Getting the show on the road

Lech Witecki is not a man to be trifled with. The head of the General Directorate of National Roads and Motorways (GDDKiA) has a lot of money at his disposal, to spend by means of dozens of tenders that are planned for the renovation and construction of highways. The rules are strict but clear for the lucrative contracts that are on offer. But if you fail to agree terms with Mr Witecki, you will find that two hundred other companies are queuing up behind you for the same contract

Emil Górecki,‘Eurobuild CEE’: Let’s start with one of the latest issues, which is the eviction of Alpine Bau from the construction site of the A1 motorway.

Lech Witecki, acting General Director of National Roads and Motorways (GDDKiA): Well, officially speaking, the GDDKiA has withdrawn from the contract.

A similar situation has occurred only once before. However, the contractor in question, Acciona Infraestructuras, eventually returned to the site after a few months. Is this latest decision final?

Both the GDDKiA and the contractor have pulled out of the contract. From a formal and legal perspective, a comeback is possible provided an agreement is reached between the two sides. However, are there any arguments in favour of Alpine Bau returning to the building site? Our correspondence with the management of the company suggests that there are not. They are not able to fulfil the conditions of the agreement. And furthermore, they do not want and they did not want to accept these conditions. We had many meetings leading up to this difficult decision. It is supported by very strong arguments. We have made a lot of the documentation connected with this case public. We also reminded them a number of times: you are extremely late starting – there is a risk that this amounts to a breach of contract, so please start working and make up for the lost time. The contract was signed in 2007, according to which the contractor was supposed to receive PLN 65 mln for constructing 1 km of motorway. Today’s prices are lower: 1 km costs app. PLN 40 mln to build. These are very good conditions; and yet the contractor did not start construction. Why? Because of inadequate project management. Shouldn’t the company pay interest as a penalty for putting back the completion of the project from August 2010 until April 2011? They think they should not. According to them the problem is that the project is wrong. And their argument for this is apparently a complaint about one bridge! – one of thirty bridges in this section.

So why has the contract been annulled at this precise moment in time? Did this result from the specific wording of the contract, or is it all about getting the motorway ready for Euro 2012?

The schedule of the work is included in an annexe to the agreement. The General Directorate monitors each project on the basis of such an annexe. This is not the only project where we have had to deal with delays. These are normal with such big projects. However, the delays are normally made up for – for example when the weather conditions improve. In this case we had to start meeting with the Austrian management because we were worried that the management in Poland was not giving us the full story. And this turned out to be the case, but the Austrians came to the conclusion that the project was well managed despite everything. We ran out of any means of resolving this situation.

Only a few days ago a spokesperson for Alpine Bau in Austria was not willing to comment on the matter, because according to him negotiations with GDDKiA were still pending. You are saying something completely at odds with this statement.

We set out our position in December last year. I have to be absolutely sure that someone who decides to carry out this project will strive to do so step by step, will sign all the necessary contracts with subcontractors and ensure that there is an adequate number of workers on the building site. If this does not happen, I will tear up the contract due to it being breached by the contractor. We prepared a rescue plan to enable the company to fulfil its contractual obligations, but it has chosen not to take it up.

What will happen now to this unlucky stretch of road?

We are in the process of inventorizing everything so that we can start a new tender process as early as April. Unfortunately, the contractor has up to now been hiding under the snow. When the thaw begins we will find out whether Alpine Bau has secured the building site properly, which was one of its responsibilities.

A few days ago, a consortium including Alpine Bau, PBG and Hydrobudowa Polska, among others, put forward the best bid in the tender for the construction of the Bojanów and Rawicz ring road, forming part of the S5 express road. How do you foresee further cooperation with Alpine Bau? Is it still possible?

The General Directorate signs dozens of contracts for thousands of kilometres of road construction. The contract monitoring system implemented by us is supposed to be an effective tool for informing the management boards of contractors about the problems we are concerned with. This mechanism works, but it is effective only if the other party actually takes this on board. And Alpine Bau is only one of over 200 contractors we cooperate with. Each contractor will have to account for its work in the same way, step by step. From the formal and legal point of view, there is no possibility of excluding this company from tender proceedings.

