Friday, 26 March 2021
Quality in Public Procurement (Contract Preparation and Award Criteria) Bill 2021: Second Stage
I move: "That the Bill be now read a Second Time."
The Minister of State, Deputy Ossian Smyth, is very welcome to the House. I thank him for his engagement on this legislation. As many colleagues across the House will be aware, procurement is an issue with wide implications. To give a sense of the Irish position, in 2019 we spent €12 billion on public contracts for goods, services and works. Over the next few weeks, the expenditure will increase very significantly. As we heard earlier this week in the Seanad, from the Minister for Public Expenditure and Reform, Deputy Michael McGrath, there will be at least €116 billion in capital works expenditure planned under the new national development plan. How we spend that money and the way we do the procurement really matters, and we owe it to members of the public to be sure we are getting the best possible outcomes from their money when we spend it.If we cut corners, it can cost more in the long run. We can see this in scandal after scandal and in many of the smaller disappointments and missed procurement opportunities, many of which may never get headlines but which each of us will have encountered and of which we will have many examples. It is not enough that we respond to each new controversy; it is about changing the policies, systems and practices around procurement in a meaningful way.
This legislation is not just a very strong instrument to avoid some of the mistakes we made in the past; it is also a very positive proposal on how we can raise the level of ambition, do more and derive wider public benefits of every kind from how we spend our public money, be those benefits social, environmental or associated with innovation. The key to that is making quality the heart of the public procurement process and strengthening the way we think about quality in public procurement.
This is an issue I have been very passionate about since I worked with the National Women's Council of Ireland. There I worked with 180 organisations. They were very different. Some were service providers and some were service users, and others were unions or business groups. There were so many examples of frustration with procurement. Very often, people were told that is just how it is, that it is a matter of EU law and that there is little that can be done. I decided to investigate. We found there is a large amount of space in the EU directives on procurement. There are many opportunities. There is space to do really positive social and sustainable procurement. That has now increased and it has been increasing since the 2014 directive, which recognised explicitly procurement as a key economic tool in delivering the Europe 2020 vision of smart, sustainable and inclusive growth and achieving the EU's collective goals in areas such as education, the environment, poverty reduction and equality. The EU directive states: "This Directive clarifies how the contracting authorities can contribute to the protection of the environment and the promotion of sustainable development, whilst ensuring that they can obtain the best value for money". The mandate from the EU is, in fact, to do more and to be more ambitious about procurement. This Bill is not just compliant with the EU laws; it will, in its implementation, bring Ireland closer to the spirt of those laws.
At the time of transposition, there were opportunities that Ireland did not choose to take. One example is that under the EU procurement laws, contracting authorities, when they prepare a call for tenders, must decide whether they will be awarding the contract on the basis of the lowest cost only, whereby the lowest bid will get the contract, on the basis of the best price-quality ratio, whereby both price and quality are thought about when making the decision on awarding the contract, or on life cycle costing, whereby one thinks about the input, the life cycle and the disposal of what one is buying. Life cycle costing is very often combined with the best price-quality ratio. At the time of transposition, the EU directive recognised that there are dangers when we opt only for the lowest cost, and member states were offered the opportunity to exclude lowest cost only arrangements. Ireland chose not to take that opportunity and to keep all three options open. However, what we have seen in the past seven years, unfortunately, is the lowest price being used time and again, far too often, and not enough weight being given to quality.
I address this in a few ways in my Bill. There are four very practical measures, the first of which is limiting the use of lowest price only contracts by making the best price-quality ratio the standard practice, either on its own or combined with life cycle costing. Let me give an idea as to where and why this matters. Having regard to the CervicalCheck scandal, the Scally report directly identified the fact that a lowest price only contract was one of the reasons quality issues were not identified early enough. We have seen examples of where companies with very high risk ratings are given public contracts.That is because as a result of that early decision the contracting authorities did not give themselves the space to prefer a better quality option since they had decided it would be lowest price only and they did not have the grounds to refuse a company that displayed clear dangers in terms of its risk rating.
The Minister for Public Expenditure and Reform has acknowledged that more thought earlier leads to better outcomes. This Bill tries to put that into practice. We do not exclude lowest price only as an option. The discretion of contracting authorities is still respected. However, if they go for lowest price only, they need to publish an explanation from a senior official that states why. That is incredibly reasonable. That is also part of our accountability to the public. Effectively, the Bill does is say that one needs to either think about quality or think about why one is not thinking about quality. That is the least that the public can expect from those spending their money.
This is based on Dutch legislation which is incredibly successful. Their projects are coming in on time and benefiting. A review of that 2016 Dutch legislation which does exactly this had two interesting findings. The first is it is not always that more expensive. A total of 73% of contracts still went to the company that had made the lowest bid but that company had proven itself also on quality. They had won on two dimensions. The other interesting finding was that the cost was 3% higher at the early stage of the procurement process but the benefit was 2.4 times more - doubling the benefit from public money - by getting those extra dimensions in. The core of it is that switch or shift in culture in what we do first.
The other part is that we need to do even more on the large national infrastructure projects. We cannot afford to get it wrong. Regarding the children's hospital, it was 75% on price and only 25% on quality and an underbidder won it with a visibly unrealistically low bid. My Bill would say that when we spend in excess of the EU public works threshold of €5.35 million, we should have a minimum of 50% quality criterion. I would like it to be higher. Many would like it to be higher. Often it will be, but that should be a minimum. That is really important. The discretion is still there to go, on a €5 million project, with price only but it will require a senior level explanation.
The final two provisions in my Bill relate to how do we help the procurement office because I see this as empowering legislation for those doing procurement. It is around the Minister providing guidelines, not only the information note that we have from the Office of Government Procurement, OGP, but around the other parts of public policy and how, if one were designing a tender, one might want to fit them in, for example, the UN Convention on the Rights of Persons with Disabilities. This would be a tool that would support contracting authorities to ask how they think about that when they are putting out a contract for a public park and how they reflect that. It would be an evolving guideline that would help. That has been done very effectively in Scotland.
It is important to remember quality is not only about sustainability and the environment. It is also about design and, for example, delivery dates and employment. The EU directive is clear that there is a wealth of ways to measure quality. They are concrete and measurable. It can be done and its being done elsewhere.
My legislation would ensure that the public duty on equality and human rights, which is an obligation of every public authority and every Department, would be reflected by them in their public procurement and that they report on how they are reflecting it in their public procurement.
I will get to respond to the debate. I look forward to the Minister's engagement. This is a constructive and positive proposal. It is long past time for the State to send a signal about what it values, what it recognises and what it rewards in best practice.
I thank the Minister for attending.
I am delighted to formally second the reading of the Bill.I pay tribute to Senator Higgins for her hard work in this area both in this term and the previous one. This is a complex area of public law. It involves much jargon, legalistic language and terminology that are often not instantly accessible. It may not be instantly clear to persons reading the Bill what practical effect the percentage changing of certain price and quality criteria in a public procurement contract or tendering process might have on their day-to-day life. However, in many ways this Bill could be one of the most consequential that we will debate in this Seanad in terms of actually causing policy and culture shifts that improve the quality of people's lived experiences for the better.
Public procurement is everywhere. Where the State does not or cannot step in to directly fulfil a need or provide a service, an intermediary must be sourced. As we engage that intermediary to fill this space on the State's behalf, we have a responsibility to ensure that service is delivered in accordance with the exact same quality, equality and human rights principles and in the furtherance of the common good that rightly underpins and guides how our public service bodies deliver services and perform their functions.
No one in Ireland should ever be disadvantaged by a public decision to outsource a service or to purchase a product from the private sector. It is in pursuit of this important goal that the real importance and need for this Bill are clear because unfortunately ordinary citizens are required to pay the price for failings in public procurement and also due to a culture that allows the quality of the service to matter little compared with one that can be delivered at the lowest cost.
People have paid through their contribution to public moneys, following supplementary financial claims made after unrealistically lowball initial bids have ballooned to hundreds of millions of euro. They have also paid by having lower quality services and products that have not been delivered at a standard that reflects our ambition or even our baseline domestic and international human rights commitments.
