Tuesday, 25 May 2021
Regulation of Tenderers Bill 2021: First Stage
That leave be granted to introduce a Bill entitled an Act to provide that abnormally low tender bids for construction works with a contract equal to or above the EU threshold for public works are regulated, and disqualified, if their low level is not adequately explained to the relevant authority, and that performance in prior public contracts be grounds for exclusion from participation in a procurement procedure.
Beidh mé ag roinnt mo chuid ama le mo chomhghleacaí, an Teachta Patricia Ryan. I am very pleased to introduce the Regulation of Tenderers Bill 2021 with my colleague, Deputy Patricia Ryan.
The Bill will provide for greater regulation with regard to publicly procured capital works. Annual spending on public procurement here is massive, coming in at approximately €12 billion. This is approximately the same amount spent on some of the pandemic income and business supports. According to the Office of Government Procurement's most recent spending and tendering analysis for 2018, capital works are the largest component of public procurement spend, coming in at more than €5 billion.
We know that for years Ireland has lagged behind our European peers in terms of capital expenditure and this has left us with a major infrastructural deficit, which the International Monetary Fund, IMF, the Economic and Social Research Institute, ESRI, and the Irish Fiscal Advisory Council, IFAC, have called for us to close. This infrastructural deficit is most acute in regional and rural areas. The recent stability programme update outlines that capital expenditure is set to increase over the coming years and I welcome this although there is certainly room to go further. The national development plan has identified numerous capital projects set for commencement and it is important these are rolled out quickly. However, it is essential that taxpayers get value for money for these projects. We do not want to face more scandalous cost overruns, such as have been witnessed in the national broadband plan, the children's hospital and, closer to home, the renovations in Leinster House.
Our Bill is designed to tackle one potential contributor to cost overruns, namely, abnormally low bids. These abnormally low bids are sometimes referred to as lowball offers. The Regulation of Tenderers Bill 2021 would establish that abnormally low tender bids for construction works that have a contract equal or above the EU threshold for public works are regulated and would be disqualified if their low level is not adequately explained to the contracting authority. It would also ensure that performance in prior public contracts would be grounds for exclusion from participation in procurement procedure. In other words, if a tenderer makes an abnormally low bid for a contract, and if the tenderer is claiming it can complete the project at a significantly lower cost than its competitors, that tenderer must explain to the contracting authority how this is achievable. If the contracting authority does not received a reasonable explanation for the abnormally low price submitted, the tender price should be rejected and the tenderer disqualified from the procurement process. The contracting authority should record the reason for rejection and submit it to the Office of Government Procurement.
I will say a few words on how the process will work in practice. When four or more tender bids are submitted for a public works contract, a tender that is more than 15% below the adjusted average shall be considered an abnormally low tender. In the event of an abnormally low tender being submitted, the contracting authority must seek information on, and an explanation of, the economics of the construction method with a detailed cost breakdown, the apparent exceptionally favourable conditions available, technical solutions and compliance with the contractual and legislative requirements. Following this, if the contracting authority does not receive a reasonable explanation for the abnormally low price submitted, the tender price should be rejected and the tenderer disqualified from the procurement process. The contracting authority should record the reasons for rejection and submit them to the Office of Government Procurement.
In the event the explanation is deemed to be reasonable and acceptable, the contracting authority must notify the chief procurement officer at the Office of Government Procurement that it intends to award the contract to an abnormally low tender. The tenderer must confirm the price to the chief procurement officer, and the contracting authority must recognise the potential requirement for enhanced contract management resources to be put in place for the duration of the contract. The contracting authority must provide regular reports to the chief procurement officer for the duration of the contract.
Moreover, contracting authorities will be empowered to exclude those suppliers that demonstrate significant or persistent deficiencies or both in the performance of prior public contracts. In the event of exclusion, the contracting authority should record the reasons for rejection and submit them to the Office of Government Procurement. We believe if the Bill is enacted it will ensure better value for taxpayers and reduce possible instances of litigation and the delays to completion that arise from this. It would also encourage good behaviour and better performance by suppliers.