COMMITTEE FOR FINANCE AND PERSONNEL
OFFICIAL REPORT
(Hansard)
Inquiry into Public Procurement Practice in Northern Ireland
20 May 2009
Members present for all or part of the proceedings:
Mr Mitchel McLaughlin (Chairperson)
Mr Simon Hamilton (Deputy Chairperson)
Dr Stephen Farry
Mr Fra McCann
Mr David McNarry
Mr Adrian McQuillan
Mr Declan O’Loan
Ms Dawn Purvis
Witnesses:
Mr George Coulter )
Mr John Finlay ) Construction Industry Group for Northern Ireland
Dr Lynda Martin )
The Chairperson:
We are now joined by Dr Lynda Martin, the chairperson of the Construction Industry Group for NI; John Finlay, the vice-chairperson; and George Coulter, the secretary. You are most welcome. Please turn off any mobile phones. Even on silent mode, they interfere with the electronic Hansard recording.
Dr Lynda Martin (Construction Industry Group for Northern Ireland):
Thank you very much. I thank the Committee for this opportunity to meet with it and discuss public procurement in Northern Ireland. My name is Lynda Martin and I am the chairperson of the professional college of the Construction Industry Group. I represent the Institution of Civil Engineers on that college. I primarily work in the water industry. With me is John Finlay, the vice-chairperson of the Construction Industry Group for Northern Ireland. He represents the Royal Institution of Chartered Surveyors, and he works in all areas of the construction industry in Northern Ireland. I am also accompanied by George Coulter who is secretary and treasurer of the Construction Industry Group for Northern Ireland, and he is responsible for structural design on many projects in Northern Ireland.
I will highlight our members’ main areas of concern, and, to maximise our time, I will keep my presentation brief.
First, in our experience, there is a reduced number of tendering opportunities in Northern Ireland due to the introduction of long-duration framework agreements that freeze out many SMEs for too long. Losing one such tender can exclude a business from that source of work for up to four years. Those long-term frameworks with potentially large volumes of work attract large, out-of-region firms that might not otherwise be attracted to Northern Ireland, thus increasing the number of firms that apply for inclusion on framework groups, to the detriment of Northern Ireland firms.
Secondly, the tendering process is too detailed, protracted and expensive — especially for SMEs. The quantity of information required is excessive. It requires a large amount of input from the SME and adds an unnecessary burden on the construction professionals in Northern Ireland. In contrast, under what we might call traditional procurement methods — where services are procured on a single-project basis — professional practices apply for the projects that are appropriate to the size of the practice and capability of the firm. Also, the tendering process is not uniform across Government bodies; there is considerable variation in format and information required between Departments and from project to project.
The inclusion of social clauses in the construction industry is a relatively new concept which has considerable merits, although, as yet, we have little experience upon which to make meaningful comment. The inclusion of a social clause to promote opportunities for SMEs in Northern Ireland would be of enormous benefit to the Northern Ireland economy, and it would be a step forward if it could be included as part of the qualitative assessment of tenders.
The Department of Finance and Personnel should address many problems, one of which is the fact that SMEs are excluded from long-term frameworks and have no opportunity to gain the necessary experience to compete for further work in that sector. Our construction professionals are among the best trained in the world, and, as such, are much sought after abroad. They are trained in the art of problem solving and are highly adaptable professionals.
Too much Government work in Northern Ireland is procured through large frameworks that attract large outside companies, which causes Northern Ireland companies to miss out. There is too much emphasis on specific experience for projects, and that automatically precludes Northern Ireland-based professional practices. The current system freezes firms in their current position and does not allow them the opportunity to expand. Should that situation be allowed to continue, there will be a reduction in the number of quality jobs and in the skills base in Northern Ireland, thus resulting in a loss of revenue to the Northern Ireland economy. The experience of procurement of construction projects in the Republic of Ireland and its effect on indigenous firms appears to be different, with many local construction companies given the opportunity to grow and develop on local projects rather than being excluded by frameworks that favour larger firms.
