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About us Members Positions Issue May 2016
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Dear Reader,

All presentations and photos from the latest EIC conference, held in Berlin on 21-22 April 2016, are now available for download on the EIC conference website.

Sincerely,
Your EIC Team

Headlines
EIC 2016 Spring Conference: New Digital Technologies for Construction
Headlines

More than 100 participants attended the EIC Spring Conference including a workshop on the effects of new digital technologies for construction and their impact on contractual relationships between all parties.
Read more...

New EIC Working Group on “Local Costs” in the context of the OECD Consensus
Headlines

EIC has established a new Working Group to draft an EIC Position that is critical of the current restrictions for national export credit agencies to insure local costs.
Read more...

EIC to comprise Position Paper on Corporate Responsibility and the industry's role in achieving the SDGs
Headlines

The newly established EIC Working Group CR will meet again on 31 May 2016 to analyse the options for establishing an EIC Position on Corporate Responsibility.
Read more...


News from Bruessels
FIEC/EIC meeting with DG MOVE on Use of (un)fair Contract Conditions for Projects financed by the Connecting Europe Facility

On behalf of the Joint FIEC/EIC Working Group Poland, the FIEC Director met with DG MOVE to discuss ways to stop the use of unfair contract conditions in projects financed by the CEF in Poland. Read more...


Multilateral & International Issues
Asian Development Bank and Japan's JICA establish US$ 1.5 Billion Fund to Invest in Private Infrastructure

The ADB and Japan's International Cooperation Agency (JICA) are establishing a new US$ 1.5 billion fund to support private infrastructure investments across Asia and the Pacific.
Read more...

EIB holds seminar on CoST contribution in developing infrastructure 

EIC was invited to speak at an internal seminar of the European Investment Bank on “Good Governance: the contribution of CoST in developing infrastructure”.
Read more...

Brief Notices

EIC Delegation joins CICA Mission to Washington

An EIC delegation is joining the CICA mission to Washington on 18-20 May 2016 and will organise a separate meeting with representatives of the European World Bank Offices in order to discuss selected aspects of the World Bank’s New Procurement Framework, European contractors’ competitiveness on Bank-financed civil works projects and the increasing weight of PPPs in Bank-financed contracts.


2016 EIC Autumn Conference with focus on Smart Cities

The 2016 EIC Autumn Conference will be held at the Radisson Blu Hotel in  Brussels on 6-7 October with a workshop on “Smart Cities: Opportunities for European Contractors”. More information will be up on the EIC Website shortly.


Members' Corner

Insurance Company Nordic Guarantee joins EIC Network

Swedish Insurance company Nordic Guarantee joined EIC as Associated company Member as of May 2016. The company has a presence in Sweden, Norway, Finland and Denmark and is one of the biggest guarantee issuers within the construction sector in the Nordic countries. Since 2003, Nordic Guarantee is part of the Fairford Group, an international family-owned group of companies investing in growth enterprises. Nordic Guarantee also has strategic alliance with South African surety bond provider Lombard Insurance Company. Read more...


Headlines

EIC 2016 Spring Conference: New Digital Technologies for Construction 

Berlin   EIC held its Spring Conference in Berlin with a workshop on “New Digital Technologies for Construction and their Impact on Contractual Relationships”. More than 100 participants attended the EIC General Assembly and Workshop on 21-22 April 2016 in Berlin where a distinguished workshop panel discussed the effects of new digital technologies for construction and their impact on contractual relationships between clients, contractors and sub-contractors.

Digital technologies can improve team work and productivity

Following an introduction by EIC President Philippe Dessoy, the speakers of the first panel, Thomas Wolf, CEO of RIB Software, Dominic Thasarathar of Autodesk and David Philp of AECOM, outlined how the new digital technologies are bound to change the production process in the construction industry. Once implemented in the daily operations of the parties, Building Information Modelling (BIM) and other digital technologies would lead to more teamwork, trust and knowledge within the team and thus to better quality and productivity.

Construction sector in transition towards increased level of digitalisation

Workshop Session 2 focussed on the impact of BIM and other software solutions on the contractual relationships between the construction parties. Frank Betzelt of construction machinery specialist Wirtgen outlined how digital technologies effect a supplier's operations, while Lars Ostenfeld Riemann of consulting giant Rambøll pointed out the benefits for the project team. Peter Westin of Skanska closed the session by showing how exactly the new construction technologies were used in the case of one of the largest PPP projects in Sweden. The panellists agreed that the construction sector is in a transition process towards an increased level of digitalisation but emphasised that the respective progress would be organic rather than revolutionary.

