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SRE: Potential price increase by builders in 5 projects - at least 4.8 million euros


Of the 77 construction projects referred to in the decision of the Competition Council (CC) on 30 July 2021, in which the builders' cartel agreement on artificial price increase has been established, the injured customer in 5 objects is SJSC State Real Estate (SRE). The first estimates show that the possible amount of damage caused to the state by the builders is at least 4.8 million euros, informs Ojārs Valkers, Executive Director at SRE.

Out of the 77 construction agreements indicated on the list of CC, 6 agreements on 5 objects concluded in the period from 2016 to 2018 are applicable to SRE.

According to the information published so far by the Competition Council, out of 77 projects indicated in the report of the Competition Council (CP), SRE is the contracting authority in the following 5 objects - renovation of the building for the needs of the Prosecutor's Office 7 Aspazijas Boulevard, Riga, reconstruction of the KNAB building at 1 Citadeles Street, Riga (contractor in both - SIA Abora), construction of a museum storage complex at 8 Pulka Street, Riga (builder PS RERE meistari 1), establishment of a memorial complex for the victims of the Soviet occupation at 1 Strēlnieku Square, Riga (builder SIA Skonto būve), as well as the agreement terminated between SRE and RERE būve 1 in 2019 for the construction of JRT at 25 Lāčplēša Street, Riga.

“We will defend the interests of the state and take action to recover the damage from the builders who are members of the cartel. We have requested additional information from the CC, we will evaluate the legal possibilities and, as soon as there is a legal basis for it, we will take immediate action to recover the state-owned funds,” reveals Valkers. “We do not rule out the fact that the amount of losses caused to the state could increase if, upon receiving the additional information requested from the CC, we find that the actual price increase has been higher,” Valkers explains.

It is currently estimated that the artificial increase in the price of construction agreements concluded as a result of the cartel amounts to at least 4.8 million euros of the total project costs. The calculation is based on the presumption laid down by law, which stipulates that in the case of a cartel agreement, the infringement has caused damage and as a result the price has been increased by 10 percent. The exact amount of damage to the state will be determined when the assessment and decisions of the Central Finance and Contracting Agency (CFLA) are also known.

"Currently, SRE has no legal basis to suspend the execution of other construction agreements. The CC, as a competent institution, has conducted an extensive and comprehensive investigation into the unauthorised agreements of construction participants, and identified all procurements, the results of which have affected it. If, after receiving additional information from the CC, we find that the cartel agreement may have historically affected a wider range of procurement, we will act accordingly, as the legal basis for a response arises from finding illegal actions during the acquisition of agreement conclusion rights or performance of the agreement,” says Valkers. “The company has a strong corporate governance system, including an internal anti-corruption and risk management system, and all relevant controls. The capital company will have zero tolerance for any illegal actions or any involvement of historical officials, if the investigation of the CC reveals any additional circumstances that are currently unknown,” says Valkers.

According to the public information, the government has instructed the Ministry of Economics, in cooperation with other ministries, to assess the impact of the builders' cartel decision on existing and planned construction projects, as well as the state budget, and to call for improvements.

SRE currently continues works on 43 different construction sites of national importance with a total project budget of 156 million euros. Capital company provides professional real estate management and administration for approximately 400 real estate properties with 1100 buildings of 1.02 million square metres and more than 3600 land properties with an area of 9.6 million square metres. SRE is one of 23 Latvian companies that have received the highest platinum award as part of the Sustainability Index of the Institute of Corporate Responsibility and Sustainability, confirming the good governance and sustainability of its operations. The company was founded in 1996, 100% owned by the Ministry of Finance of the Republic of Latvia.