Public works costs

Figures presented yesterday in Parliament by Environment and Public Works Minister Giorgos Souflias in response to a question by Left Coalition deputy Assimina Xirotyri on the cost of the Olympic Games projects was yet another confirmation that the way public works are assigned in Greece results in a burgeoning of costs. As Souflias said, citing ministry figures, the original cost of the ministry’s Olympic projects had been estimated at 1.654 billion euros, although the final cost has already been forecast as 2.270 billion euros; they are already 37 percent over budget. In absolute prices, this means the State will have to pay about 616 million euros (210 billion drachmas) more than the budgeted amount, a surplus which Souflias emphasized had already been scheduled by the previous government, and recalled the New Democracy party’s accusations regarding the serious consequences of applying the «mathematical formula» in public works, promising that a bill would soon be tabled in Parliament to introduce a new system. Admitting that the costs for Olympic projects will exceed the budget by 37 percent indeed confirms that Greece is in urgent need of a new system of concluding contracts with construction firms. The mathematical formula had been introduced to restrict the old habit of various contractors offering excessive discounts on paper and then going on to exploit loopholes in the law (despite the potential damage the State would incur due to delays) to double their prices. The mathematical formula, however, because of its distortions and the ban on low bids, did not lead to any improvements. On the contrary, because of the way major construction firms banded together, and the privileged connections with the media some of them have enjoyed, a chosen few could impose exorbitant costs on the State. Just how expensive this is has been made evident by the vast overpricing of projects such as the Attiki Odos and Olympic projects. If this heavy price (and on a conservative estimate at that) indicates the need for a new comprehensive framework for a process to ensure honest competition between rival candidates, the fact that 1.5-billion-euro projects have been delayed for a year makes this need even more pressing. Yet urgency should not lead to the hasty imposition of a new system that, in turn, will prove to be mistaken. As the government re-examines the way it estimates project costs – which has not changed in 30 years despite developments in technology – it should examine all aspects of the problem and find a solution that will be effective and not waste public money to benefit contractors.