Dáil debates

Thursday, 9 December 2021

Regulation of Tenderers Bill 2021: Second Stage [Private Members]


3:45 pm

Photo of Mairead FarrellMairead Farrell (Galway West, Sinn Fein)
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I move: “That the Bill be now read a Second Time.”

Táim chun m'am a roinnt le mo chomhghleacaithe.

I am delighted to speak alongside my colleague Deputy Patricia Ryan on the Second Stage debate of our Bill. I might say a few words on what motivated us to table it, why it is necessary and how it will improve the regulation of tender bids for capital works. We are firmly of the opinion that, if enacted, it will improve value for money for the taxpayer when it comes to large capital projects.

It is no secret this State often encounters significant problems in getting value for money for large capital projects, which can often arise from poor regulation. Most people will be aware the new national children's hospital is expected to be the most expensive hospital in the world, given its latest estimated final cost is €2 billion, having run over cost by well over 100%. The national broadband plan has also proved a fiasco, with its latest estimated cost standing at €3 billion, a cost overrun of approximately 500%.

This is by no means a recent phenomenon. In 1999, the national road improvement works for the likes of motorways, primary roads and the M50 was completed. It began with an estimated cost of €7 billion but its final cost was more than double that, at €15.5 billion, a cost overrun of 125%. In 2005, the Luas green line cross-city extension was completed at a final cost of €991 million, just shy of the €1 billion mark, and its initial cost was estimated at €358 million, meaning it ran over cost by 161%. One year later, the Dublin Port tunnel was completed and, aside from the poor planning that meant it is unable to take the largest trucks coming to and from the port, it ran over cost by €295 million, or 65%. Four years later, Dublin Airport terminal 2 was completed having overshot the mark by €139 million. I could go on but I think we get the point.

Cost overruns can arise, as we know, from a wide range of factors. There can be poor planning on the part of the contracting authority or the contractor, litigation arising from contractual disputes, poor performance in the management of risks and so on, but poor value for the taxpayer can also arise for more nefarious reasons. We can take the issue of bid-rigging, a form of price-fixing behaviour by which firms co-ordinate their bids to maintain high prices, which is a serious issue. The Government recently acknowledged that with the introduction of its competition (amendment) Bill 2021.

The Bill that Deputy Ryan and I have tabled is designed to target another source of cost overruns, namely, those arising from the issue of abnormally low tender bids in the procurement process for capital works. These abnormally low bids are sometimes referred to as lowball offers and they can be one contributor, albeit a significant one, to cost overruns. In practice, these abnormally low bids are often a result of a contractor submitting a very low bid. In the case of the building of a school or hospital, for example, given the heavy focus on lowest price criteria in this State, a contracting authority may choose the lowest offer believing it to be the best value for money. Due to unforeseen circumstances, the contract may then run over cost, leading to poor value for money for the taxpayer. This is something the Tánaiste himself has acknowledged is a serious problem, when he stated, "... some companies [are] lowballing, coming in with very low tender prices to get the contract and then coming back with claims thereafter."

Another angle to the Bill concerns a matter that is quite topical and that must be dealt with in as a timely a fashion as possible, namely, the issue of bogus self-employment. The Committee of Public Accounts has been dealing with this issue in depth and our Bill will help to tackle one aspect of this kind of fraud. A great deal of bogus self-employment takes place in the construction sector. If, for instance, a contractor misclassifies a significant number of its workers as self-employed, it will dodge the employer PRSI and other obligations and reduce the overall labour cost. This means the contractor could submit an abnormally low bid and win the competition for the contract.

As for how our Bill would address these issues, the European Union (Award of Public Authority Contracts) Regulations 2016, which govern this area, allow for bids that are abnormally low to be excluded from the process. That legislation does not, however, define an "abnormally low bid", which means strong subjectivity is involved and contracting authorities can, understandably, be hesitant to exclude contractors from the process.

Our Bill will enact a new objective criterion such that, where four or more tender bids are submitted for a public works contract or a works contract of contract value equal to or more than the EU threshold value, a bid that is more than 15% below the adjusted average will be considered abnormally low and rejected if it cannot be adequately explained to the contracting authority. If a contractor makes an abnormally low bid for a contract, thus claiming it can complete the contract at a significantly lower cost than its competitors, it must explain to the contracting authority how this is achievable. If the contracting authority does not receive a reasonable explanation for the abnormally low bid submitted, it will be rejected and the contractor disqualified from the procurement process. The contracting authority should record the reason for rejection and submit it to the Office of Government Procurement, OGP.

The Bill will also ensure that poor performance in prior public contracts will be grounds for exclusion from participation in procurement procedure. Where these contractors have shown significant or persistent deficiencies or failures in the performance of public contracts, the contracting authority, such as the local authority, should record the reasons for the rejection and submit them to the OGP. The State needs to improve regulatory oversight and enforcement when it comes to certain aspects of public procurement, a view backed up by a number of studies by the likes of the World Bank, Transparency International and the OECD. The OGP does not provide a regulatory function and contracting authorities often lack the capacity to carry this out themselves, which is why legislation is needed in this regard.

This legislation is reasonable and desirable and would lead to better value for the taxpayer in the context of large capital projects and the cost overruns that often arise. It will also help to tackle one aspect of bogus self-employment. We often hear the Government talk of fiscal prudence - it has become something of a watchword - but it seems to do little to tighten regulations that would ensure the prudent fiscal management of the public finances regarding procurement. While the OGP has no regulatory function, the interim procurement reform board that has been established is not on a statutory footing and thus is limited in what it can do.

