The Costa Rican Chamber of Construction requests changing the public works adjustment regulation

The Costa Rican Chamber of Construction proposed changing the price adjustment regulations in public works contracts due to the abandoned turnkey tenders. (Courtesy image) The Costa Rican Chamber of Construction proposed changing the price adjustment regulations in public works contracts after a series of "turnkey" tenders that were left unawarded, including the new Tony Facio Hospital, because companies refuse to assume external risks such as dollar fluctuations, inflation, or the rising cost of steel and medical equipment for three or four years. The problem, according to the organization's executive director Rándall Murillo, is not limited to a single project. The publication detailed that similar situations also occurred in the remodeling of Hemato-Oncology at the National Children's Hospital, in the expansion of the Emergency Pneumology at San Rafael Hospital in Alajuela, at the Puntarenas branch of INS, and in projects of the Emergency Program for Comprehensive Reconstruction. Murillo stated that in this type of contract, the company must handle design, construction, and equipment. Between submitting the bid and starting the design, up to a year can pass, and then another two years before the design is approved and construction begins. "For a company, it is practically impossible to predict, three or four years in advance, at the moment of making an offer, what the price of rebar will be when construction starts in two years, or the cost of X-ray equipment when construction ends and the hospital needs to be equipped in four years," said the executive to the media. The organization's proposed solution is to restore the previous scheme of automatic adjustments, which applied both increases and decreases to the contract cost based on an official index calculated by the State. If the price of a supply decreased, the builder would return the money; if it increased, the institution would adjust the amount. The Tony Facio Hospital tender was left unawarded because companies refuse to assume risks such as dollar fluctuations, inflation, and rising costs of steel and medical equipment over the years. (Courtesy image) Murillo affirmed that this model "worked for decades and worked very well." He added that the index was not calculated by the private sector and, for that reason, did not generate questions "either up or down." The CCC spokesperson argued that without this mechanism, all the risk is transferred to the construction company. In his view, companies should respond for the aspects of the work itself, but not for external variables beyond their control. "What a construction company cannot assume is the risk of whether the dollar will go up or down, whether there is a war in some country that will affect steel prices, whether there is a situation in the United States or Europe that affects equipment costs, etc. A company does not know that, does not understand it, and should not assume risks that go beyond the work," he said. The consequence, according to Murillo, is twofold: either companies speculate and raise their prices to protect themselves, or they simply choose not to participate in tenders. For the leader, the first option is irresponsible and the second explains why many tenders end without offers. The Construction Chamber has insisted on its proposal before the Ministry of Finance and the Comptroller General of the Republic, although so far it has not succeeded in opening the regulation. Despite this, the organization believes that the recent impact of unawarded tenders could facilitate a greater willingness to review the norm. Rándall Murillo explained that in turnkey contracts, the company assumes design, construction, and equipment, with deadlines that can take up to four years from the bid to delivery. (Image taken from Teletica) On May 26, the Director of Public Procurement of Finance, Yesenia Ledezma, assured, cited by Teletica.com, that the Regulation for price adjustments in public works contracts and the review of prices in goods and services contracts already regulates the updating of amounts due to external factors such as inflation, wages, or supplies. "Its goal is to maintain the economic balance of the contract, avoiding delays, breaches, or overpricing. It establishes objective rules, formulas, and official indices, limiting discretion. This is key for the continuity of public works, the protection of public resources, and transparency in government spending," said the official. Before the interview with Murillo, Ledezma had dismissed changes to the regulations. The newspaper indicated that she requested an update on this point since July 30 and had not received a response. The Public Procurement Division of the Comptroller General of the Republic declined to comment on the company's proposal, arguing that the regulatory decree was issued by the Executive Branch on January 29, 2025. Murillo also mentioned two other factors that, in the Chamber's opinion, discourage company participation in these processes. The first is government interference in project design. According to him, although technical responsibility falls on the companies, institutions often demand changes during the process. This introduces uncertainty about who should bear the consequences of those modifications. The second point relates to a provision of the General Public Procurement Law that prevents subcontractors from submitting bids with more than one general contractor. For the organization, this restriction reduces competition in areas where there are few suppliers of specialized inputs. Regarding this last aspect, the Chamber stated that it also submitted a proposal to the government and some deputies.