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Alice-Mary Higgins: The 'low-ball' public procurement model is broken and needs reform

The senator has proposed new legislation to rebalance the process.

Alice Mary Higgins

IN 2019, IRELAND spent €12 billion on contracts for goods, services and construction. This figure is set to rise considerably in the coming years as €116 billion in major capital works projects are rolled out under the National Development Plan.

The public has a right to expect that when money is spent on their behalf, it is spent in a way that delivers the best results. That requires a carefully thought-through approach to the quality of standards and performance in areas like sustainability, social impact, decent employment and design.

This week I am introducing a Bill in the Seanad that will place quality at the centre of the procurement process.

Price-only

When awarding contracts, Departments and Public Authorities can choose to use a ‘price only’ approach, where the contract automatically goes to the lowest valid bidder, or they can use a ‘price: quality ratio approach’ where the decision will be based on both price and quality.

My ‘Quality in Public Procurement Bill’ will make price-quality ratio the default approach, either on its own or combined with life-cycle costing.

If Authorities do choose to award a significant contract based on ‘price only’ they will be required to publish an explanation from a senior official, in order to ensure future accountability.

The CervicalCheck contract, for example, was based on ‘price-only’. It shows that it is not enough to respond to each new scandal, we need to get better at preventing them by reforming the system itself.

The case for reform has been acknowledged in the 2014 ‘Review of the Performance of the Public Works Contract Report’ which recommended that all projects over €2 million should have a significant weighting for quality to obtain better results and deter unsustainable pricing.

When unrealistically ‘low-ball’ bids are allowed to win contracts, it is often the beginning of long-drawn-out difficulties and negotiations around supplementary claims and delivery dates.

The tender for the National Children’s Hospital had a weighting of 75% for price and 25% for quality and the project was awarded to the lowest bidder. It is now running over schedule and about €1 billion over budget, with €300 million in additional ‘contractor claims’.

When it comes to this kind of major national infrastructure, we really cannot afford to be getting it wrong. That is why my Bill sets a minimum target of 50% quality weighting for contracts on public works over €5.35 million.

A more considered process

The practical measures in this Bill are largely based on legislation that has already been operating very successfully in the Netherlands since 2016. Evaluation of that law, by the Dutch Economic Institute of Construction, found that the use of price-quality ratio led to offers that better meet the needs of clients in an efficient way, often with little or no additional financial cost.

Over 70% of contracts in the Netherlands were still won by contractors with a lower bid, but only if they had also proven themselves on quality.

Qualitative award criteria give contracting authorities more opportunity to recognise and reward those companies, including SMEs, who have a track record on delivery, best practice and high standards.

When the State, as one of the most powerful purchasers of goods and services, sends a signal that quality matters, that encourages and supports investment, ambition and innovation in areas like sustainability, environment, accessibility and design.

The Bill encourages and requires more thought and care from everyone in the procurement process. It also strengthens reporting and accountability. This includes a requirement to report on how Government Departments and Public Bodies are reflecting the ‘Public Duty on Equality and Human Rights’ in their procurement.

The Quality in Public Procurement Bill has been described as a game-changer. It offers practical measures which could radically improve procurement culture and contribute momentum to wider reform in areas like green procurement. I hope that all parties will show their commitment to reform by supporting the Bill when it is debated in the Seanad this Friday.

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In the end, it is important to remember that the public is not only the ultimate underwriters of all these contracts, we also collectively use and rely on those goods, services and infrastructure being purchased.

When corners are cut on procurement, that can have a very real, sometimes devastating, impact on individuals, families and communities. However, when we put thought and care into improving the quality of public goods, services and infrastructure, that can make a truly transformative and positive difference to all our daily lives.

Alice-Mary Higgins is an independent senator.

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Alice Mary Higgins

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