Engineer Svetoslav Glosov, Chairman of the Bulgarian Construction Chamber: Large infrastructure and energy projects will stir up the construction industry

- Mr. Glosov, what are your expectations for the development of the sector this year?
- Unfortunately, the construction industry will not recover from the crisis this year. The National Statistics Institute data shows that the decline in the sector continues. This is one reason for the 2012 forecasts to be deemed unfavourable. The biggest decline is still being registered in building construction. The bad thing is that, in recent months, a slowdown in infrastructure construction was reported as well. The relatively insufficient absorption of EU funds, ensuring the financing of many projects, is one of the reasons for this situation. In 2011, the overall decline in road construction was 7-8%, compared to 2010. And I must emphasise that if the branch is still operating this is due to European projects.
I think that this year will be tough, even harder than the previous one. But I hope that the decline will stop. The development of big projects is a crucial issue. We cannot hope to prevent the declining volumes in residential building.

- A new bottom of the crisis is being discussed. Have you noted such trends in the branch?
- The financing of infrastructure projects is still carried out only with European funds, under the Operational Programmes and with loans awarded by the World Bank. The substantial reduction in Foreign Direct Investment (FDI) flows exerts a negative impact as well. The decline in FDI in the construction sector is around 96 %, compared to 2008. The building of large shopping centres is the only thing which is being done now with foreign financing.

I personally wonder why the construction of such sites continues. Representatives of the industry believe that the projects in the energy branch could boost the recovery of the sector. The construction branch relies on the work on major energy infrastructure projects. For example, the realisation of the Belene Nuclear Power Plant would attract a lot of money and ensure job opportunities to many companies. A project with such parameters would provide dozens of jobs for years to come.

- A major program of renovation of residential buildings is underway.
- The implementation of the projects for renovation of buildings, financed under OP Regional Development, will lead to a stir up in construction activities. It will provide work for many small and medium-sized companies in different regions. But the members of the Bulgarian Construction Chamber (BCC) are pessimistic about the implementation of this program.

- You are probably concerned about the price increase of fuels?
- More expensive oil will surely affect the sector. It will most rapidly influence transport costs. All activities associated with mechanised processes, such as excavation works will be affected as well. A price increase of construction materials is likely to take place. The abuse of eventual lower cost expectations of construction activities has to be stopped. There is no option for prices to be lower because they have already reached the minimum levels. There may be a decrease in the prices of homes that are ready and have remained unsold in recent years because builders have been forced to offer them at lower prices.

- Contractors for the various projects will now be chosen in accordance with the "most economically advantageous price" criterion. Will this approach affect the value of the offers?
- “The most economically advantageous price” criterion is the best rule for the selection of contractors on road projects. The tenders held in accordance with this principle allow for the achievement of real and advantageous prices and conditions for the implementation of the projects in terms of deadlines and costs. The BCC has always been against this selection to be made in accordance with the "lowest price" criterion because it leads to some deficiencies in the project implementation. These are poor quality, delays in payments to subcontractors and no completion of the project because of insufficient funding. "The most economically advantageous price" approach will protect both public and government interests and those of contractors. Because it affects not only the price but the technical capabilities of the company, the quality of materials, time schedules, etc..

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