Carlos Mineiro Aires: Portuguese builders must lead public works consortia to strengthen internationalisation

It is vital for Portuguese construction companies to take part in major public works so they can build capacity and a track record for international expansion - and they should be the ones leading the consortia, warns Carlos Mineiro Aires, Executive Director of the Construction Foundation, an organisation that brings together three professional bodies (Engineers, Economists and Architects) and 14 major contractors and design firms. The Foundation’s purpose is to “defend national construction and look at the big issues worrying the country where the sector can make a contribution”. One of its flagship initiatives is to create partnerships with the State to deliver affordable housing, and to push the maintenance of public buildings up the priority list.

Public procurement in Portugal and unequal competition

Does Portuguese construction need defending? Why?

The way public contracts are awarded in Portugal does not protect national interests. Bid prices are low and do not allow companies to compete on fair terms; there is also a lack of planning and visibility around when tenders will be launched, which prevents firms from scaling up for major projects. Our public procurement code is convoluted. On top of that, there are well-known issues around labour and competition. I have no doubt that foreign companies enjoy a stronger position in Portugal than Portuguese firms do.

In what way…

When things go wrong, they are not subject to the same control mechanisms that apply to Portuguese companies, such as licensing requirements, nor do they face the same penalties for delays. They do not bring people here - not even management staff. They run everything through subcontracting. We are not against international competition, and we could not be within the European Union (EU), but we must all operate under the same rules and on equal footing.

Are you concerned that foreign contractors are leading consortia on major projects?

I am not speaking on behalf of the Foundation, but as an engineer I believe consortia are perfectly legitimate - I have no issue with that. However, the leadership should always be Portuguese.

“This won’t happen without private-sector involvement. Portugal is near the bottom of the EU in terms of public housing stock.”

The Secretary of State for Infrastructure recommended that builders form consortia with foreign companies for public works. Did that offend you?

It came as a shock, because there should have been a discussion with Portuguese companies first to ask whether they do or do not have the capacity. Clearly, we are open to working alongside foreign companies.

Major projects, company capacity and workforce

Do Portuguese firms have the capacity to deliver the airport works, the third Tagus crossing and high-speed rail on their own?

With proper planning, companies will organise themselves to meet the challenge. We are talking about more than €60 billion over the next decade. Portuguese contractors know how to work together - they are already doing so abroad. But companies should be the ones choosing which partners they want, rather than being left with the projects that others do not want.

Are they large enough to handle everything at the same time?

After the subprime crisis, out of 50 medium and large contractors only twenty-odd remained. It was a wipe-out. Even so, there is capacity. Moreover, if firms are given the chance to build a major airport, they gain the credentials needed to bid internationally for other airports of a similar scale. If they are denied that opportunity, they are pushed aside. This is about national interest and long-term thinking because, once this major investment cycle ends, companies will again have to look outward. For some, Portugal is no longer their main market - Mota-Engil is one such example.

Is there enough labour for all these works?

We will need labour, but it will appear. There are companies - not only those represented within the Foundation - that run their own training schools. They will recruit across the Portuguese-speaking world or from the Spanish-speaking market and provide training themselves. Casais and Mota are examples of this approach. The PRR (Recovery and Resilience Plan) also includes a programme involving AICEP and Portugal’s embassies, but with training delivered in the countries of origin. I do not understand why it is not done here. But people should not be brought in unless there are decent conditions to offer them - accommodation, pay and living standards - so they can settle rather than just passing through. I will also say this: with the tendering baselines used to award contracts, it will not be easy; profit margins do not allow better pay. If no wealth is created, it cannot be shared.

Are there signs that the major projects will actually go ahead?

Apart from the uncertainty created by the current crisis, I have no reason to say they will not proceed. The Minister for Infrastructure, Miguel Pinto Luz, has a programme and the determination to make it happen.

Carlos Mineiro Aires, the Construction Foundation and affordable housing partnerships

You have been complaining for a long time about the convoluted procurement code, lack of planning and low prices.

We have managed to move forward on a number of files. Minister Pinto Luz understands the issues, and we speak the same language. One of the projects the Foundation is working on is a housing proposal. We have a study that leads to a solution focused on setting up partnerships - essentially a public–private partnership model - an approach that has been demonised but, if properly designed, does work. The idea is for companies to partner with local councils or central government, with those public bodies responsible for identifying land, securing permissions and licensing. Everything is defined from the outset: the costs for each housing type and the associated rents - and I can assure you they are a long way below the €2300 maximum threshold that has been announced - and maintenance is included. After 25 years or 30 years, whatever period is agreed, the property is handed over to the State or the councils and becomes theirs. And they receive the assets in perfect condition.

Is it a plan for the whole country?

It is available to whoever wants to adopt it; it is not a scheme for the Foundation. We are going to begin visiting local councils and associations of municipalities to set out that this project is available, and it would take the form of an agreement between companies and potential interested parties. All of this is rule-based. Nothing is hidden; everything is clearly defined, rents are fixed in advance, and so are profit margins.

Do the contractors then act as landlords?

The crux of the matter is who collects the rent during the concession period. Companies must have a mechanism that can enforce eviction if rent is not paid. You cannot invest without certainty that payment can be collected. If it is the municipalities, there is a mechanism: they take responsibility for rent collection and for consolidating the total payment across all rents. We are talking about affordable rents.

Have you presented this to the Ministry of Infrastructure?

Yes, last year. The Government has a solution that is very close to this. The problem is that the State does not want to take on the collection risk, nor the unpopularity of having to carry out an eviction.

Can it help solve the severe housing shortage?

It certainly can. This won’t happen without private-sector involvement. Portugal has one of the smallest public housing stocks in the European Union; we are third from last. This was designed somewhat along the lines of the PPPs used for motorways, but with much smaller investments and the potential for immediate results. We have to create leverage, because we are building a social time bomb. The main reason young people leave is not employment or salary - it is housing.