Is the Cyprus tax-payer being ripped off in government projects?

**Construction declines while civil engineering costs soar **

Construction output in Cyprus posted its 12th quarter of decline in the third quarter, with production dropping by 16.8% compared with the same period of the previous year, after a decline of 3.1% in the second.
Production in the third quarter was affected not only by weak demand but also by the daily power-cuts for four weeks in July-August implemented after 98 containers of armaments exploded, knocking out the country’s main power station.
By subcategory, production of buildings recorded a decrease compared with the year earlier of 18.7%, while production in the civil engineering sector fell by 11.4%.
Prior to that, civil engineering projects had been growing rapidly as a result of roadbuilding projects and the revamp of downtown Nicosia in advance of Cyprus taking over the EU rotating presidency in July 2012.
The demand for civil engineering projects might explain the difference in price trends.
Overall output prices in construction rose by 1% compared with the same period of the previous year in the third quarter of 2011 and increased by 1.2% over the second quarter of 2011.
However, there was a large difference between output prices for buildings, which tend to be funded by the private sector, and civil engineering projects, which tend to be funded by the public sector.
Output prices for buildings in the third quarter recorded a decrease of 0.6% compared with the third quarter of 2010. By contrast, output prices for civil engineering projects increased by 8.4%. Since the industry is so desperate for work, it raises the question whether the government is paying too much for these roadbuilding programmes.
Fiona Mullen
www.sapientaeconomics.com