That makes legislation in this regard all the more important. Deputy Ryan and myself are presenting a simple and clear-cut measure that could help tackle abnormally bids, or lowball offers as they are more commonly known. The legislation is reasonable and will give guidance in the form of an objective criterion about what should be deemed to be an abnormally low bid. Without it, that is an extremely difficult matter to assess and we must ask contracting authorities to do it.

The Bill will also allow the contractor to explain its abnormally low bid. It might be the case that the bid is in fact fair and the contractor might have a reason for how low it is. For example, it may have devised some innovative industrial process or gained access to cheaper materials. We are not saying that just because it is an abnormally low bid, we should not take it, but it is important we have information on why it is low. The contractor may have found a more effective way of doing business and, therefore, its bid could still be permitted. Crucially, however, it will also allow poor performance in prior public contracts to be a ground for a contractor to be excluded from participation in a procurement procedure for capital works.

In light of the scandals there have been, and of companies wilfully and recklessly dodging their PRSI obligations, are these the kinds of companies we want to win public contracts? Surely not. I urge the Minister of State and all Deputies to support the Bill.

3:55 pm

Photo of Patricia RyanPatricia Ryan (Kildare South, Sinn Fein)
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I am delighted to have the opportunity to co-sponsor this Bill along with my colleague, An Teachta Mairéad Farrell. It is a short and relatively simple Bill which will have far-reaching effects and will result in large savings for the public purse. Judging by reports in this weekend's Mail on Sunday, it is a very timely Bill. Apparently, a number of unforeseen delays have contributed to an increase of almost 40% in the cost of providing motorway infrastructure and the bypass of Sallins, County Kildare. The M7 widening scheme, the Sallins bypass and the Osberstown interchange, junction 9A, have cost approximately €85.5 million, an increase of nearly €24 million over the original contract figure. An Teachta Mairéad Farrell spoke about the national children's hospital. Some experts believe the final cost could be as high as €2.4 billion, an enormous 500% increase.

Successive Governments have been careless with public money by allowing such overspends to happen and this needs to change. The Bill will ensure that poor past performance in public contracts would be grounds for exclusion from participation in future tenders for procurement procedure. The current legislation governing public procurement, the European Union (Award of Public Authority Contracts) Regulations 2016, allows for bids which are considered abnormally low. An Teachta Mairéad Farrell spoke at length on this. We are asking that they be excluded from the process. However, the legislation contains the definition of what an abnormally low bid is.

The Regulation of Tenderers Bill 2021 will establish that abnormally low tender bids for capital works that have a contract equal to or above the EU threshold for public works would be regulated and disqualified if their lower level breaches a new objective base and cannot be adequately explained to the contracting authority. There are other aspects to the Bill which I will leave to my colleagues to raise given the limited time available. I commend the Bill to the House.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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I welcome the opportunity to speak on this Bill and I commend Deputies Mairéad Farrell and Patricia Ryan on introducing it. There are a number of issues with tenders and contracts. Some construction companies will submit exceptionally low bids just to secure a contract. That leads to a chain of events. Often in the middle of a project the contractor will then come back looking for more cash. It cannot be moved off-site easily. There are some good examples of major contracts not too far from this building where contractors cannot be moved. It is not possible to demobilise them and remobilise another construction company on-site. There are difficulties with getting companies to finish the works of a previous contractor. Construction companies that bid too low with an unrealistic price through lack of professionalism or not having the competence to assess the project properly should also raise red flags. The definition set out in the Bill is a serious attempt to put some shape on this so that we do not fall into these situations on major public contracts.

Exceptionally low prices can also lead to shoddy workmanship. Following work on the school bundles, the taxpayer had to go in and pick it up because there was nobody on-site checking to see if the bricklayers put metal wall ties in between each second row of blocks. These ties work out at about 9 cent each but they were not dropped in because nobody was there watching them, which was shoddy workmanship. The work then had to be redone.

Past performance is very important and I welcome that it has been specified in the Bill. We should be able to consider poor performance in the past. Too often public contracts have gone out to firms where there are red flags because of their previous track record. Where a company has no track record, its competence now needs to be seriously assessed. The Bill addresses those points.

Deputy Mairéad Farrell mentioned some of the other consequences of this, including bogus self-employment. As Chairman of the Committee of Public Accounts, I have seen more than enough examples of bogus self-employment in the past 15 months in a range of areas but particularly in the construction sector.

We need to move on further than this. Sometimes Ministers throw their hands up and say they cannot do anything about it. When we are spending taxpayers' money, we should not just get the job done but get the best public and social good out of it along the way. We need to insert provisions insisting that companies pay the living wage. That is what the Sinn Féin Minister in the North has done. The Tánaiste often challenges Sinn Féin to do this, that and the other in the North - things over which we have no control and which are set down by the diktat of the Tory government. However, where we have the control, we are doing it.

The Sinn Féin Minister up there stepped up to the plate and has insisted that for any public contract works the company must pay the living wage. Workers should be getting proper overtime rates. The rights of workers to join a trade union must be recognised. We cannot have the misclassification of workers as bogus self-employed when they are really employees. Numerous people have come to me in the last three or four years about this. Bogus self-employment is a big scandal and it needs to be stopped.

I welcomed this Bill as a step in the right direction to deal with the issue of below-cost contracts which lead to many of the issues we have just raised. I welcome that consideration of past performance is central to the Bill. Often the Government will stop our Bills just for the sake of stopping them or bury them at a committee. If there is a good idea, it does not matter who it comes from and whether it comes from the right, left or centre, or whether the Government likes the party it comes from. If an idea a good, we should embrace it. That is what leads to a successful society.

