Construction firms’ grievances

Large construction companies yesterday warned the government of «very difficult conditions» in the sector. In a letter to the Environment and Public Works Minister Giorgos Souflias, their association (STEAT) complained of the government’s cutbacks in the public investment program, delays in payments and the exclusion of its members from the recently introduced investment incentives law. «The apparent further serious reduction in the absorptions of the Public Investment Program to date, despite an increase in the number of auctions, has a negative impact on a large number of construction companies, with direct adverse influence on employment and the country’s development prospects,» STEAT said. The large discounts offered in the projects auctioned may be the result of strong competitive and free market conditions but has unfavorable side-effects, STEAT noted in the letter. Moreover, «the large letters of guarantee required prevent an appreciable number of firms from contesting projects, while banks pose an additional burden with the excessive commission fees they ask for issuing them.» Market watchers argue, however, that the truth lies somewhere in the middle. Construction companies have had strong growth opportunities in recent years, through the large number of projects subsidized by the European Union and for the Olympic Games. Moreover, they raised huge sums on the stock market which were largely wasted. Management mistakes, in combination with distortions arising from the system of selecting the winner on the basis of the now infamous «mathematical formula» (which led to colluded practices), allowed few companies to grow. STEAT says the exclusion of its members from investment incentives is unfair, particularly when «other activities, of a limited growth potential, are not excluded.» It also argues that the draft law on public-private partnerships (PPP) in public projects, now in the debate stage, should require candidate firms to be specially licensed, depending on the size of the project. However, companies bidding, say, to win a concession for a parking lot, may be specialized in the activity but not in construction, in which case they may assign the latter to a licensed firm. Separately, the Technical Chamber of Greece (TEE) expressed its opposition to the PPP draft law, claiming that it is «inadequate and its passing without the necessary changes poses a serious risk of annulling its usefulness as an instrument of growth for the country.» TEE general secretary Theodoros Dragiotis even claimed before the parliamentary committee debating the bill that PPP projects may end up costing more than under conventional contracts. He argued that PPPs should in no way be considered a cure-all. «The main, decisive and secure lever for development remains the Public Investment Program,» he said, adding that the prerequisite for the implementation of PPPs is a strong and adequately staffed and trained public administration, together with a clear and comprehensive legal framework that will be able to attract foreign investors. «The specific draft law is characterized by lack of clarity, basic principles and provisions, but also disregard, in some cases, of existing legislation which can lead to entanglements,» he said.