Public Works: Projects and budgets increased, discounts remain high

Discounts on public works remained very high in the first eight months of 2020 and there are many more projects and increased budgets. According to data collected by SATE, the average discount given to the tenders held reached 51.26%, which is still more than half of the project budgets.

Compared to 2019 there is very small improvement as the corresponding period the discounts moved to 52.2%, however the percentages given are still disappointing. The coveted legislative intervention is hgihly awaited by the industry as significant corrective interventions have been made in order to stop the phenomenon which is proven to create serious problems for the companies that provide the provide the project, as well as its execution and consequently for the entire construction market.

However, from the available data, the increase in the number of projects tendered by the contracting authorities is most encouraging. According to what is recorded by SATE, in the first eight months of 2020 we had the announcement of 480 public works, while in the same period last year we had 417 projects, i.e. 63 more projects or an increase of 15.3%.

Increase in project budgets

Also another positive element in this year’s competitions is the increase in the average budget per project which is significant. During the first eight months of the last year the average budget per project was 3.9 million euros. This year the average is 5.2 million euros. In other words, we observe an increase of 1.3 million euros or 33.5%.

Gathering the above data we can conclude that in the 480 public projects announced this year we had a total budget of 2.5 billion euros compared to 1.63 billion euros last year, ie they fall in the construction economy 1.31 billion euros more.

It must be clarified that the above data for the discounts come from a total of 297 tenders this year that had results (ie bidders) and 211 respectively last year.

Why is it so important to improve discounts?

Seeing not only the increase in the budget of the projects, but also the stagnation in the submission of excessive discounts, creates an image that has two sides. Keeping in mind what happens to most projects that are awarded with very high discounts, the budget and the number of projects can greatly improve the image of the industry, but there is also the downside.

The projects with big discounts present problems in their duration, in the inability of the contractors to respond (precisely because of the higher discounts) and many of them end up in a dead end or in continuous requests for additional contracts.

As a main consequence, the above increased budget that we have observed takes much longer to be absorbed, and as a result it is not distributed with the right way in the real economy