Every Senator will have countless examples of when they have seen public procurement go wrong, when issues that were not aired at initial tendering and contract drafting stages went on to cause serious systematic problems later in the process. If a contract does not need to compete on quality, then we all pay the price. The obvious example is the national children's hospital, where decisions on how to tender for its construction have now resulted in its likely being one of the most expensive hospitals ever built.
The most heartbreaking is the scandal of CervicalCheck which arose from a price-only contract. The most personal for me was my daughter attending a school built by Western Building Systems and being sent home in 2008 because there were concerns about the structural integrity of the physical building in which she was educated and which we were informed might collapse. This is what happens when we get public procurement wrong; public money is wasted, public health is jeopardised and public confidence suffers. We need this Bill to restore public confidence.
This Bill will create a new default approach to public procurement that would ensure that price and quality receive equal attention in deciding between bids for public contracts. Furthermore, for those once in a generation large capital projects when we will not get a second chance to get it right, it is fair and reasonable to expect that at least half of the decision-making on procurement would be determined by quality. Public procurement cannot and should not be just about how to spend as little money as possible in the here and now. It should be about building a process that can look 20 years into the future.
The Bill would require that the responsibility of public bodies to exercise and promote human rights under the Irish Human Rights and Equality Commission Act would be further reflected in the contracts that such bodies signed for the delivery of goods and services to people in Ireland. When the State spends €12 billion a year on procurement and has such a dominant role in many economic markets, the embedding of human rights and promoting that approach in service delivery really has the potential to revolutionise these sectors and ensure that the State, its bodies and the services it contracts are leading by example.
The Bill is expertly drafted and is considered balanced and timely. I ask all colleagues to support its passage through Second Stage. If they have issues, we can deal with those by debate and amendment on Committee Stage. That is what we have all been elected to do. I urge the House to send a strong signal today that it rejects the sometimes catastrophic mistakes of past procurement failures. We must say to people watching that there will never be a repeat of what happened with CervicalCheck and the national children's hospital, and that the Oireachtas is acting to place the well-being and quality of life of people living in Ireland at the centre of all future public contracts.
I wish to address the amendment the Government has tabled, which would delay the Bill's passage for 12 months.While I accept that legislative change takes time to debate and consider, particularly in between the formal debates that occur in these Houses, I struggle to see what justification the Government has for a further delay of 12 months when we already have engaged in a process that is now several years old. I will end there because I am out of time but I confirm that we will look to address the delay in amendments later on.
I welcome all the good work that Senators Higgins and Ruane have done on the Bill. They have spent quite a bit of time on the legislation and not even small details were omitted. Senator Higgins spoke passionately about the legislation and to the point, which was great.
Contracts are never simple and basing procurement on quality would not guarantee that we know the final price. Over the years I have been involved with a lot of contracts so I know there are always extras and add-ons. The devil is in the detail at that stage and nothing is ever straightforward.
I have discussed this legislation briefly with Senator Higgins and the Bill's general drive has a lot of merit. I also have spoken briefly to the Minister of State and he will outline his position, as discussed. I thank the Senator and wish her the best of luck with her Bill.
Like Senator Davitt, I compliment Senator Higgins and her colleagues on putting a lot of work into the legislation. This is an issue that we should discuss and this is an important debate because there are several aspects of procurement that need to be thrashed out. It is obvious that the Senators have done a lot of work and research on their Bill. I believe the Minister's proposal to put this back for 12 months to facilitate further discussion or whatever is not the worst suggestion in the world because a lot of discussion is required.
I seek a little information on the legislation and perhaps the Senators will be able to answer. If I am not here then I ask them to come back to me at some stage with the information. There is a proposal that calls for an Accounting Officer or CEO to make a declaration on every procurement procedure where price is the only award criteria. A few things struck me about that aspect. Would that not be very onerous? Is it necessary? Finally, would it not create a significant administrative burden that could delay important contracts from proceeding? I remind the House that there are more than 7,000 contracting authorities in Ireland, including schools and health agencies. Having so many contracting authorities reporting to the Houses of the Oireachtas each year at the scale outlined in section 7(2) could be onerous and could have a negative effect. Again, I only seek clarification in this regard.
The Bill proposes to introduce legislation to compel the Minister to issue guidelines concerning qualitative, environmental, social, human rights and equality considerations. Again, there is a concern that the Bill could have an impact on the climate Bill. Has that been considered by the Office of the Attorney General? The Bill further compels contracting authorities to comply with these guidelines. This would, in my view, create additional regulations further to existing procurement regulations under SI 284 of 2016. In addition, the Office of Government Procurement has developed the national procurement guidelines that are intended as a toolkit for public buyers and a reference guide for economic operators. I understand that those guidelines will shortly be updated to give further prominence to strategic procurement, which included environmental and social considerations.Those are my queries. I have nothing against the Bill. It is a good discussion to have. As I have said, Senator Higgins and her colleagues have put a lot of work into this and I am sure that only good will come out of it.
I will mention one final issue which I am sure Senators have come across. When major public works are being done in a local area, small local firms often feel they are excluded by the procurement process. They often get angry when they see a firm from England, Germany or somewhere else getting work and point out that they employ 20 people and do work to an excellent standard and say that they should get a fair crack of the whip. I often point out to such people that, on the other side of the coin, there are Irish firms getting work in London, Rome or wherever. There are two sides to the coin. It is, however, an issue for smaller firms. At the moment, there is a very significant amount of working going on in respect of road renewal and urban renewal. Smaller firms in these localities are losing out because of the procurement process. Perhaps we could discuss that as a group again. I know there are a lot of EU rules involved, which we must stick by, but smaller firms sometimes feel they are excluded. This discussion we are having today is really good.
I move amendment No. 1:
To delete all words after “That” and substitute the following: “the Bill be read a second time this day 12 months to allow for comprehensive consideration of the implications of the Bill.”
I welcome the Minister of State. I thank Senator Higgins and her colleagues for their work on this very important Bill.One only has to look back at the record of any of these Houses over a period of months to see the amount of times the issue of procurement is raised, whether in relation to the engagement of consultants, procurement frameworks, the procurement, management of oversight of projects, or procurement processes to appoint a design team. We all use that language very often with regard to the range of projects in which we are interested and which we want to pursue. Those who watch as much TV as I do will see the issues that arise in other countries with regard to corruption, the way contracts are awarded and all that goes with it. I would like to think that does not happen in this country. Perhaps I am being a little naive in some regards but I believe we have very high standards in our processes with regard to procurement. The Office of Government Procurement does a very important job on behalf of the State in achieving value for money and in ensuring fairness. If there is one thing most people do not like to see, it is an unfair process in which people reap the benefits of favouritism.
Transparency is very important in any system. The transparency in the Irish system has led to the business sector's acceptance of the whole process. The sector regards it as well-run. Efficient businesses are rewarded and corruption is reduced.
We do, however, need to make the process easier for small businesses who wish to tender regionally. This issue has been raised numerous times. I refer to regional procurement rather than national procurement. We have heard stories of local suppliers who were excluded because of their scale and because they do not have the requisite level of turnover to qualify for a job. They may have the requisite level for regional projects but not for national projects. That should be taken into account because we want to see local suppliers and SMEs being given a fair crack of the whip with regard to procurement.
The Minister of State has been engaging with Senator Higgins and the Senator has engaged with the Office of Government Procurement with regard to the Bill. It is a thought-provoking Bill and there is a lot in it with regard to ensuring contracts are not assessed on price only. There is merit in that but that is not to say there are not issues with the Bill. I note this is the reason a timed amendment has been proposed with regard to the reading of the Bill. I know from the 2018 public service spend and tendering analysis report published by the Department that 11 of the 16 procurement spend categories remain predominantly SME, which is heartening. It is up to a 53% share of the spend, although that varies with the category. For example, in plant hire or fleet plant hire, the proportion that won by SMEs is above 80% or even 90%. Minor building works and civils, marketing, print and stationery are all a high gain in terms of the share of the spend at above 70%, which is important. Some of the lower ones are those one might expect, such as those involved in defence utility contracts, which have a much lower share for SMEs. There is scope for SMEs to secure a tender.
