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Bucharest seen from the Thames

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I've recently revisited London on a business trip, and, as I had a bit of time for myself, I had a chance to reflect upon the tremendous changes that the city had gone through since the days I used to live there myself, in the '90. It was literally another city that had been transformed by huge infrastructure and large construction projects, a city that was busy, buzzing and full of life.
Amid all this, I met Mrs. Edwina Udrescu, a Romanian lawyer who is doing a highly spe­ci­alized M.Sc. in Construction Law & Dispute Resolution at the reputed King’s College in London. Not surprisingly, at some point the discussion touched on the way in which the Brits understand the importance of infra­structure for the economic well-being of a country or of a city for that matter. We also tried to make a comparison between the Romanian and British legislative frameworks on such an important economic sector.   
As a construction lawyer, Mrs. Udrescu identified a few major issues in the Romanian construction industry. First of all, she says, the Romanian construction sector - private or public - has been blocked for the last few years due to the economic crisis as well as the rigid public procurement and concession legislation, which have not allowed major civil and infrastructure projects to move forward.
On the positive side, Mrs. Udrescu pointed out that in Romania we now have a new legislative package aiming at modernizing the procurement procedure by implementing the European Directive, which should be a big step forward in setting transparency and non-discriminatory conditions and a complex set of awarding criteria. The new law “should set a balance between contracting authorities and constructors”, says Mrs. Udrescu, by introducing a single criterion for the awarding of public contracts, namely the most economically advantageous bid. Nevertheless, in order to establish the most economically advantageous offer, contracting authorities should apply one of the following criteria: the lowest price, lowest cost, the best price-quality ratio. Having said that, final decisions must be based on certain assessment factors (including quality, environment/social-related aspects) and the best cost-quality ratio. However, points out Mrs. Udrescu, we must wait and see how the practice will adapt to the new circumstances.

The “best price-quality ratio” is obviously different from the previous “lowest cost” criteria, and hopefully, contracting authorities will go for it, thus avoiding situations where construction companies, keen to win tenders, would bid dumping prices and rather than prices reflecting the real value of the planned construction works. Such discrepancies between tender prices and the real value of total construction work have opened the floodgates to numerous claims. Unreal contract prices and late payments from beneficiaries also have an impact on payments to subcontractors and suppliers, triggering a chain reaction of insolvencies among small and middle subcontractors/suppliers, with huge implications on the cash flow and, ultimately, on job loss.
Mrs. Udrescu, a well-seasoned construction lawyer, expressed her amazement that the Romanian legislators and contracting authorities seem oblivious to the vital role of cash flow in insuring the health and wealth of a company or an entire business chain, and how important it is to deal quickly with and find a legal solution for such situations.  

“The construction law is a very specialized field, but the settlement of disputes in Romania is mostly handled by state Courts, which are far from having the required degree of expertise in this filed, and neither do counselors or lawyers. In Romania, there are few legal experts who really understand the complexity of construction matters rendered to disputes,” says Mrs. Udrescu, adding that, in the UK there is a specialized court, namely Technology and Construction Court, and there are specialized barristers, arbitrators, mediators and adjudicators in this field. Furthermore, major companies usually go to the international arbitration courts that deal with a significant number of disputes in construction, where both arbitrators and lawyers are highly specialized in the field, knowing all the nuts and bolts of the trade, which cannot be said at this particular moment about the Romanian courts or arbitration courts.
“This is exactly why I am studying construction law and arbitration at King’s College in London, because this is an outstanding place to acquire new skills and apply them back home in Romania.”  

As for the CNSC, the National Council for Solving Complaints, the institution looks more like a compulsory step before going in front of a Court rather than a true institution that can ultimately solve a dispute between companies or between the authorities and companies on public procurement procedures.

Finally, I asked Mrs. Edwina Udrescu what the Romanian authorities should do in order to speed-up infrastructure projects and reduce the time construction companies spend in courts rather than on building or construction sites. “The key to success for Concessions and Public Private Partnership (PPP) is the implementation of successful pilot projects, including the appointment of reputable/experienced advisors to the public sector, namely legal advisor, technical advisor, lead advisor (including finance). Right now, the concept of pilot projects for infrastructure is totally unknown. As for the design development, one should allow the private sector to optimize the design during the tender process in order to optimize the value for money for the public sector and not to be too prescriptive.

Concession and PPP projects have been implemented by numerous governments globally, across many different industry sectors relating to public works including transport and infrastructure, power and energy, health, education, etc.. But as long as the Project Agreement between the public sector and the private partner is not well drafted and well balanced to attract investors and lenders, such projects are doomed to failure from the beginning. Therefore, the risks must be fairly shared between the public sector and the private sector”.

The editorial is also available in our print edition.

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