Tuesday, October 09, 2007

Tough times in Japan's construction industry...

...does not necessarily mean construction companies want to take part in actual construction projects, you know.

Too few bids for one in 10 public works projects
The Asahi Shimbun

By Eiji Zakoda - Nearly 1,200 public works projects, or roughly one in 10 that the central government tried to commission in fiscal 2006, were nonstarters because they didn't attract enough bidders, a survey shows.

Analysts said a more robust market for private-sector construction along with moves to end bid-rigging practices appear to explain the higher rate of projects that failed to attract a winning bid.

The Ministry of Land, Infrastructure and Transport surveyed the situation on a national basis from April after a number of regional development bureaus reported an increase in the number of projects that failed to end in a successful bid. It was the first such ministry survey.

Some of the projects received no bids at all, while in others, all of the bids exceeded the maximum price limit set by the central government.

The ministry studied 10,778 projects the central government planned to commission in fiscal 2006. Of those, 1,188 did not end with a successful bid...

Here's a fine conundrum for the labor economists: when the laws against collusive bid rigging and exceeding budgetary limits are enforced, over 10% of all projects become just too much trouble for even a perfunctory bid.

Funny thing that profit maximalization imperative--it makes even beggars choosers.

The weird corollary of all this - in the supposedly overstimulated and overcrowded construction sector, a low cost outsider could scoop up to 10% of all government contracts without bothering anyone else.

I am finding it harder and harder to take seriously those who argue that at least some of Koizumi fiscal reforms will have to be rolled back...

3 comments:

The French Reader said...

Saraba dangô! Dôrokôdan no min.eika banzai! Hikui rakusatsuritsu banzai!

yy said...

It is probably indication that some contracts are not worth bidding on and common sense would dictate that they should have simply been put to non-competitive contract/order . But governments are probably banned from doing that, which makes dango a practical means of getting some of the work done.

Not understanding or coping with the differences in scale of transactions also result in such stupid rules as receipts for all expenses over 1 yen (as opposed to say 1K yen or 10k yen)

MTC said...

yy -

I agree that dango, since it operated so openly (it was only in December 2005 that the Big Four construction firms finally foreswore it) must have served some socially beneficial functions on occasion.

However, I find it difficult to believe that in a field as crowded as construction there is not at least one firm is so hard up for business as to offer a bid below the maximum.

The situation described in the article sounds like a more like a game of chicken between the construction firms and the government, a dango of non-bidding on marginal contracts, an attempt to force the government to switch 10% of the contracts to non-competitive contract/order.