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Official Report (Hansard)

Session: 2008/2009

Date: 29 April 2009

NORTHERN IRELAND ASSEMBLY 
COMMITTEE FOR 
FINANCE AND PERSONNEL

Interim Report of the Construction Industry Forum for Northern Ireland Procurement Task Force

29 April 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 
Ms Jennifer McCann 
Mr Adrian McQuillan 
Mr Declan O’Loan 
Mr Ian Paisley Jnr 
Ms Dawn Purvis 
Mr Peter Weir

Witnesses:

Mr Des Armstrong ) Department of Finance and Personnel
Mr Stewart Heaney )

The Chairperson (Mr McLaughlin):

Good morning, Des and Stewart, you are very welcome. Please make some preliminary comments to the Committee and then we will open up the discussion.

Mr Des Armstrong (Department of Finance and Personnel):

To maximise the time available we will keep our opening remarks brief. I hope that the Committee has received a summary paper along with the report.

At the outset, I wish to say that the engagement that we have had with the construction industry has been very useful. We drew together good representation from the industry and from the Government construction clients. At the first meeting of the task group, there was a frank exchange of views and opinions, which really helped to move the process forward, and we got down very quickly to the crux of the matter, which is how the industry works as a partner with Government.

This is very much about building on our partnership arrangements with the industry, and we have been engaged with the industry through the Construction Industry Forum for Northern Ireland (CIFNI) for some time. It also builds on our work in July 2006, which looked at how a sustainable construction industry could be developed in Northern Ireland over the longer term. The purpose of that was to deal with the challenge of delivering the investment strategy, looking at how the industry could be developed beyond the end of that strategy, how it could seek work outside Northern Ireland, and what development individual firms would need to make that happen.

To support that type of work, we set up the constructing excellence centre, as a partnership between the Construction Industry Group for Northern Ireland (CIGNI), the Government construction clients, and the University of Ulster. We have been doing some work with the centre on how Departments have the capability to manage construction projects. We have received a report from the centre, which will be the subject of a discussion at the next meeting of CIFNI on 9 June. This is follow-on work to that.

Mr O’Loan:

I have a few issues. I have looked at the documents. In some ways, I am saying what has been said before, but I feel that it needs to be said. In all these conversations, the system is presented as being very sound; and here we have a further mechanism for good consultation between CPD and the outside firms involved. Yet, when I talk to construction firms and architectural practices, I get very poor feedback on how procurement is working here: they are not happy at all. When we look at the paper that we were given last week on the legal cases and lessons learned, it seems that there is a fair bit going wrong in the system, and it goes back to the fundamental reason why the Committee is holding an inquiry, which is that it is necessary and because the system is not fit for purpose.

Mr D Armstrong:

The Committee would not expect me to agree with that assessment directly. One must recognise that for each competition that we run there will be one winner and a set of unsuccessful tendereres. Therefore, views on the procurement process can be determined by whether one is successful or not.

As far as construction is concerned, the industry has failed to recognise the substantial amount of construction work and the increase in the workflow that have been taken forward over the past three or four years. For some reason, growth due to the investment strategy has not really found its way into the psyche of the industry. We still hear statements that the £1·4 billion or £1·6 billion is not being seen at ground level. That is not realistic. When people drive through the centre of Belfast they see a selection of tower cranes and the work that has been carried out on the Westlink and the M1. Belfast is being worked on from one end to the other.

The Chairperson:

They may have been talking about west of the Bann.

Mr D Armstrong:

There is a good project in Enniskillen — the Waterways Ireland building — which returns the highest environmental performance of any project that we have carried out in Northern Ireland. It stands alongside any standard that could be picked up in the UK.

A lot of activity has taken place. However, the construction industry’s concerns about procurement are very diverse. In the past, we have relied on CIGNI to carry through any communication to the industry.

The Chairperson:

The Committee’s inquiry will be strategic. I suspect that there is some validity in your observation that the local construction industry has either not responded to the investment programme or does not have the composite vision of it. Has there been any analysis of the extent to which the local construction industry has benefited or has been able to win contracts?

