the world in Arigna a number of months ago. Sadly, the same individual has been badly caught again, this time for €70,000. A plant hire company is owed €17,000, a machine company is owed €23,000 and another company is owed €60,000. This money is all owed by one company in one area on foot of work in regard to which it was supported with State grants. The company has paid none of these people since September 2017 notwithstanding the fact that they continued to work on site into 2018. These companies have been offered 1.75% of the debts owed to them. That is €403 in the case of the €23,000; €1,200 in the case of the €70,000; and €1,000 in the case of the €60,000. This is legal robbery and it cannot continue. Small companies are being put out of business and their employees' jobs are being wiped out by legal gangsterism, which is what this is.

Patrick O'Donovan (Limerick County, Fine Gael)
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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.

In relation-----

Pat Gallagher (Donegal, Fianna Fail)
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The Minister of State will have to use his other two minutes.

Jackie Cahill (Tipperary, Fianna Fail)
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The Minister of State has recognised that there is a problem. The procurement process needs to be re-examined. Small local companies are at a severe disadvantage and we are not helping. Often we talk here about what we can do for rural Ireland. This legislation is not helping and it has to be re-examined. We must put a level playing field in place so that local contractors themselves can win the contracts rather than going in as subcontractors where they have no rights.

Deputy Scanlon referred to unsecured creditors getting 1.75% of what they were owed when a company went into voluntary examinership. I will not name here the company that did it locally in my constituency but in the middle of January, it went into voluntary examinership. On 24 April, the company came back out of voluntary examinership and then traded away as normal again. Unfortunately, the company's local subcontractors only got paid 1.75% of what they were owned. No local businesses can carry that kind of a burden where a man who is owed €50,000 or €60,000 only gets paid a fraction of that. This has to change. The legislation has to change. This voluntary examinership is not working.

Pat Gallagher (Donegal, Fianna Fail)
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If Deputy Cahill wants to continue with the two minutes, there will be no time for Deputy Scanlon, who only has 30 seconds.

Eamon Scanlon (Sligo-Leitrim, Fianna Fail)
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I will be brief. Deputy Cahill covered most of what I want to say.

Since the company came out of examinership, that company has been paid €700,000 for some of the contracts that were already done and where subcontractors were not paid. This is another issue. As Deputy Cahill said, when a person is owed €70,000 and gets €1,200, he or she has no hope of surviving in business. The law must be changed to support small companies employing ten or 12 people who go out and do a decent day's work and then get stung like this. It is disgraceful.

Patrick O'Donovan (Limerick County, Fine Gael)
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I meant to say in my earlier reply that Deputy Cahill referred to different issues. We talked about procurement not working and then about the construction issue. In fact, procurement is working. Some €12 billion is spent by the State in Ireland on an annual basis. Over 90% of it is spent with Irish companies and of that over 50% is spent in the small and medium-sized enterprise, SME, sector. I chair the SME leadership group within the Department of Public Expenditure and Reform. We are constantly looking for Deputies who have particular issues to bring them forward to myself and I will discuss them with the Office of Government Procurement. The Office of Government Procurement is constantly looking at ways in which we can improve matters.

I acknowledge the points the Deputies raise on unacceptable behaviour in construction, which is a separate issue because it comes in under the construction contracts element of the Department of Public Expenditure and Reform and a complicating factor of which is that the covering legislation, Construction Contracts Act 2013, that former Senator Feargal Quinn brought in and that was then adopted by the Dáil, is now with the Department of Business, Enterprise and Innovation. As a state or as a contracting authority, our contract is with the principal contractor. The law of the land states that we are required to pay when a certain stage is met, and we do that. We live up to our side of it. If there are contractors who are not living up to their side of it, there is a problem. That is why the enabling legislation was enacted and that is why I encourage people to familiarise themselves with it.

I can understand this issue will come to a head with the €116 billion the State is about to spend under Project Ireland 2040, part of which we announced today. While we do not want to have the same fields of white elephants roaming around the country as roamed around under a previous national development plan, we want to make sure that we get value for money but at the same time that people are properly looked after.

I will take the points the Deputies raised in relation to specific companies - it would not be appropriate to raise them in the House - and have a look at them with the Office of Government Procurement, OGP. I have already discussed the construction issues that the Deputies raised with my colleague, the Minister, Deputy Donohoe. I am committed to trying to see whether there are resolution methods that can be adopted without additional legislation. I will revert to both Deputies. I look forward to working with both Deputies and anybody else as well.