THE GOVERNMENT has extended its cost-cutting plans to include businesses supplying goods to the State.

In February the State moved to reduce costs by requesting professional consultants, including lawyers and accountants, to reduce their fees by 8 per cent or withdraw their services within 30 days.

Government departments have now demanded the same reduction from suppliers on existing State contracts valued at over €100,000. Letters were sent to suppliers such as catering and IT providers this month.

A Government spokesperson confirmed the decision aims to reduce expenditure, and is the result of a procurement review begun by the Office of Public Works in July last year.

However, the Irish Small and Medium Enterprises Association (ISME) has lashed out at the decision. “While ISME agrees wholeheartedly with cost reduction and the fact that all future contracts must take into account the changed economic circumstances, we strongly disagree with the current bully-boy tactics,” said chief executive Mark Fielding.

“This is a total abuse of a dominant position and a frontal attack on the SME sector through blatant disregard for contractual legalities, not to mention fair play,” he said. “The ‘put-up-or-shut-up’ attitude is putting undue pressure on smaller suppliers, who are already having to contend with late payments from the State. The public procurement market, worth over €9 billion per annum, is absolutely vital to the survival of hundreds of small businesses.”

He was concerned, he said, that the decision could result in job losses in the sector.