We recommend that the opportunities for local consultants be maximised by increasing the number of professional consultants on frameworks, and consideration should be given to minor frameworks. The risk of legal challenge should be minimised by increasing the number of opportunities for local professional consultancies, and long-term exclusion should be avoided. Consideration should be given to quality versus fees to reduce the emphasis on low-cost tendering and to shortening the protracted planning process in Northern Ireland, as it adversely impacts on the delivery of public contracts.
The scale of turnover should be considered as a selection criterion to be appropriate to the local market, and future procurement strategies in Northern Ireland must have Northern Ireland scale and provide more opportunities to local firms to tender. The use of long-term exclusive framework agreements as a method of procurement in the Northern Ireland market should be reviewed.
A procurement task group was established recently at the request of the Minister of Finance and Personnel. That group produced a report on procurement which we commend to the Committee for consideration, as it contains useful principles on procurement that will provide opportunities for firms of all sizes to bid for construction-related public-sector contracts. We also commend the Central Procurement Directorate on its willingness to consult us in respect of its recent tender for its integrated consultative team framework, in which it took on board some of our concerns with regard to increasing opportunities for local SMEs.
Ms Purvis:
You commended the procurement task group report. As I understand it, that report said that frameworks are the best way in which to go forward with procurement. You have outlined many of the difficulties with frameworks. Can you suggest what you would like frameworks to include to make them more accessible to SMEs and SEEs?
Mr George Coulter (Construction Industry Group for Northern Ireland):
I was involved in the procurement task group, and I am not sure that it came out entirely in favour of frameworks. The construction sector tried to push the idea of using clusters, through which smaller groups of work would be done and large frameworks that run for three or four years at a time would not be used.
Although the task group received us very well, unfortunately, it sometimes had one ear cocked towards Treasury and Office of Government Commerce directives, and we were not able to drive all references to frameworks out of the report. On the task group, we were looking to create more opportunities for more firms in Northern Ireland to bid for work. Firms get into difficulties because there are huge arrangements that are costly to bid for. If a firm is not successful, it is locked out of the system for years at a time, which could put a business under. That is where the legal problems have come from recently, as firms try to survive. If a firm misses an opportunity but knows that another one is coming along shortly, it will not take it as hard and will look for the next opportunity. We put that point to the task group, and the principle of clustering is enshrined in the report, which will provide more opportunities and smaller jobs in shorter time frames. We hope that this Committee and others will police that and see that that principle does not become too diluted as time rolls on.
Ms Purvis:
You talked about the need to remove criteria that encourage consultants from overseas to apply. What are the criteria for experience?
Dr Martin:
For example, a prestigious project in Northern Ireland will ask for a consultant with design experience only in that particular type of project. We are trained to solve problems. I shall give an example of my experience, which is probably relevant. In the 1990s, I did a lot of work in clean-water treatment, which is one of my passions. Through a framework, Northern Ireland Water procured its clean-water treatment with designers and contractors to build the works in the late 1990s. The team that I was with was unsuccessful. If Northern Ireland Water were to tender again, it would ask for my experience in the past five years, but it is more than five years since I designed a water-treatment works in Northern Ireland. I am still perfectly capable, but my firm and I would be excluded. I find that to be very common, not only in the water industry but in all types of business.
Mr G Coulter:
Northern Ireland is a sea-locked area. New systems may be introduced from the mainland, and to get in to the tendering opportunity you are asked for your experience. In Northern Ireland, we have not had the opportunity. Those systems may have been trialled for a period on the mainland, and firms from the mainland bring that experience, while our firms have none. It is very difficult to have experience of a new system.
Ms Purvis:
A way round that would be that, if someone were brought from overseas, Northern Ireland people would be included.
Dr Martin:
I would not agree with that either. That would only give the profits for that work to an outside company. Their directors and main shareholders would spend that money somewhere other than Northern Ireland. We want to keep as much as possible of the money that is made from our industry in Northern Ireland. I do a lot of work on wastewater treatment, and the principles are the same. We are too focused on the type of project, rather than on the skill base that we have. We want to keep our skill base here.
Ms Purvis:
How does a firm get the experience of doing something new if it is not allowed to participate in something new?
