Leo Varadkar (Dublin West, Fine Gael)
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Question 189: To ask the Minister for Finance the role the national public procurement operations unit has in negotiating contracts for telecommunications and energy services for Departments, Government agencies and public bodies; if consideration has been given to awarding a single contract to supply energy and telecommunications to all public bodies; and if he will make a statement on the matter. [41183/10]

Martin Mansergh (Tipperary South, Fianna Fail)
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The National Public Procurement Operations Unit has been renamed as the National Procurement Service (NPS) since early 2010, and has within its remit the organisation and procurement of goods and services commonly used across the public service.

Energy

Given the significant expenditure on energy across the public service, the NPS has targeted this category as one appropriate for particular market intervention. The energy market comprises of six sub-markets: Electricity; Natural Gas; Automotive fuel - through a procurement charge card; Bulk Liquid Fuels – Petrol, Diesel and Central Heating Oil; Liquid Petroleum Gas (LPG) – Bottled Gas; Solid Fuel. The NPS is involved in each one of these sub-markets, as follows:

Electricity and Natural Gas

The NPS has conducted a major consultation process involving all energy stakeholders including: the Commissioner for Energy Regulation (CER); Department of Communications, Energy and Natural Resources; energy providers; and public service clients. Due to the nature of the energy market, the need to encourage greater competition and the potential size of the public service demand, it was apparent that there was a distinct risk that a single public service contract would distort the market. The NPS concluded that the optimum procurement strategy for electricity and natural gas would, therefore, be through the use of multi party framework agreements.

The NPS conducted an EU competitive tender process, which has resulted in Electricity and Natural Gas framework agreements being put in place on 29 October 2010.These framework agreements cater for all public service sectors for a period up to four years. Mini-competitions will be held for sectoral requirements on an ongoing basis. The NPS has commenced this mini-competition process, with tenders being invited from the framework participants for the central government sector. This competition will embrace some 950 sites.

Automotive fuel

A contract for the supply of automotive fuel through a procurement charge card to the public service was put in place in May 2009, and will run for a three-year period.

Bulk Liquid Fuels and Liquid Petroleum Gas

The NPS inherited contracts for Bulk Liquid Fuels and Liquid Petroleum Gas from the Government Supplies Agency. These contracts accommodate central government departments only, and will be replaced in 2011 with framework agreements accommodating the broader public service.The framework agreements will operate with ongoing sectoral mini-competitions along the lines of the electricity and natural gas markets.

Solid Fuel

Traditionally, solid fuel has consisted of coal and turf, for which there is currently insufficient demand to warrant a centralised supply arrangement. As more environmentally friendly or 'Green' alternatives emerge, the need for new procurement arrangements will be considered.

Telecommunications

The Centre for Management and Organisation Development (CMOD) in the Department of Finance has responsibility for telecommunications and technology policies, procurements, and expenditure sanction. CMOD operates multi-vendor procurement frameworks, which have been established, following open EU procurement exercises, for mobile voice and data, and for fixed voice and Voice over IP (VoIP) services. Additionally, CMOD has standardised the procurement approaches to be used by all public bodies for fixed data services. These approaches have made procurement considerably easier for both the public bodies and the vendors concerned. Additionally, procurement and administrative cost savings in the range of 35-50% have been realised - actual savings are dependent on matters such as the size of the body, its geographic dispersal, user types, user volumes, call and data transfer types, etc. Accordingly, the Government has made it mandatory for public bodies to use these procurement mechanisms and standards for voice and data communications services. As a result of this approach, 16 different telecommunications service providers are connected to Government Networks, and competing to provide services to public bodies.

Such is the dependence on telecommunications and networking infrastructures that all public bodies now need to ensure resilient provision of telecommunications and data communications service provision. The Department is satisfied that no single telecommunications provider can provide the level of diversity needed. From 2002 - 2007, public bodies did procure most telecommunications services under a single contract that had been put in place on foot of an open EU procurement exercise. However, that approach did not yield the types of savings and the innovation of products and services that have accrued from the multi-vendor approach set out above. Furthermore, it is likely that a single contract approach would lead to considerable contraction in the telecommunications market, as only a small number of companies would be in a position to satisfy all requirements and the geographic spread of public bodies. There is no evidence to suggest that this would result in cheaper prices or greater efficiencies. The experience previously suggests the opposite.

Finally, as part of the Government's commitment to supporting Small and Medium Enterprises (SMEs), the Department issued a new Circular "10/10:Facilitating SME Participation in Public Procurement".This Circular requires all public bodies to award contracts in "lots", where this can be done without compromising efficiency and value for money, to be aware of the potential of SMEs as suppliers of innovative solutions, to include smaller businesses, where these could meet requirements or compete for particular lots, and to encourage joint bidding among SMEs and sub-contracting in the case of larger contracts.