Failed tenders see steep increase after Kumamoto earthquake recovery

Repairs of damaged infrastructure in the southern prefecture of Kumamoto, which was struck by a powerful earthquake in April 2016 are hampered by a significant increase in ‘failed tenders’ reports Kumamoto Nichinichi Shimbun (J).  During the months since the earthquake the number of tenders where no successful bidder was decided increased more than 7-fold. Of 1249 tenders issued, 75 cases ended without conclusion of a contract.

Prefectural authorities see a shortage of labor in the construction industry as one of the main reasons for the increase, as demand for construction services surged to ensure swift repair of the infrastructure in the stricken areas.  Authorities are responding with more flexibility with regard to completion deadlines. However, sources from the sector also point out that labor and material costs have seen a sharp rise since the quake, which have led construction companies to shy away from public procurement tenders, where prices are usually fixed at time of contracting and the financial risk is born by the contracting company.

The Japanese government procurement market is highly restrictive with regard to construction of public works, burdened by complex and non-transparent red tape. Participation of foreign companies in the Japanese public works construction market has been almost non-existent, leading to a sector dominated by a small number of giant general contractors on the one hand and a vast pack of small, often less efficient, construction companies as subcontractors. 

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