Local geotechnical construction and foundation market, estimated at 93 million euro, will most probably maintain this year at the 2013 level, according to opinions of the managers in the area. Significantly dependent on the construction sector, the geotechnical works market has positive growth perspectives, but lack of liquidity and excessive fiscal requirements on the market, investors’ low confidence in market economy are still obstacles against sustainable resumption of the entire sector’s activity. Another market characteristic at the beginning of 2014 is the slowdown of public investments, also confirmed by the National Statistics Institute (INS), which reported for the first quarter of the year, a 27.3% decline of engineering construction sector. There are 25 specialized companies at national level, Bauer, Octagon, Soletanche Bachy, Terratest Geotehnic, Zublin Romania and Edrasis Construct S.R.L., being among the leaders.
According to Alexandros Ignatiadis, co- founder and shareholder of Octagon Contracting &Engineering- one of the main special foundation and geotechnical construction companies in Romania, with a 19.6 million euro turnover in 2013- this year will not be different from the previous.
“The first trimester brought a 3% contraction of the construction sector, while the GDP went up by 3.8%, therefore this sector was not a growth engine for the economy. The private sector was revived by the construction of two malls in Bucharest and of several factories in the country, but these investments have not generated profit yet. These results combined with the activity slowdown in the public sector have led to the -3% contribution of the construction sector to the GDP “, said Octagon manager. At the same time the incoming elections have not influenced positively the construction sector either, due to political instability. “During elections a great part of investment funds is redirected, through budget amendment, towards public sectors which can bring votes, such as social protection, to influence the electorate.” explained Alexandros Ignatiadis.
Positive estimates for foundation subcontractors
The 25 companies specialized in geotechnical construction execution, foundations, bored piles and drilling, which perform works on projects located countrywide, reported a 93 million euro turnover for 2013, according to most recent data published on the website of the Ministry of Public Finances. The results show a 4.4% growth against 2012, when the companies reported a total turnover worth 88.7 million euro. Business growth is followed by an 11.4% decline in 2012, on 2011.
In terms of value, geotechnical construction market ranks at the 2010 level. In 2014, the sector evolution will keep being influenced by the financing of the infrastructure and energy sectors works, while the 2015 operations will represent the results of current political decisions. Failure to cash receivables from the state, uncertainty related to private sector financing, low value of public investments in infrastructure and continuous change of the economic stimulation policies are among the difficulties which will be present on the market this year. Another fundamental issue is disloyal competition generated by certain companies which disrespect employment laws, maintaining low quality standards.
New contract awarding rules have not solved market issues
The new contract awarding rules, voted by the European Parliament at the beginning of this year bring, according to constructors, a plus of security and transparency in public works legislation, but they do not simplify it.
“The two directives in force will be replaced by three directives and the number of legislative provision pages will almost double. We have to mention, though, the fact that the expertise and qualification of the personnel will be used as assessment factors when the level of performance significantly depends on the quality of the personnel involved in the execution of the public acquisitions contract. At the same time many controversial and contradictory aspects remain unclear, which leads us to believe that this new rules package reaches its purpose only partially.” explained ing. Carlos Vasquez, Country Manager al Terratest Geotehnic.
The new rules do not solve the prioritization issue or the issues related to the lowest price criteria. “This can significantly affect the quality of delivered projects. More detailed and deep changes regarding this aspect are necessary.” said Octagon shareholder.