Mr G Coulter:
The problem is that the new something tends to be the process of a large framework or some type of alliance. That is where we do not have the experience. We have the experience of the work. There has been one example of what you are talking about. For a number of years now the health estates have been running a performance-related partnering system. They have insisted that, when major firms come over from the mainland, they partner with local firms to input experience to the local economy. We were all very supportive of that.
That system is not as strong as it was. It was discovered that Northern Ireland firms had as much skill to do the work as the firms from the mainland, although those mainland firms had a bit more experience of some of the peripheral processes. The recent documents from the Health Service say that the local firms should have control of documents and archives, because they are finding that the local firms are much more responsive. Once the large firm goes away again, if one wants to check a drawing or find a piece of information, they charge for that. Local firms do not; they retain the archive and leave it open to anyone who wants to examine it.
Mr John Finlay (Construction Industry Group for Northern Ireland):
The answer is to formulate the contracts in a way that brings in that experience, then to see how one could improve the technological base and knowledge of the local firm, and how that could be retained after the project was delivered.
Ms Purvis:
I am asking how that can be done.
Dr Martin:
For example, our company is involved with the new library at Queen’s University, but the architects that are designing it are based in North America. A new police training facility is being built in mid-Ulster, which is a good place for it to be built, as it is west of the Bann, but it is being designed by an American company. It will probably be designed in America, and the fees generated by that will be spent in America. The fact that it is a police training academy, and may be the first that has ever been built here, should not mean that it could not have been designed by the people here who have designed schools and hospitals. We seem to think that someone who can claim to have designed one previously can design it better. The skills required are here. The issue is how we present those skills for a Government body to judge.
The Chairperson:
How can we legally proof the process? If, for instance, that requirement was removed, or was presented in a way that allows local companies to develop the expertise, how would the process then be protected from challenge by those companies that would use that as a basis for a legal challenge?
Mr G Coulter:
What we were trying to do with the procurement task group was to see things in a Northern Ireland scale. We have companies here in Northern Ireland. We argue on scale. The Province has a population of slightly less than that of greater Manchester, yet there is a determination to establish huge frameworks. The Central Procurement Directorate has recently established a professional-services framework, and it was advertised as having fee revenue of between £16 million and £20 million. That drew the whole world and its mother to Northern Ireland, yet when one drilled down into the document, small pieces of work were arising from it; jobs worth £3 million, £4 million and £5 million. Those jobs were all perfectly within the competency of local firms. The fact that it was aggregated so much brought everybody descending in on us.
Mr Finlay:
There is a need to find a balance between the low end — jobs worth £1 million, £2 million and £3 million — and the need for a larger-scale operation for anything over £10 million to £20 million. Anything over £50 million will usually need more technological expertise, and that is when the requirement is brought in. There is a need to break it up, which would allow the different tiers that there are here to have a go. They seem to be completely excluded from the work. The integrated consultant team framework that was recently produced is all-encompassing. If the number of consultants is reduced to six, then the rest are going to be excluded.
The Chairperson:
Have you formally responded to that new procurement tender?
Mr G Coulter:
We have all responded insofar as we have all put in applications to be on the framework for the next four years. We have to do that.
Mr Finlay:
We input to the —
The Chairperson:
Did you challenge the £20 million threshold?
Mr Finlay:
We were asked to speak to CPD on two or three occasions, and to comment on four points. However, they were not about the size of the framework; it was about the documents that they were putting out and about the structure.
Ms Purvis:
Perhaps we should look at the Hansard report to see what was said in the previous session. My recollection of it is that the integrated consultant team framework was about reducing the size. They talked about having one lead partner where there was a turnover of £1 million, or two joint partners each contributing £500,000.
Mr G Coulter:
Two things are getting slightly mixed up. The overall framework is very large. We met CPD on a number of occasions. We asked them to bring down the threshold to allow local firms to bid for that work — and, to be fair, they did. They reduced the threshold, which allowed more Northern Ireland firms the opportunity to bid. Whether they will be successful will be revealed in the next couple of months. The threshold was reduced, but the funding remained at the same level.
