Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

This is my first time appearing in the Seanad and it is a privilege to be here. I look forward to this evening's debate.

I am delighted to have this opportunity to address the Seanad this evening as public procurement is a key part of my portfolio and an integral part of the Government’s overall reform agenda. The main focus of this reform has been to deliver better value for the taxpayer by harnessing the State’s buying power for commonly used goods and services and to enable greater consistency and standardisation of approach in order to facilitate small and medium-sized enterprise, SME, participation and driving of wider social policy objectives. This approach is designed to enable the provision of much-need public services within tighter budgets.

Although it is true to say these reforms have been driven by the need to secure value for money, they have been carried out in a manner that fully recognises the important role SMEs play in the Irish economy and that public procurement represents significant business opportunities. The remit of the Office of Government Procurement, OGP, is, therefore, to deliver sustainable savings for the taxpayer through centralising procurement across the public service and encouraging SMEs to fully engage in public procurement. This is relatively new and we are always in learning mode. It is important when reforming processes that we continue to study changes and further adapt as necessary. I have already held meetings with a number of people from SMEs regarding general procurement practices and I thank some of the Senators for organising some of those meetings.

Prior to the Government’s establishment of the OGP, the State lacked a consistent central mechanism for collecting, analysing and reporting categorised procurement data across the thousands of State-funded bodies in the public service. The OGP has embarked on improving data collection. One of the benefits of this exercise has been to get better data to assess the impact of procurement on SMEs. The Public Service Spend and Tendering Analysis 2013 report published last year was an important first step in improving accurate analysis of and transparency in public procurement expenditure. This data indicates that 93% of the State’s expenditure is with firms within the State and that the majority of the State’s expenditure is with SMEs. This can be contrasted with the UK, where recently produced statistics indicate that just over 10% of central government spending is directly with SMEs.

The OGP data indicate that in the majority of our expenditure areas, the typical tender value is less than €100,000, which provides a significant opportunity for SMEs. The OGP will be producing this analysis annually, and data volumes, data quality and depth of analysis will hopefully improve each time. Such reports will inform future procurement strategy and increase openness and transparency on public expenditure.

I heard at first hand yesterday some of the challenging issues facing the SME sector when I chaired my first meeting of the SME working advisory group, which consists of representatives of the SME sector, including the Irish Small and Medium Enterprises Association and the Small Firms Association, along with relevant State bodies, such as the OGP and the Department of Jobs, Enterprise and Innovation, Enterprise Ireland and InterTradeIreland.

Public sector procurement can be appear to be complex. Therefore, improving public procurement practices by removing obstacles and encouraging the involvement of SMEs is a key priority of the Government. One of the key pillars of OGP support for SMEs is proactive engagement and education. In this context, the OGP supports the work of Enterprise Ireland and InterTradeIreland in building awareness of public procurement and delivering training for small suppliers in bidding for public contracts. In particular, the OGP supports events, such as "Meet the Buyer" events, one of which was held in Belfast last month and there is another planned for October in Dublin, which help suppliers meet public sector buyers to better understand how public procurement works and the relevance of their goods or services. Hundreds of businesses attend these events. The OGP has also attended a number of business events such as "Taking Care of Business", run by the Department of Jobs, Enterprise and Innovation and the Public Procurement for SMEs events run by the local enterprise offices at a local level. In addition, the OGP launched a campaign to get more businesses to register with eTenders, the national tendering portal, which to date has resulted in 12,300 new supplier registrations. Yesterday, I heard further suggestions about to improve communications and outreach to SMEs.

