Suppliers told to deliver savings or risk losing state contracts
THE 'Top 30' suppliers to the State have been warned to deliver steep discounts if they want to continue getting lucrative government contracts.
Junior Minister for Public Service Reform Brian Hayes is due to lead negotiations with the suppliers, who account for the largest share of the €15bn spent by the Government on supplies and services.
The suppliers are understood to include major semi-states, such as the ESB and Bord Gais, as well as leading IT companies and advertisers.
It is the first time a politician will lead the negotiations in a bid to reduce costs, especially where the Government is buying in bulk.
Previously, talks were carried out by officials from the National Procurement Service (NPS), which was set up in 2009 to get value for the State.
Mr Hayes said he got the support of the Cabinet for this approach two weeks ago, but it should have been done "years ago".
Mr Hayes admitted that the companies had legally binding contracts with the State -- but said he wanted them to deliver discounts, given the current economic climate.
"If people want to have a relationship with us into the future, I expect them to come to the negotiations with proper savings proposals. I can't put it any stronger than that," he said.
Suppliers can see all available government contracts on the e-tenders website. The Government must consider a variety of criteria, including value for money, when awarding the contract and stick strictly to EU procurement rules.
Mr Hayes said: "The objective is to get a better deal for the State, given that every private sector entity is doing it."
The aim is to deliver savings that will contribute to the €3.6bn target in the December Budget -- and avoid the need for some of the more painful cuts in health and education.
The NPS has delivered about €30m in savings on government purchases since it was set up.
The 'Top 30' suppliers were all sent letters last Friday inviting them to enter negotiations with Mr Hayes next month. He is not setting a target for savings in advance of the negotiations.
The next "Top 30" state suppliers will then be contacted for a second round of negotiations.
In 2009, the State had a contract worth €12.8m with the ESB and independent company Energia for the supply of electricity to government departments and agencies.
In the same year, it had a €10m gas contract with Bord Gais and a €4.9m liquid fuels contract with Topaz.
Mr Hayes is also aiming to use the negotiations to put an end to the practice of some suppliers charging different prices for the same product to different government agencies.
"I don't blame the suppliers. I blame the buyers," he said.
The Government's plan is based on an initiative by the British minister Francis Maude.
He hauled the 19 largest suppliers into the cabinet office last year to tell them they had been excessively profiting at the public's expense.
He achieved £800m (€909m) in savings on the British government's much larger procurement bill of €51bn.