2024-07-25 23:28:49
Railway and waterworks projects blocked because contractors do not have money for indexation
Because of the missing BGN 114 million, which the National Railway Infrastructure Company cannot find and index construction contracts with, railway projects worth over BGN 6.5 billion are at real risk.
For almost a year now, in all directions of construction in the country – infrastructure, railway, water projects, there has been no application of the methodology for indexation of construction contracts, comments from the construction industry. The huge growth of inflation on the cost of implementation of the objects
puts their implementation at risk and threatens the country with loss of funds
on all operational programs.
Immediately after Russia’s attack on Ukraine, the prices of timber, iron, concrete and a number of other construction materials began to rise sharply, and for some of them the increase in price in a short time reached 70 and even 100%, and there are materials with over 200% rise in price. It took almost half a year for the “Petkov” office to develop a methodology for indexing construction contracts. Because of heavy public procurement, contracts for large projects are often awarded years before actual construction begins.
The methodology was successfully applied in 2022 and 2023,
as the contracts are reviewed every quarter and for the executed part of them, the relevant managing authority of the operational program increases the payments depending on the NSI index for construction materials. It appears that this process has stopped.
The National Railway Infrastructure Company, for example, has to pay BGN 114.2 million according to indexations calculated for the last quarter of last year and the first quarter of this year. The sums were accepted by a decision of the management board of NKŽI. There are no specified amounts for the second quarter, as the NSI index has not yet been published. But even this money has not been paid, as the enterprise does not have such a resource, NKŽI admits.
This is one of the loopholes in the methodology regulation
– it says that the indexation money can be paid if the contracting authority has the funds.
NKŽI is currently the contractor of railway projects under operational programs for about BGN 6.5 billion, although not all of them have started yet. The list of those being worked on includes the modernization and rehabilitation of the railway line Elin Pelin – Kostenets, from Kostenets to September, phase 2 of the modernization of Plovdiv – Burgas, the railway line Sofia – Elin Pelin, etc. for a total of about 150 kilometers.
Many construction contracts are executed under other operational programmes, for example “Growth Regions”, and the same problems have arisen under them. The Ministry of Internal Affairs and Communications only clarified that the admissibility of expenditure on the projects under the Operational Program “Regions in Growth 2014-2020” is until the end of 2023. There are builders who continue to work in 2024, but
they are financed by the beneficiary’s own contribution
and are not refundable with program funds.
Recently, acting regional minister Violeta Koritarova specified in response to a parliamentary question that the currently paid indexation only for the construction of the “Hemus” highway, which is financed from the state budget, is BGN 37.07 million, but this is far from the entire amount . The reason it is so small is that, until recently, construction on this site was frozen for 584 calendar days and only resumed about two months ago.
According to the minister, the average rate of increase in costs as a result of indexation is currently 32%. If it remains the same, it means that the construction of “Hemus”, which already exceeds BGN 2 billion, will absorb roughly BGN 600 million, and the amount will only increase with each subsequent delay.