'Rere Group' unable to meet major construction deadlines

University of Latvia

The future House of Letters will be the largest of the new buildings of the University of Latvia (LU). The contract for its construction was signed four years ago with the general partnership "Rere bmv", which included three companies of the "Rere Group" - "Rere būve", "Rere meistari", "Rere vide" (later - "Apex building").

On Monday afternoon, the construction site is quiet, with around 15 people working. Most of them are putting the roof on. To make this happen, the LU has itself engaged subcontractors, guaranteeing that they will be paid for their work. The same has happened in the past with the building's main structural contractor.

"The biggest problem with this is that there is such mutual mistrust within the industry. There is a general contractor and when the subcontractor does not trust the general contractor, a lot of time and resources are probably spent on trying to agree how this subcontractor will be guaranteed that he will be paid for the work he has done," Enno Ence, Vice Rector for Development at the University, told De Facto.

Of the three members of the general partnership, one is in insolvency proceedings (Rere vide, now Apex Building) and one - Rere būve - has tax arrears and payment schedules with the State Revenue Service.

The value of the contract for the LU House of Letters has increased from EUR 34 729 925 to EUR 47 800 000.

Didzis Putniņš, one of the co-owners and a member of the board of Rere Group and a member of the board of Rere meistari, was met by LTV at one of the construction sites and said:

"Because of the war in Ukraine, of course, there were cost increases, big cost increases, as we know. The state, thank you, covered part of it, but one big part was left to the builders. (...) Of course, subcontractors feel more comfortable if the university guarantees that they will be paid directly. But all payments are made to everyone, we settle with all subcontractors."

About 35% of the work is done.  The University should have moved into the House of Letters last year. 

The latest agreement is that the building should be completed by next summer. To get the full picture of what is happening under the contract, LU has commissioned a compliance audit.

Cēsis State Gymnasium

The Cēsis State Gymnasium is also looking forward to returning to its renovated premises. This building is being rebuilt by Rere meistari at a cost of EUR 4.4 million. Here, too, the completion date has been postponed several times.

Last year, the municipality sent 23 letters to the contractor, seven of them objecting to the slow pace. "This year, we have sent even more letters, including 12 letters in which we draw attention to the fact that, in our opinion, there are too few workers on the site, too little volume and too little intensity, too little execution and so on," says Jānis Rozenbergs (Jaunā Vienotība), Mayor of Cēsis Municipality.

The general contractor has also asked for advance payments, which the Cēsis City Council has not agreed to because the contract did not foresee such. When the contract was signed, the war had already started.

"On June 7 2022, at this very table in this room, we asked them in black and white whether you were able and willing to implement and execute this project in time, space, and money. And the answer was yes," says Rozenbergs.

Here, too, the municipality has entered into a tripartite contract with a subcontractor to get ahead.

Other public establishments dissatisfied

The Ministry of the Interior terminated its contract with Rere būve in September, unable to wait for the company to finish building two fire stations.

"There is a group of builders who are effectively bringing the country to its knees, knowing that any cancellation of the construction project will mean more expensive costs to continue. This is the game that is being played in bad faith, but there is a limit to everything," Dimitrijs Trofimovs, State Secretary of the Ministry of the Interior, told Latvian Television (LTV) in early September. The dispute between the parties is likely to continue in court.

Riga International Airport, where Rere meistari is rebuilding its technical services building for almost €10 million, is also very unhappy with the pace of work.

The deadline for handing over the work was January 31 this year. Seven months later, only 56% has been completed, the airport says, stressing that it is doing almost everything possible:

"(...) negotiations have been held with the owners of Rere and subcontracting managers, tripartite and quadrilateral agreements have been concluded for direct settlements with the contractors. However, despite the steps taken, the pace of construction remains unsatisfactory."

Latvian State Forests, for whom Rere meistari is building a plaza and observation tower in Tērvete Nature Park, has also experienced delays. Penalties have been imposed for inter-deadline delays for which there were no objective reasons.

But Rere meistari keeps making new commitments.

For example, in April this year, the firm won the tender of State Real Estate for the renovation of the Great Guild, promising to do it for €10.76 million.

"As far as the Guild is concerned, everything is on schedule at the moment, the State Real Estate team is following it perfectly, and we are doing everything perfectly at the moment," says Didzis Putniņš.

State Real Estate responds that the Procurement Law did not give them the right to exclude this tenderer and also refers to their own previous constructive cooperation.

"So far, cooperation with the company has been satisfactory and there are no significant indications of difficulties in fulfilling contractual obligations. It should be noted that much depends not on the general contractor, but on the project management team of the builder, which organizes the works daily and promotes effective cooperation between the parties involved to ensure the successful implementation of the project and the achievement of the result," says Jeļena Gavrilova, Member of the Board of State Real Estate Company.