I welcome the line in the programme for Government regarding the SME working groups to promote the engagement of SMEs in public procurement. That group includes representatives of the Irish Business Employers Confederation, the Irish SME Association, the Construction Industry Federation and the Small Firms Association as well as chambers and key public officials within the Government. That is very important to ensure that SMEs know about the processes and have a fair crack.
I spoke earlier in the week about the national development plan, NDP. All of this is interlinked in the delivery of the NDP. We all want whatever projects are listed in the NDP and future projects to be built on time and within cost in order that people will have confidence in them. While there is the OGP, we could do with a unit or agency to oversee and deliver large projects in particular. I do not mean it would decide on the desirability of projects but rather that it would be involved in the drawing up of tenders and managing contracts and the development. The unit would draw on expertise relating to project delivery from the OGP, identify areas requiring attention and troubleshoot at the early stages of projects. That could be of benefit in this regard.
The Bill is important. There are many thought-provoking and worthy elements to it in regard to the social contract and to ensuring that we are cognisant of minorities and people with disabilities, and in order that groups that tender for projects take notice of that. I hope that in the time before amendments are debated, we can work with Senator Higgins to ensure the delivery of what she promoted.
I warmly welcome the Minister of State to the House. We soldiered together for a few years on Dún Laoghaire-Rathdown County Council so I know of him. We have not been in the Chamber at the same time during his ministerial term, so I wish him well and congratulate him on his appointment. The Bill is an important part of his work and it is an area in which he has experience, so it is appropriate that he has responsibility for it.
I thank Senators Higgins, Ruane, Black and Flynn for introducing the Bill. It is important and timely, not least in the context of the NDP. Senator Higgins raised that with the Minister of State the other day when we were talking about the national development plan. I note her many references to the Dutch model in regard to the Bill, and that is an important yardstick by which to judge it. There is so much best practice in respect of these issues, as the Minister of State will be aware.
I do not accept or support the Government's decision to defer this matter for 12 months. Senator Kyne will be familiar with the programme for Government, which he mentioned. What it says about procurement should not come as news to the Minister of State. It states:
We are committed to evaluating and managing the environmental, economic, and social impacts of procurement strategies within the State. During the lifetime of this Government [quite frankly, we do not know how long that will be, although I take it that it is envisaged to be five years], we will develop and implement a sustainable procurement policy. [I would expect nothing less, particularly from the Green Party in government].
The policy will; - Ensure strong value-for-money for the taxpayer.
- Seek to minimise the environmental impact and optimise the community benefit of products and services procured.
- Support innovation in supply markets to increase the availability and effectiveness of sustainable solutions.
- Encourage suppliers to adopt practices that minimise their environmental impact and deliver community benefit.
- Work in partnership with suppliers to achieve common goals and continually improve performance over time. We will task the Office of Government Procurement to update all procurement frameworks, in line with green procurement practice over the next three years.
That is all very laudable, and I do not think anybody has an issue with it, but when one looks at the reality of the situation, we spend billions in this country on contracts for goods, services and construction. All of us in public life have a responsibility to hold people to account in regard to procurement contracts. We talked about transparency and openness in how we do our business. We know that in the past the Government awarded contracts to the lowest bidder, which does not always mean it is the best job or that it is best practice. Senator Higgins used the example of the national children's hospital and the absolute scandal of the overrun and issues relating to procurement. One would think no one was in government for the past five or ten years. Who was supporting the Administration? Who allowed all this to happen, and on whose watch did it happen? Many of the same people are sitting at the Cabinet table. They are certainly in government and in the parties that were in government. Then they come in here and tell us that the Bill will be debated in a year's time. Have we learned anything from what has happened, in particular with the national children's hospital? It is an absolute disgrace. I do not agree that we should support the Leader's proposal on behalf of the Government, because I do not think it is right. If a Minister said six months, we could understand that and say it was a reasonable approach, but not 12 months. What does that indicate about intent? If one has a problem, one could come back to the House in six months and explain it. That is fair enough, but not to suggest that we are going to kick this down the road for 12 months. The Government may not be here in 12 months. That is the reality of politics and a tripartite administration. We all have to live with that. We read about it every day in the newspapers.
In my remaining time I wish to speak to sections 5 to 7, inclusive. Section 5 provides for the contracting authority to take account of human rights and equality issues under existing EU and national legislation. I do not see a problem with that. I do not see how it would take 12 months to come up with some solutions around that measure. Section 6 states that the Minister for Public Expenditure and Reform shall issue guidelines concerning "qualitative, environmental, social, human rights and equality considerations" that arise from contracts governed by public authority contracts regulations and how these might be included in the preparation and procurement of such contracts. I do not have a difficulty with that. Likewise, I do not understand why it would take six months to come up with something around that.
Section 7 refers to a requirement for the Minister for Public Expenditure and Reform to prepare an annual report and lay it before the Houses of the Oireachtas. That is all about transparency and accountability. The proposals in the Bill are excellent. I again thank Senator Higgins and her colleagues for the work they have done on it. I read to the Minister of State, Deputy Ossian Smyth, the objectives on procurement in the programme for Government. I do not see what the problem is here, because everything that is in the Bill falls into the general tokenism or suggestion of what the Government may do in the programme for Government. I do not doubt that the Minister of State, Deputy Ossian Smyth, is not on board. I support the Bill and, more importantly, I would like him to indicate whether we could see greater and quicker progress within six months not 12 months.
I too welcome the Minister of State, Deputy Ossian Smyth. I also thank Senators Higgins, Ruane, Black and Flynn for bringing this important and timely Bill to the Seanad. The Labour Party is very pleased to support the Bill. There is an onus on us all in this House to ensure the Government operates best practice, given that the State is the largest procurer of services and goods. The onus must always be on best practice in labour and environmental standards while achieving the best quality standards. The need to examine public procurement and public authorities and utilities under the contract preparation and award criteria is a very timely topic. We have only to look at recent awards, including the national children's hospital, to acknowledge how important such examinations are. This should not be about the cheapest way of getting things done because, as has been said. We should always strive to achieve a quality product or service.We are all very aware of the adages that if it seems too good to be true then it is too good to be true and of being penny wise and pound foolish. That is how we should approach public procurement. I know this Bill tries to address this and I welcome that fact.
Too often, lists are presented where the only option is the contractor with the lowest price. Unfortunately, to our cost and in too many recent cases, this method of selecting and awarding contracts has left this State with a bigger cost, and ultimately, the taxpayer ends up paying these additional costs. We must address quality over price.
I am aware that many of those waiting on tenders to return are wishing that a particular contractor or contractors do not come in with the lowest price. This is simply because they know that if they are forced to accept that contractor and its lowest price, this will lead them to finding faults and spending additional time on follow-ups and time-consuming inspections, given the history and experience many have with this type of procurement. That said, thankfully we have many reputable contractors. There are, however, differences in the quality of their work and their ability to deliver quality projects and services within specified timeframes. There is certainly much merit in looking at a system which does not use the principle whereby the lowest tender wins, regardless of any contractor or its previous record.
It is my understanding that the State spends €12 billion per annum on public procurement. There can never be any question or doubt that a robust procurement system is vitally important to the running of this country on a day-to-day and future basis for the benefit of all communities. We are all unfortunately aware, however, that the State has suffered because of the consequences of the current low-price procurement process. From screening programmes to school building programmes, we have seen the results of what many describe as a system with many flaws. The children's hospital process, which I understand was weighted on the lowest price versus quality, is the latest example of the need for reform in this area.
It is true that many public sector bodies, and many of those with whom I have spoken who are involved in procurement over the last number of years, recognise the need for stronger criteria for change and for greater emphasis on quality in determining the procedures involved in how we award public contracts. Many of those who deal with the tendering process now seek more emphasis on quality with much more emphasis on the economic outcomes of the project for which they have drawn up a tender, rather than, as they see it, a race to the bottom based on who can provide the lowest price to win the same contract.
We believe this Bill, as introduced by Senator Higgins and her colleagues, will point us all in that direction. To that end, we welcome that inclusion and proposed change. We believe this will make a change in how those tendering for these contracts view the process and concentrate their minds on quality and sustainability, rather than how using certain materials or reducing some processes may win a contract which is weighted more on price.
