Government plans to centralise the way in which it buys goods and services threaten to cut small businesses out of State contracts and lead to job losses, a lobby group warned yesterday.

The Government is centralising procurement in an effort to cut up to €600 million a year off the €9 billion its spends on buying goods and services from private sector suppliers.

However, the Small Firms’ Association (SFA) says under the new system many of its members, which already rely on State contracts for some of their business, will be excluded from tendering.

Chairman AJ Noonan warned yesterday that the plan could result in these companies closing or being forced to lay off staff, ultimately adding to the Government's welfare bill.

'Five times more'
"It makes no sense to save money in one place and then end up costing yourself five times more than that in social welfare payments."

He said by amalgamating individual contracts into one large package the State was eliminating many Irish-based businesses from competitions to win contracts in the first place.

He said the contracts were now more likely to go to multinationals based outside the State, mainly in Britain. “We’ll be supporting jobs in another jurisdiction.”

He added that one company in Dublin was “wiped out” last year when it lost out on a contract to supply the city’s libraries, and said that there would be further examples of this if the Government implemented its procurement reforms in the way it intended.

Mr Noonan said the Government should make the contracts smaller in order to give local suppliers a chance of competing for them.

Late last year the Government appointed former Eircom executive Paul Quinn as the State’s chief procurement officer.

At the time Brendan Howlin, Minister for Public Expenditure and Reform, said he would lead an "efficiency drive" to cut costs.