More importantly, the Executive have taken measures to make procurement easier to access, especially for the SME sector, including the construction industry, in order to help it win contracts. Have those measures had an effect? The Committee will be looking at the baseline situation when the Executive was formed and how that has changed as the investment strategy has been rolled out and as the procurement process has been amended to make it more accessible and easier for local SMEs to win contracts.

Mr D Armstrong:

To give the Committee an idea of the benefit that local firms have had, we asked our colleagues in Government Construction Clients Group (GCCG) to give us an indication as to how many contracts were awarded in the past 12 months and the types of firms that were awarded those contracts. We found that more than 90% of the contracts had been awarded to local firms. That goes against —

The Chairperson:

As opposed to being subcontracted by —

Mr D Armstrong:

Those contracts had been awarded to local firms, and that is totally at one side of the spectrum. I do not know from where the perception has come, but the industry perceives that the investment strategy has, somehow, been bundled up as being —

The Chairperson:

Perhaps we need to tell them. Perhaps we need to do more.

Mr D Armstrong:

That is what we have recognised. Part of our engagement with the construction industry must involve reassuring stakeholders that the procurement process is open and transparent, that it is effective and that it brings benefits to the local industry. We may have missed that point in our communications.

The Chairperson:

I think so.

Mr O’Loan:

As regards the use of most economically advantageous tender (MEAT), it has been suggested to me that the word “economically” is the only relevant word in that phrase. Ultimately, cost is what matters. I can think of an instance, outside the construction system, which was about cost. The specification was not well-designed, and the public sector was not getting a good deal. It thought that it was getting a good deal because the money was good, but it was not looking at the big picture.

Mr D Armstrong:

I accept what you say if one were moving to procurement whereby one produced the specification for a client and took the lowest price: that has been shown in a number of reports, particularly in construction. However, if one draws up a specification and asks contractors to bid on the basis of lowest cost, and one accept contracts on that basis, it has been shown that that does not deliver value for money. Substantially, all contracts in recent times have been moved to assessment under quality and price.

Price has to be an important part of the equation. However, the combination of price and quality is now well-established in the construction industry, and it is being monitored carefully by the Procurement Board because any departure from the process must be explained by a senior official. An issue may arise whereby the perception of the industry is that the quality submission is not being enforced when it comes to contract —

The Chairperson:

Did you say “equality” or “quality”?

Mr D Armstrong:

I said “quality”. The perception is that the quality bid is not being enforced by the requirements of the contract. Also, the industry has told us that we, as clients, need to create that level of quality: we need to be demanding clients. If we ask for something as part of the quality submission, we must ensure that it is put in place. As part of the conversations that we have had in the task group, it has been recognised that we need to re-examine contract management procedures as well as the procurement process that sets up those contracts: we need to ask whether the contract management procedures are sufficiently fit and robust to ensure that the commitments given by suppliers, along with the price, are put into effect?

The Chairperson:

Are compliance, rewarding delivery, and non-compliance sanctions also part of your considerations?

Mr D Armstrong:

In assessing whether the terms of the contract have been applied —

The Chairperson:

Yes, but with respect to price and quality?

Mr D Armstrong:

Yes. We need to look at both aspects and they need to be clearly delivered as part of the contract. Depending on the type and conditions of contract, there are different sanctions that one can take. Ultimately, one could run to breach of contract. Dealing with contractual issues is another set of issues that needs careful consideration.

As part of this discussion, the industry has said that Government must become a demanding client and force quality through. We want the industry to understand that that is what we will do.

Mr O’Loan:

My final question is about endorsing a point that the Chairperson has made about small and medium-sized enterprises. We are still seeing, in evidence and in written submissions to the Committee, that such firms, which can be of decent size and have a substantial portfolio of work and proven experience, feel that they cannot get work here. There are two reasons: contracts are bundled together so as to be too big for them; and the whole process is extremely demanding for them. This is difficult territory: if the process is not right, then legal challenges may be made, which invite the response that the process is made even tighter.

