Jack Chambers (Dublin West, Fianna Fail)
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486. To ask the Minister for Public Expenditure and Reform the reasoning behind the rule which states that construction companies can only apply for Government tendered projects where that company’s average turnover for the three previous years is equal to or greater than the value of the project the company is tendering for; if his attention has been drawn to the fact this is resulting in many smaller firms which would be in a position to tender for such jobs not being able to; and if he will make a statement on the matter. [26573/16]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Government recognises the importance of the SME Sector and continues to develop measures to support SMEs in accessing the public procurement market.  My colleague, Minister of State Eoghan Murphy, chairs the SME Advisory Group so that the voice of Irish SMEs can be heard by Government.  Circular 10/14: Initiatives to assist SMEs in Public Procurement, sets out guidelines to promote the setting of relevant and proportionate financial capacity, turnover and insurance levels for tendering firms and the sub-dividing larger contracts into lots, where possible, to enable SMEs to bid for these opportunities. The guidelines also encourage SMEs to register onwww.etenders.gov.ieto ensure maximum exposure to tendering opportunities.

Public works contracts must be awarded on the basis of objective and non-discriminatory criteria.  Different criteria are applied at the pre-qualification stage to those at the award stage with pre-qualification criteria designed to assess the capacity of applicants and tenderers to deliver the project in question.  Their capacity is typically assessed by criteria set out under the EU procurement directives and public works tenders usually include criteria such as economic and financial standing and technical ability, among others.

The Capital Works Management Framework (CWMF) contains an integrated set of contractual provisions, guidance material, technical templates and procedures which cover all aspects of the delivery process of a public works project from inception to final project delivery and review.  The CWMF is an online resource which can be accessed on the Construction Procurement website at:.Bodies procuring public works projects must comply with the provisions of the CWMF.

The Deputy will appreciate that the assessment of a tenderer's financial and economic standing is a key part of any procurement process because the contracting authority must be reasonably satisfied that a contractor will 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; published as part of the CWMF (Guidance Note 2.3.1.3, Suitability Criteria for Works Contractors Minimum Standards refers. ).  This guidance note sets out standards under each of the criteria that may be used to assess a contractor's financial standing and technical ability.  In this regard, it is important to point out that there are no centrally imposed requirements for a minimum turnover. Such requirements would logically be developed on a case by case basis with reference to the specific needs of the contract.

The guidance was developed in consultation with industry at a point where the recession had commenced and took into account reduced capacity generally.  Turnover represents a reasonable indicator of the capacity of a contractor to deliver projects of a particular scale.

Construction projects require main contractors to manage a significant supply chain and where turnover is lower than recommended levels contracting authorities are entitled to have legitimate concerns over the capacity of a contractor to deliver the project in question.

Guidance Note GN 2.3.1.3 (page 11) states that for building projects turnover should be set within a range of 75 - 150% of the annualised turnover of the capital value of the contract.  For a straightforward building project of 2 years duration with a capital value of €4m the turnover sought can be as low as €1.5m.  For general civil engineering projects this is reduced to 30 - 60% but rises to 200 - 300% of the annualised turnover of the capital value for complex civil engineering rail projects.  The annualised turnover of the capital value of a project is the capital value divided by the number of years in which expenditure will occur.