The education system and the labour market

KOLIN Inşaat, Turizm Sanayi ve Ticaret A.Ş. is the partner of the report

Over PLN 162 billion has been allocated to the upcoming projects as part of the the road and motorway construction program until 2025.

What is the situation on the domestic road construction market? How did the pandemic affect it? What are the opinions of the ordering parties and the contractors? Finally, what are the prospects for new players on the market? These were some of the issues discussed by the participants of the panel discussion "Construction market in the new reality" during the Economic Forum in Karpacz.

What is the situation on the domestic road construction market? How did the pandemic affect it? What are the opinions of the ordering parties and the contractors? Finally, what are the prospects for new players on the market? These were some of the issues discussed by the participants of the panel discussion "Construction market in the new reality" during the Economic Forum in Karpacz.

The pandemic did not put a hold on road construction

– "The pandemic has in no way stopped or slowed down road construction projects. As the ordering party and representative of the industry, we have managed to keep a cool head. As can be seen in the results, this has paid off" - states Tomasz Żuchowski, the acting General Director of the General Directorate for National Roads and Motorways.

– "This can be seen from the point of view of work progress. To give an example, we have recorded an over 17% increase in work output, taking into account the month of July this year and last year. As evident, the pandemic did not adversely affect the implementation of the investment" - explains Tomasz Żuchowski. – "Taking into account all aspects of cooperation, digitization, flexibility, as well as remote conference tools, they must be applied also in the subsequent stages so that this experience is not only a temporary phenomenon, but one to provide valuable lessons for the future" - he emphasizes.

Tomasz Żuchowski points out that over PLN 162 billion has been allocated to the implementation of the subsequent tasks - the road and motorway construction program to be implemented by 2025. Over PLN 28 billion has been allocated to the construction of 100 bypass roads. – "This shows that both finances and opportunities are available and it is my wish that the companies operating on our market have the potential and equipment to use this money for the benefit of the whole economy" - adds Tomasz Żuchowski.

One of the major problems of the Polish construction market before the pandemic was the lack of labour force. – "Everyone was stressing it. Due to the pandemic, some companies were forced to reduce employment and many sectors of the economy suffered. There is definitely a shortage of migrant workers from the East who left and have not come back ever since. About 1.5 million people work in the road construction sector, producing approximately 10 percent of the GDP. I think the sector will be able to absorb a lot of specialists in this area" - explains Żuchowski.

– "In the post-pandemic reality we will be dealing with two types of phenomena. Stable and well-organized companies with effective management processes in times of crisis, will remain on the market. This is an ability not everyone has acquired in the period of prosperity" - states Jakub Pawelec, J.D., adviser to the management board of KOLIN Inşaat, Turizm Sanayi ve Ticaret A.Ş.

Pawelec adds that another group of companies that will be doing well on the market will be those that can organize more demanding projects. – "From the point of view of the measures introduced after the pandemic, the Polish market is perceived as one of the most stable" - he stresses.

What are the risks?

– "Banking specialists used to regard the sector of road construction as passé and involving a higher risk, which was reflected in large margins on all types of loans. Companies operating on the Polish market have often had trouble obtaining guarantees, even now. International companies have enjoyed greater support of domestic banks and in their case it is much easier to obtain guarantees. We are in the process of negotiations with banks to change the approach of the banking sector to public investments to a more flexible one, as they are the only guarantee of the continuous supply of orders" - states the acting General Director of the General Directorate for National Roads and Motorways. – "The observed shrinking of the private sector (e.g. real estate development, construction of shopping malls), will shift emphasis to public investments. As a result, the financial liquidity of companies may be upset. Even now many large international corporations refuse to accept a contractual advance from us. We will discuss the possible reasons for this situation" – says Tomasz Żuchowski.

Jakub Pawelec, J.D., emphasizes, in turn, that unsuccessful contractors, who are not able to finance their projects, should not be present on the market. – "It is good that the General Directorate for National Roads and Motorways is carefully checking new entities" - he says.

– "Healthy competition on the market and the presence of experienced entities that can introduce new stimuli are of prime importance. One of such entities is KOLIN, which has experience in various challenges. New players have a chance to prove themselves, provided that they are able to convince the ordering parties of their reliability and experience, and that they will not disappoint them during the execution of the contract" - indicates the adviser to the management board of KOLIN.

Prices have dropped

Tomasz Żuchowski addresses the subject of price variability proposed by the contractors, comparing the concept to riding a camel. – "We go up and down, up and down. We currently have a low price trend in terms of the offers submitted. We are closely monitoring it and analysing the risks. Low prices should always arouse suspicion, such as, for instance, an S category road, evaluated six months ago at PLN 43 million per kilometre, and evaluated at PLN 10 million less in the offers submitted now. What has changed since March that the cost of the road per kilometre has dropped so much. 25 percent is a lot. I would not like us to repeat the same mistakes over and over again with contractors who exaggerated with their low prices. It is puzzling that nowadays we are breaking records in terms of dumping prices - he says.

Jakub Pawelec indicates that a pragmatic approach to the project allows for lower prices. – "I cannot imagine a situation like the one in 2011-2012, when some contractors failed to carry out the undertaken motorway projects. It is important to wisely choose who you want to work with. The key to the cost-effective implementation of the project is to find support in Polish subcontractors, engineers and technological facilities" - he emphasizes.