Dr Martin:
If you offer a contract worth £3 million or £5 million, local Northern Ireland consultants will bid for the work, but if you raise its value to £20 million, external firms will be attracted. We have kept our turnover thresholds lower to enable us to compete on quality marks, we have attracted larger players by offering contracts of higher value. There is nothing illegal about keeping contracts small. There is nothing in the journal that says that we must make our projects larger. Our civil servants have decided, because they are driven by Westminster, that large is big and beautiful. I do not deny that procuring large frameworks saves time and money. Initially, the Civil Service will save money, which is good, but the long-term effect on Northern Ireland is bad.
Ms Purvis:
I am missing something completely. If the frameworks are upward of £16 million to £20 million, and some of the tenders within that are for only £3 million or £4 million, and they have lowered the threshold to let local firms compete, where does the £16 million to £20 million come from?
Mr Finlay:
The overall fees available are £20 million over four years. You split it by four, then you split it by the six teams.
Ms Purvis:
Therefore, reducing the time frame of the frameworks will reduce the cost of that.
Mr Finlay:
The frameworks could be smaller insofar as they deal only with one or two of the quotes or one or two of the projects.
Ms Purvis:
That is where your proposal for minor frameworks comes from.
Mr Finlay:
They are more numerous and there is a rolling aspect; in two years’ time, there will be another one to go for. If a firm misses one at least it will not be cut out of the process for four years.
Mr G Coulter:
Firms are excluded for four years, and that is where Northern Ireland suffers. Most of us work in the Northern Ireland community. A firm is excluded for four years, and then when the bid comes up again it is asked what its experience has been over the past four years. It is then excluded for life.
Dr Martin:
It puts you out forever.
The Chairperson:
That is a clear enough point.
Ms Purvis:
That was very useful.
The Chairperson:
If we develop at CPD level and take a proactive attitude to retaining as much of that revenue as possible within the local economy, we can do it within European legislation. However, if we go for the one-size-fits-all approach, or what might suit larger perspectives such as that of Westminster, that sort of injustice emerges, which affects local industry.
Dr Martin:
That is exactly right.
Mr G Coulter:
I also think that we should not decry our own contractors just because we are slightly smaller. There is a considerable level of expertise in the Province. There seems to be this view in the Civil Service that to do one, you must have done it before. The local example is the Waterfront Hall — an internationally-recognised building, built by a local firm that had no previous experience of it. If that building were being procured now, that firm would have no chance of winning the contract, because it had not done one before. There is too much of an emphasis on companies having done exactly the same type of work before.
The Chairperson:
I think that the Committee has got that message. [Laughter.]
Mr McNarry:
You may be accused of being from a protectionist lobby, and if that is the case, I am with you and will stand up for you. I am glad to hear what you are doing.
I do not wish to lead you, but I get a sense, as the Committee gets more into this particular issue, that Government officials are out of touch with commercialism. Are those officials connected to you, and is there any way that you might offer to train them in some way, bringing them into a world that they, I believe, do not frequent too often?
Mr G Coulter:
It is an interesting question, and one that I have not been asked before.
We would have to think about how we would train them. I have a sense that — and we have discussed this outside as well — when, for example, you are talking to Des Armstrong from CPD, who comes from a private-sector background, you get a sense that he knows what you are talking about and that he has an understanding and can make common ground with you.
Mr McNarry:
Sorry, who is Des Armstrong?
Mr G Coulter:
He is the head of CPD.
However, it is different when you go below him to the career civil servants. For example, we met Des and the procurement task group, and we had a very productive meeting and agreed with him the way that we wanted to proceed. However, getting a document drafted with his civil servants afterwards was like drawing teeth. It was horrendous.
The Chairperson:
You needed four years’ experience? [Laughter.]
Mr G Coulter:
Yes. They seemed to have an ear to the Office of Government Commerce in London, and not as big an ear to the MLAs and the people who are driving them here. Des is good, but sometimes you sense when you go down a little bit that you are dealing with people who are driven by policy from Treasury, and not by what you guys want.
Mr McNarry:
That is very interesting. I think that we will bank that issue for the meantime.
