The Regulation of Tenders Bill (2021), brought forward by Sinn Féin TDs Mairéad Farrell and Patricia Ryan, will today reach second stage in the Dáil.
The aim of the Bill is to provide greater regulation of publicly procured capital works, by preventing ‘low ball’ offers for construction contracts which can lead to cost overruns, and provide new grounds for exclusion for contractors, who have shown consistent deficiencies in the carrying out of prior public contracts.
According the Office of Government Procurement’s most recent Spend and Tendering analysis (2018), capital works are the largest component of public procurement spending coming in at over €5 billion.
However, one problem in getting value for money for taxpayers is the issue of cost overruns arising from abnormally low tender bids (low ball offers). This occurs when a supplier make a very low offer in order to win the contract, but then incurs additional costs due to the unrealistically low offer, which are passed onto the taxpayer.
Teachta Farrell said:
“We have known for years that Ireland has lagged behind our EU peers in terms of capital expenditure, which has left us with a major infrastructural deficit.
“With capital expenditure set to increase over the coming years as a result of the revised National Development Plan (NDP), it is imperative that as taxpayers we get good value for money.
“We have seen with the likes of the Children’s Hospital and the National Broadband plan, that massive cost overruns of 500% respectively, end up being borne by the taxpayer.
“Our Bill is designed to tackle cost overruns which arise from ‘low ball’ type offers. It establishes that in the event of an abnormally low bid for construction work (15% below the average), if that low level cannot be adequately explained to the public contracting authority, then this is grounds for exclusion from participation in a procurement procedure.
“In other words, if a supplier makes a surprisingly low bid for a contract relative to the average of the other competitors, if they are claiming that they can complete the project at significantly lower cost that their rivals, then that tenderer must explain to the contracting authority how this is achievable.
“If the contracting authority has not received a reasonable explanation for the abnormally low price submitted, then the tender price should be rejected, and the tenderer disqualified from the process.
“It would also allow for deficient performance in previous contracts to be grounds for exclusion for future competitions.
“If we are serious about getting value for money from the various projects outlined in the National Development Plan, then there needs to be greater regulation of public procurement spending on capital projects. This Bill is a first step on the road to better value from capital expenditure.”