Inflation Grinding Croatian Projects to a Halt, Prices Soaring

Lauren Simmonds

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As Poslovni Dnevnik/Suzana Varosanec writes, the increase in the prices of energy sources and construction materials is very much spilling over into current Croatian projects dealing with regional waste management centres (WMS). The aforementioned market trends create far more financially difficult conditions for such projects, which will obviously require more generous national funds than were originally planned for.

Otherwise, these centres and everything to do with their construction is defined by the Law on Waste Management and the Waste Management Plan of the Republic of Croatia 2017-2022, they’re managed by special companies and owned by regional and local self-government units, i.e. the City of Zagreb.

That said, some of them are clearly stuck in the proverbial mud and their financial structure(s) cannot be closed properly without the intervention of the competent ministries. Such is the case of the Regional Centre for Waste Management (RCGO) in northwestern Croatia – Piskornica, this is a company of the same name whose business is run by director Mladen Ruzman, and it is facing the very real problem of a lack of money.

This is the unfortunate case in spite of the fact that after the first tender, significant interventions were made in the procurement documentation in the repeated public procurement procedure for the design and execution of the works on the construction of RCGO Piskornica.

Speaking more specifically, the estimated value of this project stands at an enormous 346.6 million kuna, and in both tenders announced in less than a year, the bids received were significantly higher than the estimated value of the project. The public opening of bids in the first public procurement procedure was held back in October 2021, and the bids received amounted to approximately 676 and 716 million kuna.

At the opening of bids in September, it can be seen that the bidder Helector S.A  Athens submitted a bid worth 820.5 million kuna, and the Association of Bidders Kostak komunalno in gradbeno podjetje d.d., Krsko i Kostak – graditeljstvo tehnologija sirovine, Zagreb, submitted a bid worth 669.8 million kuna in total.

“Although changes were made in the procurement documentation for the new procedure with an emphasis on those that reduce the conditions of technical and professional abilities in order to open up the market, and on those that reduce the risk for contractors, given the unpredictability of the market and sudden changes in material prices and energy products, the bids received in the repeated procedure are slightly lower than those received in the earlier procedure,” they stated from the Piskornica Administration.

In addition to the available financial resources, according to the answer received from the Ministry of Economy and Sustainable Development, the dynamics of the construction of these centres also very much depends on the readiness of the project of each individual centre for waste management, the realisation of which is the responsibility of the commercial company that manages each CGO.

So far, they claim, around 630 million kuna in grants have been spent from European Union (EU) funds for Croatian projects which deal with the preparation and construction of waste management centres, including CGO Mariscina and CGO Kastijun, which have been in operation since back in 2017 and 2018 respectively.

Of the Croatian projects also currently under construction, CGO Bikarac has been constructed and all of the trial work has been completed, while CGO Biljane Donje is in the process of construction and will only be completed next year.

The planned deadline for the construction of the Lucino razdolje CGO, the Babina gora CGO and the Piskornica CGO is until the end of 2026, depending on when the contracts for the works will actually be concluded. The contract for works is expected to be signed soon for CGO Lucina razdolje, while public procurement procedures for the construction of CGO Babina gora and Piskornica are now underway.

Considering the state of the market, the competent ministry has also noted that the funds will be secured when the procurement procedure is successfully completed and the final value of the Croatian projects involved is determined through amendments to the grant award contract.

“Considering the current prices on the market, the fact of the matter is that for certain procurement procedures, offers are being received that now exceed the original estimated value of the procurement, therefore, for price increases on individual projects, which can be proven, growth will be being justified through an increase in the prices of materials and of other input parameters, consider the possibility of securing additional national funds,” they stated from MINGOR.

For the Management of the Piskornica company, the following activities include holding a meeting with MINGOR and the Ministry of Regional Development and European Union Funds in order to agree and coordinate the next steps in the realisation of the project.

They have stated that they expect this meeting to take place as soon as possible, as well as that the beginning of the project implementation depends on this coordination with the ministries in terms of further implementation regarding the securing of funds above the estimated value, while the deadline for completion is 44 months from the date of signing the contract with the selected bidder.

For more on Croatian projects and ongoing inflationary pressures, make sure to check out our dedicated business section.


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