In your recommendations, you refer to a “Northern Ireland Scale.” What do you mean by that? You say that selection criteria should be “appropriate to local market” and that we:
“must have a Northern Ireland Scale and provide more opportunities for Local firms to tender.”
I agree with all of that, but I need to explain it to myself. Therefore, can you explain it to me?
Mr G Coulter:
For years the Northern Ireland economy has gone through a process where a piece of work comes up and that work is procured by some methodology that has come out from the various Departments. The job comes out, we all tender for it and the appropriate firm is picked. Previously, there were lots of those opportunities about. However, in recent times, there seems to be a drive towards huge frameworks where you do not even know what work is coming through. Nobody knows what work will be on the current framework. It is simply a system or mechanism for pulling someone out. It creates a huge framework with a lot of fees, and it is huge for Northern Ireland. If one was doing the same thing in Northumberland or wherever in England, and you were not successful, you would have the opportunity to go to the next county. The opportunities here are not the same.
Mr McNarry:
Is the manner in which you are being asked to proceed cost-effective?
Mr G Coulter:
It depends on what you mean by cost-effectiveness. The establishment of frameworks is probably cost-effective for the Civil Service, because it does not have to do as much work. As to whether it is cost-effective for the Northern Ireland economy, that is a different matter. We suspect that it is not.
Dr Martin:
John and I share an experience which we feel quite passionately about, because it is the work that we do. Northern Ireland Water (NIW) — which is one of the COPEs, but does not seem to adhere to very much of what others do — is hoping to bring in an alliance system.
In Northern Ireland, NIW has employed approximately 20 consultants, all of whom received a rough share of the potential work that was there. That meant that small or medium-sized consultants — in Northern Ireland terms — would perhaps construct a few pumping stations or water mains for NIW; larger consultants perhaps constructed water-treatment or wastewater-treatment works. That worked reasonably well.
The new alliance system that NIW wants to introduce will employ two consultants, two contractors and two process houses, initially for three years but possibly up to eight years. The two successful consultants will be those who can demonstrate experience of working in that type of alliance. However, there are none in Northern Ireland. The successful consultants will be fairly large, because they must be able to do everything that Northern Ireland Water wants for the duration of that alliance. That excludes smaller consultants who can only do some of the work. There are only two consultants with such capacity. What will the other 18 consultants in Northern Ireland do for the next eight years? I do not know.
Mr G Coulter:
We are unsure how that situation benefits the Northern Ireland economy if those other firms go out of business. When Northern Ireland Water’s work will come up again in eight years — and that seems contrary to the public procurement legislation, which states that such deals should have a maximum of four years; this seems to go beyond that — and the other firms are gone and those two are left, I wonder how economically viable the bids will be. It is shrinking the market so much that it will cause long-term problems.
Mr Finlay:
We accept that, in the current climate, there will be consolidation in the market. That is not a bad thing. However, the issue is how far it shrinks. On the NI scale, we went back to CPD on turnover. The average consultant’s turnover is less than £2 million, which equates to approximately 20. That is an example of the scale.
Dr Martin:
They had hoped for £5 million, which would have excluded almost all Northern Ireland’s architects and chartered surveyors. There are a few larger ones, but not many.
Mr Finlay:
They are multidisciplinary companies.
Mr G Coulter:
We have got the bar lowered, and local firms have had the opportunity to price this framework. However, we must wait for the results in order to see whether anybody has actually got anything.
Mr Finlay:
Lowering the bar has allowed everybody else to bid.
Mr G Coulter:
They are not in until they win.
Mr McNarry:
I apologise in advance to you and to my colleagues for asking questions and then leaving; it is normally rude to do so. Your submission mentions shortening the protracted planning process that adversely impacts on the delivery of public contracts. What are you getting at there?
Dr Martin:
Many contracts for potentially large employers in Northern Ireland are being stalled by the Planning Service. They have been protracted for a long time.
Mr McNarry:
Do you have evidence of that? Can you provide a list?
Mr G Coulter:
Yes, but we do not have it at the minute.