We hear statements to the effect that other countries can use the system to make it friendlier to local businesses and give them a bigger slice of the cake. It enables them to get through the door more easily. We have to think about that.

Mr D Armstrong:

As I said earlier, a substantial number of construction contracts awarded in Northern Ireland have gone to local companies, many of which would be rated as SMEs. Construction operates on the basis of subcontracting, which is a legitimate business practice. However, it requires clients to focus on ensuring that subcontracting arrangements are fit for purpose, because contractors rely substantially on the supply chain for effective delivery. Parts of the supply chain will be involved in design work as well as the provision of labour and different types of systems.

How supply chains operate is important for Government to recognise. SMEs must be assured that working in direct contract with Government is OK and is a good thing. They also need to know that where they are working with Government in a subcontracting arrangement, appropriate terms and conditions will be applied also. Many opportunities for SMEs occur in the supply chain, and it is a legitimate place from which they can draw business.

The Chairperson:

Yes, but that does not mean that there is a stereotypical perspective. Subcontracting is only one dimension in the construction trade.

In a sense, we are trying to maximise the impact of the investment expenditure programme, and we may have to challenge cultures in Government as well as in the industry. If SMEs are being treated as SMEs, and if they already perceive that it is difficult to penetrate the procurement system because it is too complicated, expensive and cumbersome, they may not compete for all of the contracts that they could compete for. I do not see evidence of any attempt to encourage SMEs or to develop advice and support that would allow them to come together in a type of joint-venture approach. By doing so, they could create a critical mass that would enable them to compete for some larger contracts. That is how I see us delivering the opportunity to sustain and retain jobs in our economy at present. If SMEs feel that there is no point in competing for contracts, and if the Government are saying that SMEs can fit into the supply chain somewhere, the consequences of that in the circumstances of a downturn are inevitable.

Mr D Armstrong:

I will give a couple of examples of where that type of joint-venture approach has taken place. Central Procurement Directorate has operated a framework for professional design services. In the past, Government would have chosen various professionals and put them together as a team. We have now left it to the market to do that. In effect, partners have come together in consultancy practices and have bid, as a unit, to do work for CPD. The framework has worked very successfully for us and is about to be refreshed.

The Farrans and GRAHAM companies are another example. They worked as partners with the main contractor on the Westlink project and have won a major contract in Scotland by taking their partnership and bidding for work in their own right. The strategic partnership approach that is being used in Belfast schools involved local contractors who created the physical infrastructure. They have also bid for work outside Northern Ireland. Part of the strategy for a sustainable construction industry in Northern Ireland involves encouraging those partnerships to happen.

In developing the strategy for a sustainable industry, we have recognised that we need to bring some of the smaller players together. They can come together through bidding for contracts directly, but in such instances, we look very carefully at the level of financial standing needed to allow partners to come together and work as a consortium. This is carefully assessed before the criteria are set. There are examples of local companies that have come together to do that.

However, all of this has to be set down within the procurement rules and with the assurance of value for money. There is an issue about overstretching firms. People operate their businesses at certain levels. When one overstretches them, one is asking them to take on more resources, responsibility, risk and liability. Normal practice has been that a contractor pays out the money, claims it back and is then paid. There is a fair bit of time involved in that process, which could have an impact on cash flow. There is a complex set of business pressures on construction firms, and, in the construction industry, cash flow is a big issue that requires great care.

Mr F McCann:

There is public perception that — and one thinks of the Westlink, but there are others — many major companies that have won contracts bring their own workforces with them. Can that be monitored? Is the impact of that on the local workforce, or whether the local workforce is getting the jobs, monitored?

Mr D Armstrong:

I do not think that we monitor. The premise of European procurement legislation is to allow for the free movement of labour and firms.

Mr F McCann:

Knowing the terms of one of the firms you mentioned, I know that it had little or no impact on the locality in which the work was being done, which included some of the most deprived areas of Belfast.

Mr D Armstrong:

Some requirements put into contracts have sought to help the long-term unemployed and apprentices. Naturally, if we put such requirements into contracts, we hope that it will be more likely that the local situation will benefit and that local unemployed people will be drawn into projects.

