Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I am very pleased to be in the Seanad to deal with this legislation. I respectfully say it is a constructive use of Private Members' time to debate such issues of substance rather than the behaviour in which we can all engage from time to time. As Senator Mary White said, there is a substantial amount of money being spent in the public procurement of services. Breaking down the figure to which the Senator alluded, it works out at roughly €23 million a day being spent by the Government and its agencies in buying goods and services.

I disagree with little of what has been said by Senators on all sides of the House. There are, however, some misconceptions, to which I will get. The Office of Government Procurement has been set up as a very honest and constructive way of making sure we build expertise in procurement in the public sector. Up to this point, lots of people in the public service have had procurement as a small part of their jobs but not many have had it as their full-time job. With the Office of Government Procurement, we are building real expertise in an office that is going to be able to interact with the SME community and the Oireachtas and develop best practice over time. It is fair to say to the officials in the office and others that while 2014 was the year of establishment, 2015 has to be the year in which the structures bed down and there is upskilling and a reach-out to SMEs.

There are always reasons Ministers can find to oppose legislation, but in a spirit of co-operation and acknowledgement that this is constructive legislation, I do not intend to oppose the Bill on Second Stage or divide Seanad Éireann on the issue. The Bill is an attempt by Senator Darragh O'Brien and his colleagues to have a constructive input to the ongoing debate on and the development of procurement policy and I do not believe procurement policy is a partisan issue. There are many changes in this area which is somewhat in a state of flux. It is, therefore, very helpful that we thrash out the issues together on all sides of the House, just as we did on all sides of the Dáil a number of months ago.

The Government is committed to driving an ambitious reform programme designed to modernise the public sector and improve service delivery. We recognise that public procurement must be a key element of the programme, not only in terms of its potential to assist in the delivery of improved public services but also as a platform to add value by maximising the impact procurement can have in enabling community benefits in areas such as employment, training, assisting small business and promoting innovation. The Government is, therefore, not opposed to the principle of having community benefit clauses and sees significant merit in developing a targeted community clause framework. There are a number of initiatives where such clauses are being deployed.

Last year my colleague the Minister, Deputy Brendan Howlin, established a social clauses project group, which has been mentioned. Led by my office, the Office of Government Procurement, the project aims to proactively look at public contracts where social clauses could be deployed to contribute to employment or training opportunities for the long-term unemployed. The objectives of the project are the identification of suitable policy priorities to be addressed through the insertion of social clauses in public contracts; the provision of guidance on suitable candidate project types and spend areas; identification of suitable contract clauses developed in conjunction with the Office of the Chief State Solicitor; and the design of a monitoring and reporting framework which can be applied to future projects where social clauses are to be used.

It is important to adopt a targeted approach to the use of community benefit clauses in contracts where employers are likely to be hiring additional workers to deliver a contract. This is very important in mitigating any risk of displacing workers already in employment, while offering the opportunity of assisting with labour activation measures for the long-term unemployed. Two examples of this approach in progress, to which Senator Cáit Keane alluded, are the Grangegorman development and the devolved schools build programme. On the latter, a clause has been included in the public works contracts which requires that 10% of the aggregate time worked on site must be undertaken by individuals who have been registered on a national unemployment register within the European Union for a continuous period of at least 12 months immediately prior to their employment on the project. Additionally, 2.5% of the aggregate time worked on site must be undertaken by individuals who are employed under a registered scheme of apprenticeship or other similar national, accredited training or educational work placement arrangement.

The devolved schools build programme is being administered by the National Development Finance Agency on behalf of the Department of Education and Skills. It involves three contracts covering 14 sites, with the works comprising stand-alone, new build and extension and refurbishment works. Construction work started on all three contracts during spring 2014. The aggregate capital value of the contracts is approximately €70 million.

I understand the overall compliance rate with the pilot clause has been good. The Department of Social Protection, through its Intreo offices, is providing support for the contractors in meeting their obligations under the contract by providing suitable candidates to match the skills requirements from long-term unemployed construction workers. This is an example of joined-up thinking between public agencies. To date, approximately 48 long-term unemployed persons have been hired across the 15 sites out of a total workforce of about 440. The project is about getting people back to work and we are seeing the public and private sectors working together and providing real information on the types of people they need and their training requirements for employment in a sector.

