Warsaw, SIDIR conference October 24, 2008 József Éhn, Civil Engineer, Hungary

1. Practical experiences in Hungary,on water and sewerage projects implemented in groups of settlements Warsaw, SIDIR conference October 24, 2008 József Éhn, Civil Engineer, Hungary Honorary President of AHCEA

2. Profitability of the water and wastewater services – Dramatic change in public utility prices. • Up to 1989-90, state-subsidised, virtually free water services in the CEEC states • High per-capita consumption rates, permanent expansion,oversized sanitary projects • 1990: water supply 98%, but sewerage 46% only • Still outstanding sanitation projects: € 3,130 mio • Ratio of public utility services has grown in an average family budget from 8-10% to 25%, among them water/sewer prices to 2.5-3 €/m3

3. Effects of privatisation • 1990: state at the border of bankraptcy • constraint of accelerated, wholesale privatisation for preservation workplaces • Weak domestic capital interest for • Purchase close of all Construction Engineering Co. and 65% of Building Industry to large international firms • Expectition: increase of quality, improving organization, higher working culture

4. National Sewerage Program • Water Framework Directive 91/271/EEC • Subject: sewerage of all settlements over 2.000 Population Equivalent (number of inhabitants), with priority ranking: • 1st: Agglomerations on sensitive catchment area • 2nd: Agglomerations over 15.000 PE, on normal catchment area (CA) • 3rd: Aggl. on sensitive recipient stream CA • 4th: Aggl. of 2.000 to 10.000 PE, normal CA

5. Undertaking problems • Underrated project preparation costs • Issue of public procurement system: large competition - low-price tenders awarded • Local MSE expelled from the competition, but enrolled as underpaid subcontractors • Share of main contractor lower than 30% • Increasing role of the Engineer for quality supervision.

6. What about low-price competition? • Design and implementation costs below the necessary level: problems of quality • Decreasing chance for market oriented Co • Increasing room for corruption, but far not only at local firms • Incredible differencies in price proposals • Tools to be identified for elimination of unrealistically low bids from competition

7. Long-term considerations • Life expectancy of works: quality of works is a first priority • Construction materials, technologies available at affordable prices • Problems arise from accuracy and toleran-ces of infrastructure work performed • Lack of good preparation increasing number of claims, cost overrun and cumulated dealay may be expected

8. Designers between wind and water • Traditionally low project preparation cost expectation made by the Clients • Difficult to persuade the Employer in CEEC countries to apply more realistic fees in an unstable market • Unfair competition of some suppliers for application of their products • The QBS system would offer real solution

9. Selection Criteria of Engineer • FIDIC Engineer: what does it mean? • Competence requirements are unclear • Large responsibility on technical, financial and legal management of the project • Team-work managed by the Engineer, on behalf of the Employer • Has to be impartial to the Contracting Parties • His competence decide the flexible implemen-tation of project, in time and costs as well

10. Confused terms of competence • Group of projects: great number of players • Insreasing need of agreements for fulfiling the local requirements • Concise definition of new terms, as more as one project managers, controling orga-nisation, etc. should be previously defined • The engineer should be involved in the final project preparation phase as well

11. Increasing role of Engineer in co-financed contracts • FIDIC contracting system may be garant for impartial treatment of all Partners • The group of settlements have to appoint one top project manager of the Client, becoming direct Partner of the Engineer • The claims having effect on the project costs are subject of an approval of the Intermediate Body, garant of the respect of commitments in the Financing Memo.

12. Life-expectancy of built works • Quality of works should comply with the average life-expectancy requirements • Service life of water supply and sewerage projects is of 50 to 70 years • Public project financing include state budget and own resources of the Client • EU assistance is a non-recurring one, to be taken into consideration at the concept design and during implementation

13. Expected improvements • The infrastructure projects for Groups of settlements need more careful coordination at project preparation / implementation • The damaging low-price competition has to be replaced by the selection based on quality-price ratio • Optimal efficiency may be granted by good and –if necessary- longer and more expensive preparation and with well-organized, fast implementation • Quality of efficient and impartial supervision has to be assured on an adequate education and financial level • Expected results have to be controlled at least 10 years long, after putting into operation of works

14. Thank you for your attention!