Mr F McCann:

Is the impact for the unemployed across the North assessed when major contracts are being worked through, when sites are visited, and when the work has been completed?

Mr D Armstrong:

We have not gone as far as looking at the wider social impact of particular infrastructure projects. We are starting with sustainability and are developing that in contracts to the overall benefit of the Programme for Government.

The Chairperson:

Social clauses require you to monitor whether projects offer benefits as regards, for example, reducing long-term unemployment.

Ms J McCann:

I want to tease out the issue of social clauses. We hear that it is now in the gift of Departments and Ministers to put social clauses into the procurement process from the advertising stage through to the delivery stage. That does not seem to be happening in a way that is delivering, for example, the Programme for Government. I know that the construction industry has an impact in delivering the investment strategy.

Are you confident that social clauses, and measuring social outcomes throughout the procurement process, are being implemented sufficiently vigorously? Are Departments driving that work? Small and medium-sized enterprises and businesses in the social economy sector say that the process is not being driven as it should in order to create employment opportunities and challenge poverty and disadvantage.

Mr D Armstrong:

There is only so much of a policy that can be driven by procurement, and some of those wider issues sit outside the procurement process. Nevertheless, the construction industry now has a clear set of contractual requirements, and those requirements are being applied to contracts such as the ILEX project. The contractor for that project has been appointed, and he has told CPD that he wishes to work out with the client the best way to assure you that you will not only get the bridge work but the benefits from the social clauses. We intend to work with the contractor to identify issues that must be overcome to deliver those things. It may mean that other Departments or agencies will have to help him identify the resources he needs. For example, if the contract stipulates that long-term unemployed people must be used, other agencies and, perhaps, the local third sector, must be made aware of that and must help meet that demand. Everything cannot be driven by the procurement process, although it can be used to create demand, which must then be satisfied in a way that helps the supplier.

Ms J McCann:

Are you confident that, in the example that you have given, the number of long-term unemployed people awarded quality apprenticeships was in proportion to the value of the contract. When companies tender for contracts, should the requirement to create quality apprenticeships not be pitched at a higher level, and that more long-term unemployed people are employed in the workforce? At the minute, the requirement is minimal. There does not appear to be a big drive to get the maximum benefit.

Mr D Armstrong:

In order to arrive at the required number of apprenticeships, we looked at the forecasts of ConstructionSkills for the industry and we felt that we had arrived at a reasonable proportion to be driven by Government spend. With apprenticeships, one cannot over-boil the situation and end up with oversupply. I am not an expert on apprenticeship training, but I hear from the industry that there are issues regarding dropouts and people not completing their apprenticeships. At the same time, one must not create a situation in which young people are awarded apprenticeships only to find that there are no jobs for them on completion. There needs to be a demand profile that can be facilitated reasonably by a requirement. Contract requirements must be reasonable, or they may impact on those who might want to tender for contract.

Ms J McCann:

On a wider subject, in a recent report, InterTradeIreland said that there must be better North-South co-operation between businesses, particularly smaller businesses, given that approximately 99% of the businesses in the North are SMEs. Given that approximately £6 billion a year is spent on the public procurement of services and works and that most of that money goes to overseas companies, those businesses are asking whether there is some way that small and medium-sized businesses from the South can tap into public procurement contracts here, and, likewise, that small and medium-sized companies here can tap into contracts in the South. Is anything driving procedures to make them more compatible?

Mr D Armstrong:

With respect to opportunities in Northern Ireland, we now have the e-sourcing NI tool, which CPD introduced last year and which the Procurement Board has now approved as the template for the future. We have agreed a programme with all the centres of procurement expertise that they will come on board with during the rest of this year. Therefore, public-procurement opportunities will be visible on that portal.

It is about increasing awareness of opportunities. However, advertising opportunities could present problems such as over-interest, with many SMEs bidding for the same type of work. That means that all of those bids would have to be assessed, thus slowing down the award process. Indeed, there has been similar activity in the education sector in which some projects designed for the frameworks were not taken forward. That created huge interest among contractors who wanted to bid for those projects, and a large demand for contractors to submit pre-qualification questionnaires, which then had to be assessed.

