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Official Report (Hansard)

Session: 2008/2009

Date: 10 June 2009

NORTHERN IRELAND ASSEMBLY 
COMMITTEE FOR 
FINANCE AND PERSONNEL

Inquiry into Public Procurement Practice in Northern Ireland

10 June 2009

 

Members present for all or part of the proceedings:

Mr Mitchel McLaughlin (Chairperson) 
Mr Simon Hamilton (Deputy Chairperson) 
Mr Fra McCann 
Ms Jennifer McCann 
Mr Adrian McQuillan 
Mr Declan O’Loan 
Mr Ian Paisley Jnr 
Ms Dawn Purvis

Witnesses:

Mr David Hamilton ) Martin and Hamilton Ltd.

The Chairperson (Mr McLaughlin):

The next item on the agenda is the Committee’s inquiry into public-procurement practice. I welcome Mr David Hamilton. Thank you for your submission. Although your report is self-explanatory, I invite you to give the Committee a brief run-through of it, after which we will discuss it.

Mr David Hamilton (Martin and Hamilton Ltd):

I thank the Committee for the opportunity to come here to explain the situation. Since I wrote that report, we have found that the problems outlined in it have continued and, if anything, have become worse. For our company, as a medium-sized contractor, responding to the submissions that come in is onerous and ties up our administration totally. The cost of improving our administration to deal with those submissions is prohibitive for a company of our size, whereas large companies can have an administration department as they can justify financing it.

My other worry is that being excluded from that pool of work over time will leave me without any experience to put on my curriculum vitae. The first question on an application form is always about past experience, but, after between three and five years of having been excluded, I will have nothing to write on that form. I do not know how I will ever get that experience again to allow me to complete those forms.

I also question the value-for-money aspect of the contracts. The feedback that I get regarding contracts that have been procured so far is that they are disadvantageous in respect of providing value for money. I have asked a few questions and tried to get behind the issue and, without wanting to be derogatory or use the wrong word, it seems that some applicants provide information that is not fully true. For instance, if they are asked for experience and they do not have any, they will use a subcontractor’s experience on their curriculum vitae.

Recently, a consultant told me that a contractor asked him how he could get ISO 14001 certification quickly, because he had stated in his submission that he had it and he had been successful in securing the contract. However, if he did not have that certification, he should not have stated that in his submission. That is the type of thing that is happening, because people are desperate for work, but I come from a background where I do not put something down on paper unless I have it. I have always been honest and straightforward.

There has been a lot of talk about Companies House not having accounts submitted for obvious reasons, and one must wonder about the validity of the information that is being submitted. We now employ only half the people that we were employing when I compiled the submission to the Committee, because there is no work. The frameworks have led to our being excluded. We have been runner-up three times with quality submissions that we have made to big companies. We are doing very well to get to that stage, but, at the end of the day, it is not a job and it does not contribute anything to the company. I cannot see how we can raise ourselves to the point where we can be successful, given the current set-up.

Mr O’Loan:

David, you are very welcome. I share the view with others that it is important that we hear evidence outlining direct practitioner experience; it is particularly valuable to us. I am familiar with your firm, and I particularly welcome you here as a firm from Ballymena, in my North Antrim constituency. Will you tell us about the type, and scale, of the contracts that your firm works on?

Mr D Hamilton:

Our bread and butter is commercial work; we are not house builders or developers. Some 25% of our work is in education and 25% is in the restoration and conservation of historic buildings, funded mainly by the lottery. The remainder of our work had been for the private sector, in offices and churches, for example; however, that market has dried up because of the recession.

Mr O’Loan:

What is the value of those contracts?

Mr D Hamilton:

They go up to about £3 million in value, but we have done contracts worth up to £5 million. Contracts worth from £500,000 to £1·5 million have been our bread and butter, although we extended that to £5 million for one project. However, smaller contracts are our scene. We are a locally based Ballymena company. We employ people living in the area from Ballycastle to Newtownards. The Committee may be interested to know that 20% of our employees are small farmers who want to be close to home so that they can get back to do bits and pieces on their farms in the evenings. Those are genuine guys who are good workers and who have the skills that we need; they are not interested in contracts in Dublin or England. We are a local company that tends to work within a 45-miles radius from home.