Dr Martin:
Our professional college is innovative, and we are proud that we have brought together all the professionals in the Northern Ireland construction industry. Our architects, who feel very strongly about this issue, are not with us, but they contributed to the document. The Committee will meet the Royal Society of Ulster Architects (RSUA) during this process. That is an experienced body and it will have those numbers. We will speak to the RSUA and ensure that it brings that information. We are speaking on behalf of approximately 18 different organisations today. Unfortunately, our architects were unable to attend today because we were limited to three representatives.
Mr McNarry:
Does somebody have a piece of paper that says this is it for the next four years — this is what we are going to do; this is the money allocated; these are the contracts we are going to tender for; and these are the people? Then we could see Northern Ireland companies and jobs that risk being excluded. Does somebody have that? It is difficult to get an overall picture.
Mr G Coulter:
I do not think that such a paper exists. The Strategic Investment Board (SIB) is trying to reinvent itself now that there is not so much to invest. It is trying to produce a tracking system to identify the flow of jobs and what stage they are at so that we can all see that. That information has never been visible before. Although I have little time for the SIB, that might be something useful.
Mr McNarry:
To me, a picture tells a story. You said earlier how well-respected your colleagues are outside Northern Ireland in other fields of work. How many companies apply for work outside Northern Ireland and are successful in other people’s frameworks? We have a suspicion that companies might not get into other countries as easily as they can get in here.
Dr Martin:
We are facing some problems in that regard.
Mr McNarry:
It seems to be easier to get in here.
Mr G Coulter:
It is easier to get into Northern Ireland than it is to get into other countries.
Mr McNarry:
Have your members given up trying to get into other countries? Have they said that it is too difficult, or are they just beefing about it, without being able to say that they have tried and that there are obstacles? Outside Northern Ireland, we have a fine reputation in many professional walks of life, but I am thinking about bringing that economy back to Northern Ireland. You were saying that we are losing business to the Americans over the policing college.
Mr G Coulter:
Northern Ireland firms do not seem to be very successful on processes, but if a framework process were set up, we would be successful. The scale of Northern Ireland makes us look small in comparison with mainland firms. Northern Ireland firms have been reasonably successful in exporting some expertise, but that has come through personal contacts. For example, if Tesco comes here and uses a local firm, it tends to be impressed and takes that local firm back to do work for it on the mainland. That type of thing has happened.
Mr McNarry:
Do the Government provide any help on how to access the ladder? I assume that the Germans are given all the help in the world to access ladders to get into other countries.
Mr Finlay:
There is support to go abroad, outwith the UK; delegations have visited Romania and Poland.Mr G Coulter:
We are involved in a joint venture with a German consultant engineer to look at a landmark scheme for Belfast. They were utterly shocked to find that there was a fee competition, because, in Germany, that is illegal. All firms charge the same in Germany, and the only incentive to pick one particular firm is because they do a good job, and not because they are cheaper.
Mr McNarry:
I must ask to be excused.
The Chairperson:
I do not wish to be unfair to other members, but Dawn has given me notice that she has to leave, so we are going to lose our quorum.
Mr O’Loan:
With reference to the point about supporting local business, obviously there is a big advantage in the openness of the system, and firms from here are winning work elsewhere. There was reference to a local consortium winning a major roads contract in Scotland. I know of local firms that are building schools in Scotland and winning frameworks there. Firms in the North want to be able to bid in the South, and firms in the South want to be able to bid in the North, and all that is very good. I do not see those as incompatible positions at all.
We can value that openness and still say that we want to create opportunities and ensure that there are no barriers against our local firms fully participating in the public procurement process. Clearly, you are saying that there are significant barriers. Your critique of the large frameworks, is one example of that. Your points have to be taken on board. The CPD representatives were in earlier, and I talked to them about the fundamental disconnect between the positions that they are presenting and what we are hearing from the industry. That is really why we are conducting the inquiry. It is a very necessary inquiry.
You referred to, and advocated the use of, social clauses that would encourage the SMEs gaining advantage under them. I put that specific point to the CPD representatives, but I used the word “favour” with the social clauses — that they “favour” SMEs. They were absolutely clear in answer to that: they regard it as being fundamentally illegal and as being an improper process. I do not know whether there is a big difference between the words “encourage” and “favour”. How might social clauses be written to encourage SMEs?