I ask the Minister of State to take the Bill on board and hopefully we can progress it.

Photo of Ossian SmythOssian Smyth (Dún Laoghaire, Green Party)
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I thank Deputies Mairéad Farrell and Patricia Ryan, the proposers of the Bill. I welcome the opportunity to address the House on the subject of abnormally low tenders and poor past performance in the procurement of public works contracts. The Bill is well intended and seeks to address the issue that arises on public works tenders from time to time where a contractor will bid low to win the contract and seek to recover its costs through claims under the contract.

The Government, having considered and reflected on the proposals in the Bill has decided to oppose it on two grounds. First, the provisions to exclude abnormally low tenders and tenderers for poor past performance already exist in the regulations that govern the award of public contracts, and, second, the proposals may have an adverse impact on the award of public works contracts.

The Government has significant concerns about the Bill's potential impact on the ability of the State to seek value for money on all projects delivered under the Exchequer-funded element of the national development plan and the implications for Ireland of the Bill with respect to EU public procurement directives.

Public procurement is governed by EU legislation and national rules and guidelines with the aim of promoting an open, competitive and non-discriminatory public procurement regime, which delivers best value for money. The measures proposed in the Bill seek to modify those, which are already provided for under the 2016 European Union (Award of Public Authority Contracts) Regulations.

The capital works management framework, CWMF, is the tool a public body must use to procure and manage the external resources necessary to deliver public works projects that are delivered under the Exchequer-funded element of the national development plan. The Office of Government Procurement, OGP, has introduced amendments to the public works contracts in the interest of improving tender outcomes. This work will continue in the ongoing review of the capital works management framework.

The measures already introduced include the following. Fully measured bills of quantities are required for those projects which use the traditional contract type. This measure increases the focus of the design team in preparing more comprehensive design information that can be accurately measured for pricing purposes. With a comprehensive price breakdown, it is easier to identify abnormally low pricing strategies. A mechanism to directly tender specialist works was also introduced so that these critical work elements are priced directly by the specialist, thus reducing the extent of the contract sum for which the main contractor has overall price responsibility.

A review of construction procurement policy is under way and will deliver significant changes to the capital works management framework over the coming years. One of the work streams identified as part of the review is performance evaluation. Engagement will take place with industry on developing robust key performance indicators as part of this work stream in 2022.

The reform of the public procurement function is driven by the need to obtain value for public money in procuring goods, services and works. It is essential that value for money is not adversely affected and projects are not delayed by arbitrary formulas and onerous administrative and reporting procedures that go beyond the provisions already set down in the national regulations transposed from the EU procurement directives.

There is a balance to be struck in deciding to award a public contract between value for money and a quality project outcome.

From the perspective of a public body's duty to taxpayers, it can be difficult to justify a decision to reject the lowest price as being out of hand, particularly in circumstances where the contractor who has bid the price is willing to undertake the project.

I will now discuss the Government's concerns in respect of the proposals within the Bill. In order to avail of the long-standing provisions, as set down in the EU procurement directives for dealing with abnormally low tenders, it is vital that projects are adequately defined so that a proper analysis of the constituent elements of the project can be undertaken. The existing regulations already impose a duty on contracting authorities that require economic operators to explain the price or cost proposed where the tenders seem abnormally low regarding works, supplies and services. When investigating what appears to be an abnormally low tender, contracting authorities must take into consideration the possibility that the tenderer may be obtaining terms that are more favourable from suppliers and subcontractors than rival tenderers. A contracting authority is not obliged to reject an abnormally low tender except where it is established that the tender is abnormally low because it does comply with relevant labour, social and environmental law. In that case, it must be rejected. The Bill does not address this aspect and if enacted, it may conflict with this important provision of EU procurement law.

Guidance on abnormally low tenders is published by the Office of Government Procurement, OGP, under the capital works management framework, CWMF, and in the public procurement guidelines for goods and services. The CWMF guidance on abnormally low tenders applies to all contract values above and below the EU thresholds, and is included in all CWMF instructions to tenderers templates.

The provisions in section 2 seek to define an abnormally low tender where no such definition exists in the regulations or in the EU directives. It defines an abnormally low tender as a tender that is 15% lower than the adjusted average of the tenders received. The adjusted average is the average of all tender prices provided excluding the highest tender price. The arbitrary nature of the definition may have unintended consequences given the range of tender prices that can arise on some works tenders. While it is fair to say prices may be received that are below pre-tender estimate, prices well in excess of that estimate may also be received. It also raises the question as to whether the operation must be repeated should a tender identified as abnormally low is rejected, and perhaps lead to further rejections as the average value increases depending on the range of tender prices.

In common with existing regulations, a contracting authority is not obliged to exclude a tender that is identified as abnormally low. However, the provisions in section 2 would force a contracting authority to engage with the tenderer and, in so doing, would have to disclose the other prices received as part of the tender in order to explain to the tenderer why his or her tender was identified as abnormally low. In accordance with the principle of equal treatment, that information would then have to be shared with all tenderers, which may raise questions with respect to broader competition in the market. Under the existing regulations, the price of the successful tenderer is only required to be disclosed upon the publication of the contract award notice, which must be no later than 30 days after the contract is awarded.

The Bill also caters for situations where fewer than four tenders are received. However, the provisions proposed in subsections (2) and (3) leave it to the discretion of the contracting authority, or on the basis of professional advice, to determine whether a tender is abnormally low. The term "discretion" is problematic. It is not found in the existing regulations and would leave the contracting authority open to a challenge on the grounds that there had been a breach of the principles of transparency and equal treatment.