Mr O’Loan:

Getting your perspective is very important. Yours is by no means an insignificant company; it has substantial resources. I spoke to representatives of a significant firm of electrical and mechanical engineers who made a similar point to yours, which was that if they were starting off with the rules as they are now, they would be unable to get up the ladder. There is a significant inhibitor in the system.

You are critical of the framework system and you say that they render contracts beyond your reach; education contracts, for example, require bidders to have a turnover of £35 million. Why do you think that the public sector has moved so much towards frameworks? What do you understand as being the gains of the framework system, if you see any? I imagine that the standard response to a firm the size of yours is that you should form a consortium with other firms — how do you feel about that?

Mr D Hamilton:

The ethos of the framework system is that, from a Government point of view, there is one point of contact. There are eight approved contractors in the education framework and in the other there are five, and those are the firms through which work is procured. For example, if a group of primary schools require work to be done, there will be one framework and one point of contact, rather than a large number of small contracts to be administered.

The new form of contract that has been introduced is the NEC3, and the ethos of that is to get away from confrontation in the construction industry. I am sure that members all know the format of the contract; essentially, the different tradespeople are brought in as a part of a team and all are in it together so a financial claims situation does not arise. However, to a large extent, such problems did not arise in Northern Ireland. In England, there was a lot of problems; for example, contracts ran over time and over budget. Here, projects are of a smaller scale.

When bidding in the education framework, we were not tied in with anyone else, but we bid along with other contractors in other frameworks and were not successful. I have spoken with smaller contractors who have been in those frameworks who still find that they are getting no work, because the larger contractors look after themselves and the work is not being fed down.

Furthermore, I have been an independent contractor for years and I do not want to be a subcontractor to a large contractor, because that will mean that our finances and everything else depend on it. In other words, our being paid depends on it being paid, but at what stage that happens is questionable.

Mr O’Loan:

Therefore, you have tried the consortium route but without significant success?

Mr D Hamilton:

We are not averse to participating in consortia. We put in a submission for one of the Government contracts as part of a consortium with the Patton Group from Ballymena. Five firms were chosen and we came sixth.

Members may recall that the education framework came out quite quickly. A meeting was held in the Stormont Hotel and there was then a 40-day period in which to respond. We were probably quite conservative; we looked at it, read it, but we missed the opportunity by not reacting quickly enough. Once we realised that, we began to participate. However, we have not been successful in any of the others.

We are now making quality submissions for other projects. We were runner-up for the Conway Mill project; we were beaten by 1∙25 points. That is how close we have been. We went for a debriefing on that and found that we had missed out because of the social contribution element; we had not emphasised sufficiently that we would employ local labour. We came third in the Crescent Arts Centre competition, and we are waiting for a response on the Crumlin Road jail project.

The Chairperson:

Do you find the debriefing feedback constructive and helpful?

Mr D Hamilton:

Yes, we do. However, on the Crescent Arts Centre project, for example, our problem was that our programming was not good enough. I do not have a programmer in my company; that duty is shared among the contracts managers. It was found that our software was not as slick as that of the big companies, and we were marked down for that.

Putting programming software in place and employing people with expertise to operate it would be another expense to me. It is a chicken-and-egg situation. If the money is spent and the software is put in place, a person with third-level education would probably have to be employed to operate it. They would have to be paid about £30,000 a year in addition to perks.

Mr O’Loan:

You talked about the system being very onerous, and you amplified that as you spoke about the different applications that you have made. Is every application that you submit significantly different, or do you see a potential for a once-and-for-all approach? Could you be registered in some way?

Mr D Hamilton:

Under the old system, we were required to have constructionline registration and Safe-T-Cert. A company was qualified if it had those things, so experience and the type of project were then considered. I see that as the way forward. We hanker back to the old days when the construction service and so on had approved lists. Those lists revolved, and the top six companies tendered for a certain project, and the next six tendered for the next, and so on. That meant that everybody got an opportunity. Those companies were all approved and passed a standard. There is a need for some standardisation because a lot of the questions are fairly standard and the submissions are quite alike. However, there will always be something different because that is how things are sorted out.

