Polish infrastructure under scrutiny

A letter from six European ambassadors highlighting problems with dealing with Polish Contracting Agencies – including the General Directorate for National Roads & Motorways (GDDKiA) – appears to have hit home, with Poland’s Deputy Prime Minister agreeing to meet the ambassadors to find out more.

The Ambassadors of Austria, France, Germany, Ireland, the Netherlands and Portugal wrote to Deputy Prime Minister Janusz Piechociński expressing concern over the number and value of claims pending before Polish courts, which they said indicated some “fundamental and systematic challenges connected with the execution of major infrastructure projects in Poland”.

Among the claims in the letter is that many contract conditions deleted the provisions from the International Federation of Consulting Engineers (FIDIC) standard contract form that gave the contractor an entitlement to request an adjustment of the costs from the employer incurred as result of an event caused by the employer – for example, design errors or unforeseeable ground conditions.

It said that in the case of legitimate claims submitted by a contractor, the engineer of the Contracting Authority would typically not be authorised to make “a fair and timely determination on the issues raised”, which it again claimed was against the letter and the spirit of the FIDIC standard form of contract.

The letter pointed out that there were some cases where decisions were made by “a so-called Dispute Adjudication Board” but that even those were usually not respected by the Polish Contracting Authorities.

The ambassadors said that as a consequence, the Contracting Authority “deliberately delayed the payment of amounts due to the contractors”.

It said it understood the accumulated amount of construction claims pending before Polish courts amounted to around PLN10 billion (€2.35 billion).

These procedures were further complicated, it said, by a rigid contractual penalty policy which, in some instances, even foresaw penalties independent of contractor's default.

Another concern raised by the ambassadors was that they felt that contractors were discouraged from filing law suits against such a penalty policy, as the Polish government had recently amended its public procurement law. They pointed out that it was now stipulated that contractors would be automatically disqualified from participating in Polish tenders for three years if a Polish court confirmed a penalty of 5% or more of the contract amount.

'High pressure'

While Polish Contracting Authorities put unusually high pressure on general contractors, claimed the letter, Polish contract law, as well as procurement laws, specifically protected subcontractors, with further legislation under preparation.

It claimed that in extreme cases, this could lead to subcontractors being paid twice and general contractors being not paid at all.

Mr Piechociński has said he intends meeting with the ambassadors as soon as possible.

FIEC (the European Construction Industry Federation) and the EIC (European International Contractors) said this development was a positive surprise, and that it had come from “a simple FIEC/EIC Working Group of contractors suffering from the particularities of Polish public procurement law and practice”.

Ulrich Paetzold, FIEC’s director general, said, “This is a promising step in the right direction and we hope the combined efforts made by Polish contractors and consulting engineers, co-ordinated by FIEC and EIC, will achieve tangible improvement.

“On the other hand,” he added, “it would be catastrophic, both for Poland and contractors/consulting engineers, if the Polish authorities simply tried to brush all criticism aside and continue what they have started.”

FCC withdraws

Meanwhile, Spanish-based contractor FCC Construccion has withdrawn from a contract to build a ring road around the Polish town of Szczuczyn and has blamed the investor – the GDDKiA – for its decision, according to research company PMR.

FCC was to have built a bypass more than 8km, plus essential technical infrastructure. The contract was worth PLN124.8 million (€29.5 million). PMR said the contractor claimed that the documentation provided by the GDDKiA for the tender stage did not include details on the actual geological conditions of the construction site.

The contracting authority is also said to have failed to disclose this information during the tender, when questioned by the contractor.

According to the company's senior management, GDDKiA had therefore expected additional work to be carried out at a cost that would have been in the region of PLN20 to 30 million (€4.7 to 7.1 million). FCC claimed the Directorate had not accepted any essential changes, did not offer any other possible solutions, and also delayed approving and paying for work already completed.

PMR said that GDDKiA, on the other hand, said that only 16% of the work on the road had currently been completed, despite the fact that half the time allotted for completing the entire contract had already passed.