merrion street

Firstly I would like to thank Gina Quin (CEO of Dublin Chambers) for inviting me here today to launch this report "Promoting SME Participation in Public Contracts". I very much welcome the report as in many ways its recommendations act as a validation of the many initiatives undertaken by my Department, and in particular the National Procurement Service, over the last two years to ensure openness and equality of opportunity to all SMEs in accessing the public market.

Background

In Ireland public expenditure on capital works, goods and services is on a constant downward trajectory. From an estimated spend of €19 billion in 2008, to €16 billion (est.) in 2009, to €15 billion (est.) in 2010 and now to €14 billion (est.) in 2011.

Despite these recessionary times the public sector procurement market remains as a significant market for SMEs. The value of this market on the Island of Ireland is estimated at some €20 billion per annum. This represents approx 10% of GDP.

Given current budgetary restrictions however public procurement policy must, more than ever, ensure the optimal use of funds in order to foster growth and job creation. It is also important however that the public procurement market works effectively to deliver increased levels of value for money.

The Programme for Government has identified the role public procurement can play in becoming a tool to support innovation and to ensure access by small and medium sized businesses to the public service market. So improving our public procurement practices by removing obstacles and encouraging the involvement of SMEs is a key priority. We recognise that for some suppliers the concept of trading with the public service is alien and one masked in complexity and bureaucratic barriers. This perception alone can stop suppliers, particularly SMEs, from competing for potentially lucrative contracts at home and abroad. Since coming to office I have recognised the importance of the role that SMEs can play in public service procurement and I have consistently worked to break down barriers to their involvement in the process.

Just last week the Government appointed a new Chief Procurement Officer – Paul Quinn- to accelerate the change process in the area of procurement. Under the leadership of Paul a new National Procurement Office (NPO) will be established. This Office - for the first time ever – will bring together the various strands of procurement that had been previously operating in isolation – policy, operations, construction, ICT and compliance. This development represents a major leap forward for procurement in the public service.

In the past two years a number of significant steps have been taken to improve SMEs access to the public procurement market – Namely:

The National Procurement Service (NPS) recently established an industry collaborative working group - involving major business representative groups and the various public sector groupings. This Working Group has as its aim to identify the challenges for SMEs when transacting business with the public service and, most importantly, to come up with practical solutions to thesechallenges. Already advices have issued to both buyers and suppliers on various issues that have arisen. These advices fall within the following three broad categories, Market analysis, Costs of tendering and the use of the eTenders portal. I believe this Group will be invaluable as we relentlessly seek out better ways for us all to do business.

Transparency

Proportionality

Reduce administrative

The open encouragement of consortium building by tenderers

Encourage buyers to break contracts into lots where possible/practical – however suppliers must explore the possibility of forming consortium to bid for the larger contracts.

Use, where possible, of standard documentation to assist suppliers.

My launch of a new Suite of Procurement documentation in June 2011 has considerably reduced the administrative burden on both suppliers and buyers. These have helped create certainty in the marketplace and ensure a consistent approach by public sector bodies. These documents were the result of extensive work between the NPS, the Chief State Solicitors Office and the Office of the Attorney General. I am pleased to say that a further extension of this suite will be launched by me very shortlythat will make it easier for buyers and suppliers to create framework agreements and thus enter into contracts more quickly.

EU Directives have placed a heightened emphasise on the need to be procedurally accurate and legally compliant. Under Ireland’s Presidency of the EU however, negotiations are at an advanced stage to amend the current directives in a variety of areas. The reform proposals contain measures specifically designed to improve access for SMEs. These measures include:

a general simplification of information requirements, so that self-declarations will have to be accepted at the preliminary stage of the procurement procedure;

online access by contracting authorities to relevant documents confirming that an economic operator meets selection criteria;

contracting authorities being encouraged to divide contracts above certain values into "lots"; and

a limitation on requirements for participation, to avoid unjustified barriers to SMEs. In particular, except in justified cases, it is proposed that turnover requirements be explicitly limited to three times the estimated contract value.

These measures, which have been designed to cut red tape in the procurement process, can promote SME involvement and significantly reduce the administrative burden arising from participation in a tender process.

The proposals will also allow contracting authorities to work towards achieving wider social and environmentalobjectives in the procurement process. The ability to include social considerations in the evaluation process, where social criteria could for example refer to the employment of long-term job seekers, can help with the delivery of labour activation initiatives.

The inclusion of specific sanctions to deal with situations where tenderers are not compliant with social, labour and environmental law can assist greatly with ensuring that suppliers comply with their obligations in these areas. The construction sector is one area that I would encourage the use of social clauses to facilitate the employment of long-term job seekers.

In recognition of the need to work more closely with suppliers the NPS, in collaboration with Intertrade Ireland hosted three very successful "Meet the Buyer" events in 2012, in Athlone, Cookstown and Kilkenny. Over 1650 suppliers attended these events where they met over 35 major buying organising from across the island of Ireland. They could learn how to improve their chances in tendering, find out the latest procurement news and trends, and how to form consortium. It also enabled businesses network with other companies to form joint ventures and identify sub-contracting opportunities. It is proposed to hosting further, major Meet the Buyer events in 2013.

The recent launch of new eTenders website

A lot has been done to improve SME access to the lucrative public procurement market, such as the aforementioned Dept Finance Circular 10/10, which addresses most of the recommendations of this report, however the challenge now is to ensure its full implementation. Guidelines have been issued emphasising the need for proportionality with regard to qualification criteria. The NPS is committed to upskilling our public sector buyers so that all those involved have the necessary skills to interact effectively with emerging markets, are compliant while at the same time achieve value for money for the taxpayer.

Despite what some may think, Irish SMEs have done extremely well when competing for centralised contracts and frameworks. 77%of NPS contracts/frameworks are held by SMEs. For example, the contract for Managed Print Services, 4 of the 7 places on the framework are held by Irish SMEs. All actual contracts placed to date have been won by Irish SMEs.

However this Government is under pressure to achieve increased value for money from the marketplace, the public service needs to realise real and immediate efficiencies in public procurement that will result in verifiable savings to the exchequer. Savings in excess of €35 million have already accrued to the public service from a number of initiatives to date.

Recently I embarked on a major round of discussions with the top 50 suppliers to the Irish Public Service. My message to these significant players was very clear – the Irish Government and the Irish taxpayer expects to receive optimum value when dealing with major suppliers to the public service. No longer is it acceptable that a supplier gives one price to one public body and a vastly inflated price to another for the same goods.

I am pleased to report very good engagement by suppliers to these discussions which revealed savings from various procurement initiatives amounting to some €41 million.

Procurement officials need to continuously seek ways to act in a more collaborative manner. However this drive for cost efficiencies will be balanced with an ongoing focus on supporting SMEs access public procurement opportunities and encouraging innovation.

Finally I again would like to thank Gina Quin and Dublin Cambers for the invitation here today.

I welcome this report and I will continue to ensure that the drive for cost efficiencies in public procurement will be balanced with a continued focus on supporting SME access the market and also encourage innovation.

Thank you all for attending this launch and may I wish you the very best in your business dealings into the future.