The other issue is that, with the recession in the industry, one finds that the Central Procurement Directorate (CPD) receives anything from 30 to 70 returns. When one tries to select six companies from those returns, one needs to get down to the real nitty-gritty to pick the differences among those contractors. We would find it quite unfair if past experience was not taken into consideration. A company may have built a £1 million school, but that cannot compare to tendering for a £10 million or £15 million school. It cannot be said that that is experience of building a £10 million school, but that experience will get that company the marks because the applicants have to be sorted out in some way.

I have ISO 9001 certification. I do not have ISO 14001 or ISO 18001, but when it comes to looking at safety, quality and environment, the guy who has the ISI 18001 will tick the box and will be selected. The system is currently biased towards the bigger contractors who have the resources and those things in place.

Mr O’Loan:

I am not quite sure what your written submission says about what I would call the quality/cost debate in the adjudication of contracts. What is your view on that?

Mr D Hamilton:

You can write “quality” down on a bit of paper, but delivering it in a construction project is totally different. I can sell myself on a bit of paper, but that does not necessarily mean that I will do a quality job.

Mr O’Loan:

Do you feel that something is currently lacking in the adjudication of the quality/cost issue?

Mr D Hamilton:

Yes. It is really about the presentation of a report.

Mr O’Loan:

I could ask other questions, Chairperson, but I know that other members have questions, so I will leave it there.

The Chairperson:

I am certain that that was very useful.

Mr Paisley Jnr:

David, you are very welcome. It is good to see you. You have painted quite a dire picture of the policy’s impact on local companies.

Mr D Hamilton:

If you have a word with companies in North Antrim — I talk to them on a regular basis — you will find that they are all in the same situation. Not one of them has a decent workload at present.

Mr Paisley Jnr:

Yes: 50% of your workforce has gone.

Mr D Hamilton:

We would have been unusual in the fact that we employed people. An awful lot of construction companies today employ six or 10 people, who would mainly be staff. Traditionally, we like to have in-house expertise.

The Chairperson:

You had a work team.

Mr D Hamilton:

Yes. We had joiners, plasterers and bricklayers.

Mr Paisley Jnr:

You had a reservoir of tradesmen.

Mr D Hamilton:

Yes. We then subcontracted work to make up the rest. Traditionally, we trained apprentices. We were very unusual in that regard, because the big contractors do not train apprentices.

Mr Paisley Jnr:

That is gone now.

Mr D Hamilton:

I can run through the list of my employees. Most of those guys have served their time with us and have been with us from anything up to 25, 30 or 40 years.

Mr Paisley Jnr:

So, you were training and developing people’s skills, but that situation has gone?

Mr D Hamilton:

Yes, that has gone. I felt that it was unfair to keep apprentices in work while paying off tradesmen who had mortgages and families to support.

Mr Paisley Jnr:

You also indicated that, because of their abilities and the amount that they can spend on administration, large companies can hoover up not only the big jobs that you would not be interested in, but all the small jobs, because they are under financial pressure to get work.

Mr D Hamilton:

I know that the big contractors got on to the lists for recent projects for the North Eastern Education and Library Board due to of the quality of their submissions. They can provide a level of information that the rest of us cannot. I have been battling on, however. I am fortunate that my daughter works in marketing, because she has been a great help in improving the quality of our submissions. We are sticking with it and will continue to do so. I know that a lot of contractors have just given up.

Mr Paisley Jnr:

You also said that there are companies that embellish their CVs and take the credit for work that was done by others. You may not want to name them, but do you have evidence that that has happened? If you have such evidence, it would give us a bit of muscle when we make our arguments to the Minister and the Department about changing the arrangements in the way that you wisely set out in your letter to the Committee.

Mr D Hamilton:

The evidence is based on hearsay, but I know that it is happening. I met a consultant last week who put that point to me. He was called by a client who was in a panic and who asked him how he might get ISO 14001 certification quickly, because he had used it in a submission that had been successful and needed to obtain it. I know that the other side of the coin applies to the big contractors. If they cannot include particular project experience on their CV, they will use a subcontractor’s project. In other words, if the question is asked of them, they will say that they are going to use a subcontractor who has done a project of the relevant type. That is not specifically set out in the application form, but from what I have heard about the way in which applications are assessed, as long as the jargon is in the answer, the marks will be awarded. It is not checked back.

Mr Paisley Jnr:

So there is a lot of spin?

Mr D Hamilton:

Yes.

Mr Paisley Jnr:

Some people in this room know about that.

The Chairperson:

Some people know more about it than others.