So Alpine Bau will build the ring road?

Alpine Bau has in fact offered the lowest price. According to the regulations of competitive tendering you can exclude a company from the proceedings if it has been prohibited by a court order. So far there is no such ruling, so I cannot say today whether we will accept this offer. I can only assure you that we have very strong evidence against the company.

Price is now the overriding factor when choosing a contractor, so perhaps it would be worthwhile changing this criterion?

Competitive tendering is a special type of order, so we have to be guided first of all by the costs. We have a big budget: last year we spent over PLN 18 bln and this year we are planning to spend over PLN 30 bln. I am not worried about expenditure because in most cases this amounts to the ‘consumption’ of contracts signed earlier. The price is of course the most important criterion, but not the only one. For example, in the contract for the construction of the A4 motorway, the guarantee period played the most important role.

So savings come first after all?

Yes, because we are spending the taxpayer’s money. Last year we managed to save over PLN 11 bln as a result of freeing up the market for road tenders. Before 2008 only about 20 companies could participate in tenders, and they would have taken 20 years to build the 3,000 km of roads we need! We looked through the specifications. What did we find? Many requirements which were permissible by the law, but not really necessary. For example, a company had to prove that it employed a contract manager with long-term experience, and yet there were only five such specialists in our country at the time. So we changed the requirements and allowed all entities which have enough experience and could guarantee safety and a high quality of work to participate in tenders. We have consulted with many civil engineering associations on this matter. They have in turn put forward their own proposals. Today over 200 companies can participate in tenders.

Are you sure that this will not have a negative impact on the quality of road construction?

We have announced many tenders for laboratory equipment. For several years the General Directorate has not had the equipment for monitoring the work in progress and for the acceptance of projects. Specially equipped laboratories and laboratories in the field will be an effective tool for the supervision of the whole process. What for? In order to avoid the same problems as were evident in the case of the Wyszków ring road, where significant deviations from the terms of the contract that the investor’s supervision had failed to detect eventually started to become obvious once the contract had been awarded. Another example is the recently completed section of the A2, constructed by the concession holder Autostrada Wielkopolska, where renovation work was already required. We will not let this happen again. Holding the tenders is the easiest thing in the whole process. And in 2010 Poland will be the biggest building site in Europe!

Furthermore, the General Directorate is the biggest investor, not just in Poland but also in the whole region?

I think even in the whole of Europe.

So you are now being visited by delegations from abroad, just like under communism?

Indeed, many foreign companies are looking to work here, and you can sense their hunger for projects. And the institution runs a very intensive exchange programme with companies abroad concerning know-how. We do not want to reinvent the wheel. The mechanisms and project management methods that we use were developed by similar institutions in Scandinavian countries, in Germany, Holland and Belgium. We only need to adapt their experience to our needs and conditions. Thanks to these contacts, the General Directorate has managed to build a group of leaders – 1,700 people – who pass their knowledge further down the organization structure. At the moment we are talking about the construction of roads, but as time goes by, the maintenance of these roads will be a more important task. We have freed up the tendering market, there has been a fall in prices, and to benefit the state treasury we have created a mechanism for the supervision and monitoring of construction, the only cost of which is for the additional equipment for laboratories and the simplification of the document flow. And finally we are preparing a new system for road maintenance and management. I believe that we will have a well-prepared management sector within the next couple of months, which we will gradually become responsible for the new sections of roads that will have been built with five-year guarantees. The Alpine Bau case has given the supervision and monitoring mechanism its first test: we managed to spot the delays at a certain stage and a repair programme was put forward which was not accepted by the contractor. We had to terminate the contract as a result.

Is there any risk that this might also be the case with any other road project?

Such drastic measures will be used in the case of any contract where the requisite cooperation from the contractor is lacking. I want to emphasize that currently we do not have any other such cases where there has been a lack of response to our interventions.

Does this mean that no such risk exists at this point?

The risk is always there. However, there is no case where the management board has not accepted repair plans after realizing that something is wrong. We do actually have companies in Poland that are capable of building roads.

In the press, both civil engineers and the Polish Chamber of Commerce for Roads have given frequent warnings about the quality of roads constructed by contractors from the Far East.