The view of the Government is that the Bill may drive tender prices higher than might otherwise be bid, as contractors seek to avoid the examination that follows identification of an abnormally low tender based on the formula proposed. It may disadvantage smaller contractors who may be able to offer lower prices than their larger competitors. It may significantly delay the award of a contract, and it may give rise to procurement challenges both from those whose tenders are rejected and who believe a tender should have been rejected.

It is not clear how the role of the chief procurement officer in the OGP, as proposed in the Bill, will fit with the public spending code and devolved authority to accounting officers. There are provisions for oversight of capital projects in the public spending code, and it is a matter for the contracting authority and the approving authority to satisfy themselves as to the adequacy of the approach with regards to compliance with procurement rules and project appraisal in accordance with the code.

Section 4 permits a contracting authority to exclude a tenderer where the economic operator has shown significant or persistent deficiencies or failures in the performance of a prior public contract. The existing regulations already contain this provision and, crucially, the Bill does not require evidence of that poor performance. The regulations require poor past performance to be demonstrated through the early termination of a prior public contract, damages or a comparable sanction. This is a key balancing provision to ensure a contracting authority may not abuse its position. The proposed section 4, therefore, extends the contracting authority's power to exclude tenderers beyond the parameters in Article 57(4)(g) of the EU Directive 2014/24 on procurement and, to this extent, is unlikely to be permitted under EU law. The key to the successful deployment of this provision is consistent contract administration and the application of the sanctions that are already available under the public works contract to address poor performance. A contractor may not be excluded simply because he or she raised claims or adopted an adversarial approach under a prior contract.

The Bill refers only to works procured under the European Union (Award of Public Authority Contracts) Regulations as transposed from EU Directive 2014/24. There is no reference to works procured under the utilities directive or concessions directives.

Ambiguity in the project requirements can easily result in a price that may adequately cover the tenderer's interpretation of the tender documents, but may not necessarily align with the contracting authority's expectations. The formula approach set out in section 2 may impact upon innovation, particularly in a design and build tender where there is real scope for innovation from a construction point of view. The formula approach may result in a tender being categorised as abnormally low that is well considered and very efficient to build, meets the brief and output specification and is generally cheaper to build. Whilst it may pass the test set out in section 3(1)(a) and-or (c), meaning it does not have to be rejected, it will nonetheless have been identified as potentially being an abnormally low tender leaving the decision of the contracting authority to award the contract open to challenge from other tenderers.

The Bill, which deals with how the State regulates for abnormally low tenders for construction works with a contract value equal to or above the EU threshold for public works, and poor past performance to be grounds for exclusion from participation in a procurement procedure, has not undergone a regulatory impact assessment. It places an additional administrative burden on contracting authorities and the chief procurement officer in the Office of Government Procurement.

The Government appreciates the intention behind the Bill. However, for the reasons I have outlined, the Government has significant concerns regarding the Bill's potential impact on the ability of the State to seek value for money on all projects delivered under the Exchequer-funded element of the national development plan and the implications of the Bill for Ireland with respect to EU public procurement directives. I thank Members for the opportunity to address them on this.

4:05 pm

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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Is the Minister of State's script available to Members?

Photo of Seán Ó FearghaílSeán Ó Fearghaíl (Ceann Comhairle; Kildare South, Ceann Comhairle)
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We can get it.

Photo of Gerald NashGerald Nash (Louth, Labour)
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Unfortunately, the script was not available to me. While it was clear what the Minister of State was saying - this is not meant as a criticism of him - it is good practice to circulate a script, particularly on complex matters of this nature.

Photo of Seán Ó FearghaílSeán Ó Fearghaíl (Ceann Comhairle; Kildare South, Ceann Comhairle)
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If scripts are required, they will be provided as Members want then.

Photo of Gerald NashGerald Nash (Louth, Labour)
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That is fair enough. I thank the Minister for his response, and I thank especially Deputy Farrell and her colleagues for taking the time to construct a thoughtful and well considered Bill that is designed to address the issue colloquially known as low-balling.

I accept the Minister of State and the Department are making efforts to improve the procurement situation and the management framework for major projects. It is fair to say that some lessons have been learned from the catastrophe, in the context of public expenditure, that is the national children's hospital and the national broadband process farrago. Have the Government's interventions gone far enough? It is arguable that they have not.

The Bill attempts to address some of the inadequacies inherent in the system. It is crucially important that those inadequacies are addressed in the context of the vast sums of taxpayers' money, derived from the hard work of the citizens of Ireland, that will be deployed in delivering the €140 billion national development plan over a period of ten years.

Never were value for money, transparency in public tendering and delivering on tenders for critical public infrastructure more important than they are now. Over the years, tenderers and contractors have, quite frankly, taken the State for a ride. They have routinely added fat to contracts, safe in the knowledge that, if they came in with a lowball tender way below what anyone would consider a reasonable price for a job, they would get the job and could then come calling again to say that they did not have sufficient resources to compete the job and the State would ask how much was needed and when it could put the money in their bank account. I am summarising the course of events, but that has been the case. It has been quite typical of situations we have seen over the years.

In fairness, the Bill presents a considered approach to the problem. If we do not address the question of lowballing in tendering and procurement in a comprehensive way, we will end up paying a very heavy price. There will be a cost to the State. This will not only be a financial cost, but a cost in terms of the underdevelopment of the critical infrastructure we need to make our economy and society work. There will also be a critical cost in respect of the State meeting its climate mitigation and adaptation targets. We are in trouble on that count, as the Minister of State will know from the report the Climate Change Advisory Council published yesterday.