At the outset, I stated that I felt this Bill was timely. I will use part of my contribution to back the calls by my union, SIPTU, in calling on the Minister for Social Protection to reverse her recently announced market-driven approach to local development companies. The Minister, Deputy Humphreys, in the opinion of many is heading down a road of privatising community employment services, including the local development companies involved in job creation and support for the unemployed. SIPTU commented that this proposed process has created a real and genuine concern among its members that the wholesale privatisation of the community sector is the ultimate endgame for this Government. Local development companies are constituted on a not-for-profit basis and the proposal to change these essential services to a cost bid rather than a cost met model will not serve jobseekers, staff or communities well. SIPTU goes on to say that this move may ultimately facilitate these important services being sold off to private companies with little or no positive outcomes for the communities its members serve.
The timely aspect of this proposed announcement is the emphasis again in the Government on cost, rather than the quality and environmental outcomes of the changes in public procurement, as proposed in Senator Higgins's Bill. I am aware of the terrific work being carried out all over the country by local development companies, particularly in my home county of Kildare. We must not make the mistakes of the past and put price before community benefit.
We note the Bill does not propose introducing mandatory green public procurement criteria. We agree with Senator Higgins, however, that it should lead to more consideration of the importance of reviewing green criteria and how we view the future of our tendering process from a green environmental perspective. We must ensure the future procurement process includes sustainable products and services.
I look forward to this Bill progressing. Once again, I thank Senator Higgins and all her colleagues for introducing it. We must learn from the mistakes of the past to build and secure and sustainable infrastructure and services that will last into the future and give us all value for money.
The Government has no intention of going anywhere, the Senator will be glad to hear. If the Senator read the whole piece from the programme for government he would see that it states we task the Office of Government Procurement to update all procurement frameworks in line with agreeing procurement practice over the next three years. It is quite generous to state we will look at this in the next 12 months. I can also see the Minister has worked very closely with Senator Higgins, and she would agree with this, and with all of the other Senators involved.
I very much welcome that we would come back to the Bill and it is correct that it is a timed amendment. We need to be practical about things. We could just put in a timed amendment for tomorrow but if, in looking through what needs to go into it, we came back tomorrow and it was not green and did not protect workers' rights, then there would be no point to it. The proposal for 12 months sounds very decent and I hope everybody will join with me in supporting it. It is important that we do not throw around nonsense figures that would not be achievable. What is very clear is that the Government put a Green Party Minister in this area so it does show it is very important to us. There is quite a significant amount in the programme for Government that also shows it is really important to us.
People are probably sick of hearing about what I did in my past life but I did work in procurement for a few years as well as everything else. Sometimes what happens is that procurement is done behind closed doors. We need to have robust systems in place because sometimes it is the person with the most money or the lowest contract that will get it. Sometimes it feels like a box-ticking exercise. We have to make sure there are enough boxes to cover every eventuality and make sure everybody is protected in it. Procurement does not hit the headlines until something goes wrong. Nobody is watching. The systems need to be in place but they need to be robust systems. I welcome everything in the Bill and it is coming from a very good place. The fact that Senator Higgins has worked with the Government to change the previous iteration shows a good working relationship and I hope it continues.
It is good to see my comrade, Senator Warfield, in the role of Acting Chair. I congratulate Senator Higgins for this excellent well thought out legislation. I am quite taken aback by the comments made by Senator Pauline O'Reilly. She spoke about throwing about nonsense figures. The only figure mentioned was by Senator Boyhan, who suggested six months rather than 12. To make a comment such as she did shows either she was not listening or not showing respect to the very hard work done on the Bill.
Like others, I am frustrated about the 12 months. We have heard from most people that this is a very good well thought out Bill. Senator Murphy made some constructive points that need to be addressed. Six months is more than adequate in which to do so.
What I like about the Bill is that it highlights the real untapped potential of public procurement. We spend €12 billion but we have an extremely narrow set of criteria about price and price only. Many people have referred to the disasters that can unfold under this process, such as the children's hospital. I suspect all of us would agree on this. The Bill also blows out of the water the myth that social clauses must be restricted because of the EU rules on procurement. This has been really well called out by Senator Higgins, not just in the Bill but in a series of meetings we have had in the run up to it.
With regard to public procurement, the European Commission states, "Public authorities can engage in socially-responsible public procurement by buying ethical products and services, and by using public tenders to create job opportunities, decent work, social and professional inclusion and better conditions for disabled and disadvantaged people." This is what was allowed when the directive was put in place in 2014. It is a real tragedy the Government at the time ignored all of this and went in with the minimum possible requirements just on price. It is hugely disappointing. We now have an opportunity to change it. What I particularly like about the Bill is that it fits in well with Sinn Féin's policy of community wealth-building. This is about anchor institutions talking to each other across every locality. In Limerick, for example, it would involve University Hospital Limerick, the council and the university. It would get core principles applied across those anchor institutions in how they go about procurement, as well as look at issues like low-carbon footprint, a living wage and recognising the right of people to join and be represented by trade unions and awarding points on those. That would be transformative to people's lives.
Canteen staff in a Galway hospital who work for one of the biggest multinationals in the world have been in contact with me. They are front-line workers serving meals for people in the hospital but are paid just the bare, miserable minimum wage. What happens to anyone who steps out of line, talks about wanting to join a trade union or take action? They do not get work the following week. That is how public procurement works at the moment. There is something fundamentally wrong and broken with the system. The point is that it can be changed. This Bill points to the way in which we can do that.
I am very taken by the fact that in 73% of contracts in the Netherlands, there is no additional cost. Again, we see how it can work better. Senator Murphy is correct about local builders missing out. The procurement game does not work well enough for small local builders. I spoke to a councillor in Limerick earlier who told me that small builders have missed out on the work relating to 150 local authority housing voids. The big contractors are incredibly slow at doing the work meaning we lose out in terms of the results because of the way procurement is currently stacked. We need to do it differently.
In 2015, the Irish Congress of Trade Unions called on the Government to do much more with the original directive. Of course, it was not done. Now we have this amendment to extend it for 12 months. Does anyone remember the last time we were told about kicking it out for 12 months? What was that about? It was about Seanad reform. Everyone knows where we are going with Seanad reform under this Government. It is not going to happen.
Where is the Green Party making a difference? We know what to expect from Fianna Fáil and Fine Gael. In fairness, they are open about the fact they are conservative, right-of-centre parties. The Green Party was supposed to make a difference. The way the Minister of State can make a difference is by not waiting 12 months and kicking the can down the road. He can make a real difference, with the huge amounts spent each year, to people's lives and working conditions by building decency in public procurement. Why does he not at the very least take up the sensible response put forward by me, Senators Higgins and Boyhan and others and buy into a period of six months? Six months would give us plenty of time to do the additional work. It should not be forgotten that Senator Higgins has done work on this Bill for the past several years, including in the previous Oireachtas. The idea of this conversation only starting is not the case. This is the fruition of that work. It is a really well-thought out Bill. We believe it is legally sound. We would prefer to do a little bit more in terms of being more specific about workers' rights but that could be done on Committee Stage.
Right now, we have to make a decision collectively. Do we move forward with this Bill, take a six-month timeline and come back to make those changes in order that we can make real differences at the end of this year for the coming year? Do we make a real difference to procurement or do we kick the can down the road? If we choose the latter, that would be a huge failing. It would be another example of where the Green Party said it was going to make a difference but then basically faded away into the background doing what the civil servants told it to do. I want to put on the record that I believe there is an ideological issue at the heart of this. In the Department of Public Expenditure and Reform, there is a real resistance to building in decency, particularly in the context of collective bargaining and a living wage. That is a fundamental problem we need to overcome. The Minister of State can do better. I implore him to do better today.
