Vladimír Urbánek (Kurzy.cz)
Macroeconomics  |  November 19, 2012 15:57:46

CEEC: Construction in the Czech Republic next year will fall by a further 4.4%, hard competition

Czech construction industry will decline in the next year by another 4.4%, despite a significant decline in recent years. It results from the latest Quarterly analysis of the Czech construction industry, which regularly publishes CEEC Research in cooperation with the consulting firm KPMG Czech Republic. Additionally, there is a tough price war, which was amplified by an amendment to the Law on Public Procurement.

The decline in the next year will build on previous slump sector, which still have not found a bottom, according to the CSO construction has fallen by more than 20% from its peak in 2008 and declining steadily for four years. "According to current forecasts, the market in 2013 have decreased by another 4.4 percent. Construction companies deteriorating your expectations every quarter mainly due to very low demand for construction work, but also because of the ever zostřujícího competitive fight, which leads to some companies that carry out construction below the price * safe, "says Jiří Vacek results, Director of CEEC Research. "Prospects Czech construction industry remain negative. The main reason is the continued cautious approach private investors combined with the investment restrictions of public authorities. It seems clear that the true equation - no economic growth in the Czech construction industry recovery does not occur, "adds his opinion Paul Clement, Partner responsible for services to the real estate and construction company, KPMG in the Czech Republic. Return to growth, according to the results of research are expected representatives of companies or in 2014th

This year also an amendment to the Law on Public Procurement. Construction companies confirmed six months after the entry into force of that one of its consequences is a significant intensification of price warfare. The vast majority of representatives of construction companies (80%) confirms that the lowest bid price in the tender is lower than their calculated costs required for the implementation of the contract. "Low price is jednoznačným problem. It damages the whole construction sector. I do not understand why some construction companies are able to sign the contract below cost price. It is the way to hell, "said Milan Valenta, Managing Director, Board Member Průmstav. For large companies and companies dealing with engineering stavitelstvím indicate this fact even reach all directors.

However, each company is the third building never met by the purchaser demanded competing explanation is extremely low offer price. Secretion does not occur even to such offers, two-thirds of construction companies with that have never or rarely encountered. Contracting authorities are worried because they could be accused of corrupt behavior. "But investors who built the building for the cheapest labor and the cheapest material, definitely wins. Everyone can conjecture what it means for the quality of work, "says Robert Mikes, Marketing Manager  Weber Saint-Gobain.

While 83% of construction companies known cases where extremely low bid price resulted in extra work or in subsequent orders overcharged. Almost half of the companies (44%) say that it happens quite often. 'Implement supplier selection works solely by price is definitely wrong principle and in fact often uneconomical for the company. It must be such a variety of combinations of parameters to achieve the target investment while guaranteeing quality with optimum cost, "explains Ivan Kunst, CEO Scaserv. "It is always necessary to ask whether to build cheap, or expensive and well - in most cases is not the nature of things to pay the lowest price for quality work. This procedure often leads to additional costs and other price increases, "says Robert Pergl, chairman of the Chamber of administrators of public procurement(KAVZ) and adds: "The law on public procurement authorities to impose yet to compete solely on the lowest bid price, but only sufficient does not define how to set sub-criteria and how to evaluate them."

Define price * Secure Czech Chamber of Architects (CCA) and Czech Chamber of Authorized Engineers and Technicians (ČKAIT) as the price at which it is possible to design a guarantee (or even realize) quality, safe construction.Buildings designed (or realized) as a safe price are guaranteed value for money at the time, at such buildings no subsequent increase in the cost of construction and its operation.

Gold Partner CEEC Research is a research company SaintGobain Weber Terranova, the exclusive partner of the legal company Vilímková, Piper & partners, the exclusive partner in the insurance company Kooperativa.

In the full version the Quarterly analysis of Czech Construction Q4 2012 as a free download on the websites of CEEC Research www.ceec.eu

Jitka Němečková
PR and Media Director
CEEC Research

Quarterly analysis of Czech Construction Q4 2012 is based on a structured telephone interviews with a selected sample of 100 construction companies. Talks were held in October 2012. Addition to the standard analysis of this research has alsodetailed information about the attitudes of the major segments of the Hungarian construction by two-dimensional segmentation of the sample (ie, in terms of size construction companies, as well as the construction of the participants). Segments are divided into large and medium / small companies. From the other point of view then the segments dealing with building or civil engineering construction.

CEEC Research (Research potential construction in the countries of Central and Eastern Europe) is the largest analyst firm specializing in the construction sector in Central and Eastern Europe. Founded in 2005 and since provides free study on the current state and prospects of the construction sector in the ten countries of Central and Eastern Europe.All studies and analyzes CEEC Research are based solely on information obtained from regular structured interviews with key representatives of selected major, medium and small construction companies.

CEEC Research in addition to the regular analysis and free building also organizes meetings of leaders of construction companies, which are attended by CEOs of leading construction companies, presidents of associations, guilds and chambers of the construction industry, as well as ministers and heads of state selected countries.

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. The member firms employ more than 145,000 workers in 152 countries. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss business unit. Each member KPMG firm is a legally distinct and separate entity and describes itself as such.

KPMG Czech Republic started its activity in 1990, when it was first opened in Prague office. It currently has 760 employees and offices in Prague, Brno, Czech Budejovice, Liberec and Ostrava. KPMG Czech Republic provides audit, tax, consulting and law. Z 620 professionals, 29 partners, 27 of statutory auditors, 96 and 65 Certified Accountants, tax advisers.KPMG Czech Republic, a total of 22 qualified foreign experts.

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