“Why is it necessary to change the building regulations, which provide for the charging of interest to consultants and do not guarantee the quality of construction.”, — write: www.epravda.com.ua
Despite reforms and deregulation – the abolition of legally, technically and morally outdated Soviet norms and standards – the construction industry in Ukraine remains one of the most difficult for control measures.
First of all, this is due to the fact that for years the construction market was in the zone of special attention of large business groups, which tried to “reshape” it or change it according to their interests.
Even now, when the issue of protecting energy infrastructure or restoring destroyed objects is a state priority, the construction industry remains a “sacred cow” for inspections.
The system of architectural and construction control in Ukraine is so closed that neither public organizations nor specialized ones – such as the State Audit Service of Ukraine – have full access to it.
The construction process resembles Skinner’s “black box”: only its preparation and final result are generally available. And how and what happens inside is a “commercial secret”.
Of course, some scandalous projects can be stopped at the tender stage. This was the case with “Okhmatdyt”, when the winner was the firm that offered building reconstruction services for twice the price – UAH 307 million. Such audacity caused a public outcry and was punished: the tender was cancelled.
However, the general public has not noted another problem that auditors constantly face. It is about charging interest to “consultants” who provide author’s and technical supervision during construction.
For example, if the scandalous tender for the reconstruction of the children’s hospital had remained valid, the private company chosen by the customer as the technical supervisor would have received UAH 5.22 million, which is 1.7% of the declared amount.
Now imagine how much money is spent on such private services, when the price of construction contracts reaches billions. It is worth noting right away: such unjustified expenses – and we are talking about state funds – amount to tens and hundreds of millions of hryvnias.
Construction on paper…Construction does not start from the construction site. It is prepared in the offices of developers and licensing organizations. And this entire stage is hidden from everyone. First, the customer conducts a tender or determines the project organization, which as a separate construction participant is the executor of the project and estimate documentation.
Next, there is an examination of the project, and at this stage opportunities for corruption abuses appear.
In 2017, a number of legislative changes were lobbied as part of the deregulation of construction: dozens of outdated normative legal acts were canceled and brought up to modern standards. At least this is what the authors of this reform claimed.
Changes and examination of construction projects and cost documentation were touched upon, i.e. compliance of project decisions with the requirements of operational safety and engineering support, standards of the living environment.
Expertise of projects is mandatory for all construction objects constructed with funds from city, state or regional budgets with estimated documentation in the amount of more than UAH 300,000.
However, if previously such activities were carried out only by qualified state experts, after the 2017 reform, the expertise is carried out by so-called certified specialists. These are representatives of organizations that formally meet the requirements of the Ministry of Infrastructure.
That is, the customer can choose experts who will carry out an examination of the project and estimate documentation for him. Or, as written in the motivational prospectus on the website of one of the organizations engaged in such activities, “the cost (price) of the examination of the construction project will pleasantly surprise you.”
At the same time, the expert organization is not responsible for its conclusions. It only confirms the compliance of the project with technical standards. Although it is at this stage that a time bomb is laid, which later explodes in the form of an increase in construction costs.
… and in realityWhen construction begins, the customer or general contractor is required to determine and provide author’s and technical supervision.
Technical supervision is the control of construction and assembly works, i.e. their compliance with construction regulations, rules and state standards. The author’s supervision is carried out in order to ensure the compliance of the completed construction works with the project documentation.
Theoretically, anyone can qualify as a technical supervision expert if he has a specialized education and has worked in construction for three years. Cost training and certification amount to slightly more than UAH 21,000 in total.
In practice, experienced by experts of the State Audit Service, the construction customer transfers the functions of project organization, scientific and technical support and author’s supervision to the contractor. What does this mean?
Technical and author supervision begins to adjust the project already after its approval by the project organization. Usually, these proposals are not aimed at making construction solutions cheaper, but at making them more expensive. After all, the contractor receives more funds after that and the interest for additional services grows proportionally.
Here are some examples. In 2023, the State Audit Service analyzed contracts for the construction of large infrastructure facilities with budget funds. At the beginning of the implementation of the projects and after the adjustment by the contractor, the contract prices increased dramatically: from UAH 300 million to UAH 1.1 billion, from UAH 2.5 billion to UAH 3.8 billion.
How much do additional services cost?The situation with “Okhmatdyt” showed that not only contractors can make money from unjustified overestimation of construction costs. The availability of accompanying services brings profit to other construction participants, which can be up to 6% of the production cost of the construction object. That is, the more expensive the project, the more money “certified specialists” will receive for engineering services.
For example, the amount of additional costs for the construction of the object for UAH 3.8 billion exceeded UAH 160 million without VAT:
- scientific and technical support – UAH 12 million;
- customer service maintenance – UAH 26 million;
- implementation of technical supervision – UAH 38 million;
- consulting engineer services – UAH 56.5 million;
- production of project and estimate documentation – UAH 23 million;
- examination of project and estimate documentation – UAH 1.3 million;
- implementation of author’s supervision – UAH 3.3 million.
It seemed that the presence of such a large number of accompanying services should at least guarantee the quality of the work performed.
However, during inspections by specialists of the State Audit Service, mass cases of inconsistency of the performed works with the project were established (responsible – author’s and technical supervision), poor execution of the PCD and miscalculations in it (responsible – project and expert organizations), payment for unfulfilled or poorly performed works (responsible – technical supervision).
The question arises: why were such large funds paid from the budget?
Proposals of the State Audit ServiceWe all need to learn how to save, especially when there is an opportunity to minimize expenses. This is a matter of our survival and our victory.
Construction is one of the industries in which a rational approach can save hundreds of millions of hryvnias. Therefore, the State Audit Service proposes a number of changes in approaches to the calculation of construction costs.
1. Reasons for increasing the cost of each object must be substantiated in detail, if specific technical solutions require it.
2. It is worth considering the issue of creating an independent state institution for certification of construction participants (engineers, architects, experts).
3. Abolish the practice of engaging a third-party consulting engineer by specialized customers (Recovery Service, capital construction departments) who have engineering and technical specialists on staff and make deductions for their maintenance from the funds for the construction of the facility.
4. Review the requirements for construction participants subject to certification and define clear criteria for canceling the certificate in case of violations.