I congratulate my good friend and colleague, Senator Higgins, on this legislation. She is a particularly reflective individual and a very hard-working Senator. The Bill is the product of much assiduous work. It has led to a good debate about procurement and how to legislate properly for it. The Senator has made a great contribution to the House on this matter and is to be commended for that. She displays tremendous patriotism and commitment to all of these matters, as well as great dedication to the Seanad. There is approximately €116 billion worth of contracts in the national development plan. That imminent expenditure, which is wonderful, brings into focus this whole question. I had a relation in Cavan who had a healthy thriftiness, a condition that is much caricatured by Niall Tóibín, of course, incorrectly. This particular relation of mine had a certain thriftiness about him but he would always buy everything new at a time when the culture would allow for buying second-hand things. He was asked by a neighbour why he bought everything new, given that he had this other attribute, and he said the reason was that the new article was the cheapest article. This is the basic fundamental principle that is at issue here. Sometimes, what is a little dearer may be the cheapest in the long term because of the overall holistic impact. I will mention a cautionary tale in that regard shortly.
The question of sustainability arises in the context of the climate change Bill published yesterday, which is wonderful legislation and is to be applauded and welcomed. Sustainability and green energy-proofing will have to be part of procurement into the future in areas like low-cost energy, clean energy and the use of products arising from clean energy. The social impact is very important. We have known cases down the years of exploited foreign workers in this country, and there were some shocking examples back in the Celtic Tiger days of Turkish labourers in Ireland and how they were being treated on building sites. That sort of thing has to be addressed in the context of the procurement process. Decent employment standards have to be addressed, as well as the whole human rights agenda. I believe that is all sustainable.
The cautionary tale I want mention to Senator Higgins and the Minister of State is that we have to watch that this would not provide a smokescreen for fiddling. By that, I mean that if there were wrongly and properly accepted tenders, for wrong and corrupt reasons and for favouritism and insider trading, the pretext could be that such tenders could represent a supposed social advantage. Therefore, we need very strict criteria. I sat on the tenders committee of a county council for a number of years and I know where this could come into play. One would be rejecting the lowest or cheapest tender and doing it on the premise that there was more social equity in the manner of operation of the other one. I ask Senator Higgins and the Minister of State to take care that we avoid corruption being used as a smokescreen, albeit a right and laudatory exercise in the first place.
There is interesting issue that arises in the school system locally and across the country, although, naturally, I know my local examples best. Schools are constrained by the national procurement framework in that they cannot support local businesses. They would wish to support local businesses and tradespeople who sponsor them and events in the school but they cannot do that because of the national procurement model. Sometimes that is not a good thing. The metric in the national procurement model is cost alone and, thus, might preclude local tradespeople from being involved.
There is an interesting thing that happens in the Border region. I am all in favour of and I speak at the Brexit committee and all of my other committees about the need for cross-Border co-operation, which there is, should be and must be. However, one of the little by-products of the Border in my area is that, because of lower wages and different laws in the North in regard to employment rules and so on, it is possible for Northern people to come to the South, where they are very welcome. The issue is that they can tender at an artificially low rate because they come from a regime of lower wages, more casual employment, no unionisation and so on. That is an issue along the Border. I notice my good friend, Senator Davitt, nodding because he knows that terrain as he lives near the Cavan border. This is a real issue in my area.Contracts for the building of local community schools and various other public facilities have been lost to people who are entitled to tender under EU law but who should not be able to come in with a different regime and be considered to be on an equal playing pitch. Therein lies the kernel of the problem. As has been mentioned, there are 7,000 agencies in the country doing this, which makes it a very complex business.
I forget who made the point about persons with disabilities, but it was well made. That is very important. The Scottish model was cited as an issue. There is a bonus, as it were, being given in the Scottish model of procurement for the employment of persons with disability. We all know from practical experience that we will not be able to increase the ratio of persons with varying disabilities employed without having it built into the procurement process as a bonus. Otherwise, if one were to opt for the lowest price in a blanket way, one would miss that element.
I am going over time so I will conclude by genuinely congratulating my colleague, Senator Higgins. It is extremely deep and reflective legislation and it is worthy of serious consideration. However, if it takes a year to get it right, we should get it right, so I would not quibble over the few months if I were her.
I wish to speak briefly on this legislation. I begin by commending Senator Higgins on it. It is positive and good and "reflective" is a very good word for it. It shows the Senator's tremendous passion and insight. It stands as a challenge to the Government, from which we would benefit to listen to and take on board.
While the most economically advantageous tender and cost is a very attractive and obvious metric to use in determining the outcome of a tender process, it does not always take cognisance of all the elements and issues that need to be considered. I appreciate the Government's concerns and I do not want a situation whereby supply chains become laboriously bureaucratic but we must consider the metrics that are used in considering and determining a tender process to ensure they are fit for purpose and test what should be tested. All projects should have an assessment to establish whether the criteria that assess the outcome of the tender process are suited to ensuring that the intended beneficiaries of the process get the maximum out of it.
In recent years we have seen the tendering of the work of partnerships around the State, resulting in the consolidation of services and the consolidation of more managed services with a client and community focus. That has lent itself to innovations in services in a positive way. In some instances, I have seen the creation of new services by the people who did not get the tender. They were able to be freed up to do other areas of work. The recruitment industry has been brought into the provision of jobseeker supports. I believe this is another positive development which was gained through the greater use of the tendering process of the State.
The eTenders system for advertising tenders has been very effective and efficient. I know that from my business in the past. I still receive the email every morning and glance through it. I have done so for years, as do many small companies. However, not all small companies are able to tender for the work. Many companies have to retain the services of a person to write tenders, because they are so complex and there is so much required in them. From my experience, the tendering process requires an assessment of competence and capability of the applicant, as well as taking account of the experience of similar work. The applicant must reference other completed projects as well. For companies that are starting off and getting into the system, that can be a difficult thing to do and quite an ordeal, so I wonder how much innovation and positivity we lose from that process due to the hesitation of companies that find it onerous.We need to ensure that the process of tendering for work takes cognisance of that and allows for small and big. I would be anxious to see that bureaucracy removed.
In preparation for today's debate, I read the public procurement guidelines for goods and services published by the then Minister for Public Expenditure and Reform, Deputy Donohoe, and the then Minister of State at that Department, Deputy O'Donovan, in 2019. Those guidelines deal with a wide range of issues, including the necessity to take environmental concerns into account and, in the context of the labour market, to ensure that employment standards are maintained. In our employment law, we have a "transfer of undertakings" provision which is a protection to ensure that the terms and conditions of employees are not reduced when tendering comes into play. I note the level of assurance this provides, having been involved in the due diligence process in that regard, where staff transfer when tenders are won by different parties. We have in-built standards already, in terms of industry standards, EU standards and ISO standards. The published public procurement guidelines are very helpful as they set out to actively engage SMEs in the process and elaborate on those minimum standards. The guidelines also deal with the issue of abnormally low tenders and the need to ensure that there are audit trails. They provide guidance on the exclusion of competing parties and set out the grounds under which this can be done.
We already have systems in place but there are enhanced systems within this legislation that I would very much recommend. Taking time to ensure that we come out with the best possible process is to be commended and I support that approach. I welcome this Bill and the fact that it ignites the conversation around reviewing and reconsidering our procurement processes. That said, I also agree that we should pause and allow to time to ensure that we have the best possible outcome.
I thank the Minister of State for being here for this debate on procurement. I also join colleagues in thanking Senator Higgins for bringing this legislation before the House because it is very important that we consider the principles raised therein. It is unfortunate, however, that Senator Gavan has used this debate as an opportunity to attack the Government again. He referred to what centrist parties had done and then asked what difference the Green Party has made in government. We must ensure that we build environmental protections into our procurement processes and in that regard, the Climate Action and Low Carbon (Development) Bill, to which all parties in government are committed, will make a real difference and I pay tribute to the Green Party for that legislation. This climate action Bill will make a real difference in the long term. Comments were made about the number of projects being procured under the NDP and that too is where the parties in government are making a difference to all of our communities. Investment is taking place under the NDP and that is because we have a vibrant economy. The Government parties also believe it is important to talk about protecting workers' rights. It is bizarre to listen to Senator Gavan regularly citing Cuba and Venezuela as model countries when their record on workers' rights is certainly nothing to brag about.
Prior to my election to the Oireachtas, I worked for the Higher Education Authority, HEA, and was involved in a number of procurement projects. I frequently looked at how procurement was carried out, particularly the principle of the most economically advantageous tender. That works well if one is ordering a large consignment of paper clips, for example, but when it comes to things like web design, IT systems or design contracts, other factors must be taken into account.Too often we simply assume that following the most economically advantageous tender, MEAT, formula is best but it is not. We must look at quality criteria, as Senator Higgins and others have said. I am not opposed to the idea of 50% of marks being given to quality and building in factors. We must debate that and it is certainly something very important.
