Infrastructures: simplified and speeded up tenders, but the unforeseen events remain during the construction phase
The resources coming from the PNRR will represent the long-awaited injection of liquidity necessary to reduce the infrastructural gap that separates our country from our neighbors, France, Germany, England. As is known, however, the lack of financial resources is not the only obstacle to the realization of infrastructure and the same reforms requested by the EU to support the PNRR testify that our infrastructural delay is also linked to bureaucracy and litigation above the European average.
We recently witnessed theapproval of some procurement reforms and public concessions aimed at simplify and speed up the various phases of the award, but the delay that public and private works accumulate in remains on the table construction phase.
In the course of the works it happens regularly that they show up unexpected events or needs to make changes to the work with a consequent increase in costs for the contractor and an attempt to pass the costs on to the client. Beyond the contingency relating to the pandemic, there are frequent discoveries in the subsoil not highlighted in the preliminary investigations or other technical problems that require variations to the original projects.
If not dealt with by a prompt financial intervention of the client, these situations can result difficulties for the contractor or dealer (and its sponsors). In the most favorable situations, the parties are able to reach an amicable agreement that limits the inconvenience and delays but sometimes the circumstances require a more in-depth analysis of the incident which involves technical, economic and legal aspects from which the reserves and related disputes arise. In these cases, the most concrete risks occur suspension and severe slowdowns some jobs.
The side effects of the problem are also the same management costs of reserves and disputes, which impose appointments to external consultants, and the difficult valuation of reserves in the financial statements.
The problems described above could find a possible solution in the release of reserves in favor of specialized investors, which would focus on credit recovery and at least partially free up the resources necessary to avoid the suspension of the works.
L’purchase without recourse of reserves and credits in dispute it is an instrument already known and practiced at national and international level, but in Italy the level of trading is far from international standards and a real market for this asset class cannot yet be configured.
Late reserve market, causes and solutions
The main causes that prevent the reserve market from taking off are of various kinds and traditionally range from constraints to credit assignment provided for public procurement to the delicate legal framework of the transfer of reserves up to limitations on the assignment of credits imposed by lenders on builders. To the technical obstacles are added commercial issues such as the distrust of public and private clients towards potential third party transferees and the difficulties in meeting supply and demand for reserves due to evaluation difficulties.
The critical issues in question could be overcome thanks to a more favorable regulatory framework that makes the transfer of reserves is legitimate if specific objective and subjective criteria are used, provide specific qualifications for the expert witnesses who operate in disputes on major works and fast track of judgments before the specialized sections up to any incentives for the sale.
The meeting between supply and demand could also be favored by contractual instruments. Without abandoning the without recourse approach to the operation, they can be imagined risk sharing tools, foreseeing for example advances, earn-out mechanisms and other clauses typical of transactions in which the assets are difficult to value.
The contractual structure and the related assessment will have to specifically consider both the reservations that are still in the negotiation phase and those that have resulted in a real judicial or arbitration dispute.
The dissemination of shared valuation methodologies on the market would also help create a platform of greater trust in investors.
The reserve market may have some similarities with that of NPLs as key elements for a positive evaluation of the transaction by investors, the critical mass of reserves and the servicing structure for the management of the claim and the recovery of the credit will be.
With construction sites and contractors slowed by litigation, our infrastructure projects could do not arrive on time for the appointment with the PNRR. A claims market could guarantee greater effectiveness to the liquidity of the PNRR and to reforms and give that boost to the infrastructures necessary to meet the deadlines and the challenges that come to us from Europe.
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