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Monday 21.08.2017 | Name days: Linda, Janīna
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Road builders’ biggest issue – unpredictable prices

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Oil and other material prices are the ones most affecting road construction costs in Latvia, while the inability to predict price changes and fluctuations is the biggest issue for road builders, indicates Gints Karols, board member of SIA Saldus ceļinieks.

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUWhen participating at tenders, a road construction company counts on one price; however, projects often last for more than a year and the actual costs may differ. It is impossible to project these prices in the future, yet any price changes immediately affect all road construction costs, Karols emphasizes. However, he disagrees that, unlike in Latvia, Europe does not have such problem. The situation is similar, resulting in terminated contracts, so that at current costs builders would not have to implement projects based on the low price level in 2009.

Aigars Sēja, managing director at SIA Binders, is of the same opinion, highlighting that materials have the greatest impact on expenses, accounting for 60% of the total costs and mechanisms (40%). One of the key factors influencing prices is also the road transport necessary for hauling the construction materials.

As companies, we buy the road transport in form of services on the market. If in 2009, it cost 35 santims to transport one ton, this year the price is already 70 santims or more, Sēja affirms.

The representatives of road construction companies argue that the renewal and construction of Latvia’s roads is costlier than, for example, in Lithuania, because the extracted dolomite only partially meets the set requirements, so it is freighted to Latvia from Lithuania.

At the same time, Andrejs Radzēvičs, representative of the Latvian Union of Municipalities, recognizes there was a point in 2009 when the small builders’ guild started fighting among itself. A number of builders is no longer found in the Register of Enterprises or actively operating, since many of them tried to set maximally-low price for their work.

The market situation was characterized by crippling dumping trends, setting unrealistically-low road construction costs. Thus, the European Union (EU) funding is now partially distorting the market – it is now twice as large, yet without adequate capacity prices are raised artificially. So, the price surge is partly objective and partly caused by the previous price dumping, recognizes Radzēvičs.

Karols proposes to renew the Road Fund, whose financial means could be used for road reconstruction. There was a public pressure on such idea after seeing many potholes with the arrival of spring. The EU funds are not the solution for this, points out the representative of Saldus ceļinieks. Another option is private partnership.

On the other hand, experts agree that drivers pay yearly 450 million lats in excise tax on fuel and other fees, of which mere 60 million lats are directed to roads, investing the rest of the sum in other state budget priorities.


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