Overall, we want to ensure we learn from the practical experience gained where community benefit clauses are utilised. This is a complex area, as has been acknowledged by Senators on all sides. It is important to develop a robust structure that will assist the contracting authority to develop the correct clause and provide support from the appropriate agency to aid the company in implementing the clause. We do not want unintended consequences that would inadvertently put any SME at a disadvantage.

I note that the Bill contains provisions which recognise that public procurement is governed by EU rules, national legislation and World Trade Organisation agreements. The aim of the rules is to promote an open, competitive and non-discriminatory public procurement regime. In order to be compatible with EU law, social clauses must be made known to all interested parties and not restrict participation by contractors from other member states. It would be a breach of the rules for a public body to favour or discriminate against particular candidates and there are legal remedies which may be used against any public body which infringes these rules. The EU procurement directives primarily envisage that social considerations may be included as contract performance conditions, provided they are not discriminatory and included in the contract notice or contract documents and relate to the performance of the contract.

In 2010 the European Commission documented a long list of possible policy issues which might be taken into account within the framework of a socially responsible public procurement policy. The list includes the promotion of employment opportunities for various groups of employees; the promotion of decent work; compliance with social and labour rights; support for social inclusion; the encouragement of human rights; and the consideration of ethical and fair trade principles. The proposed Private Members' Bill clearly goes beyond this by seeking to include certain mandatorysocial clauses in public contracts. The revised EU directives, when transposed, will provide greater scope and legal clarity in the use of social benefit clauses in the context of an open, competitive and non-discriminatory public procurement regime which delivers value for money. The new rules will contribute to the implementation of the Europe 2020 strategy for a more social, innovative and inclusive economy. The transposing of the directive provides a further opportunity to examine and seek clarity on the legal possibilities and how it might interact with the suggestions made in the Bill.

The reform of the public procurement function remains driven by the need to obtain value for public money in procuring works, supplies and services. It is essential to ensure value for money is not adversely affected by the inclusion of social clauses or that additional costs are not placed on domestic suppliers relative to other potential suppliers. We do not want to have inadvertent consequences or disadvantages for SMEs. Merely inserting clauses that require additional employment or training of additional staff could give rise to increased public procurement costs because of higher input costs imposed on suppliers.This may disadvantage SMEs in favour of larger companies which can absorb the additional costs and may lead to displacement of the current workforce with no net employment gain for the economy. For this reason the proposal to require all public procurement contractors to employ a quota of long-term unemployed poses a number of significant risks. In the current economic climate and bearing in mind the difficulties in the construction sector, businesses have for obvious reasons been reducing their existing workforce rather than taking on new employees. Consequently, it is likely that where a business is awarded a public contract, in particular a small-scale contract, the work would be carried out by existing employees. In such circumstances a social clause requiring that a number of long-term unemployed be taken on to deliver a public contract could impose an additional cost on SMEs which they may not be able to afford or result in an employee of the supplier being let go in favour of a long-term unemployed person. The final legislation will need to provide the flexibility to adapt to the economic environment that prevails at any given time. I acknowledge Senator Darragh O'Brien's willingness to engage on these issues and to anticipate any unanticipated consequences of being too rigid in our approach.

The Office of Government Procurement, OGP, has been proactive in developing measures designed to assist SMEs in accessing public procurement opportunities and to encourage innovation. Where practical and legally possible, policy also seeks to promote whole-of-government objectives, including the promotion of innovation in procurement. The stated aim of the OGP is to provide value for money and solutions that are smarter and more efficient. The OGP has established category councils for categories of goods and services bought by the public service. Category councils are responsible for developing commercial strategies for sourcing goods and services in each of their categories, in line with the needs of customer organisations and in the context of obtaining value for money. The scope for innovation in procurement will form part of this exercise and it is part of the remit to examine this where it is appropriate and relevant to do so. Given that the OGP is still newly established, it is too early to say what obstacles, challenges or lessons it will face in this regard. However, there is a clear focus within the office on fostering and facilitating innovation in public procurement.

