Builders winning contracts with 'abnormally' low bids
Building firms are submitting "abnormally low tenders'' to win major state contracts, only to push up the prices at a later stage in an "abusive'' way, government agencies claim in a submission passed to the EU.
Last night, the building industry rejected the claims, but the issue is unlikely to go away as the Government wants to effectively name and shame firms that "habitually'' engage in such practices.
The EU is now reviewing the procurement rules at a time when the construction industry is under pressure in several EU economies, including Ireland.
In a frank submission, two government agencies -- one connected to the Office of Public Works -- have spelled out a problem that appears to have gotten worse in the downturn.
"Some contracting authorities are experiencing difficulties on the issue of abnormally low tenders, particularly in the construction sector,'' claims the submission.
Once the state contract is awarded, the firms adopt a different stance, with claims being submitted for additional payments. Many of the firms use clauses in contracts and dispute resolution in a way that is "abusive'', adds the submission.
The Government now wants to set up a database which would track the firms engaging in this activity.
"This could identify contractors who habitually engage in the practice,'' it states. "At a minimum this would leave contracting authorities better informed and in a position to take some action, or, in serious cases, exclude such contractors,'' said the submission, made by the National Public Procurement Policy Unit and the National Procurement Service.
The two agencies said the EU, if it needed to prioritise, should look at the issue of abnormally low tenders among the three key areas it addresses.
The EU is involved in the issue of procurement because it has a directive that effectively governs the entire area. Any radical changes in procedures in Ireland would have to be in compliance with EU rules.
The Construction Industry Federation (CIF) rejected the claims last night. Don O'Sullivan, its director of tenders and contracting, said there was very little scope for building firms to seek additional payments once contracts had been won.
He said either payments had to be made because they were legitimate or they should not be paid at all. He said contracts in Ireland were "very draconian" and while some firms did win contracts based on offering a below cost price, the CIF strongly disagreed with building firms simply trying to win contracts just to boost turnover.