I am very interested in section 2 and the way in which the Bill seeks to address that particular issue, which is that a red light goes off when it becomes clear that a tender is way of the radar. I know there are structures within the Department to examine abnormally low tenders but nobody could say that they are effective enough. Section 2 of this Bill tries to go a little bit further and to enhance and improve the system as it relates to the examination of those issues. The Minister of State mentioned that it is a requirement under the current code of practice in the Department to examine absurdly or abnormally low tenders. It is the case that there is a requirement to reject tenders that do not comply with social, environmental or labour law or regulation. However, while this is theoretically true, it has not always been put into practice. We know that from direct experience. I know that from speaking to the constituents I represent and my trade union colleagues. I have been raising this issue time and time again, ad nauseam, for as long as I have been in these Houses.

I will now address one of the key issues, which was referenced by colleagues in their earlier contributions. This is the issue of bogus self-employment and the misrepresentation of the reality of the employment relationships of construction workers. That goes to the absolute core of this problem. While the Minister of State may say that labour law must be complied with, the reality is that the practice of bogus self-employment is not, in itself, unlawful in this country. It is undesirable and not something that should be tolerated, but it is tolerated. I will go further and say that, in some respects, the gaps in our law encourage the practice.

I introduced legislation in the Seanad in 2017 in respect of the misclassification of someone's employment status and the misrepresentation of its true nature and my colleague, Senator Marie Sherlock, introduced legislation with a similar intent this year. The 2017 Bill was rejected out of hand when it was quite routine, under the guise of the so-called new politics, that much-derided term, to simply send Bills to the place where Bills go to die with the promise that Government would consider them at some point in the distant future. However, the Government at that time made a point of voting against the Bill in question on Second Stage. I find that curious because the reality is that there is only one winner when it comes to the phenomenon of bogus self-employment, that is, dodgy and bad bosses.

The truth is that the phenomenon of bogus self-employment cheats the State by way of lost PRSI and income tax revenue. Because the employment status of workers is deliberately misclassified, their entitlements under the social protection system are affected. Misclassifying the employment status of their workers enables dodgy contractors to win contracts but it leaves those workers in a tremendously invidious situation as regards their employment rights and social benefits, including holiday leave, sick leave and so on. This issue is at the core of the problem, which is why I am dwelling on it in the context of the Bill before us. It is real problem. I have made attempts to ensure that those who are caught up in these insidious practices are protected and that the true reality of their relationships with their de facto employers are recognised properly.

The contractors operating these kinds of systems should be subject to the full force of the law. That is why the legislation which I and my colleagues introduced sought to describe employers who are involved in these kinds of practices as tax cheats and to ensure they were treated as such. If you decide to tender for a contract with the Department of Transport, you need a tax clearance certificate. You need a clean bill of health from that point of view. It is high time that we started treating employment rights and the phenomenon of bogus self-employment in the same way. The Minister of State is right that, theoretically, if a contractor does not comply with social, labour or environmental laws he or she will not be considered for a contract, but the situation is somewhat different in practice.

This goes back to the very grey area of bogus self-employment. I had reasons for establishing the sectoral employment order system back in 2015, a system which is operating in the construction sector. One of the reasons was that I wanted to ensure a level playing pitch with regard to labour costs for all of those decent contractors who were applying for various tenders in the normal way, through the procurement process. Those decent employers are being undercut all the time by people who are engaged in dodgy practices. It is simply not good enough. It is not something this Government, or any government, should stand over.

We are not going to be able to deliver the national development plan or to successfully award the kinds of contracts the Department wishes to under that plan if we do not have a sufficient number of skilled building workers to deliver the projects. The Minister of State should mark my words: we need to deal with the issue of bogus self-employment. We know from our own experience on the ground that, while the number of apprentices is improving, there are families across the country who have been tradespeople for generations but who will not encourage their own sons or daughters to get involved in the building sector because of the phenomenon of bogus self-employment. The Irish Fiscal Advisory Council recently concluded that we need approximately 30,000 additional building workers in this country. There is no chance whatsoever that we will achieve that target if we do not deal with the fundamental issue affecting that sector.

4:15 pm

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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Ar dtús báire, I commend Deputies Mairéad Farrell and Patricia Ryan for bringing forward this timely, well-drafted legislation. The Regulation of Tenderers Bill 2021 would ensure that some of the problems that have arisen from the gross mismanagement of projects such as the national children's hospital, mismanagement that we are, unfortunately, all too familiar with, does not happen again.

This legislation provides specifically for two important regulations. It would put in place a system for identifying abnormally low tenders and then disqualifying them from the selection process for a public contract, if the contractor cannot provide a credible explanation for its bid and how it would be achieved. This is vital, as abnormally low tenders are warning signs of contractors lowballing bids, with a likely consequence of cost escalation further down the line. Unfortunately, we have had far too many examples of this in our State. Who picks up the tab in these cases? Unfortunately, it is the Irish taxpayers.

Section 2 provides for the mechanism for identifying abnormally low tenders for public work contracts. These mechanisms are robust, work successfully in other jurisdictions and offer clear guidance for Departments and contracting authorities.

Section 3 allows for the regulation and disqualification of abnormally low tenders. If a tender bid is identified as abnormally low and if an explanation from the contractor fails to adequately demonstrate how the price could be delivered, the contracting authority would then disqualify it. It will also put in place a system for identifying and disqualifying contractors that have shown significant and persistent deficiencies in prior public contracts. That is a crucial section and provision in this Bill.