Mr G Coulter:
That is a difficult one. At first glance, the social clauses appear to be more applicable to contractors than to professionals such as us, who are initially required to have a third-level degree. We may be able to work with some element of them; however, they are more applicable to contractors than to the professional side of the industry.
Although I do not wish to criticise civil servants or to be seen as kicking them, they always seem to have problems with legalities and with interpreting public procurement rules. The Republic of Ireland, France and Germany do not appear to have the same problems with the same rules. Given that no one else has those problems, I am not sure why civil servants in Northern Ireland do.
Mr O’Loan:
You are raising a genuine point. Some people seem able to work within the system and use the rules —
Dr Martin:
And still manage not to discriminate against their indigenous industry.
Mr O’Loan:
Indeed, and others seem to find every difficulty possible.
Dr Martin:
There must be a mechanism to consult with an equivalent Committee in the South of Ireland in order to ask its advice. Unfortunately, there has been a downturn, but, two or three years ago, the Republic’s Government were able to use its economy’s growth to promote its local firms. We seem to have missed that opportunity, but we must learn from the South, because its Government were excellent at doing that. If a road scheme had to be built, the Government there ensured that local people were involved. It was local projects for local people.
Mr O’Loan:
You referred to reducing the emphasis on lowest-cost tendering. When we put that point to CPD, it said that it is not about the lowest cost; it is about a full value-for-money estimate. The acronym MEAT — the most economically advantageous tender — is used. I think that that acronym is unhelpful, because, funnily enough, it suggests that lowest-cost tenders are being used. However, for all the talk otherwise, many contractors and suppliers seem to hold the view that the tendering process is about the lowest cost.
Training is not your area of work, but many concerns have been expressed about major training contracts being awarded to English firms that do not even have an office or a telephone number here. Yet, when contracts are awarded to those companies, they do not appear even to be at the starting point for delivery. Therefore, the suspicion exists that —
The Chairperson:
They are hoping to collapse local training organisations so that they can pick up their staff.
Mr O’Loan:
Yes, and that it was the bottom line that won the contract, rather than ability to deliver. Those views seem to be diametrically opposed.
Mr Finlay:
In a conversation with the Central Procurement Directorate about its most recent integrated consultant team framework, we said that it should not be lowest, and CPD agreed. CPD said that the quality:price split should be 80:20. Our view is that the quality offered by the top six or 10 companies should be similar. Everyone should be capable of delivering, so it will go down to price. The price part of the marking system is lowest cost, not the mean average that we suggested should be used, because the lowest cost produces the poorest service. From a consultancy point of view, you need to recover. Therefore, you knock off the top and the bottom and take an average. The average then gets the highest score, and positive and negative are based on that. I believe that the last framework has an element of lowest cost. If you assume quality, it should be similarly, if not closely, marked at the top end and come down to price at the end of the day.
Mr G Coulter:
It strikes me as slightly strange, as it must the Committee, that a company has won a competition for any work that comes up for the next four years, with no idea of what it is. This strange mechanism cuts the number of applicants to six. When a particular job comes up, that mechanism is used to appoint one of them. I am not entirely sure how that represents value for that particular scheme to anyone.
Mr Finlay:
As soon as the secondary tendering begins, each group will say that it must readdress the fee in its original tender because the parameters have changed.
Mr O’Loan:
We should not turf out the concept of frameworks, because they have their place in certain types of work.
Mr G Coulter:
Absolutely.
Mr O’Loan:
There may be an advantage to the public sector in getting value for money.
Mr Finlay:
Our concerns relate purely to the size and the breakdown of the frameworks.
The Chairperson:
What is missing from the debate, although the Committee has started to focus on it, is an assessment of the regional economic impact. That can be addressed while staying within the wider legislative frameworks. It appears not to be a current focus of the inquiry, but we may come back to you, as well as exploring the issue with other witnesses, because it is important.
Mr G Coulter:
Frameworks have a place; they are a useful system for subjects that are clearly identifiable, such as the supply of sandwiches, JCB diggers or dumpers. However, at one stage, the South of Ireland actually excluded construction from the regulations because it was considered to be an intellectual service. As construction work could not be easily defined, the industry was exempted from the regulations.