At EU level, there is also a growing recognition of the need to promote and facilitate SME participation in public procurement. The new EU directives on procurement have recently been transposed by the OGP. They are intended to make it easier for businesses and SMEs to tender for public sector procurement contracts. The directives contain provisions specifically designed to improve access for SMEs and start-up businesses. In April 2014, the OGP accelerated the implementation of some of the key measures by issuing guidance to public sector bodies. The key provisions of this guidance are in Circular 10/14. They indicate that buyers are advised to undertake market analysis prior to tendering in order to better understand the range of goods and services on offer, the competitive landscape, including the specific capabilities of SMEs etc.; transparency is promoted in procurement by requiring supplies and general services contracts with an estimated value of €25,000 be advertised on the Government's electronic tendering portal, eTenders; and suppliers, including SMEs, should be encouraged to fully use eTenders and avail of its facilities for registration, e-tendering and automatic alerts for future tendering opportunities. The provisions also indicate that buyers are encouraged not to set turnover thresholds at more than twice the estimated contract value and put limits on insurance levels for suppliers where possible; that there should be greater use of "open" tendering and less use of "restrictive" tendering; and that SMEs should 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. The circular also encourages contracting authorities to break large contracts down into lots where reasonable to do so and where it does not expose the State to undue risk or significant management overheads.

In addition to achieving value for money in what the State procures and encouraging SME access to procurement opportunities, the Government is keen to explore to scope for maximising wider policy objectives, including social clauses in public contracts where they are suited to the objective of the contract and therefore would have the greatest impact. In this context, the OGP is examining social clauses with a view to assessing where they can be deployed to contribute to employment or training opportunities for the long-term unemployed. The purpose of this work includes the provision of general guidance and the identification of suitable contract clauses to be developed in conjunction with the Office of the Chief State Solicitor.

It is important to adopt a targeted approach to the use of social clauses in contracts where employers are likely to be hiring additional workers to deliver the contract. This is likely to mitigate the 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 which are currently in progress are the Grangegorman development and the devolved schools building programme. With regard to the latter, a clause has been included in the public works contract which requires 10% of the aggregate time worked on site to have been undertaken by individuals who have been registered on a national unemployment register within the EU for a continuous period of at least 12 months immediately prior to their employment on the project. The clause also requires 2.5% of the aggregate time worked on site to have been undertaken by individuals who are employed under a registered scheme of apprenticeship or other similar national accredited training or educational work placement arrangement.

Experience of this pilot has been positive. It is important to learn from such practical experiences where community benefit clauses are utilised. However, this is a complex area and we must also ensure that value for money is not adversely affected, additional costs are not placed on domestic suppliers relative to other potential suppliers, contracts are of a minimum scale to absorb the increased administrative requirements, and the targeted benefit is capable of being measured and monitored during the execution of the contract. In this context, also, care must be taken not to disproportionately affect SMEs that are bidding for public contracts. It is important to develop a robust structure that will assist the contracting authority in developing the correct clause and to provide support from the appropriate agency to aid the company in implementing the clause. I have instructed the Office of Government Procurement to issue practical guidance designed to assist contracting authorities in carrying out this important role in a consistent manner. I understand that the OGP will be issuing this guidance to public bodies in the coming months.

The benefits of procurement reform include enabling cost reductions, a consistent approach to enable SME access and the capacity to use public procurement in certain circumstances as a driver of wider social considerations. With regard to savings, in the three years to the end of 2015 the OGP and its partner sectoral sourcing organisations in health, education, local government and defence had achieved procurement savings of an estimated €165 million. The OGP will continue to proactively work with stakeholders in identifying issues of concern for SMEs and social stakeholders and effectively dealing with those issues to the betterment of the procurement landscape in Ireland.

Nothing is set in stone, however. I look forward to hearing new ideas and constructive contributions from Members. Our work is not finished in improving our procurement practices, not just in saving money for the State but to get value for the State. Where we can, we must recognise that value comes with things such as local knowledge, familiar service or the type of dynamic offering that sometimes only SMEs can give. I look forward to further engagement with Members on this important matter, as I wish, in line with the programme for Government, to refine the new procurement structures that are in place and make appropriate adjustments according to best international practice and in conjunction with Irish businesses.