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Fund Ehitus: a quiet yet aggressive builder

Lepingu järgi peaks Fund Ehitus andma Eesti Rahva Muuseumi uue hoone Riigi Kinnisvarale üle veel sellel kuul. PHOTO: Margus Ansu

Fund Ehitus, publicity shy to the extreme, is owned by seasoned builders hardened by the battles on the market.  

Decisively, Fund pocketed the top expensive objects in the land – Estonian National Museum and the new Tallinn Prison – the two of them offering a total of €120m plus of production volume.

«I realise the veiled question is why Fund Ehitus is winning the major procurements recently. Regrettably, however, all I can say is their price policy is probably the most aggressive,» said State Real Estate Ltd head Urmas Somelar.

Unlike the market leaders Merko and Nordecon who talk rather thoroughly of their doings and intentions in annual reports, the report of Fund Ehitus is limited to minimal requirements.

In equal parts, the company belongs to four entrepreneurs: Ott Kikkas (53), Toomas Lipre (56), Anti Maksone (50) and Eiki Rump (41).

The owners are only willing to communicate with journalist via e-mail while letting the youngest take the blow. The firm feels like a family business saying it’s none of your business. «Indeed we are a family and [among us we] can communicate freely,» writes Mr Rump.

Success by intentional risk

The introvert living spawns myths, some of which can be toppled by numbers while others live on as legends.

The building sector is like boxing: you get hit, you spit out the blood, respect the other guy the better and vow to be more careful.

Whoever has anything to openly say about Fund, only has good to say. Therefore, it is on whisper level alone that the rumours go about Fund Ehitus winning the public procurements by price dumping so severe that subcontractors get skinned real bad. Some are saying the underbidding is threefold.

But this can be rejected by a glance at the last three talked-about procurements won by Fund. With the multiple ministries building to be erected at Suur-Ameerika St, the state won out best while the bidding was for rental price of square metres. Fund Ehitus offered 15 percent below the competitors.

But with the much more expensive Estonian national Museum and Tallinn Prison, the closest competitor was only beaten by 2 percent.

«Talking about Fund’s price policy, then our company being able to do the complex works we are able to choose: not liking the price, we won’t take it,» said Erik Metsis, head of Kulden Grupp acting as subcontractor to Fund Ehitus with interior work.

«Fund is such a large enterprise that it is difficult to talk about a common thread. They have dozens of object managers working for them and the result depends on their personality and skills. To some of them we go gladly, with others we do not want to have any business. If when accepting the order an object manager has agreed to difficult price condition in some section of the work, you shoot yourself in the leg working with him. If there’s no money, we’re not going,» he adds.

Mr Metsis says there’s no major difference between Fund and other main contractors and that Fund pays its bills diligently.

Fund claims they are never ever intentionally underbidding. The cheaper price, they assure us, may at times just happen by calculation error. «In the building sector, the joke is the one who errs most in calculations wins,» says Mr Rump the «spokesperson».

Competitors think Fund wins by calculated risk playing on the possibility that with large and long-term objects prices of materials and subcontractors will not jump during the time.

«Looking at their offers, they rather expect the domestic prices to drop. Well, time will tell,» said Merko Ehitus Estonia CEO Tiit Roben.

«As evidenced in the freshly published top charts for 2014, Fund has earned good money in former periods and they can take risks on account of that; if needed, they are able to subsidise the objects to complete them.»

The assessment by Merko is in line with what the subcontractors are saying about how Fund presses down the prices. For example, they offer doors and windows separately from the installation thereof. If price of doors and windows fits but someone offers cheaper installation, with that they pressurise the supplier to lower prices. The same tactics is applied at other stages of the work like floors etc.  

At that, they have the subcontractors assume responsibility for the quality of concrete as the latter have to enter contracts with concrete factories. Therefore, Fund’s subcontractors feature no concrete factory.

But how does Fund motivate its subcontractors to achieve expected results with an intense price policy like that?

Mr Rump says they treat their subcontractors as partners, are diligent and honest, and always keep the office doors open.

«Thankfully or regrettably, we do not have long to co from construction site to management board,» he says. «Subcontractors learned from the downturn. They have all restructured and think totally different than eight years ago – much more reasonably. Near term, I see no major battle for survival on subcontractors market. All are busy, aware of their abilities. No fooling around.»

Own developments coming

Andrus Koolme, head of concrete details maker Lasbet Tootmine says Fund’s ability to bring down prices springs from skills to create complete solutions. «The approach may surely make the job of architects meaningless, but with public procurements the cheaper price wins,» he says.

Concrete details point to the difficulties faced by Fund with the new Tallinn Prison. Namely, for next year majority of Estonian wall panel production is sold out because of the large shopping centres being built as well as lots of apartment blocks.  

«Prison walls can’t be built of some soft stuff so they may run into difficulty with price and deadlines,» adds Mr Koolme.

In that, Fund agrees. «With Tallinn Prison, deadline will be a large challenge,» confirms Mr Rump.

By tackling the Kopli Lines in Tallinn – most exclusive in ambition while shabbiest at present – Fund is letting it be known they intend to do major growth with own developments. It is by the own developments that make Merko and Nordecon have manifold more turnover though in construction work Fund is seen as of equal weight category.

«As our best investment knowledge is in real estate sector, it makes sense to tackle the Kopli Lines,» remarks Mr Rump.