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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.

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.

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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18 Comments
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    Mute This time its personable!
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    Mar 24th 2021, 7:11 AM

    Planning system and bureaucracy add 872m to every public project and 12 years in delays also. Cut down on those aspects which waste time, effort and budget and you’ll likely see even more efficiency. Oops, can’t use the E word in relation to public sector spending. It’s not as if anyone is ever held accountable for blowing the public’s money, it’s free isn’t it!

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    Mute Padraic O Sullivan
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    Mar 24th 2021, 7:12 AM

    How much is the Burj Bam Children’s hospital gonna cost us?
    600 million was the original costing so with delays the guessimate is 4 Billion. Bargain.

    84
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    Mute john s
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    Mar 24th 2021, 7:21 AM

    @Padraic O Sullivan: the lowest cost should always be the metric. This is a st3pid idea. In reality the specification of any project is key and as has been proven time and time again the public sector cannot do this. BAM priced what they were asked and turns out the public sector did not create the right spec.
    How about a law that sacks civil servants who make such big mistakes

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    Mute Padraic O Sullivan
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    Mar 24th 2021, 7:28 AM

    @john s: my price would have been 1 euro.
    Do I win the tender ?

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    Mute D. Memery
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    Mar 24th 2021, 7:29 AM

    @john s: whilst there maybe some debate as to implementing a cost:quality ratio methodology, how you you actually score the quality component? As it’s so subjective very high possibility of contract award ending up in court unless robust systems are in place to ensure transparency and fairness.
    If quality isn’t incorporated, at least adopting a lowest cost life-cycle cost approach, whilst possibly having higher initial cost, ultimately saves the taxpayer money throughout the lifespan of the product/service.

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    Mute john s
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    Mar 24th 2021, 8:22 AM

    @Padraic O Sullivan: yes as you will be signing a contract that has a list of goods and services. Using the hospital the tender will say do x y z if you under price you are on the hook. Just like the civil service under specified the hospital and now the state are on the hook.

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    Mute john s
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    Mar 24th 2021, 8:26 AM

    @D. Memery: i agree with quality lifespan etc but these should be incorporated in the tender with regards to specs for example. If the council put a tendernout for 100 3 bed houses the quality element would be the house rating which is standardised. So the cheapest bid wins and the house ratings are the quality element.
    Everything revolves around the initial tender documents which has to be done right.

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    Mute Mr Kayfabe
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    Mar 24th 2021, 11:39 AM

    @john s: hate to break it to you but wasn’t civil servants who priced and bought the hospital.

    It was private sector consultants ;)

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    Mute john s
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    Mar 24th 2021, 1:03 PM

    @Mr Kayfabe: no wrong again the civil service asked for a hospital design they may have indeed got a private company to do the work but they only did the work they were asked to do. And the civil service signed off on it. No private business has been brought to task on this as it will show quite clearly the civil service were at fault here and we cannot have that.

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    Mute Valthebear
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    Mar 24th 2021, 7:19 AM

    “… a truly transformative and positive difference to all our daily lives” could be made by abolishing the Seanad.

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    Mute Helpless In The Face Of Your Beauty
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    Mar 24th 2021, 7:27 AM

    I’ve been involved in public sector procurement for most of my career. The single most critical factor is the skill and expertise of the buyers. Enabling the buyers to factor in quality in their bid scoring is not enough, they must be able to judge that quality or else they’ll just end up buying even more expensive crap. Unfortunately the public sector has found it difficult to attract and retain people that can do this job well, because job for life does not appeal to high performers. This isn’t necessarily easy to fix.

    tldr: don’t expect miracles

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    Mute Ignorant Carbon
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    Mar 24th 2021, 8:54 AM

    @Helpless In The Face Of Your Beauty: Agreed. I’ve also found issues with the “they are the approved supplier” model that locks out competition from other suppliers because someone is “on the system”, leading to poor value for the taxpayer.
    I believe that when a supplier is added, particularly for consumables, there should be a requirement to seek one or even two alternative suppliers to allow for competition.

    I’ve found it difficult to purchase machines and computers we know (from experience or extensive research) are the best fit for the dept because there is a current supplier on the system that procurement sees as something similar. I’ve ended up with equipment that is substandard or not fit for purpose as we get blocked from seeking other sources by the systems.

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    Mute Neil Neart
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    Mar 24th 2021, 8:27 AM

    The current Public Procurement system was put in place by Paul Reid (now in HSE) when he was in DoPER. He was advised by Accenture. The reform process started in 2008. It looks like its still going on. Is anyone annoyed that it takes so long for the Irish public sector to get things done? https://www.eolasmagazine.ie/leading-procurement-reform/

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    Mute Brían Ó Tuathail
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    Mar 24th 2021, 1:36 PM

    @Neil Neart: Wrong. Paul Reid has nothing to do with The Office Of Government Procurement (OGP). That group was set up by Paul Quinn. Paul Quinn was the ex Supply Chain Director at eircom. Paul Quinn has been quiet sucessful at the OGP whereas Paul Reid is struggling at the HSE. Before the OGP was set up, Public Procurement in Ireland was like the wild west.

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    Mute Manoj Chawla
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    Mar 24th 2021, 7:28 AM

    A minimum quality threshold would probably be a good idea but accountability and transparency with an independent review (and I don’t mean a whitewash) would make sure the procurement process actually delivered the results. It’s about checks and balances.

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    Mute Ronan Lawler
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    Mar 24th 2021, 7:28 AM

    Government contract? Double it.

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    Mute Crocodylus Pontifex
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    Mar 24th 2021, 7:42 AM

    @Ronan Lawler: you amateur, add a zero before you double it

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    Mute Brían Ó Tuathail
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    Mar 24th 2021, 11:18 AM

    This shows much the learned Senator knows about Public Procurement (PP) First of all changes cannot be made locally. PP in Ireland has to follow the EU Directive which has been transposed into Irish law.
    As for cost vs quality, this is the decision of the contracting authority. The moment you make cost more than 50% of your award criteria, it becomes a cost driven tender and the lowest cost will win.
    In PPthere are 5 or 6 different options to take when running a tender. In Ireland the default position is to use the Open Procedure which can either be a free for all or deter suppliers from tendering. One of the reasons the Open Procedure is used so much is the lack of planning and as result the contracting authority goes to the market too late.

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