Construction costs ‘eliminate’ discounts on projects

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of Eleni Botas

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Smaller discounts – often in single digits – on public works tenders result in increased construction costs.

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The reduction of discounts is characterized by executives of the construction industry necessary as otherwise the projects do not come out with data the huge increases in raw materials (cement, asphalt, iron etc).

There are also concerns about the new projects that are expected to be put up for auction in the near future, as they themselves believe that due to the increase in construction materials, the projects are already “hit” and therefore “what discount can you give to such case? “, they ask.

“The huge increases in materials and raw materials have blown up the budgets of many projects, while they have significantly reduced the profit margin of companies.

Although at the moment the problem of increasing the cost of raw materials has been addressed by the Construction Groups by reducing the percentage of discounts they give to project tenders, we do not yet know what will happen to the next batch of projects to be put up for auction. “, points out an executive of a construction group.

It is noted that the high discounts have been one of the biggest scourges of public procurement over time, with significant effects on the quality and progress of projects in recent years.

Indicative of the extent of the phenomenon of excessively high discounts are the data of SATE (Panhellenic Association of Technical Companies).

According to them, in 2020, the average discount offered in a total of 369 budget projects from 2 million euros and up, reached 48.7%. Respectively, during the first four months of 2021, the average discount was 49.6% out of a total of 182 auctioned projects.

In 2019 the average discount per tender was 51.7%, from 56.2% in 2018 and 58.35% in 2017.

According to a recent IOBE survey for the construction industry, the high percentages of discounts mean either that the projects are awarded even below cost with the expectation of concluding a supplementary contract in the future, or that the initial project budget is not related to the actual technical cost conditions. projects.

And while from the customer (Public) point of view it can be considered that the big discounts are a result of the operation of the competition and create savings for the public treasury, the side effects should not be ignored, including: time-consuming completion procedures and questionable quality of construction. projects / studies as well as unfair competition in healthy companies, which can not compete with bids below cost and will eventually either have no activity or be forced to engage in a loss-making bidding process that will again lead to their closure.

Source: Capital

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