The new EU procurement directives will contribute to facilitating public procurement of innovation in Ireland, particularly because they allow greater scope for interaction and dialogue with the market in regard to preliminary market consultation, competitive dialogue and competitive procedures in terms of negotiation and innovation partnerships. The Government's Action Plan for Jobs, which was developed by the Department of Jobs, Enterprise and Innovation, also recognises that procurement can be an enabler of private sector innovation and can support the drive to reduce costs in procurement budgets. It acknowledges that many innovative companies can offer solutions to the needs of public sector bodies with lower whole-of-life costs than more conventional purchases. It recognises the need for contracting authorities in Ireland to be become more open to procuring innovation. It commits to examining practical ways to highlight the merits of purchasing innovative products and services, where appropriate, as a means of achieving cost savings in public procurement.

In April 2014, the OGP published circular 10/14, which sets out the measures buyers should take to promote SME involvement in public sector procurement. Buyers are advised to undertake market analysis prior to tendering to better understand the range of goods and services on offer and the competitive landscape, including the specific capabilities of SMEs. The circular promotes transparency in procurement by requiring supplies and general services contracts with an estimated value of €25,000 to be advertised on the Government's electronic tendering portal, eTenders, and it encourages suppliers, including SMEs, to use eTenders fully and avail of its facilities for registration, e-tendering and automatic alerts of future tendering opportunities. Buyers are encouraged not to set turnover thresholds at more than twice the estimated contract value and to put limits on insurance levels for suppliers where possible. The circular also promotes greater use of open tendering and less use of restrictive tendering and encourages SMEs to consider using consortia where they are not of sufficient scale to tender in their own right or where they may lack certain capabilities necessary to provide a compelling proposition. It also encourages contracting authorities to break large contracts into lots where it is reasonable to do so and where it does not expose the State to undue risk or significant management overheads. Buyers are encouraged, where possible and appropriate, to promote new and innovative solutions by indicating in tender documents whether they are prepared to accept reasonable variants to the specifications. Requirements can adopt an output oriented approach in the tenders to encourage creative and innovative solutions.

The OGP also supports the work of Enterprise Ireland and InterTradeIreland in building awareness of public procurement and supporting training for small suppliers in bidding for public contracts. For example, in 2014, the OGP supported two meet the buyer events in Belfast and Dublin which were attended by approximately 1,600 suppliers. We also supported the Go-2-Tender programme organised by InterTradeIreland, which was attended by approximately 400 SMEs. This year, InterTradeIreland also delivered a programme on consortia building to assist SMEs to bid jointly for State contracts. We will continue to work with suppliers to ensure winning Government business is done in a fair, transparent and accessible way and that government procurement policies are business friendly.

Senator Darragh O'Brien referred to the great work being done by SME representative bodies. I will not name those bodies in order to avoid the risk of leaving one out. When I recently attended a meeting of the SME advisory group, the view was expressed to me that there is a good level of engagement. SMEs want to have other issues addressed but they recognise that steps have been taken. We have established a tender advisory service through which it is possible to lodge queries or problems with a tender and receive a factual response within a set period and in an informal manner. We are also involving the local enterprise office in this engagement. These offices are already working with chambers of commerce and interacting with businesses on the ground, and we have commenced the process of upskilling them on procurement matters. The meet the buyer event which I attended in Dublin offered a superb opportunity for small businesses to engage face to face with State agencies, but I would also like to see that happening on a local level. We have a responsibility to provide local leadership in our communities in ensuring such events take place on a smaller scale through our enterprise offices.

While the Government does not oppose this Bill, considerable work needs to be done before it becomes viable legislation with the necessary flexibility to procure the wide variety of works, goods and services necessary to deliver vital public services. Further debate and discussion is required to put in place the correct policy approach to facilitate effective use of community benefit clauses. We must be mindful of the need to maintain flexibility to reflect changing economic and social circumstances. I want the discussion to continue and I support the Bill on Second Stage in that spirit. I encourage Senators to engage with the OGP and the various initiatives on procurement. Public procurement is in a state of change for the better. We should use 2015 to build structures of which we can be proud.

Senator Hayden referred to a report providing an analysis of public expenditure in this area for the first time. I encourage Senators to study the report, which found that 93% of the value of public procurement is spent in the country and that 66% of procurement expenditure is being won by SMEs. The report also drew attention to the gaps in the data and the need to capture more data. In regard to the local person not losing out, we need to consider further how we can break contracts into lots. This conversation is only the beginning. The Bill represents a constructive contribution and I look forward to its passage and the continuation of the debate.