In looking at public procurement contracts, I often consider how the public perceives what is happening. One of the difficulties is so often there is a perception the public sector is not able to get good value for money. We must look at ways to ensure we can address that, and this legislation goes some way to helping to do that. There is a perception, which is not true, that many public projects always end up running over time and budget. We must consider how we can ensure from very early on, as part of the procurement process, we can give certainty to all our citizens that, either with national or local government, we know spending will be tracked.
I will cite an example where I am from, in Gorey, County Wexford, that is mind-boggling to people in the locality. This is the redevelopment of Gorey town park. It went through a public procurement process and was originally meant to come in at a cost of €1.2 million and be completed 18 months to two years ago. The current cost is running to approximately €2.7 million and it still has not been completed. In spite of commitments to have a clerk of works appointed, that has not happened. There are many good projects with which Wexford County Council has been involved but people in the House can cite projects in local authorities throughout the country where there have been cost overruns and they have run late but nobody seems to be held to account. Whatever we do with public procurement, the public must have confidence the system will deliver on time. Of course there are times when projects run over for very good reasons, but once the contract is awarded, its stipulations must be followed.
I am glad the Government is not opposing the legislation. I agree with a number of the points raised by Senator Seery Kearney and the Bill asks some very important questions. I hope the Minister of State in his response will take the contributions of all Senators on board.
I move amendment No. 1 to amendment No. 1:
To delete "12 months" and substitute "6 months".
I welcome the Minister of State to the House. I am in wholehearted support of this quality in public procurement Bill and I begin by commending my colleague, Senator Alice-Mary Higgins, on her hard work and ongoing commitment to tackling the numerous flaws in the public procurement and expenditure areas. This Bill is clear, concise and strong, and the aim is to strengthen the national legislative framework for sustainable public procurement with a well-mapped, four-part approach. We have an historic opportunity to overhaul our outdated public procurement regime and pass legislation that delivers for our communities and our businesses.
In 2019, Ireland spent €12 billion on goods, services and construction and the national development plan states €116 billion of public funding will go towards major capital work projects. This huge amount of Government spending must be leveraged to play its part in Ireland's economic recovery, opening public contracts to more small businesses and social enterprises to innovate in public services delivery. Introducing legislation like this Bill would support that aim. The people have a right to know our money is being spent wisely and efficiently on the public services from which we all benefit and enjoy. To do this, legislation such as this quality in public procurement Bill is essential to create a carefully thought through model in standards and performances.
When State agencies consider tenders for projects, they do not have to select the lowest price. In setting the procurement strategy, drafting the contract terms and evaluating tenders they can and should take a broad view of value for money that includes social value. This Bill will help us to improve public procurement, which will not only save the taxpayer money but drive social, environmental and economic benefits in our country. Awarding the right contract to the right supplier is the cornerstone of public procurement and the litmus test for an effective procurement regime. To have the best public services we need the best suppliers and the regulatory regime must support contracting authorities in selecting those suppliers.
Achieving value for money in public procurement must continue to be about securing the best mix of quality and effectiveness for the least outlay over the period of use of the goods or services bought. That includes the whole-life costs, quality aspects and the economic, social and environmental aspects of a contract. Departments do not have to select the cheapest bid and they can take into account the wider economic, social or environmental benefits.
This legislation would introduce a price quality ratio as the default approach to awarding contracts. That would mean that if authorities chose to award a significant contract based on the price only they would also be required to publish an explanation from a senior official on the reason that contract was awarded, which would ensure transparency and accountability. This Bill would ensure that any contacts worth more than €5.3 million, or otherwise known as contracts over the EU public works threshold, would set a target of 50% quality criteria. That has massive potential in terms of shifting the culture around the public procurement process and sends a signal to businesses, including small and medium enterprises, SMEs, that we care about their track record and the quality of what they do. It also sends a clear and important message that if they put in the work to raise their standards and lead best practice in an area they would be rewarded when it comes to securing contracts.
I am happy to support this legislation as there is no doubt that the benefits of having the awarding of contracts based on best value and also best quality will benefit everyone. As the awarding of contracts is the spending of public funds it is imperative that these contracts are both value for money and of the highest quality. We must ensure that the tendering process is open and transparent. I am very disappointed with the Government's amendment to defer the Bill for 12 months. All the work can get done within the six-month period. I encourage the Minister of State to think about that because the Bill is a phenomenal piece of work and my colleague has put so much work into it. I encourage Members here today support the proposal for a six-month rather than a 12-month deferral.
The Minister of State is very welcome to the House. I commend Senator Alice Mary Higgins on what is very prudent legislation. For too long procurement has been price driven. The rule of thumb is 15% in terms of quality and 85% in terms of price but that is not reflective of a modern world where we want and deserve quality. I refer to one of the well known examples that is in the public domain, namely, the children's hospital. If a different approach to the tendering was operated for the children's hospital there would have been a far different outcome. That is one example but there are hundreds of examples that we are all aware of where contracts were awarded to outfits that should not have had those contracts awarded. There have been schools which turned out to have defects and the quality was questionable, to say the least, so the need for this legislation is urgent. We need to get it right but I am not quite convinced that a 12-month deferral was necessary but I bow to the Minister of State's better judgment on that.He is starting into a very interesting brief. If he believes that in 12 months' time we will get it right, I will take his word on that, but I would like to be back in 12 months' time when we have got it right. The are many examples of where we have not got it right.
I also want to talk about the phenomenal number of cost overruns that have taken place on projects over the past 20 or 30 years. The only projects that have come in on time and under budget have been motorway projects. Practically all other projects have gone over budget because they were awarded to the cheapest tender, which was not always necessarily the best. In many cases the quantity surveyor, QS, work did not identify issues that emerged. Who ends up paying at the end of the day? It is the taxpayer, the people of Ireland. That would not happen if we had a different approach to procurement.
Senator Seery Kearney spoke about the guidelines that were introduced in 2019. Considerable work went into those guidelines and they are by and large a good set of guidelines. While this debate is necessary, action is critical. I sincerely hope we can address this because ultimately it will save money. Ultimately, there is a better chance at least we will be able to stand over the quality of the work that will eventually be done.
I would like to know what happens internationally because we seem to get it so wrong so often, yet in other countries they do not get it as wrong. It cannot be rocket science. In the upcoming 12-month period, the Minister of State might investigate what is happening internationally and see if we can learn from it. Senator Higgins always comes up with Private Members' Bills that are very thoughtful and very responsive to societal need and I commend her on this one. I sincerely hope the Minister of State will engage with her. She had similar legislation in the previous Seanad. I have no doubt what is before us now is a much-improved version of that. If the Minister of State can engage with her, I am sure what will emerge as the end product will save money for Ireland and will improve the quality of public works for decades to come.
I command my NUI Seanad colleague, Senator Higgins, on introducing the Bill which I support. I welcome the Minister of State.
We have a serious problem with value for money in this country. It arises in part because of the quick-fix nature of Irish politics and public administration and the constant desire to seek out easy answers to difficult problems, often for electoral reasons. Flowing from this is the notion that when it comes to public procurement, the cheapest option would have surely delivered the best value for money. However, we have learned from bitter experience that is rarely the case. Anyone running a household knows the lowest priced goods or services are rarely those of best quality or indeed the best option for their circumstances and needs. Even households that are struggling to make ends meet will sometimes need to strike a balance by paying a higher price for improved quality for a product which might last longer, ensuring better value in the long run. Surely the same ought to apply to public procurement and public projects involving the spending of taxpayers' money.
