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Shortage of labour and materials

October 29, 2012


25 percent of public works projects in disaster-struck areas fail to get bidders



About 25 percent of public works projects placed by Iwate, Miyagi and Fukushima prefectures and the city of Sendai between April and August this year were not concluded because bids on the projects did not materialize, a survey by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) shows.

The MLIT probe found that many firms have decided not to tender bids for public works projects under the central government's reconstruction budget because they cannot make a profit due to rising material and labor costs even if they win the bid.

The finding comes in the wake of the revelation that certain amounts of budgets for reconstruction of disaster-hit areas are being spent on non-disaster regions. The three prefectures, Sendai and other regions hard hit by the 2011 Great East Japan Earthquake and tsunami and subsequent nuclear crisis, are concerned that the reconstruction budget may not be utilized in time.

The government has decided to spend about 23 trillion yen over a 10-year period from fiscal 2011 to 2020 under the reconstruction budget, including 19 trillion yen in the first five fiscal years through fiscal 2015.

According to the MLIT, the ratio of unsuccessful bids came to 47 percent, or 96 cases, in Sendai, followed by 34 percent, or 87 cases, in Miyagi, 20 percent, or 99 cases, in Fukushima and 7 percent, or 19 cases, in Iwate. There were similar trends in September, ministry officials say.

Many construction companies avoided small public works projects in fiscal 2011 and are even shying away from construction projects in the hundreds of millions of yen in the current fiscal year. In Miyagi Prefecture, bidding for 17 construction projects with a price tag of more than 100 million yen, or about 10 percent of the total projects, did not materialize in fiscal 2011. In the current fiscal year, bidding for 38 cases, or 20 percent of the total, did not take place through September.

The Miyagi Prefectural Government checked with 29 local construction companies and 24 of them cited rising labor and material costs as the reason for their decisions not to make bids. There is a big gap between the intended price and the realized price, these firms say, adding they cannot tender bids because they cannot make money even if they make a successful bid at the intended price.

Construction materials are expected to stay in short supply. The MLIT and others say supply of ready-mixed concrete in Miyagi's Kesennuma district in fiscal 2014 will total about 30 percent, or 500,000 cubic meters, of its total needs.

Miyagi Gov. Yoshihiro Murai is asking the central government to extend the reconstruction budget's implementation period, saying a shortage of materials and manpower is hampering reconstruction efforts.


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