Three construction companies secured 41 percent of public projects in the 10-year period up to 2024, said the Audit Office in a report released on Tuesday. The report also pointed out that although the three companies carried out 13 per cent of the projects, they took 41 per cent of the total revenue which amounted to €1.03 billion. The three companies were Cyfield, Iacovou Brothers and Cybarco, with the first taking more than 50 per cent of the total, which amounted to a staggering €563,955,276.
“These figures indicate increasing concentration of the market for major projects among specific contractors,” said the report, which also expressed serious concern about the fact that for 14.2 per cent of the projects there was only one bid and the contract was awarded to the single bidder. “This should be a cause of concern for the contracting authorities, especially when there are indications that a particular contractor is repeatedly the only bidder.”
These are perfectly legitimate points to raise, but the Audit Service often acts as if it were operating in a vacuum, rather than in a tiny country. A reason for three contractors dominating the construction sector is the size of the country. Because of the size of the country there are not enough contractors capable of handling big projects and competing for projects. It is not because of collusion by companies that there is only one bidder for many of the projects.
Then again, this possibility cannot be ruled out given how contractors behaved in the 90s. Back then, they took turns to make the most competitive bid for a construction project, something that ensured the state always paid very high prices. There is no indication that this is happening now, but perhaps the Audit Office could undertake a more in-depth examination of the tenders’ procedure that attracts only one bidder.
As an EU member-state, any EU-based contractor could bid for projects in Cyprus but it may be that these projects are not profitable enough to attract foreign construction companies which may be reluctant to spend money preparing bids in a country in which projects often go wrong. The Audit Office report mentions the Paphos-Polis highway contract which was signed with Greek company Intrakat in 2021 and was terminated in 2024 because of disputes over costs and completion dates. Other foreign companies that hear about these disputes that usually end up in arbitration court, will avoid tendering for projects in Cyprus.
Unfortunately, there is no obvious way forward because of the size of the country. Competition has led to the closing down of several construction companies in the last 10 to 15 years and this has led to less competition for public projects. How the authorities can encourage more competition, assuming they would want to, nobody really knows.
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