Mr Paisley Jnr:

Everyone is guilty.

Mr D Hamilton:

That is life. We pride ourselves on paying our bills, doing things properly and carrying on from there. The Government must encourage that and give strength to it. We cannot be seen to be going down the other road.

Mr Paisley Jnr:

You are from a typical backbone-of-Northern Ireland company; you have taken some real knocks.

You talked about being tied up in administration costs and how it is almost prohibitive to make applications because of the costs involved. Can you put some meat on the bones of that? What is the average administrative cost of applying for a £1·5 million contract? How much would you prefer to have to pay just to stay in the game?

Mr D Hamilton:

A quality submission for a £1·5 million contract will involve two weeks’ administrative work. There will be health and safety, quality and environmental input, and quantity surveyors and estimators will be required to cost the project. In addition, there is a planning element, which involves drawing up a programme of work, and method statements have to be written. All of those elements are brought together. We rarely quantify it, because people do it in their working week, and we do not count the hours that they spend on a particular project. In certain instances — not regularly — we have brought in consultants to improve and polish our presentation.

Mr Paisley Jnr:

For a company the size of yours to ask one person to devote two weeks’ work to those administrative tasks is a considerable burden compared with that of a large company that would normally tender for contracts worth £10 million and which can easily afford to ask two or three people to do that work. That is where you are disadvantaged.

Mr D Hamilton:

Yes. The cost of administering a £1·5 million contract might amount to £3,000 or £5,000 with consultancy added.

Mr Paisley Jnr:

In your submission you write about a change in the system. That could form the bones of a motion that the Committee could table in the Assembly. Together with the Department, we would have to explore whether it would be possible to achieve the recommendations that are set out in the last paragraph of your letter. However, I think that the Committee has the basis for a motion to take the issue forward.

The Chairperson:

We will give separate consideration to that point.

Mr D Hamilton:

The housing associations pulled their framework on the morning of the submission, because, I think, they were scared of a legal challenge. That framework would have enabled companies with annual turnovers of up to £500,000, between £500,000 and £2 million, and over £2 million to submit bids. I encourage those types of frameworks because they put contractors into streams.

Mr Paisley Jnr:

That seems to be a more open way of operating and is linked to your recommendation for the continuity of contracts that are scheduled throughout the year.

Ms J McCann:

Thank you for coming here. Other witnesses have said that the current system is weighted in favour of larger companies and that small and medium-sized companies cannot get a foot on the ladder to bid for contracts. Your written submission states that the present system is ignoring the social, economic and environmental advantages of local contractors, and other witnesses have said the same.

People responsible for public procurement have told the Committee that, when considering bids, social and environmental factors are marked up; however, evidence that we have heard from others does not bear that out. It seems that less weight is given to social and environmental factors than other issues. For example, you said that the framework system puts contracts beyond the reach of many businesses because they must have a turnover of millions before their bid will be considered.

We are in favour of pushing social requirements from the point at which a contract is put together initially through to its delivery, because that will enable companies such as yours to employ quality apprentices and the long-term unemployed in areas of disadvantage and need. Would the inclusion of social requirements in contracts from the outset help small and medium-sized companies?

Mr D Hamilton:

Yes, very much so, and for the reasons that you outlined. The strength of a local company lies in the fact that it does not have to travel long distances to work, it can respond quickly and it has an interest in the area and will look after that environment. Some of the new contracts include a directive that requires companies to employ apprentices. However, larger companies will simply employ apprentices for the length of a project and then lay them off again. Companies must be required to prove that they employ apprentices on a long-term basis and that they work with local colleges to develop apprentices’ skills. That is an important part of it.

Ms J McCann:

I want to ask a question about subcontracting. A lot of small and medium-sized firms are forced into a subcontractor role because they cannot win a main contract. We heard evidence that, among other problems, subcontractors get only a small percentage of the moneys available. At present, do contracts include a provision to ensure that large companies treat subcontractors fairly and give them equality of opportunity?

Mr D Hamilton:

Yes, contracts must adhere to what is enshrined in European law generally; however, it is really up to the firms to administer that. For example, people have signed up to the quick-payment initiative, but there is nothing in law. The largest project we did as subcontractor was for McLaughlin and Harvey to build the in-situ concrete package at the Halifax call centre in the Gasworks. That project went well. However, being a subcontractor, we were well down the line of administration. Therefore, we could not talk directly to the architect or to the quantity surveyor. We submitted our valuations, and we got paid what the main contractor felt was right, and we could not make our case directly. That was frustrating because we were used to being at the higher level.