Mr Hamilton:
I agree with Declan. I am not entirely convinced that frameworks are as bad as they are portrayed to be. There have been legal problems, but in my recollection they have not focused on the frameworks per se but on the process. They have not been judged as unacceptable in their totality. Even your comments and submission concentrate on the size and focus, rather than the concept, of frameworks.
We have heard in other evidence sessions from construction firms. Even when a big firm from outside Northern Ireland has won a contract or got on to the framework, it has subcontracted significant portions of work to local building firms. I am not saying for a second that local firms should be satisfied with getting a second dig; far from it. You said that local firms were missing out, but they can gain from certain aspects of the frameworks. Are you saying that, in your field of work, the entire picture is one of local firms losing out?
Dr Martin:
The service that we provide is not the same as buying a repetitive product, such as car maintenance or toilet cleaning. it is an intellectual service, and it is hard to define even when we know what the project is. Even I consider that it is ludicrous to try to have a one-size-fits-all definition for unknown projects. It makes no sense. I cannot see how bringing in as part of the framework an umbrella organisation that subsequently subcontracts the work to local firms represents value for money for Northern Ireland. That is introducing another tier, and there must be a cost there. If you can employ us directly without somebody above us telling us what to do, we will do just as good a job — if not better — and charge you less.
Mr Hamilton:
The argument is the one that Declan referred to, which is value for money. As much as we, as locally elected representatives, want to help local firms, there is also the pressure, particularly at this time, of value for money. I am not saying that that is the correct argument every time.
Mr Finlay:
It goes back to scale. My company is a multinational company, and the office here employs 24 people. I have the same problems gaining work, and therefore I can bring in that scale. However, we retain the intellect here, and we try to build on that and bring it in. There is an opportunity for a good section of the firms here to deal with the lower-value projects where that expertise is not needed.
Mr G Coulter:
The divide between construction and the professional end has been made. Obviously, if one is building something, one requires people on the ground to physically build it. Big contractors will come in and they will subcontract, and a lot of local people will get work on that building, and that is very good. However, it is not quite the same at the consultancy end, because it is an intellectual service and it can be carried out remotely from the site. If a large firm gets the contract, it will use its own slack resource to fill that space. It will look for a local firm to carry out supervisory or similar work only when it finds that it does not have enough capacity, and one does not learn a lot from that.
Dr Martin:
The design can be done in New York or Los Angeles — or Mumbai, where some of them are being done. It is not like construction; it can be farmed out all over the world and the people can be anywhere. What we provide must be provided locally.
Are frameworks value for money? I am on one of the frameworks, as is Mr Finlay, and they are great. If one is on a framework, they are fantastic. Our framework started off fine, but some auditor came along and decided that it was not demonstrating value for money. We had all spent a lot of money tendering to get onto the framework. There are four contractor consortiums on the framework. As it is not demonstrating value for money, the auditors have decided that the four of us must now compete against each other. We have almost taken back a step. The initial concept was that we divided into regions and worked together as a team; we partnered. We put a lot of effort into gaining the framework because we thought that that would bring great rewards. Now we are a step back and the auditors are insisting that the four of us tender.
Mr Finlay:
The value for money in that case is money, rather than the partnering. The partnering that we have now in our region is working excellently because we have not had any contentious litigation with the contractor in the past four years. That is complete partnering because that contractor has delivered all the projects. He has had that workflow and that work stream, and he has known that he has been able to do that. However, that is only in one region. There is an opportunity for three other contractors to work in three other regions. It was not closing off the market.
Mr Hamilton:
I see the point that you are making. Equally, another part of me is saying that I am glad that there is someone in Government who is continuing to assess value for money on an ongoing basis. I have other questions that I could ask, but I know that we are running out of time. Perhaps the Committee could forward its queries.
The Chairperson:
It is obvious that a number of issues have not been teased out fully. The Committee will correspond with you, if that is OK. As the inquiry proceeds, we may come across additional issues that we would like to check with you. Thank you.
Dr Martin:
Thank you for your time.