The high interest of Romanian and foreign builders for the 107 kilometers of highway, for which the company in change of the national roads and highways held tenders, might drive the construction cost thereof 30% or 40% down from the EUR1 billion the authorities estimated. At least this is the price drop for the 183 kilometers CNADNR awarded contracts for in the first half of last year. With price being an important factor in the selection process, many construction companies usually bid lower than the CNADNR expects.
CNADNR received 95 bids for the 107 kilometers of highways divided into five sections. Competition was much higher than last year, when it got 64 bids for 183 kilometers divided into nine sections.
The recent highway tenders are very important for the construction market, and will make an impact not only on the business of the builders, which won them, but also on the construction equipment distributors, construction supplies producers, on the increase in jobs and eventually on the consumer spending.
“In principle, a high number of bids is an indicator of how interesting the project is for a service provider. There is a limited number of projects available, therefore any project with high changes of being implemented/financed will make builders take part in the selection process,” said Florin Popa, managing partner of construction consultant Vitalis Consulting.
Last year’s tenders for the building of 183 kilometers of highway on the European Corridor IV in western Romania drove the construction price down from the EUR1.4 billion estimated by CNADNR to about EUR1 billion.
However, Vitalis Consulting’s Florin Popa explains that tight competition in tenders is not always a guarantee that the winner will bid less than expected by CNADNR. “This is generally because of two reasons: on the one hand builders will not risk quoting a price that would jeopardize the fulfillment of the contract and their balance sheet in case of significant fluctuations of the market, and on the other, infrastructure projects come with significant margins for unforeseen risks or risks unknown at the time of the signing of the contracts, which should be provided for in the bid.”
Whereas highways in Romania may cost as much as EUR15 million to EUR20 million per kilometer, as was the case with the Transilvania highway before the Transport Ministry dropped the contract, in Bulgaria, highways are built for less than EUR4 million per kilometer.
(English version by Loredana Fratila-Cristescu)