Strategies for policy makers to introduce BIM to public works

Session 3, moderated by Ilka May of planen bauen 4.0, a German platform to promote the use of digital technology in construction, focussed on the perspective of policy makers. Mark Bew, Chairman of the UK BIM Task Group, presented the UK Experience with New Digital Construction Technologies, while Lutz Koeppen of the European Commission's DG GROW outlined how the use of BIM can be established under EU Procurement Rules. They expressed support to the EU BIM Task Group which has the mandate to submit recommendations to public procurers and policy makers as how to introduce BIM and other digital technologies to their public works and strategies.

Links:
Presentations from the EIC Spring Workshop

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Headlines

New EIC Working Group on “Local Costs” in the context of the OECD Consensus

Amsterdam   EIC has established a new Working Group with the mandate to draft an EIC Position concerning the current restrictions for national export credit agencies (ECAs) to insure local costs. Whilst many ECAs acknowledge the problem created for the construction industry, they claim their hands to be tied by the so-called “OECD Consensus”.

Since 1978 this gentlemen’s agreement places limitations on the terms and conditions of export credits to benefit from official support, e.g. on maximum repayment terms, minimum cash payments to be made at or before the starting point of credit, minimum premium rates, minimum interest rates when a transaction benefits from official financing support, or local costs.

OECD local cost rule suits export of capital goods but not construction export

The Working Group concluded that the restrictive OECD approach towards local costs is no longer appropriate in the case of construction services. Contrary to the manufacturing industries, the nature of the construction business for the most part requires local production because it is the production process that is exported, whilst the final output must be totally constructed in the host country. In other words: building or infrastructure “products” (i.e. roads, railways, ports, dams, hospitals, etc.) are not exportable as such. Due to the fact that any construction project needs to be erected in the buyer country, the respective amount of local costs involved is evidently higher than in the case of export of goods or other services.

EIC calls for special rules for construction export

Due to the fact that the systematics of the OECD local costs rule adheres primarily to the sphere of capital goods and is not compatible with the nature of the construction business, the Working Group argues that special rules for construction export in the “OECD Consensus” would be justified. For instance, construction services could be exempt from the Consensus altogether, or the local cost definition could apply strictly to ancillary goods or services, or the different treatment of foreign content and local costs could be replaced by a consistent regime on third-country content to be regulated and administrated by each individual OECD member.

OECD Sector Understanding for Construction

Experience shows, however, that modifications to the common rules of the “OECD Consensus” are only introduced after many rounds of negotiations. Therefore, the Working Group also considers proposing a Sector Understanding on Construction Projects with an overall contract value of more than SDR 10 million. This might be the quickest way to improve the situation for European international contractors. Over the last decade alone, OECD member states have negotiated two successive aircraft sector understandings (2007 and 2011), a revised sector understanding (SU) for nuclear power plants (2009), a new SU for renewable energies and water projects (2009), subsequently extended to include both climate change mitigation (2012) and climate change adaptation projects (2014), a new SU on rail infrastructure projects (2014) and a new SU on Coal-Fired Electricity Generation Projects (2015).

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Headlines

EIC to comprise Position Paper on Corporate Responsibility and the industry's role in achieving the Sustainable Development Goals

Frankfurt   The newly established EIC Working Group CR will be meeting again on 31 May 2016 to analyse the options for establishing an EIC Position on Corporate Responsibility and the European construction sector's role in achieving the Sustainable Development Goals (SDG).

At its kick-off meeting on 14 April participants from Belgium, France, Germany, Netherlands, Spain and Sweden discussed the terms of reference for the Working Group and decided to approach the subject of Corporate Responsibility both from a risk management as well as from a business development perspective.

Working Group collects material for EIC Position

The Working Group has started to collect material for a potential EIC Position which would highlight how European international contractors can contribute to achieving the Sustainable Development Goals (SDGs). The EIC paper would target Multilateral and Bilateral Development Banks, the OECD, DG DEVCO, Member Federations and clients around the world.

Investment in infrastructure and innovation is one of 17 Global Goals that make up the 2030 Agenda for Sustainable Development. SDG 9 reads: Sustained investment in infrastructure and innovation are crucial drivers of economic growth and development. With over half the world population now living in cities, mass transport and renewable energy are becoming ever more important, as are the growth of new industries and information and communication technologies.

