Shaping a strong future: Construction employer associations join forces with the Government in a strategic working session
At the end of June, Prime Minister Marcel Ciolacu hosted a working conference with industry officials from employer groups as part of a proactive effort to promote the construction sector. The objective was to encourage a practical debate and identify the required steps for enhancing this vital sector of the Romanian economy.
In 2022, despite facing border conflicts and high inflation, Romania achieved economic results beyond expectations, largely driven by the construction sector, including infrastructure and residential projects. The impact of the construction sector on Romania’s GDP reached 7%, a significant contribution that cannot be overlooked.
The Government recognizes the significance of advancing the construction materials sector in fostering economic growth and enhancing national infrastructure. Through the promotion of domestic production and reducing reliance on imports, the objective is to reinforce the country’s manufacturing capabilities and generate fresh employment prospects within the construction industry.
The focus of the discussion was on the government’s plan to offer financial assistance to companies interested in investing in construction materials factories. The main objective of this initiative is to provide support and stimulate the growth of the construction sector in Romania. By creating a favorable investment environment in the construction materials industry, the aim is to attract both local and foreign investors.
Moreover, it is anticipated that investments in construction materials factories will lead to an improvement in the quality and diversification of products available in the market, thereby enhancing construction standards and facilitating projects to be carried out in a more efficient and sustainable manner. This government initiative comes at a time when the construction materials industry is facing significant challenges, such as import dependency, price fluctuations, and the need for modernization. By supporting investments in construction materials factories, the aim is to ensure a competitive and sustainable local production, which will contribute to the development of the sector and the overall strengthening of Romania’s economy in a tangible way.
During this meeting, a number of other important topics related to the construction industry were also discussed. The Romanian Association of Construction Entrepreneurs (ARACO) brought up 10 points that reflect the concerns and needs of the sector, aiming to improve working conditions and legislation in the field.
Mr. Bogdan Pândaru, Deputy CEO of INSPET, attended this working meeting on behalf of our firm, a member of ARACO.
Pre-Complaint ARACO – ARIC
The first item on the proposed agenda concerns the pre-complaint filed by ARACO – ARIC (Romanian Association of Consulting Engineers) against Government Decision 375 of March 18, 2022. The complaint seeks the revocation or the necessary steps to repeal the provisions of Item 12, Section I of GD no. 375/2022[1], and consequently, the provisions of Article 166, paragraphs (52), (53), and (54) of GD no. 395/2016; the provisions of Article II, Item 12 of GD no. 375/2022, and consequently, the provisions of Article 161, paragraphs (52), (53), and (54) of GD no. 394/2016; as well as the provisions of Article IV, paragraph 5 of the same GD no. 375/2022. The mentioned legislative texts raise several concerns, such as the illegality of the criticized provisions, as well as the violation of the principles of legal security, non-retroactivity, accessibility, and predictability of the law. ARACO argues that it is important to discuss this complaint and clarify the situation at hand. The employer associations seek to receive a response from the government and find an amicable solution to avoid litigation in court.
Lack of predictability and workforce shortage
A second item on the agenda consisted of discussions regarding the lack of tax predictability and workforce shortages. Employer associations in the industry request the maintenance of tax incentives for the construction sector, at least at the current threshold level, which has recently been reduced to one-third of the initially announced period of 10 years. Additionally, they aim to avoid frequent changes in legislation and ensure an adequate workforce to guarantee stability and industry development.
Lack of Freedom for Supervisors to Make Decisions in the Interest of “Independent” Projects
Another discussed topic addressed the lack of freedom for supervisors to make decisions in the interest of “independent” projects. ARACO believes that currently, supervisors mostly act as mere “transmitters” of decisions. Therefore, a discussion about the role and responsibilities of supervisors in construction projects is more than necessary. Employer associations desire supervisors to have the freedom to make decisions in the interest of the project, even if they contradict the wishes of the beneficiaries. Given the absence of a standard contract, and considering that beneficiaries exploit the situation through their own contracts, a reevaluation of supervision contracts could help avoid project blockages, delays, as well as disputes resolved in court or through arbitration.
