Politicians love a good ribbon cutting, especially to a new local school, lots of photos in local newspapers with beaming kids. Delivering education and votes - parish pump politics at its best. Do the politicians care who built the school? Not really, as long as there was an Irish contractor on board. Do they care if the subcontractors were paid by the contractor? Not unless the subcontractor is an employer in their constituency.
The six public schools being built by the Carillion led special purpose vehicle, "Inspired Spaces", were contracted to Kildare based building contractor, Sammon Contracting. The value of the six school contract to Sammon was €87m. Sammon like most contractors subcontracted the bulk of the actual building work to subcontractors. So when Carillion collapsed, the €8m they owed to Sammon was not paid and in turn Sammon could not pay the subcontractors.
Two Sammon Group companies, Sammon Contracting Ltd and Sammon Construction Ireland Ltd went into liquidation in June this year following a period of Court protection from creditors known as examinership. The liquidator will now liquidate each of those companies' assets and pay their own fee, followed by bank loans and only then to the subcontractors. Subcontractors will be lucky to get €0.05c in the €1 from the liquidator.
If the subcontractors had signed contracts with Sammon, the subcontract would not put them in any better position because the contractor has gone into liquidation.
The State has looked on at all of this as if it were a nonchalant bystander. The State sanctioned these building projects and is paying for the schools to be built. It is not a party to the contract between Sammon and its subcontractors and therefore is highly unlikely to get involved in paying short changed subcontractors. The State will resist all pressure to step in to pay the subcontractors. Legally right perhaps but morally wrong.
The State has absolved itself of any responsibility to pay subcontractors left unpaid by a contractor in public funded construction projects. Much like our government's view of its responsibility to build social housing, the Department of Finance does not believe that it has any duty, moral or legal to ensure that subcontractors who deliver publicly funded built projects should be paid in full by the contractors who subcontract out the works. The State has orchestrated a culture of irresponsibility to payment of subcontractors in its own drafted building contracts.
Going forward the State can do four things to ensure we do not have another Sammon fallout for subcontractors: -
1. Ensure that contractors tendering for public building projects have financial stability, through an enhanced financial due diligence process;
2. Seek evidence of a history of prompt payment to subcontractors;
3. Mandate that contractors have a substantial financial bond in place in the event of financial collapse as pre-qualification criteria for a tender. Tour Operators have to do so and they are supplying any services to the State;
4. The State should nominate subcontractors in publicly funded projects so that they become contractually bound to pay subcontractors, in the event of non payment by the contractor where no genuine dispute arises.