We still subcontract, and we look at different factors. In the present recession, however, no big building companies are subcontracting work, because they are trying to keep their own people in work.

Most builders here have a different mindset. That type of contract probably works well in England. I attended a lecture one night that was given by ChandlerKBS, which set up the education framework. I spoke to the representative, and he said that I should work as a subcontractor. I asked him where I would get the work, because the big firms do not subcontract. I do not want to be, for example, a joinery subcontractor. I would have to work on a decent-sized package for it to be worth my while. I cannot compete with labour-only joiners or labour-only bricklayers who work as subcontractors; that is not my market.

Northern Ireland is a small entity. In a 10-mile radius of any city in England, the workload can be 10 times greater than that in Northern Ireland. Northern Ireland is also more rural. That creates a totally different picture.

Ms J McCann:

I was particularly interested in your comments about the social requirements, because we hear constantly that they are not being administered. Conditions to do with apprenticeships and people who are long-term unemployed are written into the applications in the tendering process, but the social requirements are not followed through to the delivery stage. Your comments have convinced me that that seems to be the case with some of the larger companies.

Mr D Hamilton:

Companies such as ours give employees 29 days of holidays a year, which has been standard in the construction industry for a long time. Our employees get holiday pay, sickness benefit, and, although they do not get a great pension, they get a lump sum when they retire. They have all the benefits of employment, and a subcontractor does not offer that. Expense is involved in providing that.

Ms Purvis:

You mentioned constructionline and Safe-T-Cert. Have you used the eSourcing NI portal, which brings together all of the tenders? How useful have you found it to be?

Mr D Hamilton:

Applications forms can be downloaded and uploaded from that portal. We have to use it, because it is the only way to be involved in projects.

Ms Purvis:

When the Committee began its inquiry, it found that many SMEs complained that tenders were often advertised all over the place. The portal brings all of them together on one website.

Mr D Hamilton:

That is not necessarily the case. Applications for tender are sometimes missing from the portal. Recently, I missed a tender to do with education. When I questioned it, I was told that it had been on the portal, but I did not find it. The applications only appear for a week, and then they drop off. After a certain period, it is reckoned that contractors do not have enough time to apply, so the applications are removed from the portal. If firms do not constantly look at the portal, they may miss an opportunity.

Ms Purvis:

According to the evidence that we have received, applicants have 14 days to apply. After that, the information drops off the website. Are you represented on the construction industry forum for Northern Ireland?

Mr D Hamilton:

No. I am not.

Ms Purvis:

Are you aware of the procurement task group report that the construction industry forum for Northern Ireland produced?

Mr D Hamilton:

Yes, I am aware of that.

Ms Purvis:

The task group report advocates the use of frameworks, and we have taken evidence from SMEs that the frameworks lock out SMEs because of their size, their annual turnover and the criteria that ask for experience gained in the past five years. One of the procurement task force’s proposals was to reduce the size of the frameworks — more for maintenance contracts than for construction contracts. How do you feel about that?

Mr D Hamilton:

The company is a member of the Construction Employers Federation (CEF). I am not personally involved, but I know a couple of guys who are, and I receive its reports. We have been involved in setting up some of the frameworks for education maintenance contracts. The process is not complete, but a couple of meetings were held to discuss how best to progress to suit the contractors, get the best value for money, and so forth. If I come across as being against frameworks, it is because, to my mind, they are enormous packages. However, if frameworks were to be made smaller, I would view them simply as a different form of procurement.

Ms Purvis:

Would you like the size of all frameworks reduced to help SMEs to compete better?

Mr D Hamilton:

Not necessarily, because there will still be bigger projects. As I said earlier, if frameworks were separately designated for contracts of up to £500,000, £500,000 to £2 million, and £2 million and above, contractors could work to their strengths. The Construction Employers Federation realised only recently that smaller contractors are among their members. The tendency had been for the larger contractors to run the federation, but we are now able to get our point across to it.

Ms Purvis:

You have read and been consulted on the report: is its proposal workable?