Therefore, all of those things must be balanced to ensure that there are as few barriers as possible and that people are aware of the opportunities. However, I keep returning to the point that the opportunities need to be either direct contract with Government or working as part of a well-managed and resourced supply chain. It is there that the maximum benefits will be developed.

Ms Purvis:

Are the social, environmental and economic clauses that you discussed with Jennifer McCann contained in any of the seven principles you have produced?

Mr D Armstrong:

They are covered under “Principle 6 – Best Value for Money”, which includes a clear commitment not only on price, but also on the wider social, economic and environmental measures in relation to supply chains. Indeed, principle 6(d)(i) relates to:

“promoting equality and sustainable development included by Government Construction Clients as contractual requirements”

and principle 6(d)(ii) relates to progress reporting on the implementation of those requirements. Therefore, specific reference is made to those factors in the principles.

We have now moved to the point where we know that the best value for money is not just about a combination of price and quality but that it also includes social, economic and environmental measures where appropriate.

Ms Purvis:

Returning to the point that Declan made earlier in relation to SMEs, paragraph 8 of your report states that:

“The Task Group also considered the most appropriate procurement and contract strategies that should be adopted by the public sector. They concluded that Framework Agreements have the potential to deliver better value for money than stand-alone contracts.”

The Committee has received evidence suggesting that frameworks have tended to exclude or disadvantage, unfairly, SMEs due to their relative size, the nature of the selection criteria and because they excluded businesses for a long period of time, up to four years. Has any consideration been given to reducing the size of the frameworks and change the selection criteria?

Mr D Armstrong:

I do not believe that the selection criteria will be changed. We will still be looking for a high-quality supplier who can provide the best value for money.

Ms Purvis:

Yes, but the insurance requirements are beyond SMEs. Requirements regarding business turnover are excessive in comparison with those of some SMEs. It is about ensuring that the criteria fit the contract on offer.

Mr D Armstrong:

The industry has said that one of the important things, in relation to the frameworks, is that they provide an opportunity to bid. The construction frameworks that we tried to develop were in a different time, when the economy was in a different position and when the construction industry was likely to be short of resources to do the types of work that Government and the private sector wanted. At that time, the procurement strategy established for those frameworks was fine and could have been closed off at any point in time.

Frameworks are not contractual commitments in the same way as long-term contracts; therefore they afford flexibility. If one finds that a framework is no longer appropriate or is not delivering value for money, the decision can be taken not to put any further work into that framework. There are some advantages over a long-term contract.

Even so, the industry says that it wants to see, and would support, a more frequent refreshing of the frameworks, or lesser value being placed on each framework. The industry prefers a number of frameworks to be working at the same time, adding to the value, and those being refreshed almost by a programme that allows the procurement process to be managed properly. That is something on which we can work with the industry to ensure happens.

As to entry points, we need to ensure that companies have sufficient financial standing and are not overcommitted. Those requirements need to be examined carefully. We have some guidance, through the Office of Government Commerce (OGC), as to how a supplier’s financial standing may be assessed. One has to be careful about how one settles on the criteria to allow firms to tender for work.

Ms Purvis:

It should be about making the framework appropriate to the size of the contract, rather than having a very large framework that an SME cannot get on to because of turnover and other requirements.

Mr D Armstrong:

We found that SMEs are on those frameworks and that local SMEs are forming partnerships. The option of allowing firms to come together in partnerships is available. We can provide information that shows that those frameworks are going to deliver that.

Ms Purvis:

I am thinking of smaller businesses at the other end of the scale.

Mr D Armstrong:

Yes, the micro-businesses.

The Chairperson:

The value-for-money criterion is clearly dominant: that is sensible and I am not challenging that. However, is it possible to codify what is meant by social inclusion or social clauses? That should not be an afterthought or a less significant criterion. Where can we refer to in order to judge whether we are meeting those targets? Is it in any of the principles? I did not see that it was there.

