Cartel practices seen in construction sector

Cartel practices seen in construction sector

A Competition Commission report published late on Wednesday established that there is insufficient competition in the construction sector. Listed construction firms appeared reserved on Thursday ahead of the next stages of the process.

The market regulator has found that there was a considerable concentration in the sector over the last decade, with an increase in the entry barriers in certain segments of the market. In this context company officials said on Thursday they will carefully examine the report and speak during the public consultation process that began on Thursday and will last until May 7.

The report has found that among the issues requiring further consultation and interventions are the unusually low bids in the sector (that the recent Infrastructure Ministry bill is attempting to settle), the organization mode and mainly the criteria for entry into the Public Works Contractors Register (MHEEDE), and the broader and more common use of public-private partnerships (PPPs) and concessions without a prior systematic analysis of their possible consequences on competition.

The commission recommends the further investigation and valuation of the competition conditions of PPPs and concessions, considering that their use has increased, while due to their size they usually address a specific number of large companies. On the other hand, market sources note the great success of the PPP system in Greece, with it being used as an example internationally; they point out that this instrument has managed to mobilize considerable private funds, making up for the shortage of public funds.

Regarding the recent regulation for tackling the problem of excessive discounts in public works, the commission believes it is insufficient and could have a negative effect on competition. This regulation provides that if a bid is more than 10% away from the average of all bids, it is deemed unusually low and will have to be explained.

Market sources comment that a similar system of project concession had also been employed 20 years ago (the mathematical formula) without success, as there were phenomena of bidder cooperation in an attempt to use the formula to direct the tender toward a specific bid.

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