Wednesday, 6 May 2015
Public Procurement Contracts
I thank the Minister of State for coming to the House to take this matter. In anticipation of his answer, I know what he is going to say about cost savings in the public sector and note that I appreciate the need for that. Surely, however, it should not be at the expense of the small local operator. The procurement and tendering process has squeezed the lifeblood out of small operators in local areas. The contracts they had for Government and State agency buildings were their lifeblood. I refer also to caterers and suppliers to the HSE of foods, etc., stationery and office supplies to local authorities, and cleaning contractors to Garda stations and Government buildings. All of those people are suffering and the life is being squeezed out of them by the big operators with whom they cannot hope to compete. The big operators can buy all their supplies in bulk, reduce their costs and tender lower.
In line with the regional dimension to the Action Plan for Jobs, our aim is to keep jobs and create them in regional areas. This is an area where we are killing jobs in the regions. They have no hope. I have one man who employed 25 people. He lost a contract to clean a Government building and had to let ten of his 25 staff go. The Minister of State will probably say the new contractors will take people on, but they are taking them on at a different cost. They are paying them lower wages. I know for a fact that some people cleaning Government buildings - we are standing over this - are not paid bank holiday rates. Local contractors were available at short notice to the organisations and buildings involved and could come in if there was a flood or something else happened. They were there on the spot to deal with these things.
While we are claiming to make savings in the public sector by doing this, it must be asked if this is true in the longer term given that people who are let go from their jobs must claim social welfare payments. The revenue was circulating locally whereas the contractors doing jobs in the Kerry area, for example, who got the contracts through the tendering process are in Dublin. Once again, the revenue will be circulating in Dublin inside the Red Cow roundabout.
I ask that we look at this and instead tender by region. We should keep the tendering process within the regions thereby maintaining regional jobs. I understand that we must make savings. I am not naive. However, we should not squeeze the life out of the small operators in our local areas. I await the Minister of State's reply.
I thank Senator Marie Moloney for raising this matter. It is timely to do so as we have put in place a new structure, the Office of Government Procurement, for which I have responsibility at ministerial level. While 2014 was the year of the establishment of the office, 2015 and 2016 will be about ensuring that we have the structures right and that we put as many measures as possible in place to help SMEs. Any thoughts the Senator has in that regard - she has raised some today - will be given serious consideration. We may be able to consider that in a moment.The main purpose of the EU public procurement regime is to open up the market and to ensure the free movement of supplies, services and works within the EU having regard to Treaty of Rome principles including transparency, proportionality and equal treatment. This is the rationale that shapes the detailed rules set out in the EU directives governing the regime. It would be a breach of the EU rules for a public body to favour or discriminate against particular candidates on grounds such as nationality, geographic location or organisational size, and there are legal remedies which may be used against any public body infringing these rules.
The new model for procurement was approved by the Government in September 2012 and envisages common goods and services such as utilities, professional services and marketing, print and stationery being procured by a new central sourcing organisation, in this case the Office of Government Procurement, with sectoral specific goods and services and minor works being sourced through the sectors health, education, local government and defence. The aim of the reform is to deliver overall reductions in the cost of goods and services, better procurement services, introduction of technical standardisation, greater levels of professionalism among staff responsible for procurement and increased performance management of the central procurement function.
Taxpayers demand that Government secures value for money in all of its spend. The fragmented procurement arrangements across the public service have enabled suppliers to charge different public service bodies different prices for the same goods and services. This is not sustainable as the State cannot afford to continue to purchase works, goods and services in a manner that undermines the level of services it can deliver. Reforms are being carried out in a manner that recognises the clear importance of small and medium-sized enterprises in this country's economic recovery.
We have to be transparent and equitable in our treatment of all suppliers. We spend approximately €8 billion per year on public procurement, some €23 million per day. If we are serious about economic recovery we need our SMEs to get involved and to have an equal chance in procuring and that is why I am not closing any doors in terms of measures we can put in place to help our SMEs. A couple of weeks ago there was a very useful Private Members' debate in this House when I accepted an Opposition Bill on social clauses. Nobody has a monopoly on good ideas and I am always eager to hear them.
The guidance to contracting authorities contained within circular 10/14, which we put in place to help SMEs participate and which was launched by my Department in April 2014, encourages those bodies to break large contracts down into lots where reasonable to do so. This enables smaller businesses to compete for these smaller elements of a larger contract. This has to be done in a way, however, that does not expose the State to undue risk or significant management overheads. The OGP appreciates that, as it centralises more, there is always the risk that people feel crowded out. The OGP, therefore, is working with bodies like Enterprise Ireland and InterTrade Ireland to help educate suppliers around building consortia in order that smaller businesses may come together and win larger offerings that the State may put to the marketplace.