And do they give any concrete examples?

No. So is this down to pure envy?

I would not say that. We have a free market. There are no regulations which could close this market up. We are a member of the European Union. These are our first experiences with Chinese companies. The General Director of National Roads and Motorways in 2007, Zbigniew Kotlarek, signed an agreement with China aimed at showing Chinese companies how to operate under Polish realities. As a result they won the tender for the construction of two A2 sections. They are preparing the design at the moment, and we are supervising their work. The designs are no different from other constructed sections in any way. We asked a lot of questions beforehand, so as to have an emergency plan in case the consortium did not manage to adjust. However, we were satisfied with their response. The A2 is one example of how to manage a tender in the best way to allow the winner to be announced and the speedy signing of the contract. I am very happy with it because it was a kind of test: if this method had not worked, I would not have had a ready tool for the tender for the Łódź-Katowice project.

After the announcement of the decision to grant the right to host the Euro 2012 football championship to Poland and Ukraine, politicians have started to review and improve the laws that had been intended to bring the necessary projects into being more efficiently. Back in 2008, you praised the changes that were made. But are there any issues to be resolved in this area? Was legal reform all that was needed?

We have managed to implement necessary changes to the competitive tendering law. Obvious mistakes in the design of a project, which were not an issue in terms of the road project itself, used to result in the automatically elimination of the offer at an early stage. This has now been amended, and this simple measure has made investors’ and contractors’ lives much easier. The period allowed for protests has also been shortened, since they significantly extended the proceedings. The Special Road Act is another such step. The environmental law in Poland was only adjusted to European requirements at the end of last year. This is why our team drew up the internal procedures we are now following, and which were based on the bill and European directives. This unconventional move made it possible for us to announce a large number of tenders last year. It also made it easier for us to finally establish the Natura 2000 areas. There is no urgent need to make any other changes to the law at this point. However, we would never have been able to announce so many tenders if we had not been the biggest beneficiary of funds from the EU.

Precisely. There is so much money around that you are having problems fitting it all into your plans, just like in 2009. You mentioned a figure of PLN 30 bln in a press conference in December 2008.

The planned budget of the General Directorate was PLN 22 bln. The PLN 30 bln figure referred to a reserve, in case additional money was needed. We knew in advance that it was unlikely that we would spend so much because expenditure is determined by the tenders announced in previous years. The tender boom started at the end of 2008 and lasted throughout the whole of last year. One of the reasons why we did not manage to spend the PLN 22 bln was the fact that tender offers are much cheaper nowadays. PLN 30 bln will only be spent in 2010 – and you will see this record broken again in 2011. We have also found a lot of savings for this year’s budget resulting from prices having fallen by 30 pct on average. I can announce more tenders.

When you became the General Director, civil engineers regarded your appointment with some caution because you had not been previously connected with the field. Is it hard to cooperate with them now?

My responsibility was for the maximum simplification of procedures and to announce as many tenders as possible. I believe that I have managed to accomplish my aims for 2008 and 2009. The goal for 2010 is the effective management of the projects in progress. Announcing the tenders has gone smoothly so far; but it will be much harder this and next year. Why? Because we do not have any influence on the very many factors that can crop up and impact upon project execution. This is why not only do we try to analyze all the risks, but we also draw up a method for solving the problems. ν

100 Years of tradition, miles of roads, billions of złoty

The General Directorate of National Roads and Motorways (GDDKiA) is a state body established for the construction and administration of roads that are important for the whole country. As such, it is subject to conditions laid down by the Treasury. It is responsible for 18,300 km of national roads, including the express roads and motorways. This constitutes less than 5 pct of the total length of the road network in Poland but carries a clear majority of the country’s traffic. Last year the GDDKiA was responsible for the construction or upgrading of 777 km of roads. This year, the institution plans to spend app. PLN 30 bln on the building and modernization of roads and will start construction work on over 1,200 km. GDDKiA is regarded as the successor to the General Directorate of Roads and Bridges of the Polish Kingdom. Lech Witecki became the acting General Director in May 2008. Prior to this, his career included a spell at the Supreme Chamber of Control (central auditing office), where he was responsible for the supervision and coordination of EU fund allocation.