Terence Flanagan (Dublin North East, Fine Gael)
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To ask the Minister for Public Expenditure and Reform if the pre-qualification criteria for procuring public sector work should contain a solvency statement with a double lock mechanism, for example, that the solvency statement should be signed by the contractor, owner, their solicitor and their accountant; and if he will make a statement on the matter. [6871/13]

Brendan Howlin (Wexford, Labour)
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Public procurement procedures require applicants to meet certain standards when applying for public contracts. In qualifying for inclusion in tender competitions for public works contracts, applicants must submit signed declarations stating that none of the circumstances outlined in Regulation 53 of SI 329 of 2006 European Communities (Award of Public Contracts) Regulations 2006 or Article 45 and 51 of 2004/18/EC, the EU Directive on the co-ordination of procedures for the award of public works contracts, public supply contracts and public service contracts apply.

The list of exclusions in Article 45 and Regulation 53 are divided into two categories, the first deals with mandatory exclusions and the second deals with discretionary exclusions. An applicant may be excluded from a procurement process if:

- they are bankrupt or their affairs are being wound up;

- they are subject to proceedings leading to a declaration of bankruptcy or;

- they have defaulted in payment of taxes or social insurance contributions.

However they must be given an opportunity to establish whether there are mitigating circumstances. The Contracting Authority must investigate the event thoroughly before a decision is taken on the course of action to take.

In a public works tender, applicants are obliged to submit a signed declaration on oath which must be sworn in the last 12 months. This must be witnessed by a practising solicitor or Commissioner for Oaths and should be accompanied with a signed confirmation that the applicant’s legal situation has not changed in any way which would prohibit the applicant from making a new declaration on oath on the same basis since the declaration was made and signed. Applicants from Ireland and the UK must provide a declaration on oath. In countries where a declaration on oath does not exist, the applicant can instead make a solemn declaration in their country of origin or in the country whence the applicant comes before a judicial or administrative authority, a notary or a competent professional or trade body.

Prior to the award of the works contract, the successful applicant is also required to produce a current Notification of Determination (formerly C2 certificate) from the Revenue Commissioners.

Terence Flanagan (Dublin North East, Fine Gael)
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To ask the Minister for Public Expenditure and Reform if it will be possible to reintroduce nominated supply packages within public and private sector contracts; and if he will make a statement on the matter. [6874/13]

Brendan Howlin (Wexford, Labour)
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The Government Departments and Local Authority (GDLA) form of contract, which preceded the Public Works Contracts, included a provision for the nomination of certain specialist sub-contractors and suppliers. In order to facilitate the nomination process, estimates were included in the tender documents for the main contractor to cover the works packages to be undertaken by the specialist sub-contractor or supplies in the case of the specialist supplier. These estimates, known as Prime Cost or PC Sums, were based upon a quotation for the works or supply concerned or upon typical rates for the work or supply already known to the design team. Separate tenders for these specialist works or supplies packages were undertaken and, based upon the outcome of the tender, the successful sub-contractor or supplier was ‘nominated’ to the already appointed main contractor by way of an instruction from the Architect named in the contract. That instruction included direction to the main contractor to expend the PC Sum and provision was made for an adjustment to the contract sum depending on whether the tender for the particular package was greater or less than the PC Sum.

One of the key requirements of the Government’s Construction Procurement Reform Initiative is to ensure greater cost certainty at contract award stage and in order to meet this requirement it was decided to dispense with the nomination of specialist sub-contractors and suppliers because the final contract sum could not be established until well after the main contractor was appointed. This places the onus on the appointed design team to ensure that reasonably detailed information is supplied as part of the tender documents to ensure that the tenders received reflect the quality of installation required.

Contracting authorities may ensure that quality specialist sub-contractors are employed on public works contracts by requiring such specialists to pre-qualify with the main contractor. This is achieved by naming particular specialist works areas in the pre-qualification documents. The main contractor must name one specialist in their Form of Tender for each of the specialist works areas defined by the contracting authority.

Terence Flanagan (Dublin North East, Fine Gael)
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To ask the Minister for Public Expenditure and Reform if it will be possible to introduce a payment bond that would protect the supply chain of any construction contracts; and if he will make a statement on the matter. [6875/13]

Brendan Howlin (Wexford, Labour)
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The issue of payment bonds to provide protection to the supply chain under a construction contract was examined during the consultation and Regulatory Impact Assessment (RIA) of the Construction Contracts Bill.

The RIA found that requiring contractors to purchase bonds would reduce competition in the sector as such financial products are not widely available in the current market and the costs associated with purchasing them would be a barrier to entry for smaller contractors. Therefore the provisions necessary to provide security of payment would increase the regulatory burden and costs associated with contracts between clients, contractors, subcontractors and the final consumer.

Whilst it will not cut across the normal rules for company liquidation/receivership or Prompt Payment regulations, the Construction Contracts Bill includes two key provisions that will reduce the exposure of subcontractors to non-payment in the event of a business failure.

- A requirement for all construction contracts to include a payment schedule. In the event that a contract fails to provide a payment schedule then the terms set out in the Schedule to the Bill will apply.

- Pay when paid clauses will no longer be permitted meaning that sub-contractors are no longer dependent on the main contractor receiving payment before they in turn receive their own payment.

Therefore in the event of a sub-contractor failing to receive payment in the terms set out in the contract they will have the right to suspend work and, if the payment is disputed, to seek the matter to be resolved through adjudication.

Terence Flanagan (Dublin North East, Fine Gael)
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To ask the Minister for Public Expenditure and Reform if there is a requirement for more forensic examination of the financial affairs of potential participants in Government sponsored projects (details supplied); and if he will make a statement on the matter. [6876/13]

Brendan Howlin (Wexford, Labour)
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The assessment of a tenderer’s financial and economic standing is a key part of any procurement process because tenderers must have the necessary capacity to carry out a contract. Establishing the appropriate suitability criteria that are relevant and appropriate to a particular contract is, of course, a matter for the contracting authority concerned. This is because the contracting authority is in the best position to gauge the appropriate levels of financial capacity that are appropriate to the needs of that specific contract.

My Department has developed specific national guidelines for contracting authorities in relation to minimum standards for suitability criteria for construction contractors interested in tendering for public works projects (GN 2.3.1.3 Suitability Criteria for Works Contractors – Minimum Standards), published as part of the Capital Works Management Framework, which is available at www.constructionprocurement.gov.ie. In relation to pre-qualification criteria, the guidelines stress that public bodies must ensure that any criteria levels set by them must be both justifiable and proportionate to the needs of the contract.

The level of reliable information available to contracting authorities is limited below the point where audited accounts are required to be submitted to the Companies Registration Office, currently this is only required for companies with a turnover in excess of €7.3 million. However specific guidance on the financial appraisal of works contractors is currently being developed by my Department and will be available at www.constructionprocurement.gov.ie when finalised. The document is intended to provide advice to Contracting Authorities to ensure that appropriate information is sought from contractors who apply to take part in a competition for the award of a public works contract in order to assess their financial and economic standing. The guidance will deal predominantly with the threat posed to a Contracting Authority by the insolvency of the main contractor and suggests the steps to be taken to manage the risk through appropriate measures taken in the procurement stage.

Guidance already exists in GN 1.5 Public Works Contracts (Section 2.3 Bonds and Guarantees) on the steps that contracting authorities should take to minimise the risk to the taxpayer in the event of insolvency and is available at the same website.