The practice of lowest price tendering has often led to contractors undercutting each other, deliberately, but perhaps understandably, presenting unrealistic costings of projects to secure a deal. In some cases, it has led to contractors and developers collapsing because the project could not be completed based on original unrealistic projections. Quality and reliability are rarely properly considered. Once contracts are signed, the reality is the taxpayer assumes all the risk because the State often cannot allow key projects to fail. It is too late at that point to go back to the drawing board to review contracts or to address any deficits in the plans.Ultimately, this may lead to the State having to throw good money after bad to bail out failed contracts or failing projects. Ultimately, choosing the lowest price contract ends up costing the taxpayer much more. Surely we should be looking at this as a prudent householder would. Instead of choosing the lowest price, we should choose the best value price. I suspect that Senator Higgins would not be Margaret Thatcher's greatest fan but Mrs. Thatcher's obsession with value for money was brought home to me when my sister gave me the first volume of Charles Moore's excellent biography of Thatcher for Christmas. Reading it, I discovered that Mrs. Thatcher passed her driving test before managing to take two lessons that she had already paid for. Having passed her driving test, she took the two lessons anyway, which Moore described as an almost inhuman thirst to get value for money. Others would say it was because she still had not mastered the U-turn, as she never did.
I am proud to be accused of finally saying something gendered. I had wondered for so long what that actually means.
Some €11 billion per annum is spent by the State on public procurement, which is 13% of our entire public spending. This shows the vast amount of money at stake here and how much there is to be misspent. It also shows the purchasing clout of the State and what should be an ability to demand the best value for money. We are all too aware of situations where seeking the lowest price rather than the best price has led to poor outcomes for the State and its people. Senator Higgins's briefing note on the Bill mentioned the CervicalCheck scandal where low cost was a priority, leading directly to misdiagnoses of scores of women and in so many cases to sadness and justified indignation. The Senator's point was a welcome reminder and an astute illustration of the problem.
I have raised the issue of the national children's hospital many times in recent years. Clearly, the tender accepted for that project was unrealistically low and this has led to endless increases in costs. A project that was tendered at €432 million in 2017 was valued at €1 billion in 2019. When push comes to shove it will probably exceed €2 billion by the time it is finished. One must wonder, genuinely, how this was possible. Clearly, the factors included woefully inadequate oversight at a political and Civil Service level within the Department of Health and a hands-off attitude by the former Minister for Health, Deputy Harris. Inadequate and unrealistic estimates were clearly made at the tendering stage. Was achieving a lowest price a factor in this? I think perhaps it was.
My reading of the Bill is that it would introduce a greater concept of what is referred to as best value pricing, BVP. I understand this was originally an American concept but that it has spread to Europe. In the Netherlands it is known as prestatie-inkoop- I have probably pronounced that terribly - which means performance-based procurement. We should support the adoption of this practice in Ireland.
The Bill also binds the State to ensuring its obligations under the European Convention on Human Rights are factored into public procurement. This, surely, should be uncontroversial. The Bill introduces concepts of social considerations into procurement. I would be interested to hear more about what kinds of social considerations might be taken into account here and what these would look like in practice. I often wonder whether large construction projects, for example, the renovation and redevelopment of 1950s council housing in Dublin city, employ many people from the communities where the developments take place? There have been huge developments in the Dublin docklands and Grand Canal area in the past decade, most of which were in the private sector admittedly. I get the impression that despite relatively high unemployment in these areas, very few local people were employed in the construction of these office buildings or indeed in the multinational business that later occupied them. Perhaps this is also the case in publicly-funded projects. Whether this issue could be taken into account under the heading of social consideration seems to be well worth considering.
I thank the Acting Chairperson for the latitude shown during my contribution.
Before we return to the Minister of State, I thank Senator Higgins for bringing the Bill to the House today. My daughter in the UK runs a public procurement platform for social enterprises. I am pleased, therefore, that section 6 deals with social enterprises and social inclusion.
I thank Senator Higgins for her detailed engagement with me and my office over recent months on this legislation. I also thank all Senators here today. I found that the contributions were instructive, thoughtful and constructive, and I am delighted to see a consensus emerging across all parties.
I will explain the reasons the Government has tabled a time-limited amendment of 12 months to allow for comprehensive consideration of the implications of the Bill. Strategic spending should play a key role in responding to societal, environmental and economic challenges. Sustainable procurement practices with a continued focus on qualitative criteria in line with the national procurement guidelines represents the future of public procurement in Ireland. The Government has set out a number of commitments in the programme for Government in relation to public procurement, including evaluating and managing the environmental, economic and social impacts of procurement strategies in the State. The intentions behind this Bill are well considered. The practical implications require comprehensive consideration, particularly the ability of the State to seek value for money, the potential impact on businesses and the legal implications for Ireland with respect to EU public procurement directives.
The proposed legislation goes beyond the minimum obligations under the procurement regulations. The Bill would add an overhead of additional procedures to the sourcing of vital goods and services. It is my duty as Minister of State responsible for public procurement to accurately weigh up the costs of this additional administration against the probable benefits. I will not prejudge this exercise. The national public procurement policy framework provides the framework to allow more sustainable and better public procurement practices and significant work has already been undertaken by the Office of Government Procurement, OGP, in this regard. The implications of this Bill need to be thoroughly thought through. Previous generations of EU directives were criticised for their lack of flexibility. The 2014 directives, transposed into the 2016 regulations, afforded flexibility to public buyers to obtain procurement that fits their individual needs. Government policy has not changed in this regard. The aim and the challenge is to leverage public procurement to achieve wider societal benefits while retaining the flexibility afforded by the regulations.
The method by which we deliver change must also be fully considered. While it is essential that the State achieve quality outcomes for citizens through public procurement, I wish to point out that the reform of the public procurement function remains driven by the need to obtain value for public money in procuring goods, services and works. It is essential that value for money is not adversely affected by the inclusion of overly prescriptive quality-price balance requirements and administrative and reporting procedures. I know that is not the intention of Senator Higgins's Bill.
The OGP has been actively engaged and proactive on environmental and social issues. It published its circular 20 of 2019 promoting the use of environmental and social considerations in public procurement in October 2019. The circular highlights the potential for Departments to deliver wider social and environmental aims through public procurement, including in relation to employment and training opportunities for disadvantaged groups, disability access, promoting social inclusion and social enterprises. This circular was the latest in a series of measures following publication of the information note on incorporating social considerations into public procurement in December 2018. That information note assists policymakers and practitioners in understanding how public procurement can be used to facilitate the advancement of existing social policy objectives as well as the wider context and implications of including them in particular public procurement projects.
The OGP has also established the cross-departmental strategic procurement advisory group, bringing together officials from policy Departments with procurement practitioners to share best practices and to facilitate the process of incorporating social and environmental considerations into public procurement. These developments promote and facilitate the inclusion of social considerations in a structured manner and are aimed at helping policymakers and procurement practitioners to understand how procurement can be used to support advancement of existing social policy, the wider context and implications of including them in procurement projects.
By way of context, I will outline the significant successes in the area of public procurement that have been achieved so far. In particular, I highlight circular 10/14, an administrative means of implementing Government policy that has had a significant impact on facilitating SME participation in public procurement. I recently chaired a meeting of the SME advisory group where industry representatives complimented the impact that circular 10/14 has had on facilitating and promoting the participation of SMEs in public procurement.That circular, which was developed in consultation with SME representative bodies, sets out a number of measures that contracting authorities should implement to assist SMEs in competing for public contracts. Major successes included improved market analysis to understand the specific capabilities of SMEs; the subdivision of contracts to facilitate access of SMEs; encouragement to SMEs to avail of consortium bidding; more use of open rather than restricted tendering; the use of proportionate capacity, turnover and insurance requirements; and a requirement for public bodies to advertise contracts for goods and services valued above €25,000 and work-related services worth above €50,000 on e-tenders.
The circular also recommends that the buyer, where appropriate, take into account not just the current but also the whole life cycle costs. The term "where appropriate" is key. The circular recognises that public buyers need to retain an element of flexibility to make decisions at the coalface. It is this flexibility that this Bill will have the consequence of limiting. The feedback from the SME advisory group is that Circular 10/14 had a tangible and immediate impact of removing the primary barriers to SME participation in public procurement. Improving access for SMEs to public procurement opportunities, which was achieved without the need for legislation, remains a priority. The Government and the OGP continue to work with industry and public buyers to enhance our suite of support measures through non-administrative means. I will liaise with my officials in the OGP and will engage with SME representatives further in this regard.
