For many companies from Eastern Europe, it is the ultimate goal: performing orders in German-speaking countries. In particular, construction companies located close to the borders with Austria and Germany, i.e. from Poland, the Czech Republic, Hungary and Slovakia, are trying to attract new clients from Western Europe. It is not made easy for them and often it remains only a dream. The foreign language makes cooperation difficult. In addition, there are legal requirements, administrative barriers and a lack of contacts in the new market. Nevertheless, many CEOs look to the West for good reasons. What is their motivation and what lies behind the desire to do business in German-speaking countries?
1. Financially lucrative
Germany and Austria are economically highly developed countries. This can effectively be measured by the gross domestic product (GDP) per capita in purchasing power standards (PPS). In simplified terms, this figure represents the economic power of a country, calculated per inhabitant and adjusted for different price levels. Basically, it shows how "rich" or "poor" countries and, generally, their citizens are. A comparison here with other countries is particularly useful.
According to data from the EU Commission, this adjusted GDP averaged EUR 26,852 in Poland, the Czech Republic, Hungary and Slovakia in 2021. In relation to this, Germany reached EUR 38,963, and Austria even slightly more, which corresponds to an increase of around 45% compared to the selected Eastern European average. We can thus see that the German-speaking region is significantly more solvent and economically developed than the neighboring eastern European region.
Similarly wide gaps exist in construction and personnel costs, which makes it generally easy to compete with domestic companies and to achieve comparatively high prices. Eastern European companies are able to benefit from this by charging significantly more for the same work in Germany and Austria than in their home countries.
2. Tenders: Reliable and professional
The area of public tenders in particular offers great opportunities in Germany and Austria. The economic significance is undisputed: In Austria, contracts worth 60 billion euros are awarded publicly every year, which corresponds to a share of around 18% of total economic output. In Germany, the picture is likely to be similar. Precise data is lacking to date, but experts estimate the figure at around 500 billion euros, which results in a comparable ratio when population figures are taken into account.
In our experience, however, public tenders and awards differ significantly from those in Eastern Europe. Clients have clearly defined and specific requirements. Meeting standards, product quality and, in some cases, sustainability aspects play a much greater role here and, depending on the contract, are often even included in the decision to award the contract. The evaluation criteria are clearly defined and transparent. In other words, there is more to it than just the lowest price; particularly high-quality and environmentally friendly/ecological products also have a chance. Under certain circumstances, you can also win the bid with a higher-priced product, which is interesting not only for the construction industry, but also for deliveries and services.
Another advantage is the much simpler and less complicated procedure, which leads to significantly less administrative work for contractors. And this is despite the fact that in most cases the contract is awarded transparently and correctly. Corruption and collusion are significantly less than in Eastern Europe. And last but not least, you can enjoy high payment discipline and minimal default probabilities.
3. Optimize workload
Another argument in favor of executing orders in Germany and Austria, as well as abroad in general, is that of capacity utilization. Companies that are only active in their home market are at the same time exposed to its fluctuations in demand. With a second or even third pillar abroad, these can be wonderfully balanced out, as long as global economic cycles are not involved.
An example of this is the current development around inflation, which is much stronger in Eastern Europe than in the West. In October 2022, Hungary had an inflation rate of 21.9%, Poland 16.4%, the Czech Republic 15.5%, and Slovakia 14.5%, well above the roughly 11.5% in Germany and Austria. Stronger interest rate hikes and thus a more pronounced slowdown in the economic environment may be the consequences. A broader regional base in terms of orders diversifies revenue streams and makes them more reliable. Companies that are dependent on a few individual construction companies or general contractors can also reduce their risk in this way. In addition, difficult competitive conditions and strong competition at the main location become less of an issue.
Not only Eastern European construction companies benefit from this, but also Western European clients. In particular, public authorities such as communities, but also private institutions, are struggling in this region with an extremely busy construction industry. Awarding contracts is increasingly becoming a major challenge, especially if this is to be done quickly and at market prices.
4. Collect valuable references
Last, but not least, valuable references can be collected through orders in German-speaking countries. Work carried out in Germany and Austria is generally highly recognized and appreciated in Eastern Europe by both public and private clients. References of this kind promise a high degree of accumulated experience as well as professionalism, not at least because in the West usually a very precise and professional way of working dominates.
On the other hand, with references from foreign companies you can also score points with German and Austrian clients. Especially with top-class and very large companies it is easy to convince.
Conclusion
In summary, contracts in German-speaking countries offer 4 unsurpassed advantages for Eastern European companies: A very high price level and thus good economic profits. Transparent, professional, uncomplicated and lucrative public tenders. Optimization of own capacity utilization through cross-border work. And the acquisition of top-class contract references.
We at AV-LEAD can help you find the right job for you, remove language barriers, establish contacts and assist you with administrative requirements. So nothing stands in the way of a successful and lucrative order fulfillment for you anymore. Learn more about our contract brokerage services or contact us. We look forward to hearing from you!