Performance of construction contracts requires more attention

Toomas Mattson | 1/18/2019 | 2:30 PM

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TALLINN, 18 January 2019 – The National Audit Office analysed the situation in the performance of construction contracts on the basis of 10 buildings completed from 2015 to 2018 and came to the conclusion that when public procurements are supervised, it is important to put the emphasis on whether the best possible result was achieved for public money as a result of the procurement and whether the present Public Procurement Act serves its purpose and is of help in real life. The present tradition of supervision, which focuses mostly on the formal and legal nuances of the organisation of the procurement procedure, does not support the main purpose of the Act.

The construction experience of 10 sites shows that on average, it was possible to start using the building eight months later than set forth in the first public contract entered into for construction of the building. The average increase in the cost of construction in comparison with the initial public contract was 20%. However, all of the auditees were satisfied with the completed buildings and the National Audit Office did not find any expert analyses suggesting that their construction quality was weak or that they were dangerous in any way.

Unfortunately, there have been serious problems in the conduct of the contracting entities as well as those participating in procurements.The analysis indicates that construction is delayed and its cost increases mainly in the cases where the contracting entity initiates the procurement on the basis of a deficient construction design or where it becomes evident during construction that the builder cannot perform the contract in the required manner. Many problems encountered during the performance of a public contract emerge because the works are procured on the basis of a design according to which it is actually impossible to build, or the wishes of the contracting entity change and the builder has to redesign the solutions or design new ones. People don’t always act like this because of their lack of knowledge or skills, but because of time or financial pressure, as they hope that designing at the same time as building will save them time and money. None of the buildings among the sites analysed by the National Audit Office where designing took place at the same time as construction corresponded to the initial procurement conditions. In the opinion of the National Audit Office, the possibility of compliance with the Public Procurement Act is questionable in the cases where construction is procured with the design from very beginning, and an additional analysis and guidelines from the Ministry of Finance are therefore required.

The winning offers in a significant number of procurements are still made by builders who, irrespective of confirming that they are capable of building under the required conditions, haven’t actually set this as a goal for themselves. During the performance of the contract, they want to replace the solutions required in the procurement with ones that are cheaper for them to build and thereby save money.

In the opinion of the National Audit Office, contracting entities should help ensure that the breaches of malicious builders in the performance of construction contracts are recorded and other contracting entities are informed about them. As a result of the audit, the National Audit Office also made several recommendations to contracting entities on how to negotiate any possible replacements of materials and solutions before the public contract is entered into, not after.

The National Audit Office also found that contracting entities should document the course of construction better than before and determine in their internal rules of procedure which persons are responsible for which issues during the performance of the public contract. The National Audit Office advised the Ministry of Finance to start giving more attention to analysing the systematic problems emerging during the performance of construction contracts in order to ascertain whether the errors were caused solely by the contracting entity’s lack of skill or maliciousness, or whether they were partly caused by the inapplicability of the act.

 

Toomas Mattson
Communication Manager of the National Audit Office
+372 640 0777
+372 513 4900
toomas.mattson@riigikontroll.ee
press@riigikontroll.ee
http://www.riigikontroll.ee/

  • Posted: 1/18/2019 2:30 PM
  • Last Update: 1/18/2019 2:39 PM
  • Last Review: 1/18/2019 2:39 PM

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