Mr D Hamilton:

I think so. I spoke to Ciarán Fox recently about it. As with so many aspects of life, it is a matter of compromising, and the proposal represents a workable compromise that should allow everyone some opportunities.

Mr McQuillan:

David, are you saying that you do not mind frameworks as long as everyone is equal within them? If everyone in the framework has an equal say, rather than one large company treating the others as subcontractors, would you be happy?

Mr D Hamilton:

Yes.

Mr McQuillan:

You said that your company has attained ISO 9001 certification. How much would it cost to attain ISO 14001 and ISO 18001?

Mr D Hamilton:

It is hard to quantify the cost, but it would probably be approximately £20,000 a year. It could cost even more, because it would require the employment of a specific individual to be responsible for it. At present, the company employs a girl to look after quality, and health and safety. We also employ a part-time health and safety inspector to carry out site inspections. However, to move to ISO 14001 and ISO 18001 would require us to employ another member of staff, as well as the accompanying administration and paperwork that would be involved.

Mr McQuillan:

Would the frameworks mean that you would not need ISO 14001 and ISO 18001 but could work with ISO 9001?

Mr D Hamilton:

I am not sure; I tend to be sceptical. I attained the old BS 5750 standard long before anyone else. However, as no one ever asked me for it, and I never needed it, I let it lapse because it was costing me between £2,000 and £3,000 a year. Therefore, when ISO was introduced, I was fairly slow to adopt it. However, we now have the relevant paperwork and are progressing towards ISO 14001. I am holding back because, at present, it is an expense that I do not need, but it could be put in place quite quickly.

The consultants concerned would push me to go up to ISO 18001, because one big system that does everything replaces much of the Safe-T-Cert, and so forth. I am not adverse to that, but there must be some justification for doing that, and there must be a return to enable us to pay the bills.

Mr McQuillan:

Is there any justification for asking for ISO in the first place for contracts worth less than £5 million?

Mr D Hamilton:

The requirement for ISO is possibly justified for bigger contracts, but not for smaller ones, because it places an onerous requirement on contractors. At present, the market is distorted because of the recession. Therefore, everyone is looking for work, and we all know that prices are being driven down. At present, we are working at a loss. We just have to accept that, take it for a year, keep our set-up together, and hope that the situation improves. We do not need the expense of another layer of consultancy. If all companies accepted that level of certification, fair enough; we would accept it too.

The Chairperson:

Your comments have been helpful. Your perspective goes to the heart of the Committee’s concerns. You said that the new tendering process has brought its own difficulties. It has not made the system quicker or more efficient. You mentioned that the progress of projects has slowed down. Can you give us a specific example, or even a proposal, that you believe would address that? Apart from slowing down project delivery from a Government perspective, the system makes it difficult for local enterprise to be competitive in that environment.

Mr D Hamilton:

When I talk to clients, they tell me that their biggest problem is the level of submissions that they receive — between 40 and 60, even 70, big documents — all of which must be sorted through and analysed. They have to try to reduce that number to six. That takes a lot of time and slows the process down. What Declan O’Loan said makes sense: pre-qualification on many sections would bring submissions down to the specific requirements of a particular project, and that would be bound to be less onerous for us and, again, for whoever would assess those submissions.

The Chairperson:

Do you believe that that is doable in view of wider considerations, such as EU regulations? Can you set aside those requirements? Is there a way to short-circuit the process?

Mr D Hamilton:

Yes. I do not see why not. If a firm has ISO 9001, why does it need to answer all those additional questions?

Mr O’Loan:

The answers are implicit in the certification.

Mr D Hamilton:

Yes.

The Chairperson:

In a sense, the company is already pre-qualified?

Mr D Hamilton:

Yes. If, like us, a company is qualified to deal with construction contracts up to £3·5 million, the client will have copies of its insurance details and all relevant information. It will have the Safe-T-Cert and so on. Those requirements are already in place.

The Chairperson:

In order to make it possible, basically, for people to come to an agreed position, would you suggest a time frame for that accreditation? For example, when a company is qualified and is accepted and recognised, should that qualification remain in place for a set period?

Mr D Hamilton:

Yes. Obviously, it would be. Most Safe-T-Cert and constructionline registrations stand for one year. Each year, an audit is carried out on the ISO 9001. That is a high standard.

