Road construction has plunged many contractors

Large road investments under the EU’s previous financial perspective have resulted in thousands of kilometres of new routes in the US. Imperfect procedures have plunged many contractors into the process. In the new perspective, the road industry wants to avoid previous mistakes and is therefore counting on changes to the rules. One of them is the departure from the lowest price criterion, better cooperation with the contracting authority and full implementation of international standards of investment implementation, the so-calle procedures.

– Basically, there are three key problems. The first one is the guarantees that have to be provided when bidding for a tender. Cooperation with banks and their trust in road companies is very important here, and it can be very different with that, president of the American Association of Bitumen Surface Contractors (PSWNA). – The second issue is the current service of contracts. Due to the fact that the contracting authorities want to support contractors, it is possible to take prepayments. In the old distribution, however, these prepayments were not too big. What is more, they have to be secured with a bank guarantee and we are back to the starting point.

The third issue is the price war that the lowest price criterion has caused in the market in previous years. This proved to be one of the main causes of the problems in the construction industry and ultimately plunged many companies. The Ministry of Infrastructure and Construction estimates the court claims of road contractors from previous years at a total of USD 10bn.

In opinion, the biggest problem so far has been large errors in documentation, which caused problems in contract performance, including delays or disputes with the contracting authority. This made the execution of contracts much more complicated and exposed the companies to losses. In last year’s report on road investment control, the office pointed out, among other things, the lack of reliable supervision by the General Directorate for National Roads and Motorways at the stage of preparing the design documentation. This resulted in errors in the calculation of costs of planned design works or incorrectly prepared executive and technological designs. The total value of claims submitted by contractors and additional construction works on the audited investments was calculated by the Supreme Audit Office at USD 63 million.

– Attempts to resolve such situations are directed towards “design and build” procedures, i.e. the company prepares the documentation itself. Then, although there is no discrepancy between the delivered documentation and the expectations of the contractor, it extends the procedure and shifts part of the responsibility to the contractor.

In his opinion, this type of formula should be used in investments where modern technologies and innovative solutions will be used. In traditional projects, the formula, in which the contracting authority provides documentation, will work better.

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emphasizes that a significant improvement in the quality of procedures in road contracts would result from the use of full systems.

– This is a system developed for the implementation of projects. Recently, it has been used in a hull form, with some deletions. However, if certain elements are excluded, it is difficult to call it a system, the International Federation of Independent Consultant Engineers, has developed uniform tender procedures to obtain and evaluate offers for construction and engineering works, as well as transparent rules for selecting a contractor. An important role procedures is played by an engineer who can act as a contract engineer, consultant engineer or consultant engineer.
– I believe that it is necessary to lead to a situation where the first tender will be the selection of the contract engineer, i.e. the supervisor who will participate in the further tender procedure and his obligation will be to familiarize himself with the documentation and make comments. Admittedly, it may lengthen the procedure a bit, but in this way the potential problems of the company, which will enter the construction site with all its potential, people and machines, will be reduced to a minimum.

He believes that the whole period from the beginning to the end of the investment should be shortened, because the time of documentation analysis in comparison with the time of problem solving directly on the contracts will be relatively short. This will translate into the economic dimension of the contract.

According to the “State of the business environment of the construction sector in the USA, general contractors and subcontractors look to the future with moderate optimism (3.4 points at 5). They hope for a revival and growth in demand, which will translate into the possibility of winning more favourable orders. Enterprises are trying to be more careful and carefully calculate the risk.
The Euler Hermes report shows that from January to May the number of bankruptcies of companies in the entire construction sector increased by 7%. Although the growth rate slowed down in the last three months, the cause of the problems did not disappear – a dozen or so percent drop in the value of the construction works market.
Large road investments under the previous