Wednesday, 5 December 2012
Construction Contracts Legislation
I thank the Minister of State, Deputy Hayes, for coming to the House as I know he has had quite a long day, as have we all. I wish to speak about an episode that took place in a school in Kilfinane almost two weeks ago, which was widely reported on in the media. A number of subcontractors who were going to be left out of pocket by the main contractor involved in building the new school took action. They decided that the only way to get recompense for their loss was to go into the school and take out what they believed belonged to them. Incidents such as this badly affect small communities. The people involved were from places like Ballinderreen, Elton, Bruff and Murroe. One of the men involved is the father of seven children and one of his daughters babysat for my sister. A brother of the guy from Elton is married to a second cousin of mine and the sister of another guy taught me in primary school. That gives some indication of how closely connected everybody involved was. The Minister of State will appreciate that the entire episode really cut close to the bone in the local community. I wish to praise the staff and parents in the school who, when they saw their school being stripped of equipment, intervened because they had fought to have the school built for many years. I also wish to praise the local gardaí for ensuring that a volatile situation did not get out of hand.
The crux of the matter is that many of the subcontractors who worked on the site and who were left short had also been left short previously by a different contractor. When the first contractor on the school project went bust, some of the subcontractors were down considerable sums of money. One guy in particular was owed almost ¤80,000. That kind of money is make or break for subcontractors. For a main contractor, it might not be the end of the world but for subcontractors, it is. One guy in particular had remortgaged his house in order to buy equipment. Losses such as those incurred could easily have sent the subcontractors over the edge. When the second contract was awarded I was delighted to see the same subcontractors who had lost out on the first contract being given a chance to recoup some of the money lost and to finish the work they had started. I welcomed that at the time but eyebrows were raised locally when the name of contractor who was awarded the second contract became known. It begs the question as to what type of research is done when tenders are submitted, when contracts can be awarded to people who have not got a great reputation locally. I spoke to an engineer shortly after the contract was announced and he threw his eyes up to heaven and said "forget about it, that is not going to be finished". However, that is a separate issue which I will not go into now.
The subcontractors were left in absolute desperation and I am concerned about the delay in bringing forward the construction contracts legislation. A motion was before Limerick County Council in May calling for the legislation to be introduced before the summer recess. The Construction Industry Federation wrote to me again last week concerning this issue. The federation said that it has been almost two and half years since this legislation was first introduced in the Seanad by Senator Feargal Quinn, which was long before my time in the House. Will this legislation be expedited so that subcontractors are given the protection they need and deserve? Will the law be passed soon?
I thank Senator Heffernan for raising this issue. I am aware of the case to which he referred in Kilfinane, County Limerick and the circumstances surrounding the subcontractors on the national school project there. It emphasises the need to swiftly enact this legislation and if I can be as bold as to say, it is not for the want of trying on my part.
That is a shift in the responsibilities and there is a sense of frustration on my part that we have not made more progress.
The Bill in question is not a Government Bill, but one put forward by Senator Quinn. The Government has accepted the Bill and it has concluded Second Stage in the Dáil. I have set out the areas of it on which I intend to bring amendments on Committee Stage and I hope that by early in the new year the Government will have agreed to those amendments, through the Office of the Attorney General and the Department. This will allow me take the Bill to Committee Stage as soon as possible and on to Report Stage and then back to this House to where it started over two and a half years ago.
I wish to acknowledge the work of Senator Quinn, who has been a partner with me in trying to get this Bill on the Statute Book. I had a meeting recently with representatives of the construction industry and I outlined to them the new timetable we have for the passage of this Bill early in the new year. The case in Kilfinane highlights the need for this legislation. Although the Bill will not have retrospective effect with regard to cases that happened some years ago, it will have effect from when it is enacted. We must ensure the rules and procedures are right for subcontractors.
Last summer, we had a full regulatory impact statement on the legislation, when all of the interested players, on the supplier and construction side, large and small, worked with me and spokespersons to work out a number of amendments. As a result of that regulatory impact statement, I have given commitments to the Dáil with regard to amendments on thresholds and adjudication. I want to go ahead with this Bill, but the problem is getting the time to do it and I am frustrated that we have not made more progress on it.
I wish to assure the Senator that the Government intends to get the Bill over the line as soon as possible. I hope to be back to this House early in the new year to report progress on the Bill so that it can be enacted and so that a case like the one that occurred in Kilfinane will never happen again. With regard to the particular case to which the Senator has referred today, I am not sure the Act, if it was in place, would make a difference. My officials have said it would not have applied because of the circumstances, but that highlights even further the need to make progress on this.
I welcome the Minister of State's response and his commitment to bringing the legislation through as soon as possible. I accept the point that this might not have had an impact in this case, although it might have been helpful for some of the subcontractors. I could be wrong, but as far as I understand, the Bill only comes into play for contracts worth over ¤50,000. That is not a lot of money for many large contractors, but it is a significant sum for smaller contractors. It is the difference between staying afloat and going out of business or going bankrupt. I suggest the Minister of State should take a look at that.
The Senator is correct. The threshold in the current Bill is ¤50,000. I am of a mind to abolish the thresholds altogether so the regulations will apply to everyone. We have not decided a view on that issue, but the threshold will certainly be lower than ¤50,000. There is an argument for abolishing it altogether. The objective is to ensure these cases do not go to court. It is to work up an adjudication system which will arrive at some agreement for both suppliers and contractors. This system has worked well in the United Kingdom without thresholds and should work equally well here in our smaller market. Margins are very tight currently because of the reduction in cost of approximately one third in the total amounts for these contracts. I am minded to have no threshold, but we will wait to see the amendment.