The Chairperson:

You do not suggest any change to that annual process of auditing? If people continue to meet the criteria, their accreditation should be accepted. They have a kind of stamped certification and, therefore, should not be required to resubmit all of the time.

Mr D Hamilton:

Yes. For example, car insurance is renewed each year. You send away your new certificate when it is renewed. That ticks the boxes and keeps you qualified. The same type of process could apply.

The Chairperson:

That has been helpful.

Mr D Hamilton:

I hope so.

The Chairperson:

Fra wants to ask a question. We have a late runner.

Mr F McCann:

I have two questions. I am aware that the discussion has covered much ground and a lot of questions have been answered. If there were two or three things that the Committee’s inquiry could do to help small businesses like yours to compete on a level playing field, what would you advise us to do?

Mr D Hamilton:

At present, if work were released, it would be of great benefit. Small businesses are finding that there is an absolute dearth of work. As I said, there seem to be no smaller, school projects of less than £500,000 or between £500,000 and £1·5 million.

There is a lot less work in all the sectors in which we would normally have worked. For example, although we would not have done a lot of work with housing associations traditionally, we always had some projects going on with them, but that is no longer the case. The level of inquiries from the health sector has also dropped significantly. More work in those sectors would be a big help, because it would keep the market turning and keep businesses going and paying their bills until such time as the economy improves and house building and suchlike increases.

Mr F McCann:

Earlier, the Committee discussed how the latest ruling from Europe has hit housing associations particularly hard. Does that impact on your company directly? Are people interpreting European Commission rules too strictly?

Mr D Hamilton:

Yes; there should have been a lead-in phase, meaning that the rule would take effect in, say, two years’ time. Projects that are in the system — some of which are well advanced — have now been shelved. The public have lost potential houses, and developers have lost potential projects. To a large extent, those projects were good value for money because, in the current market, developers were glad to have an outlet for those projects and were accepting reduced prices for them. It was not a case of the public purse being bled.

The Chairperson:

Has Europe provided scope for a phased introduction? Is it the case that we are dealing with a more over-zealous approach locally?

Mr D Hamilton:

I am not involved directly in any of those projects, but I know of them. There have been well-advanced projects for which housing associations have had to tell developers that they can buy the site but will have to tender for the building work, which is embarrassing for them, especially when the project had been pulled together as a package. It will probably not make financial sense for the developer to sell the land to the housing associations, so those projects will fall flat.

Mr F McCann:

Do major contractors use their experience and size to get contracts and then top-slice the profit, leaving less for local subcontractors and builders?

Mr D Hamilton:

That is difficult to answer. As you know, the bigger contractors have more influence because they work on a wider basis. That is a true statement. The bigger contractors will have experience in all spheres, whether they are working for the Health Department, the Department of Education or Invest Northern Ireland. Therefore, no matter what project comes up, they have experience and contacts, and are known. Our influence would be a lot less and is much more limited.

The Chairperson:

Major contractors also have the in-house capacity. You indicated a particular problem, which is that, for understandable business reasons, they will look after their own interests first. The local dimension will, perhaps, come last in the pecking order.

Mr D Hamilton:

If any of those contractors had an additional contract that was above their capacity, they would go out and recruit a contracts manager, a good site manager and an additional quantity surveyor; they would not go to a subcontractor.

Mr F McCann:

My point is that some major contracts here worth between £50 million and £100 million have been won by companies outside the North. Those companies then employ local subcontractors.

The Chairperson:

In such instances, 100% of the delivery is by local workers.

Mr F McCann:

Yes, and those companies top-slice their profit before they deliver it down to subcontractors.

Mr D Hamilton:

One does not mind that, providing that it is a reasonable figure, because we all have to make money. That is why we are in business; we will not survive if we do not do that. However, I know where you are coming from, and I can sympathise with that. In my experience, that is how it happens. The large contractor will not lose money; the guys below him will suffer.

Mr F McCann:

That approach must affect quality.

Mr D Hamilton:

Yes, but that is where the NEC3 contract should come in. Its ethos and theory are great, but getting it to work is another story.

The Chairperson:

Thank you very much, David. We may be in touch with you depending on how our inquiry progresses. We are also considering the prospect of organising a conference as part of our work, so we may be in touch with you about that.

Mr D Hamilton:

I will be glad to help in any way that I can.

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