Section 4 allows for the contracting authority to exclude those contractors who have ripped off the State and shown consistent deficiencies in previous public contracts. Both of these regulations would have gone some way towards protecting the taxpayer and the State from the debacle at the heart of the National Children’s Hospital, NCH, and would put in place a robust system to safeguard the public purse and to deliver capital projects at cost. The fact that neither the Minister for Public Expenditure and Reform, Deputy Michael McGrath, the Minister for Health, Deputy Stephen Donnelly, nor, indeed, any Minister in the Cabinet, including the Minister of State sitting opposite me, can tell the Houses of the Oireachtas at this stage in 2021 the cost of the National Children’s Hospital speaks loudly as to why it is so crucial that this legislation, drafted by the Deputies I mentioned, is debated and enacted in this House.

It is worth noting that this Bill simply enforces regulations already provided for in EU regulations on the awarding of public contracts. Governments, now and in the past, have abjectly failed to implement these regulations, with no evidence that any circulars or guidance notes have been issued from the Department of Public Expenditure and Reform to Departments or contracting authorities on their provision. These regulations are in place in the North, however, and with some considerable success. Indeed, these regulations are implemented by the Department of Finance there, under my party colleague, the Minister for Finance, Mr. Conor Murphy. I also welcome the announcement by the Executive in the North that it has approved and awarded a living wage. Unlike here, that means that all those employed in the public sector and Civil Service in the North will be provided with a living wage. Not only that, those who provide ancillary services to those buildings must also be paid a living wage.

Furthermore, that provision includes all public contracts awarded in the North. I mention this aspect to the Minister of State because the money we spend on public contracts can be used for greater social good. In the North, all winning tenderers for public contracts will now have to show that they are also living wage employers. In April 2019, in a response to a parliamentary question tabled by my party, the then Minister for Public Expenditure and Reform, Deputy Donohoe, informed us that no economic operator had been disqualified since 2014 on the grounds of abnormally low bidding. I ask the current holder of that portfolio to update us in respect of whether that is still the case for every Department. This legislation would sharpen how and to whom we award public contracts and, crucially, it would defend the Irish taxpayer in the process. Similarly, I ask the Minister for Public Expenditure and Reform, Deputy Michael McGrath, to inform the Dáil of how many economic operators have been disqualified from a tender process on the grounds of poor past performance. I am sure that there are many who should be struck off as a result.

Successive Governments have destroyed public confidence in the ability of the State to deliver capital projects on time and on budget due to a history of overruns. Unfortunately, we are seeing the debacle of the National Children’s Hospital reopened, with the information given to this House simply being either misleading or untrue. We also now see that the consortium has very little skin in the game in respect of the national broadband plan, NBP. It has only put €500,000 of investment into the project and only €2 million in equity, as opposed to €220 million. The €98 million is made up of loans. Crucially as well, the commitments and assurances that the Irish taxpayers were given by Ministers, through this House, that no money would be expended by the taxpayer until milestones had been achieved and the full equity had been put in is simply not true and does not now hold up to scrutiny. Indeed, we see that the Minister of State’s party colleague has actually allowed that contractor to take the €20 million, was a reserve and a confidence provision for the taxpayer, and draw it down. We also know, through the Minister, that significant amounts of taxpayers' money have been put into this project without the full equity being installed and, crucially, the Government has also allowed the company to draw down taxpayers' money without a single home being connected to the scheme. That really sums up all of what is wrong regarding the awarding of public contracts and the need for this legislation, drawn up by Deputies Patricia Ryan and Mairéad Farrell, to be taken on by the Government and supported. It can be tweaked, if need be, on Committee Stage, as we do with all legislation, and then enshrined in law.

The State has a history of overruns with public contracts. For example, the Dublin Port Tunnel involved an overrun of 160% on its initial budget. It was a total of €500 million of an overrun. The construction of the first Luas lines had an overrun of 289% and a budget cost to the tune of €600 million. As I mentioned, the national broadband plan project has seen the cost rise from an initial €500 million to almost six times that in official estimates, at a reported cost of €3 billion. Yet, we cannot afford HEPA filters in our schools or free antigen tests. The Government is opposing this Bill, but, by God, this is about saving not millions of euro but potentially billions of euro for Irish taxpayers in the future. The Government will still try to find holes in and poke at this legislation.

The National Children’s Hospital’s is the largest capital investment project ever undertaken in Ireland’s healthcare system. Since the project was established, the estimated cost of this investment has doubled. In 2013, the estimated budget for construction was €790 million and the latest estimate now is €1.9 billion, with the Minister unable or unwilling to give an updated figure. That is actually a laughable situation. We have a Department of Public Expenditure and Reform that cannot tell us the cost of the biggest healthcare contract awarded in the history of the State. Seriously, there is something wrong here. Go into any primary school and talk to fifth or six class students and they would tell us that we have a problem with this contract if we have a Department of Public Expenditure and Reform that cannot tell us what the ultimate cost of this project will be. We have a problem with how we award contracts and with how they are designed, and those are problems that this legislation can start to deal with.

This legislation is about enforcing regulations that will deliver value for money for the taxpayer and protect the taxpayer by ensuring that economic operators that perform badly and that fail to deliver on quality, on time and within budget can be disqualified from future contracts. It would also provide that companies that lowball bids with the intention of ramping up costs down the line can be identified and disqualified. The taxpayer should be defended. That is what this legislation is about and that is what Deputies Mairéad Farrell and Patricia Ryan are doing here. This legislation is concerned with ensuring that value for money should be delivered and this Bill should be supported by everyone in this House. This legislation will go some way towards remedying the incompetence that we have witnessed in public project delivery and it will protect the taxpayer.