Links:
The UN Sustainable Development Goals

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News from Bruessels

FIEC/EIC meeting with DG MOVE on Use of (un)fair Contract Conditions for Projects financed by the Connecting Europe Facility

Brussels   On behalf of the Joint FIEC/EIC Working Group Poland, the FIEC Director met on 25 April 2016 with DG MOVE and its Innovation & Networks Executive Agency (INEA) to call upon the European Commission to set an end to the use of unfair contract conditions in projects financed by the so-called “Connecting Europe Facility” (CEF) in Poland.

Connecting Europe Facility centrally managed in Brussels

The meeting was a follow-up to an initial meeting in February in which FIEC and EIC, joined by FIDIC and EFCA, had informed the Cabinet of EU Commissioner Violeta Bulc of the widespread use of unfair contract conditions in Poland in connection with EU-financed infrastructure projects. Contrary to DG REGIO, which is more or less restricted to monitoring the implementation of the projects financed with the Structural Funds, DG MOVE is in charge of centrally managing projects financed under the CEF and thus might have more leverage on Polish contracting authorities and in particular GDKKiA.

Moreover, the CEF Regulation contains a specific Recital No. 65 which stipulates that contract conditions (for CEF-financed projects) should be drafted in such a way as to fairly allocate the risks associated with the contract. Against this background, EIC has prepared a synopsis about unfair contract conditions found in a specific CEF-financed tender of the Via Baltica/S 61 express road with the objective to present detailed evidence about unfair contract conditions in a Polish road construction tender.

Links:
Joint FIEC/EIC Position Paper on Use of (un)fair Contract Conditions for Projects financed by CEF

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Multilateral & International Issues

Asian Development Bank and Japan's JICA establish US$ 1.5 Billion Fund to Invest in Private Infrastructure 

Manila   The Asian Development Bank (ADB) announced an agreement with Japan's International Cooperation Agency (JICA) to establish a new fund to support private infrastructure investments across Asia and the Pacific. The fund named Leading Asia’s Private Infrastructure (LEAP) will be capitalized with US $1.5 billion in equity from JICA, and managed by ADB’s Private Sector Operations Department.

LEAP will invest in projects at different stages of development through a variety of modalities, including public-private partnerships, joint ventures, infrastructure concessions, and corporate financings. It will target a wide range of quality, private sector infrastructure transactions in energy and power generation—with a strong focus on renewable energy and energy efficiency—as well as water and urban infrastructure, transport, information and communications technology, and health.

The new fund is part of a larger initiative. In November 2015, the ADB and the Government of Japan had announced a US$16 billion partnership over the next five years, including the establishment of an investment fund, to boost support for private infrastructure projects and promote public infrastructure development. Developing quality, reliable, sustainable, and resilient infrastructure is one of the Sustainable Development Goals (SDGs) agreed at the UN summit in September 2015.

Links:
ADB on establishing investment fund LEAP

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Multilateral & International Issues

EIB holds seminar on CoST contribution in developing infrastructure

Luxembourg   EIC was invited to speak at an internal seminar of the European Investment Bank on “Good Governance: the contribution of CoST in developing infrastructure”. The event, held on 13 April 2016, was attended by more than 100 EIB staff members interested in finding tools to reduce corruption, mismanagement and inefficiency in the project planning, implementation and monitoring phases of EIB projects.

CoST’s contribution to Good Governance in Infrastructure Development

The event was opened by EIB Inspector General Jan Willem van der Kaaij, who emphasised EIB’s determination to reduce corruption, mismanagement and inefficiency in the project planning, implementation and monitoring phases of EIB projects to ensure that the social and economic benefits of infrastructure projects are realised. The Executive Director of CoST, Petter Matthews, explained to EIB staff the CoST approach to improving transparency and accountability in public infrastructure investment. He gave an overview of CoST’s operational activities at country level to support supervision, audit, regulatory, investigative, and judicial functions. He also presented some case studies to illustrate the positive impact of the initiative in the countries of operation.

EIC supports CoST since 2011

EIC Director Frank Kehlenbach explained that EIC had endorsed the CoST initiative already in 2011 because of its preventive and holistic approach. As EIC itself was advocating fair and transparent competition for international construction projects, followed by careful monitoring of the project implementation by the Multilateral Development Banks, EIC believes that CoST could make a critical contribution to advance reliable and efficient procurement practices and project delivery around the globe.

Links:
Construction Sector Transparency Initiative (CoST) presentation

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Picture Credits: EIC, SDG, OECD

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