State to seek €1.5bn savings from suppliers

THE Government could be in line to make savings of €1.5 billion after announcing plans to renegotiate the fees private contractors and suppliers charge the state.

The move could mean trouble for firms who rely on Government for their greatest source of income, with one official admitting there might be some “collateral damage” involved.

Discussions will begin next month with close to 500 private companies who provide €15bn a year worth of goods and services throughout the public sector, from government departments to the HSE and the Garda Síochána, for everything from school equipment to Garda cars.

Junior Finance Minister Brian Hayes said he will meet the top 30 suppliers in early September to get “not just the best price, but a discount price”.

He warned that reducing the burden on taxpayers would take priority over protecting jobs in small and medium businesses.

“We are not in that business any more,” he said. “I don’t think the state can subsidise jobs any more. The state has got to get rigorous value for money. I’m doing what every private sector business is doing in terms of getting better value and a discount from suppliers.”

Mr Hayes said he wanted to put an end to the situation where some companies charged separate fees across different areas of the public sector for supplying the same goods or service.

“I’m going to stop that and demand that, in future, we deal with it in our department so we have a proper procurement system in place.”

He said he was “piggy backing” on the idea of the British cabinet office minister, Francis Maude, who made £800 million (€915m) of savings last year by asking companies to negotiate prices.

“We can’t change existing contracts, all we can do is use the muscle we have to argue that we’re entitled to discounts and that’s what I’m going to look for when these negotiations start in September.”

Vowing to “rigorously go after this”, Mr Hayes said: “We can’t drop people in the middle of a contract. But we can say to them that if they don’t deliver the goods for us, it could change our relationship with them in the future.”

The Government last night refused to put a figure on the savings achievable but said they were looking for “as much as possible”.

Experts consulted on the issue by the Dáil’s Public Accounts Committee last year said savings of 10% were achievable.

In 2009, more than €65m in contracts were awarded without competition — the prison service spent €22m on 154 contracts without a tender.