4:25 pm

Photo of Réada CroninRéada Cronin (Kildare North, Sinn Fein)
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I commend my comrades, Deputies Mairéad Farrell and Patricia Ryan, on bringing forward this important and promising Bill which would bring a bit of transparency, accountability and accuracy to the tendering process. It would also specifically address the issues of lowball tenders and bogus self-employment within its remit. It is disappointing for the Minister of State to say that the Government is going to oppose this Bill. The Government’s record on provision in this area is nothing to boast about. He cannot stand there and tell us that everything is all right and that the Government has this issue under control. It was said that the Government has significant concerns regarding the Bill's potential impact on the ability of the State to seek value for money on all projects. I do not know what to say about that. Whoever wrote that speech for the Minister of State has some neck

These lowball tenders turn out to be wrecking balls for the taxpayer and the economy. We only have to look at the national children's hospital and the national broadband plan to see the carnage that is inflicted on the public finances. That carnage is felt in the personal lives of workers, carers and families. Every few million in cost overruns on the lowball tenders are a few million snatched away from neurology, housing, mental health, special education or from the residential respite that our carers need just to keep on living.

I had questions down to the Minister for Transport on the overruns in my constituency in Sallins in respect of the widening of a section of the N4 as my Kildare colleague, Deputy Ryan, has already noted. We are at €23 million in overruns now and counting, which is 40% of the original price. We have to look at our record here. The sum of €23 million is an awful lot of nurses in Naas General Hospital, if we are going to talk about nurses' salaries. It is an awful lot of psychologists or special education places, an awful lot of houses and an awful lot of silent nights for the families looking for respite and who are at the end of their tether.

Too often these lowball tenders are not only a false economy but also an exploitation of the public good and of the workers who are employed or, more correctly, bogusly self-employed. Bogus self-employment is a blight on our workers and our economy. It is accurately described as a corruption by the tireless campaigner and whistleblower, Martin McMahon of the Tortoise Shack podcasts. Bogus self-employment allows companies to come in low and continue acting low, in fact, to act in the lowest way possible by devouring all the benefits of profit while spitting out the workers who made it for them. By telling workers not to look to them for PRSI contributions, that the workers are on their tod and self-employed, those companies have all the rights to our public money but no responsibilities to their workers whose taxes actually fund that public purse. Alongside the exploitation of our workers by wealth funds and cuckoo funds, bogus self-employment is right up there. It is socially repulsive and perverse.

This Bill will set out to make it anything but normal for hard-working people in a modern democratic society. If a company cannot explain why it is coming in at 15% below the others, it would be "thanks but no thanks" to them, for a change. For the sake of the public and our workers and the way it should be, I challenge the Minister of State if he is saying he is going to oppose this Bill and I hope he will have a rethink.

4:35 pm

Photo of Ossian SmythOssian Smyth (Dún Laoghaire, Green Party)
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I thank the Deputies. I will address one or two of the points raised. Deputy Farrell raised the question of cost overruns. They are real and on particular projects there have been some dramatic overruns which have been the subject of investigations. We can learn from those and make sure we do not repeat them in the future. It has to be borne in mind that when we are comparing the cost agreed and the actual cost outturn, we need to compare the irrevocable contract price that was signed on the tender, not the price that was discussed by project proposers years earlier at the start of the process. Sometimes a road might be proposed for €100 million but by the time it goes to tender and goes through everything, it is signed at €500 million and comes in at €600 million. That is an overrun of €100 million. The final cost can be compared with whatever was the imaginary, guessed price before the contracts come in, but nobody knows what a project really costs until the bids have come in under tender. That is not to say that cost overruns do not happen. They do.

Deputy Farrell is looking for new objective criteria for what is an abnormally low tender. There is a problem if we are saying that the contracting authority can use its discretion to decide what an abnormally low tender is, particularly where there is a small number of bids. That is not an objective way to go about it.

Deputy Nash talked about the problem of bogus self-employment, as did Deputy Cronin. Bogus self-employment is dealt with under the public works contracts. Contractors who are not complying with employment law may have deductions applied to their payments under the contract. Enforcement of labour laws is a matter for the Workplace Relations Commission. Public works contracts require the contractor to retain extensive records with regard to payments to all workers engaged on site.

Deputy Stanley talked about companies with no track record winning bids. This Bill does not address that, however. What this Bill addresses is poor past performance. We are limited by European law in how we can exclude people for poor past performance. The limit is that we can exclude somebody who bids for a contract if they have poor past performance, but only where we have direct evidence of it. For example, has the company been convicted of non-compliance with contract? Is there a judgment against it? Where it is simply a case that it was a nightmare to work with that contractor and we were constantly fighting with them, we cannot exclude them under European law. If it was private procurement, we would. If I previously had painters in and had been fighting with them all the time, I would not hire them to paint my house a second time. However, under public procurement we are obliged to be non-discriminatory and not to exclude people unless we have actual evidence that they have underperformed.

I outlined in my earlier contribution the issues that the Government has identified with the Bill. The existing regulations already contain carefully balanced provisions drafted in the context of the rights and obligations of both contracting authorities and economic operators. The Bill seeks to shift that balance, which may not necessarily result in a better outcome for the economic operator, the contracting authority or indeed the taxpayer. Also it is not clear how the oversight role of the chief procurement officer in the Office of Government Procurement, OGP, proposed in the Bill will fit with the public spending code and with the devolved authority to Accounting Officers in managing expenditure. The Accounting Officer is the person responsible for the expenditure of any given Department. If a Department that has a huge contract that overruns the price and there are problems with the way it was specified in the first place, the Accounting Officer is the person who has to go before the Oireachtas committee and explain to the Comptroller and Auditor General why the contract did not work out. The Accounting Officer and not the chief procurement officer is the person who appears before the Oireachtas committee to explain himself or herself. It would be a huge change of role if we said the chief procurement officer was responsible for all cost overruns.