Aggregation arrangements can be implemented in a manner that achieves value for money with a minimal impact on SMEs. The greater use, where appropriate, of multi-supplier frameworks can address local supplier issues while also ensuring the ongoing cost competitiveness of the framework itself. Such multi-supplier frameworks may also offer SMEs the opportunity to participate in national level contracts, thereby offering valuable reference work when competing for public procurement contracts in other jurisdictions. Although changing the tendering procurement process to funding by region only is not allowed under the EU public procurement regime the sourcing strategies developed by the OGP sourcing teams will be based on a full understanding of the supply market in question and the impacts that any new supply arrangements may have. That is where we may be able to progress the concerns made by the Senator.
The OGP sourcing teams are made up of procurement professionals specialising in a spend category supported by customer representatives appointed by category councils. Before the OGP sourcing teams decide how they will go to the market for goods or services they will carry out a full supply market assessment. This will include consideration of three main elements: current supply arrangements, supply market competition and, crucially, direct consultation with suppliers. In evaluating current supply arrangements the sourcing teams will consider items such as customer and stakeholder requirements, supplier types, who the suppliers are, regional supply structures and arrangements, a supplier's share of public sector bodies' business, suppliers' locations, structures and sizes, and scope and length of contracts.
In evaluating supply market competition the sourcing teams will consider items such as level of competition in the local and regional supply market, existence of barriers to entry, potential for substitute goods and services or new innovations, supply chain risks and issues, other customers buying the same items and PESTEL, which stands for political, economic, social, technological, environmental and legal trend analysis, so as to gain an understanding of opportunities and threats that might exist to competition.
Direct consultation with suppliers is also a key means through which the sourcing teams may gain market insight through the issue of requests for information sent to all suppliers in a given category registered on e-Tenders, and through bidders' briefing sessions and-or consultation with trade and industry representative bodies.On the basis of this research, the sourcing team will have a full evidence-based understanding of the market. This will allow them to make an informed decision about how to go to market and the sourcing strategy, in such a way as to deliver the optimum balance between value for money and risk.
I would be the first to admit that we need to do more. We are actively trying to pursue more measures to help SMEs. It is not all about value for money, although it is absolutely about value for money for the taxpayer, but not just at a headline rate. We need our SMEs to be involved. We have put a range of measures in place and I look forward to building upon them.
Yes and I thank the Minister of State for his comprehensive answer. I was delighted to hear him say that it was not all about value for money. Sometimes people can tender lower, but they do not do a better job. We had proof of that in my locality where a person tendered for a local sewerage scheme, but half way through he found he could not do it. They took my parish out of the scheme. We discovered later that he had made a terrible mess of another job, yet he still got the job because his was the lowest tender. Therefore, the lowest tender is not always the best.
I have been informed that while two people were working on some jobs in a local government building, that number has now been reduced to one. Yet they are trying to get the same work done in the same time, so corners are obviously being cut.
I thank the Minister of State for his reply which I will circulate to the local people who raised the issue with me. Hopefully we can come to some arrangement to ensure that jobs are kept in the locality.
I again thank Senator Moloney for raising this important matter. When discussing the issue with local suppliers, she and other public representatives should bring to their attention a number of new measures we have put in place to try to help SMEs. For example, we are currently considering social clauses whereby unemployment and disadvantaged areas can be factored into decisions. We will shortly have progress in that regard, as the Minister for Public Expenditure and Reform, Deputy Howlin, established a working group on that last year.
In addition, we have put in place "meet the buyer" events providing opportunities for SMEs to meet the big public sector buyers face to face. They can thereby have human conversations, rather than just talking to a machine.
InterTradeIreland is working on a cross-Border basis to provide supports and even grants for upskilling SMEs. I recently launched a new tender advisory service, which guarantees SMEs a quick turnaround answer to a query within a certain number of working days. Crucially, local enterprise offices have all been given training on procurements. The LEOs are the interface for all our businesses with the State and I want to see them playing a greater role. I look forward to LEOs holding many training and information days for SMEs in various communities. I would be interested in trying to bring one to the Senator's county in due course.
We had two last year - one in Belfast and one in Dublin. It is done on a cross-Border basis. Approximately 1,000 businesses were represented at the one in Dublin. I want to see them take place on a more regional basis though. I am examining how to roll them out to the regions, while working with LEOs. I will report back to the Senator in due course.