Mr D Armstrong:

It lies in the principle of best value for money.

The Chairperson:

Is it codified within that?

Mr D Armstrong:

We have taken the approach with the construction industry of imposing contractual requirements. The issue with sustainability, at present, it is an undefined term, and individuals or organisations may take different views as to what it means.

The Chairperson:

They will. That is predictable. What I am saying is that the Assembly parties are anxious to achieve maximum value for money and maximum benefit for money by using a social-inclusion approach. How can we hold ourselves to that target? How can we deliver on it? If this is an undefined term, no one can be held to account.

Mr D Armstrong:

We will be able to report on the aspects of procurement policy or applications that have delivered visible benefits. We have identified in the construction industry those aspects that span social, economic and environmental categories. Part of the work of the centres of procurement expertise is to ensure that they start to clock up the benefits that are coming through on the contracts. We are very alert to the fact that in the future we will be asked how many contracts and how many benefits have been delivered through them? We are alerting the centres of procurement expertise to that, and to look at how we might record that. The e-sourcingNI tool includes the possibility of inserting that as part of the contract management module. As part of contract management, we should be able to pick up the success that we have had against those particular items and make sure that that is collated and reported.

The Procurement Board will have an interest in how its guidance on equality and sustainable development is being applied; and, again, it will fall to CPD to work on that.

The Chairperson:

Coming at this from a different angle: has experience demonstrated that there is an upper level in the value of a public contract that SMEs have not passed and that they are operating in a certain stratum within the overall spending profile and not beyond, except as clients or subcontractors?

Mr D Armstrong:

Again, that falls to the guidance.

The Chairperson:

Coming back to the frameworks, it has been mentioned that they tended to be too big to be digested by the local SME sector, and we are looking at that now. I am just trying to find out how anyone measures the effectiveness of the responses or amendments to the process.

Mr D Armstrong:

We could do some work to look at the frameworks that have been appointed, or would have been appointed, to give you some indication of the level of SME activity within those frameworks?

The Chairperson:

That would be helpful, given that they make up 99% of our local industry.

Mr D Armstrong:

I am anxious, with respect to perceptions, that there is a need for data and information. Therefore, we will do some work on the level of SME success.

The Chairperson:

I am coming close to abusing my position as Chairperson.

Mr F McCann:

Some of my questions have been asked. I will pick up on some of the evidence and points made about new businesses. They are unable to provide three years of accounts, which almost rules them out of applying. Furthermore, there is no real clear definition of an SME, the bulk of which employ between 10 and 20 people and are ruled out because of their size.

Furthermore, jurisdictions such as Scotland and France seem to push the boat out continually regarding social clauses and local employment. I get the impression at various meetings that we seem to be reluctant to push our boat out as far as it can go. I know that there are legal constraints, but, on some occasions, if we do not try something, we might never be able to provide employment.

Finally, does the Department monitor how many contracts go overseas and how many are won by local companies?

Mr D Armstrong:

That information has not been monitored in the past, but we will be able to provide it in the future. Procurement information will be coming through on the eSourcingNI portal, which will give us very good management information. There is always the risk of protectionism, but it is not for me to comment on that.

We are in discussions with Wales, Scotland and the OGC regarding what other jurisdictions are doing, and we had a meeting on construction matters about 10 days ago. We are seeing what they are doing, and although the situation is not perfect in Northern Ireland, we are moving ahead on the important areas that we have to address. Procurement is something we need to continually improve in order to reassure everyone that we are doing what we can with the funding that is available to us. However, the success rate for local suppliers in Scotland and Wales is not as high as it is in Northern Ireland.

Mr F McCann:

I notice that the evidence states that there is no clear definition for an SME.

Mr D Armstrong:

We are happy to look at the definition and at how the financial standing issue can be addressed and is being addressed.

Mr F McCann:

What about new companies that do not have accounts for three years and feel disadvantaged because they cannot apply for contracts?

Mr D Armstrong:

I will take that as a specific point to look at.