Photo of Mairead FarrellMairead Farrell (Galway West, Sinn Fein)
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I am fed up of coming in here and being told the Government wants to work with the Opposition but the Opposition and Sinn Féin do not give the Government any ideas and do not do anything. Every time I come in here with any kind of a Bill, all I hear from Government is that it will kick the can down the road for nine months, it will not engage on it, it disagrees, it will not bring the Bill to Committee Stage, it will not have the discussion or look at it. It does my head in. We put work into these things. We look at these proposals and we are willing to work. I was very clear in my opening statement that I am happy to work with the Government on this, as my colleague, Deputy Doherty also said. We can bring it to Committee Stage and look at the different suggestions and amendments the Government has. However, again from the Government the answer is "No". The Government is not happy to work with the Opposition on different Bills it is bringing forward. This is the fourth piece of legislation that I have brought before the Dáil. That is not just an easy thing we do overnight. It takes a lot of work. If the Government is not willing to engage with the Opposition on different Bills and proposals, I am really disheartened and shocked.

The Government is not implementing the stuff that needs to be implemented to ensure this is dealt with. The Minister of State was talking about cost overruns. We are not saying this is a panacea for cost overruns, far from it. I said that very clearly. We need to look at the issue of abnormally lowball offers, however. This is not just something my party is talking about. It is something those on the Government benches have spoken about as well. There is no definition for that. That is what the experts in procurement law say.

There is no clear definition. The Minister of State said that in deciding to award a public contract, a balance needs to be struck between value for money and a quality project outcome. We are all saying that. It is clear that it needs to be done. We are not saying it needs to be in just one sense or the other. The Minister of State stated the existing regulations already impose a duty on contracting authorities to require economic operators to explain the price or cost proposed where tenders seem abnormally low in relation to works, supplies and services. I will table a parliamentary question to find out how many bidders that Departments have disqualified on grounds of abnormally low tenders. I would be really interested in knowing that. The Minister of State also stated the provisions in the Bill seek to define an abnormally low tender where no such definition exists in the regulations or EU directives. We have a definition. The Minister of State is concerned about the definition. We would be willing to work with him on this. That is the whole point of this Parliament. The whole point is that we are supposed to work together to get the best outcome for the taxpayer and ordinary people. To be honest, I have not seen many best outcomes for ordinary people from this Government at all. I am really annoyed about this. As the Minister of State knows, I am always willing to work with the Government. I am always very calm and collected — most of the time anyway — but this really does annoy me.

The Minister of State said the Bill, as drafted, would drive tender prices higher than might otherwise be bid as contractors seek to avoid the examination that follows the identification of an abnormally low tender based on the formula proposed. It should not be very difficult. We are not trying to make it more difficult; we are just trying to deal with the issue. We should not be running scared of this. We know we have an issue so we should deal with it and make it easier for people.

The Minister of State also stated the Bill could disadvantage smaller contractors who may be able to offer prices that are lower than those of their larger competitors. I said very clearly in my opening speech that there could be reasons for having a lower tender. That is brilliant; fair play to those concerned. The Minister of State, however, is referring to disadvantaging smaller contractors. Unfortunately, my colleague Deputy Stanley is gone. He has done significant work on community wealth building. I cannot wait to see the work the Government has done in this regard.

I have said most of what I have time to say. I am genuinely disappointed. We are putting together legislation and want to work with the Government and have the best outcome. We are all supposed to be doing our best for the public, the taxpayer. The Government's position is really disheartening and frustrating. I will be introducing another Bill in a few weeks and I look forward to the Minister of State supporting it.

4:45 pm

Photo of Patricia RyanPatricia Ryan (Kildare South, Sinn Fein)
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I am at a loss. That is all I can say at this point. I cannot understand why members of the Government come in here and oppose Bill after Bill after Bill. In my opening speech, I referred to successive Governments being careless with public money. This one is no better. I thought it might change some legislation but all it does is constantly oppose Bills we introduce. We are parliamentarians for a reason. We are elected by the people to do a job for them. We are here to do what they want. The money is not our money or the Government's money; it is the taxpayers' money. This matter needs to be addressed properly. We cannot be wasting taxpayers' money constantly.

Deputies Stanley and Nash spoke about bogus self-employers. The Minister of State tells us there is no such thing as a bogus self-employer. There is. I do not know what planet the Minister of State is living on because there are plenty of them. Deputy Stanley mentioned how many he has come across. I assure the Minister of State that Deputy Stanley is not the only one who has come across bogus self-employers. Many of us have.

Deputy Doherty spoke about value for money. The Minister of State does not care about value for money. The expenditure is considered fine because it is not his money. Deputy Cronin spoke about over-expenditure on the Sallins bypass. We should consider what the money would do. My constituency is very poverty-stricken and there is a lack of housing. There is no one to build houses and no one wants to build them. Every day, there are people in my constituency office who tell me how they cannot get houses.

I am a spokesperson for older people. Older people are living in poverty, yet it is okay to spend millions upon millions of euro without anybody being interested in where it goes. It is time that the Minister of State stood up to the plate and did what he was asked to do. It is time that he did what this country needs, made a change and looked after the public money.

As somebody who worked as a shop steward many years ago for people who lived on very low wages, I believe it is time that the living wage was implemented in this country and that the Government got off its backside and did it.

Question put.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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In accordance with Standing Order 80(2), the division is postponed until the weekly division time on Wednesday, 15 December 2021.