In an effort to push heavily indebted major general contractors toward consolidation, the infrastructure ministry decided Friday to triple the yen figure of completion guarantees for large-scale public works projects.
The required guarantees, now set at 10 percent of the contract value, are paid by contractors if they go bankrupt and fail to finish their projects. Most construction companies conclude insurance contracts to cover the guarantee.
According to the plan, the ministry will raise the figure to 30 percent for public works worth at least 750 million yen.
The move will take effect by the end of March, ministry officials said.
The theory behind the move is that reluctance by banks to provide increased guarantees would prevent ailing contractors from winning public works orders. The decision was reached by a panel of experts under the ministry.
The panel also decided to introduce a similar guarantee system to large public works projects contracted by joint ventures, which currently need no guarantee.
Major construction companies are strongly opposed to the move and to any government interference in realignment of the industry.
Ministry officials argue that they are merely preparing an environment that will allow for heathy competition and are not targeting specific companies.