Mr Hamilton:

The thrust of questioning and probing has been about how we can help local companies, whether they are small, medium, large, or social, to take more advantage of the procurement process and the many millions of pounds that are bound up in that.

On the back of their work on the Westlink contract, Farrans and GRAHAM came together to take a contract to build a road in Scotland. There may be an MSP in Edinburgh today who is asking what can be done to prevent those so-and-sos in Northern Ireland from taking contracts in Scotland. There are swings and roundabouts in this issue.

Principle 6(d) is about and sustainable development and includes proposals for promoting equality and sustainable development and making them contractual requirements. That is one half of the equation. How will that be enforced? Are you considering the flip side in the form of sanctions for not meeting those requirements and rewards for attaining that performance?

Mr D Armstrong:

As regards sustainable development, the practice in the environmental area is better established than it is in the social and economic areas. For the construction industry, the Department has placed a focus on site waste-management plans and on building structures with good energy performance. That is more akin to a traditional approach in construction.

The social and economic benefits are fresh requirements. Therefore, we have alerted the centres of procurement expertise that they need to look again at their contract-management procedures to ensure that everyone is aware that, as well as the hard infrastructure that we have always asked for in the past, we are now asking for those additional items. We want to work with the centres to look at what contract-management procedures are in place to ensure that those are effectively applied and deal with a situation where we feel that a supplier is not delivering on those commitments.

As I have said previously, we need to recognise the benefit that Government spend can make to the economy through its impact on individual businesses. In return for that, the Government need to get back the maximum for the money that they have made available. If there are commitments in contracts to do things, it falls to us to ensure that those are delivered. Rather than getting into a contractual dispute, we want to work in partnership with suppliers to ensure that they realise that the requirements are important and that we intend to ensure that they are delivered.

Mr Hamilton:

Principle 1 is about visibility of opportunity. Much of the grumbling and complaining about the procurement process may come from people who are not necessarily that involved in the process or are aware of what goes on. It is useful to highlight what is going on through regular updates on websites, certainly for the big boys. Does CPD or any of the centres of procurement expertise actively talk to local businesses about opportunities? I do not mean that that should be done on a contract-by-contract basis, as that would be ridiculous, but local businesses could be educated about the procurement process and be shown how to get information on a regular basis. Do you do that already?

Mr D Armstrong:

No. We have guidance notes on the website, on which we rely heavily. We will carry out work to see how effective that is.

Recently, we worked with the CBI on a conference that we held specifically to allow us to explain how the procurement process works, to demystify it, and to explain that we must operate within the boundaries set for us by European directives. Part of the conference aim was to get feedback from suppliers and to let them tell us their experience of Government procurement in Northern Ireland. We then had a break-out session in which each of the centres of procurement expertise held a surgery. First, they dealt with suppliers’ general questions, after which they were available to address individuals’ concerns about their own particular procurement.

There is a need to continue that kind of engagement. We are planning to hold a further conference with the Construction Employers’ Federation in June 2009, with a view to outlining the work that we have done on the task group and explain Government requirements. At that conference, we will also say that we expect the construction industry to come to the process as good suppliers and be able to deliver the best value for money for Northern Ireland’s expenditure. There are two sides in the process. It might be interesting to hear the views of some Government construction clients against those of some suppliers.

Mr Hamilton:

That level of engagement is positive. You said that there is one winner and many losers. It is easy for suppliers who are unsuccessful to sometimes, say that: “You cannot work with that so-and-so sitting up there”, without getting the other side of the story. Equally, you cannot hide behind EU rules and regulations.

You used the term “demystify”. It would be helpful to get out there and speak positively to businesses, whether that is through the CBI, the Institute of Directors, the Construction Employers’ Federation, or the Federation of Small Businesses, to explain how they can be involved.

Mr McQuillan:

Do you view local Government procurement as part of the process or separate altogether?

Mr D Armstrong:

Local Government procurement is not bound by Government procurement policy. The review of public procurement recognised that there is a different legal standing for councils in Northern Ireland. Therefore, the policy that has been set for Government Departments is applied at councils’ discretion.

