Construction turns rational

Greece’s major construction groups are looking forward to the decline of the phenomenon of excessive discounts for undertaking public projects as of the next few months.

Officials at listed companies estimate that discounts (i.e. deals with the state for a drastically reduced price at the expense of the contractors) amounting to 60%, or even 70%, will soon become a thing of the past. The fact that this opinion is expressed formally or informally by the majority of managers at the big construction groups increases the chances of this being implemented.

“The sector needs tranquillity. I believe this will happen in any case, thanks to the multitude of projects to be realized in our country in the next few years, which will remove the need for the submission of offers even below cost,” Christos Ioannou, the chairman of the Avax group, tells Kathimerini.

He argues that the significant increase in the pie of public works in the years to come will normalize conditions in construction as there will be less pressure to undertake new projects, so a more sustainable approach to the level of discount will be attainable. By the end of the decade, he notes, “projects with a total budget of 15-20 billion euros are expected – this is a huge sum.”

For the sector to respond to this supply and for funds not to be lost, market officials estimate that a cooler attitude will prevail among constructors, with the legal conflicts and excessive discounts being avoided as there will be enough work for everyone.

The extent of the discount phenomenon is reflected in the data of the association of construction companies (SATE) that showed the average discount in 2020 at 48.7% in the 369 tenders for projects of €2 million or more. In the first four months of this year the average discount came to 49.6% among 182 auctioned projects. Even so, this is a slight improvement from the 51.7% average rate in 2019.

Back in 2012 the average discount stood at just 36.3%. However, as of 2015, the number of state projects shrank and discount rates soared.