500 Public Works, Worth Over 230 M €, Abandoned Because They Do Not Consider Rise In Price Of Materials

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The National Construction Confederation (CNC) warns that the public tenders that are being abandoned in Spain already exceed 230 million euros, as stated in the report that the employers’ association has presented with data broken down by territory.

In total, almost 500 deserted works have been identified. Of these, the most affected would be Catalonia, where the hole due to the 200 abandoned tenders amounts to more than 50 million euros. Galicia (96), Andalusia (46), Valencia (32) and the Basque Country (24) follow in terms of the number of paralysed tenders. In the Canary Islands, on the other hand, no works have been abandoned.

According to the study, the largest tendered work that has been abandoned amounts to 37 million euros and the average amount per abandoned public work is 475,000 euros. In total, 484 works have been accounted for whose execution has been left without companies to take them on. Of these, 35 tenders (7%) have a budget of more than one million euros.

The sector’s employers’ association attributes this hole to out-of-date prices, far below the market reality, which do not take into account the rising cost of raw materials. This is causing a significant standstill in public works in our country. Likewise, CNC warns that, if this price increase is not taken into account in the projects put out to tender and in the specifications, a price review mechanism could jeopardise the country’s economic recovery.

The employers’ association argues that this slowdown negatively affects the economic recovery, both because of the scale of the works and because of the thousands of jobs that will not be created due to the business vacuum. So amongst the hundreds of projects that have remained deserted, there are works whose paralysis impacts on the lives of millions of people: schools, roads, viaducts, high-speed lines, museums…

According to the study presented by CNC last October, the rise in the price of materials has led four out of ten companies to cancel or paralyse their projects. Since then, the situation has worsened globally.

In response to this, the CNC reiterates the urgency of establishing an automatic price rebalancing system to address this cost overrun. And, therefore, to take into account changes after the submission of bids, both upwards and downwards, seeking to provide stability to the contracts. At the same time, it calls for the introduction of market prices in the specifications, as required by the Public Sector Contracts Act, updating those that appear in projects prior to 2020, as the projects are old and do not reflect current prices.

CNC recalls that in 2020 public works were tendered for 14.521 billion euros, a third of the contracts put out to tender by the different administrations in 2006 (46 billion euros).

According to the president of the Construction Industry, Pedro Fernández Alén, “the figures for unopened tenders show the alarming paralysis of our sector, which could lead to a slowdown in economic recovery, taking into account its weight in the GDP and the important traction effect it has on other strategic sectors”.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.