The construction companies expect a good year for public works in 2023 thanks above all to the arrival of European funds and the prodigality of the administrations in an election year, but they warn of various risks that could derail their expectations. In order to move forward with the projects and avoid a construction stoppage, they say, it is necessary to extend the terms of the Next Generation program by one year, unblock the concession model and extend the exceptional system for reviewing the prices of construction materials approved after the invasion of Ukraine, without which hundreds of tenders may be abandoned.
“We need at least one year of extension in EU funds, both on the project submission deadline and on the execution date,” said the president of the Seopan construction association, Julián Nuñez, at the conference press to present the results of the sector in 2022. The projects included in the Next Generation program must be presented before the end of the year for their execution at the latest by the end of 2026, and Seopan considers that many of them will not arrive on time, especially those of hydraulic infrastructures.
The construction companies calculate that, within the European funds, about 11,619 million euros will be dedicated to infrastructure, of which 7,244 million correspond to the State, 1,639 million to the autonomous communities and 2,736 million to local entities. “If we had an additional year, we would be in a position to launch large, massive projects,” says the president of Seopan before criticizing the “manifest lack of human and material resources in the public sector, often in the autonomous communities, to attend to the needs”.
The other two major demands have to do with concessions and with the material price review system. According to Seopan, there are 3,000 million euros in concession projects blocked due to doubts about their deadlines or risks, which is equivalent to seven out of ten files. The garbage contract of the Madrid city council stands out, for 2,142 million, and the one for Guipuzcoa residences, for 260 million.
This problem is due to the deindexation law of the economy approved in 2015, which “disincentives and hinders concessionaire activity” by linking the remuneration to the price of the ten-year Spanish bond plus a spread. According to Seopan, this formula prevents new projects from going ahead and is dissuading public administrations from betting on the concession model.
The third big problem, he says, is found in the exceptional review mechanism for the prices of construction materials applied by the Government after the invasion of Ukraine. This formula expires at the beginning of March and from the Executive there is apparently no interest in renewing it, which can cause hundreds of tenders to be deserted in the opinion of the construction companies.
“We have already sent all our proposals and, if there is still no news, it is because the Government does not intend to extend the mechanism,” says Núñez. “Practically all the works put out to tender by the autonomous communities and town halls since November of last year, which do not have price revision formulas in the specifications, are going to remain deserted,” he affirms. The blow, he affirms, could be “thousands of millions of euros”.
The exceptional price review mechanism was launched in March of last year and has a duration of one year. All bids awarded and signed during this time will enjoy these reviews throughout construction when the price of materials exceeds 20%. The problem is in the contracts published at the end of last year that have not yet been closed, which are the ones that will probably remain void as the mechanism is not renewed.
“I sense that a part of the Government thinks that the inflation problem has not yet been resolved, but 2023 is going to be a year of enormous inflation for the construction sector, which will not return to rates of 3% until at least 2024”, Nunez stated.
For works in progress, builders already enjoy these upward revisions when materials become more than 20% more expensive, a circumstance that occurs in 85% of contracts. Steel, indicates Seopan, accumulates a rise of 51% in two years, compared to 38% for copper and 33% for aluminum.
In 2022, the tender for public works increased strongly, 34%, to reach 29,615 million euros, although it is never enough for construction companies, which calculate that the country has an infrastructure deficit of 253,000 million euros.
By 2023, Seopan hopes that, if the problems it denounces are resolved, “the electoral cycle will be positive for the volume of local and regional contracting.” “We also hope that the State recovers its leading role in the bidding for works.”
