Building procurements to get tougher

Töölised Tallinnas Hiltoni hotelli ehitusplatsil. Foto on illustratiivne.


By toughening up building procurement participation requirements, the state hopes for about eight extra millions in its coffers.

Currently, the state keeps losing up to €17m a year on the construction market, says a tax administrator. Of the building market, public procurements make for about a half. According to Tax and Customs Board deputy director-general Egon Veermäe, by applying stricter rules the state would gain about a half of that money.  

At the moment, the main criterion at procurements is the low price. In cooperation with State Real Estate Ltd (RKAS) and Estonian Association of Construction Entrepreneurs, the Tax Board has now developed extra requirements aimed at reducing the underbids and keep tax evaders away.

Tender price won’t rise

By the said changes, subcontractors will be obligated – in order to get the job – to report average wage of employees, average amount of employees and a printout presenting tax evasions by tax administrator.

«On basis of that information, it will be decoded if the subcontractor is acceptable or not. Such subcontractors as have salaries substantially below the building sector average, who do not have enough workers for the job, or who have current tax infringements, will not be included,» explained RKAS board member Elari Udam.

Subcontractors who, during the work, will commit violations of tax law or fail to comply with requirements set by ordering party, will be fined or, in worst case scenario, the contract will be terminated.

According to Mr Udam, tender prices will not rise due to the stricter rules.

«Tenders should not get more expensive. I think the prices will be fairer, not higher. Competition should be a healthy thing, bringing in the right bids; the state should get the best for its money,» said he.

Cheats under pressure

According to Mr Udam, many honest bidders currently stay away from public procurements, as there are too many muddier-of-the-markets; now, those who kept their distance are expected to come participate.

Lemminkäinen Eesti, the construction company, thinks the toughening of rules to be positive. According to CEO Sven Pertens, the cheats will now have a harder time.  

«Surely, even with the extra requirements there will be the companies seeking ways to avoid paying taxes; still, participation at procurements will for them be more difficult; such cases will be rarer and thus the tough ruler will have proven effective,» said he.

The new requirements are planned to be first applied at three pilot projects: Kaagvere specialised school in Tartu County; Häädemeeste rescue depot in Pärnu County; and construction objects of National Archives.