The Environmental Protection Agency will shortly publish guidance on green procurement. This will focus on a number of sectors. It updates its previously published green procurement guidelines from 2014. I am looking forward to reading those.
I will take the opportunity to discuss the merits of some proposals in the Bill and those proposals which the Government has concerns with, which we think need further work. The European directives give member states discretion in specific circumstances not to use price or cost only as the sole award criterion. This provision was not transposed into the national regulations to avail of and support a degree of flexibility in tendering procedures for contracting authorities. Accordingly, it remains open to contracting authorities to decide themselves as to which categorisation of award criteria best supports the effectiveness of their tendering process in pursuance value for money in public contracts.
The directives allow member states to prevent the use of price-only or cost-only criteria where particular national agencies or market conditions would require or merit such a provision. A consultation taken in advance of the public procurement directives did not identify any significant demand within the public procurement community, including from economic operators, to apply such a restriction. Additionally, in 2018, the European Commission found that the majority of member states opted not to transpose this provision, in line with the approach which was adopted in Ireland. Of the remaining states, the prohibition was limited to specific categories of public bodies or contract types. There are many stages before award criteria in the procurement processes where contracting authorities may gauge the merit of a tender on characteristics other than price. In the case of generic or commonly-acquired goods or services, this reasonably leaves the contracting authority in a position to decide to award based on price in cases where all other conditions provided for in earlier stages of the process have been met.
The provisions in section 3(4)(b) and 3(4)(c), prohibiting the use of price criteria accounting for greater than 50% of the criteria for contracts above the European threshold for works may be inconsistent with the provisions of the directives. This provision could increase the administrative burden on suppliers to satisfy the responses to qualitative criteria. It also introduces a quality weighting that might be disproportionate to the added value that the tendering field can bring to the contract. For example, in the case of a construction project that is comprehensively defined, with high performance standards already set as a minimum requirement, so I will seek legal advice on this issue.
Since an extension of the procurement provisions in national regulations could require consultation with the European Commission to assess whether such national provisions are consistent with the directives. The potential impact of this Bill on the remedies regulation will also require consideration by the Office of the Attorney General.
The medium-term strategy for the procurement of public works projects includes a review of the capital works management framework. This review involves, among other things, consideration and consultation on the creation of a best price:quality ratio in the awarded contracts. The outcome of the review process should be known before considering any prescriptive legislation in the area. The proposal to require an Accounting Officer or chief executive officer to make a declaration on every procurement procedure where price is the only award criterion has a cost in time and money. We would need to ensure that it does not delay the award of contracts. Any potential impact of this Bill on the remedies regulation will be considered by the Office of the Attorney General.There are over 7,000 contracting authorities in Ireland, as several Senators have mentioned, including schools, health agencies and so on. Having up to 7,000 contracting authorities reporting to the Houses of the Oireachtas each year at the scale outlined in section 7(2)(a)to (f)would have an administrative cost. This cost would need to be weighed up against the possible benefits and whether alternative methods of achieving the same goals could be deployed.
The Bill requires the Minister to issue guidelines concerning qualitative, environmental, social, human rights and equality considerations that may arise in contracts governed by the public authority contracts regulation. The necessity of this proposal will have to be assessed in view of the fact that guidance in this area is progressing without the need for legislation in line with the programme for Government commitment to evaluate and manage the environmental, economic and social impacts of procurement strategies within the State.
As part of the national procurement policy framework, the Office of Government Procurement has developed the national procurement guidelines, which are intended as a toolkit for public buyers and a reference guide for economic operators. The guidelines will be updated to give further prominence to strategic procurement that includes environmental and social considerations.
The Government considers that this Bill may require a money message. The Bill, which deals with the fundamental aspects of how the State procures, has not undergone a regulatory impact assessment yet. It places an additional administrative overhead on contracting authorities.
The Government appreciates the intention behind the Bill. However, it is important to take the time to ensure that the legislation is workable and sound, and that procurement policies in the programme for Government are included where appropriate. Accordingly, the Government has tabled a time-limited amendment for 12 months to allow sufficient time for legal advice to be provided by the Office of the Attorney General and for full financial consideration of the implications of the Bill to be considered. I thank Senators and I thank Senator Higgins in particular for all her detailed work on the Bill.
I formally second the amendment. While I am glad to see the Government supporting the Bill passing Second Stage, I would rather that it would be deemed to have passed after six months rather than one year. That is important because, as we have heard, the decisions are going to be made in respect of that €116 billion in the next two to three years. I do not want us to have spent €50 billion and then come back and say that we should have done it better. In terms of time, I have engaged on this issue since 2014. I have engaged with Office of Government Procurement officials since that time. We engaged very intensively in the last period with the Department, officials and with the Attorney General. Any feedback from that engagement has been incorporated into the streamlined Bill and I am most confident that it is excellently reflective of the law. I would like to pay tribute to the Office of Parliamentary Legal Advisers, which has done tremendous work, and David Dodd, Ciaran Mooney and Kate Bulter in particular, who did drafting and work on both the previous legislation and this new refined legislation. I also thank Dr. Deirdre Halloran and other academics who have contributed to this work.
There has been wide engagement and there is an appetite for this Bill. I have spoken to unions, including Fórsa and the public service unions, the Royal Institute of Architects, service providers, small firms and IBEC. There is a wide understanding of the need for a shift towards a stronger quality focus. Even one of the former chairs of the Construction Industry Federation described lowest-cost bidding as a plague on the industry. Therefore, we must be very clear that there is a strong momentum and desire for action on this issue. That is why I want us to move forward and I am seconding the motion that we should return to this legislation in six months. I thank the Minister of State for indicating that if the Bill does come back to the House in six months or one year, Government time will be given to it. That is welcome.
In the small bit of time remaining, I want to address some of the many very interesting points and questions that were raised and to perhaps provide some clarification. There is no prohibition in this Bill; discretion remains. There is greater accountability. This goes to Senator Murphy's question on whether the system will be onerous. It will not be. There will be accountability. If procuring authorities go with price quality, they do not need to approach any senior accountable officer. The Bill is designed directly to encourage this. A question was asked as to whether the legislation will make it harder for procuring authorities to basically go with price only. It will. The Bill absolutely respects the discretion that authorities have to do this, but it does make it something that must be considered further.I would not make apologies for that. That is one of the key reasons this Bill will work. It is important we encourage and reward best practice. The Office of Government Procurement, OGP, guidelines have been mentioned extensively and they are good. I engaged extensively with the OGP and recognise some of the language from my previous engagement in the last Oireachtas in those guidelines and I am aware that this is an area in which there is movement. Those guidelines are fine and good but there needs to be more and the State cannot outsource its political and policy responsibility to show and send that key signal that it wants bodies to think about quality, and not just hopes that some bodies will happen to take up best practice. That is what the message is from this Bill. It is important in that regard that we send that signal through this legislation to all of the procurement officials and to the contracting authorities, that it is almost an imprimaturto think about quality.
It also sends a very strong message to small and medium-sized businesses and to others to say that we value and that we will recognise and reward leading standards, best practice, innovation and new ideas. It encourages an ecosystem of better environmental sustainability and, indeed, social and employment standards right across the board. For small businesses, which I believe were mentioned, that is a significant concern.
Of course, this is EU-wide and we need to look at it in that way, but this Bill will help in three ways. When one talks about quality, it will work against bundling of the very large contract based on one big figure. It will support less bundling and it will give a competitive advantage to companies which are doing very good and important things and doing them well. It will give them a competitive advantage that they could not have simply in terms of scale and also the financial piece very large companies have. It also encourages good quality supply chains. This is going to have a knock-on effect where those who win contracts will also think about their supply chain, which may also be SMEs themselves. That is why it is very important and takes us forward.
We always say we know a contract runs over, but it does not need to run over. We do not need to have millions of euro in supplementary claims. That is not normal or standard and in other countries, like the Netherlands where there are these policies, that does not happen. We can do more and are not restricted but are empowered by those EU directives. This should be a positive opportunity.
I hope the Minister of State will support the six-month amendment and I look forward to further engagement on this, on green procurement and on other employment issues because this is one part of the wider picture of transformative public procurement.