Some of the developments that we have had with the local construction industry have not flowed as well as we expected because some councils have taken on the policy and others have not. That has caused a wee bit of confusion. We have taken approaches to look at how the review of public administration might have impact and to try to put on the agenda that when organisations are brought together, procurement spend increases and becomes more significant. CPB is happy to help to explain that policy —

The Chairperson:

You do not have a role at present?

Mr D Armstrong:

No. We do not have a role beyond volunteering our advice.

Mr Weir:

There will be greater emphasis on local Government procurement, particularly post-2011. There will much pressure to meet the level of efficiency savings needed to deliver the best value for money from the opportunities that arise.

I want to pick up on Adrian’s point. I appreciate that there are constraints, or, at least, that there are not the same number of opportunities for local Government procurement as there are for central Government procurement. Local government and central Government need to take a reasonably proactive approach so that, even if they cannot operate according to the same policies, there is closer co-operation.

There is willingness in local Government to take advantage of best practice and, indeed, to ensure that there is closer co-operation. For example, the Local Government Association has organised a local economic-development summit, which will take place this afternoon. I am not sure whether you plan to be there. One of the sessions, with which I have been directly involved, will deal with procurement. So there is not just willingness but a desire on the part of local government to tap into the best methodologies for procurement. That needs to be more proactively explored, even if it cannot be enforced.

The Chairperson:

One would have thought that the economic development pillar of the review of public administration discussions would have created an almost irresistible argument in favour of formalising the procurement processes.

Mr Weir:

In the review of public administration process, policy development panels are looking at issues: I am not sure which panel is looking at this one. Procurement can play an important role in, for example, shared services. One of the panels is concerned with finance. In finance, there may be mutually beneficial savings for local government. I think that the door is open, and if it were pressed — I was going to say pressed from both sides but then one would get stuck. The analogy slightly breaks down there, but there are opportunities.

The Chairperson:

A revolving door would not be much help either.

Mr Weir:

That is correct — we would end up at opposite sides.

The Chairperson:

The reference at principle 7(b) to an alternative dispute resolution procedure sounds interesting. What does that entail?

Mr D Armstrong:

It is something in which the construction industry is very interested. It has been in contact with Scotland, has seen the Scottish model, and is to explain a Northern Ireland version to us. We are waiting on the industry coming forward with that information.

As regards my views on a regulated public procurement process, some things could give reassurance, up to a point, that the process is open, transparent and fair. However, it cannot replace the absolute entitlement to go to court. However, at the centre of procurement expertise, we sometimes receive complaints about particular aspects of procurement. We have a formal complaints procedure. There is a two-stage approach in CPD. The director or provisional director does his bit, and if he cannot resolve the matter with the complainant, it then comes to me and I will have it reviewed. We have had some comments that that looks as though we are acting as judge and jury in our own case and that the procedure is not as open as it could be. If we had an alternative procedure, by which we could quickly get an independent view and which may or may not be binding on the parties, it might calm some of the concerns that we are closed to —

The Chairperson:

I presume that, if you got agreement, it would become a binding resolution?

Mr D Armstrong:

If we could assure firms that their bid has been handled in a fair and reasonable way, and that there is no case to answer, that might encourage them to realise that it has been looked at by an independent party, to take rejection on the chin and look for the next opportunity. We would be willing to look at that as a part of the complaints procedure that centres of procurement expertise have to have in place. I have some concerns as to how it might work alongside the legal entitlement to go to court.

The Chairperson:

I hope that this is not just an endless piece of string and I hope that there are timelines involved. Will you please keep the Committee up to date? There are certain actions against the principles that have been enunciated. It would be helpful if the Committee could be given an update.

Mr D Armstrong:

The intention is that much of the activity will be taken forward by smaller task groups that will work through the summer. The next CIFNI meeting is in June and there will be a follow-up in October. Perhaps we could update the Committee after that.

The Chairperson:

We are in the midst of taking a broader, more strategic approach to procurement, but you have given us very useful information this morning. We will have a continuing interest in how those protocols work out in practice, and we will come back to you on that.

Thank you very much for your assistance.

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