Changing the Chronological Order of Tendering Procedures
An important point of discussion focused on changing the chronological order of tendering procedures. It was proposed to alter the sequence in which tenders are organized, so that the supervision process takes place prior to the construction phase. In recent years, according to ARACO, situations have multiplied where the constructor is already known at the time of organizing the supervision tender, based solely on the criterion of “lowest price.” The proposed change by the association would allow the identification of potential issues before commencing the works and ensure better planning and implementation of projects.
Strengthening the National Contract (Government Decision 1/2018)
There were discussions regarding the strengthening of the National Contract (Government Decision 1/2018), considered a balanced and fair form of contract. ARACO aims to maintain and improve this national contract for construction works, which has brought a balance between beneficiaries and contractors. However, certain aspects, such as issuing the performance guarantee within a more realistic timeframe (the current period of only 5 days from the contract signing is deemed too short) and ensuring coverage throughout the entire lifespan of the construction (a policy that no insurer can provide!), could be revised to better meet the industry’s needs.
Classification of Construction Companies based on Pre-established Criteria
Another agenda item was the mechanism for classifying companies. ARACO proposes involving objective organizations (specialized universities, professional associations, NGOs, etc.) in the classification of construction companies. These organizations would develop and implement a classification mechanism based on criteria such as similar experience, number of employees, financial capacity, etc. This classification could allow companies to access certain categories of projects based on their level of development.
Digitalization
Discussions also focused on the digitalization of processes in the construction industry. ARACO believes that the issue of electronic document signing should be addressed, and platforms should be created to facilitate efficient communication between beneficiaries and contractors for each project. This would enable better control over document status and prompt signing. Implementing digital solutions could contribute to reducing bureaucracy and improving project management.
Discrepancy between Different Emergency Ordinances
Issues related to discrepancies in regulations concerning price adjustments, caused by different emergency ordinances governing price adjustments, have also been highlighted. For example, ARACO has pointed out that the polynomial formula in Article 31 of Government Emergency Ordinance 64, which is the most feasible for infrastructure projects, cannot be applied to projects financed by sources other than European funds. The industry associations seek a coherent and uniform approach in this regard.
Implementation of Government Ordinance 15/2021 for Contracts Financed by Budgetary Funds
Another agenda item addressed the implementation of Government Ordinance 15/2021 for contracts financed by budgetary funds (such as the National Local Development Program – PNDL1, PNDL 2). ARACO believes it is important to discuss the methods of implementing the government ordinance regarding contracts financed by budgetary funds, including those under the National Local Development Program.
Resizing the Performance Guarantee Amount
Last but not least, construction industry associations wish to discuss the appropriate level of the performance guarantee and the possible adjustments needed for resizing the performance guarantee amount.
These thematic proposals discussed during the working meeting with industry associations on June 23, 2023, reflect the concerns and needs of the construction sector, and they were addressed in the meeting with the aim of identifying solutions and improving conditions and regulations in the field.
ARACO is an employer association, a professional, non-governmental, and non-political organization, established in 1990 to promote the economic and technical interests of construction and assembly units, research and design institutions, and construction machinery and equipment manufacturers, whether state-owned, mixed, or private. Since 2000, ARACO has been a confederative organization with national representation. As a member of the national social dialogue system with trade unions, ministries, the government, and local authorities, ARACO participates in the negotiation and signing of the national collective labor agreement in the construction industry.
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INSPET, a member company of ARACO, has been honored this year with the esteemed “ARACO Quality Trophy” in recognition of its valuable contribution to the BRUA project. (“Development of the Bulgaria-Romania-Hungary-Austria Gas Transport Corridor” project, 2018-2020) – the largest investment project in the history of the Romanian gas industry, with the main objective of developing the natural gas transportation infrastructure in Romania and Europe. (Beneficiary: TRANSGAZ SA).
The recognition was given for the successful completion of the three Natural Gas Compression Stations (PODIȘOR – located in Giurgiu county, BIBEȘTI – in Gorj county, and JUPA – in Caraș-Severin county), which play a crucial role in the overall implementation of the project. INSPET led the Consortium Association consisting of 7 companies, and the collaboration was a success both for the execution of the PODIȘOR station (where our company assumed the role of specialized construction contractor), as well as for the BIBEȘTI and JUPA stations. This recognition inspires us to maintain our commitment to the highest standards of quality and to be a dependable partner for future projects that benefit both the European Union and our country.
You can find news and more information about INSPET company on LinkedIn, Facebook, YouTube, and on the website www.inspet.ro.
