Construction in Poland is booming, spurred on by the country's accession to the EU. Danusia Osiowy visits Warsaw to see how British QSs and project managers are contributing to a more mature market and how the demand for infrastructure and PPP skills is set to soar
"Poland has become the jewel in the crown of Central Europe," says Terry Rogers, managing director at QS Day & Johnson. "Business is booming all over the country, it's changing into one big construction site," he says.
Only two years ago the Polish construction industry was flat on its face, recalls Rogers. The political situation was shaky, there was an overflow of office and industrial space and investors were holding back. But what was once an impoverished country crippled by Communism and physical isolation after the Second World War is now swiftly emerging as the hottest new country in Central Europe. It seems everybody wants to be a player, resulting in fresh opportunity and demand for UK construction firms to help out.
"There has been a big recovery, all timed from entry into the EU," says Rogers, "and now it is the hotbed of investment in Central Europe. There is more investment here than anywhere else." Little wonder the country has earned the title the Flying Eagle of Europe.
Poland's capital Warsaw will always be the hub, but it is also the catalyst for the massive development currently sweeping all regions.
The government's desire to improve transport links has led to the Polish government creating a comprehensive programme of road, rail and environment development. Commercial and retail development is equally fast-paced, with new buildings being unveiled daily and contractors dictating higher prices. There is also a huge thirst for residential developments in the country, which has a population of 40m. The government has recently announced that it will not carry out its threat to increase VAT by 8% from 2008, ending months of unsettling speculation for the sector. The exception will be luxurious apartments whose fit-out constitutes at least 50% of the cost of the whole project.
As the construction industry lies in the midst of a boom, the mood is excitable and the role of the QS has evolved to become stronger and more defined.
There is no formal training of in Poland, similarly to other European countries, but instead engineers are trained to specialise in costing. One of the main differences between here and the UK is the presence of a certified site inspector, required by law. In the past site inspectors undertook the role of a QS, controlling costs and agreeing changes and variations, but this is now becoming rare.
Rafal Szwedowski, managing director at Mott MacDonald, says the term QS has been introduced over the last five years. He says: "A civil engineer, which is how a QS is known over here, tends to mean construction engineer whereas in the UK there is a very strong differentiation between building and civil. Whatever their name, there is a big need for QSs and project managers and we're hopeful the numbers will definitely increase."
But as Poland is in transition it is also experiencing growing pains and working life as a QS or PM in Poland is challenging - starting with politics.
Whatever their name, there is a big need for QSs and project managersRafal Szwedowski,
managing director, Mott MacDonald
Since the fall of Communism, government changes mean an ever-changing legal system that has become a thorn in the industry's side.
Fiddling with his shiny silver cufflink, Szwedowski explains that the law changes at least every two months. He deems it a "fat headache" and says he has given up following it, as it is impossible to keep up with.
Poland reformed its procurement law after joining the EU. The new law stipulates all public contracts must be drawn up in Polish (although English is the language used for foreign investment business). Several PMs tell me that the new document is fragile and does not cover all the issues that it should. Polish law is frequently changing and there is no formal documentation for land permits and contracts.
With bureaucracy still rife, the approval process is harder and obtaining permits takes longer. Project delays are inevitable and industry experts say the situation is unlikely to change in the foreseeable future.
Bogdan Zasada, a senior manager at EC Harris, greets me with a bouquet of tulips in his hand. It's National Woman Day's in Poland and its tradition for men to say it with flowers. "It maybe a forward thinking country but we still have our traditions," he says.
He believes projects will continue to be delayed because deadlines are treated with little urgency in the planning stage. "There doesn't appear to be a strong political interest in tidying things up."
Peter Maitland, associate director at EC Harris, blames the problem on the absence of a masterplan. "There isn't a structure in place which developers and investors can follow to know if they make an application for a particular development on site they will get permission," he shrugs. "It's done on a case by case basis and it's slowed down the whole procurement process, particularly for residential developments in Warsaw because of re-privatisation claims," he says.
If bureaucracy is a headache for the industry, land ownership claims are a minefield. Now Communism has fallen, people whose land was confiscated by the old regime are claiming it back. With very few single ownership plots of land, the situation is complicated for consultants and a goldmine for lawyers.
The claim game hasn’t arrived here as yet
Con Murphy, managing director, PM Group
Brain drain
The third challenge affecting the industry is a shortage of skilled workers, particularly senior PMs, partly due to those currently working in the UK.
In an office located in the heart of Warsaw, Jonathan Cohen, regional managing director at Gleeds, says low wages, relaxed immigration laws in the UK and lack of training are all contributing factors.
