Darragh O'Brien (Fianna Fail) | Oireachtas source

I move: "That the Bill be now read a Second Time."

Cuirim fáilte roimh an Aire Stáit. Senators on both sides of the House are aware of the importance of small and medium businesses. The sector employs almost 900,000 people and was responsible for more than 60% of the growth achieved in the past two years.

I have been critical of the record of successive Governments on procurement and the use of State contracts and tenders to support business. We can do better in this regard by catching up with other countries in Europe.

I accept that the Bill is not perfect and may need to be amended on Committee Stage. The purpose of the legislation is to address the absence in our procurement guidelines of a social value clause which other European countries have included in their procurement legislation. Section 3 which deals with community benefit requirements sets out how a social value clause would work. It would require any State body, local authority or Department issuing a tender to take into account the benefit of awarding the contract to the local and national economy when assessing bids. The Minister of State has engaged with the Small Firms Association, Chambers Ireland and other associations, including representatives of printing companies with regard to library services, that have been effectively excluded from State contracts as a result of the current approach to assessing tenders.

In recent months my colleagues and I have consulted widely across all business sectors, with a particular focus on the small and medium enterprise sector, to identify what the Oireachtas can do to improve public procurement. The €8.5 billion the State spends each year on goods and services generates a significant amount of business. Ireland's ranking in Europe in respect of the proportion of public goods and services procured outside the State is high. While it is not always possible to award contracts and tenders to Irish companies, the objective of the Bill is to achieve a level paying pitch. One of the criticisms made of the potential privatisation of certain Dublin bus routes is that complete adherence to turnover rules would mean that a company pitching for the contract would require an annual turnover of €30 million. We must examine how to unbundle tenders to set the bar somewhat lower.

Section 3 on community benefit requirements reads as follows:

3. (a) For the purposes of this Act, a community benefit requirement is a contractual requirement imposed by a contracting authority—

(i) relating to—

(I) training and recruitment, or

(II) the availability of sub-contracting opportunities, or

(III) facilitating the involvement of small and medium enterprises, third sector bodies and supported businesses in the process, or

(IV) promotes innovation,

(ii) which is otherwise intended to improve the economic, social or environmental well-being of the authority’s area in a way additional to the main purpose of the contract in which the requirement is included.

(b) (i) The public procurement process, in taking into account community benefits as outlined in this Act, must conform to the legislative provisions of the European Union.

(ii) The Minister shall publish guidance on the community benefits duty.

(iii) Contracting authorities shall have regard to any guidance published under this Act.

(iv) The Minister shall lay a copy of any guidance published under this Act before the Houses of the Oireachtas.

The Bill does not provide all of the answers. For this reason, we ask the Minister of State to publish guidance.

I have examined closely the social value clauses provided for in the successful Scottish legislation on public procurement. The approach adopted in Scotland is not protectionist but one which goes beyond consideration of the bottom line and cheapest price. Cost and quality must be considered but so too must the overall value of the contract to the area in which it is being tendered. To use the example of local authority housing, a couple of years ago in my area of Fingal the awarding of a contact to a firm from Northern Ireland resulted in the closure of a local company with the loss of 74 jobs.

Library, printing, photocopying, food and beverage services and many other areas must be included. No one, including the Small Firms Association, the Irish Small and Medium Enterprises Association, ISME, and companies affiliated to Chambers Ireland, is seeking to have all contracts awarded to Irish firms. We simply want to catch up with the rest of Europe by creating a level playing pitch.

The stock answer to my queries on this matter both in this term and the term of the previous Government has been that we must not do anything that is not in compliance with European Union rules, laws and regulations. While I fully appreciate that is the case, Denmark has successfully introduced social value clauses, as have Scotland, the rest of the United Kingdom, France, the Netherlands, Austria and Belgium. Ireland should follow suit.

The Minister of State and I should consult further on how to improve this legislation. While he and his two immediate predecessors, Mr. Brian Hayes, MEP, and Dr. Martin Mansergh, introduced guidance in this area, companies have not noticed an improvement in their ability to secure State or local authority contracts.This is a way forward in my view. Surveys show that 82% of respondents in Ireland believe that the lowest cost is not always the best option and that there is a need to consider overall value and quality. It is unfortunate that in many areas the consideration is purely the base cost and too heavy a weighting is given to it.

The problem arises when local authorities group their tenders. For example, the four Dublin local authorities in some instances will group their tenders and, by doing so, exclude hundreds of Irish businesses from even tendering for those contracts. The Department and the Office of Government Procurement need to work out a solution. That office is very active in seeking feedback and it has engaged with businesses. There needs to be an improvement in the percentage of the number of businesses, goods and services procured from outside the State. Many people have cited the example of the reason the French police drive Citroen cars, which is not because they are the cheapest or the best cars but because the French want to support their own industries within EU rules and guidelines. Other EU states do likewise and so should we. Irish industries and companies employ almost 900,000 people. These are the sustainable businesses. We all welcome FDI, foreign direct investment and large companies and their investments, but our indigenous firms are rooted in every town and village throughout the country and they are the businesses the State and the local authorities can support better.

This legislation, if accepted and passed, would send a message to all State bodies, Departments and local authorities that we are changing the way we do things, that we will catch up with the rest of Europe, and that we will use the money we spend on goods, services and products to better support Irish businesses. While this legislation is not perfect and needs improvement, in my view it provides a basis. If Second Stage is agreed to and amendments are accepted on Committee Stage, the Bill can be further improved. We could consult stakeholders, local authorities, the Office of Government Procurement and, most important, those running enterprises, employing people and looking to expand their businesses. I do not think any Government wants to put our firms at a disadvantage against EU and worldwide competitors. Unfortunately, in some instances, we do that. This may not be done knowingly and certainly not deliberately but that is what happens. We must grasp this nettle once and for all. No more should we have the examples of leaving certificate papers being printed in Spain while people in Ireland are losing their jobs as a result. Irish firms have proven they have the track record, expertise and quality of work to undertake large State contracts and they should not be losing out purely on the basis of cost, which means people lose their jobs, the State picks up the tab and there is a knock-on effect on subcontractors and other businesses. The schools summer work schemes has an effect on communities whereby schools are permitted to procure their own services. Much of that business stays within the community and it keeps people afloat.

I am pleased to introduce the Bill to the House. I am interested to hear the Minister of State's comments. The Bill is a step in the right direction and it will put momentum behind this issue. We talk about the issue of procurement every two or three years. In 2008 and 2009, the former Deputy Bernard Allen from Fine Gael and I wrote a report on public procurement for the Committee of Public Accounts. As I have defined in this Bill, one area in which public procurement could be improved is through social value clauses in tenders issued by Government agencies, Departments and bodies. This would have a very significant and positive effect and would help to improve the number of Irish firms procuring State and local authority contracts.

As the proposer of the Bill, I thank all those who contributed to this legislation, such as the Small Firms Association, Chambers Ireland and many business groups that have taken an interest in this legislation. I look forward to the Minister of State's comments and response.