As construction activity soars contractors are not able to resource projects properly and consultants struggle to recruit the staff they need to meet market expectations. Many firms are pinning their hopes on the Polish government allowing workers from Ukraine to come into the country. "This change will stabilise the subcontractors market which at the moment is causing problems," says Cohen. In the meantime the QSs and project managers in the market are well-educated, high quality and held in high-regard. Cohen remembers when he first arrived in Poland a QS would get paid less than a quarter of the UK salary; now it's close to one on one.
Several PMs say that many people hail the Polish labourers in the UK as the new Irish. One PM says the main thing preventing Polish workers from returning home is the lower wages.
Despite these issues, disputes are rarer than you might think and the Polish resolution system is not widely used. Arbitration is sporadic, negotiation is everything and I'm told people avoid the courts like the plague. "The claim game hasn't arrived here as yet," says Con Murphy, managing director at PM Group.
Instead, the dispute resolution system is being developed to allow independent experts to step in and help streamline processes. According to Maitland, there are several Polish RICS members in Warsaw who could offer a dispute resolution service, but he confesses the RICS might turn to UK expertise. "As the market is still relatively small there may well be conflicts of interest. It's common with relatively small markets that people know exactly what's going on and know the parties perhaps too well to be truly independent," Maitland says.
Negotiation is a vital part of Polish business. It's expected. Take tendering, for example. There is no official two-stage tendering process and evaluation of most bids are based on price only. This forces consultants to cut their prices, which can lead to lower standards of services. The game also encourages risks in guaranteeing a fixed price. "It's a big difference compared to the UK but it works, the means of getting there is a little different."
Investors are running around Poland buying everything possible, desperate to get into the market. It’s an exciting place to be
Jonathan Cohen, regional managing director, Gleeds
But Maitland warns there is no room for mistakes and any errors made in the early stages of bidding will result in rejection. Polish law is very strict in these matters.
The most popular type of contract is traditional or FIDIC (International Federation of Consulting Engineers) which is published back to back in English and Polish. Design and Build contracts are gradually being introduced and the PPP model looks set to make a huge impact on the public sector (see overleaf).
So what is the attraction of Poland for a British QS or PM? Some say it's the unyielding pace and buzzing atmosphere, others say it is because the boom is here to stay.
Cohen believes the draw of Poland lies in the rapid reaction of financial institutions to market changes: "When the recession hit there was a lot of real estate at reasonable prices so institutions decided to spend money here. Now investors are running around Poland buying everything possible, desperate to get into the market. It's an exciting place to be," he says. "The system can be improved and finding innovative solutions to help the system run more smoothly is where we can add value, rather than trying to completely turn the system we had on its head," he adds.
Maitland, who has been in Warsaw for nine years, says: "I take pleasure in going on that journey with the Polish people and seeing the real potential that Poland has for the future. I'm here for the long haul."
Con Murphy echoes the thought and believes there is a flavour to the work that you "just don't get anywhere else".
Bidding plans to host the 2012 European championship are already under way. At first, a bid might seem unrealistic given the country's unresolved and urgent tasks. However, such bold ventures can act as catalysts for development. Pursuing this would boost development and promote the capital internationally.
I ask Maitland for any final words of wisdom on fitting in with the Polish way of life: "Don't ever try having a drinking contest with a Pole because you won't ever win," he winks.
What’s next for Poland?
Poland’s poorly developed infrastructure has led to expansive highway construction, plus railway and environment modernisation.
With an estimated €1bn (£687.79m) being ploughed into infrastructure, and more to follow, this is Poland’s most ambitious sector. Firms such as EC Harris, Gleeds and Franklin + Andrews are acting as strategic advisors, site supervisors or PMs to GDDKIA – the Polish equivalent of the Highways Agency in the UK. Bovis Lend Lease is also heavily focused on the infrastructure and hope for future PPP projects.
Construction and assembly output in the period 2005-2008 will grow on average by 13% a year, according to research analysts PMR. By 2008 most of the largest cities will have an expressway connecting them with the expressway network of Western Europe.
Talks are underway regarding a new international airport, a football stadium in Warsaw and a second subway line (in an east to west direction).
Pawel Pajchel, managing director at Bovis Lend Lease, says PPP will build much needed hospitals, schools, subways and even a prison. “The law is almost done but it will take time. The PPP needs understanding from local government which must be prepared to be more open towards private investors,” he says. If Poland qualifies for the next World Cup, Pawel predicts as many as five stadiums around Poland could be built, all of which could be funded by PPP. According to Jonathan Cohen at Gleeds there is a big interest from the UK in the introduction and execution of the PPP structure in Poland.
The British Embassy has launched an initiative, offering UK knowledge of PPP to the Polish government. “Levering private sector finance for public sector projects is the only way there is going to be an expansion in the construction programme.
There is such a backlog of projects that need to be implemented. Infrastructure, residential and industrial are going to be a huge part of the industry for the next 10 years at least.”
Source
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