PMR Report: 2019 marked by delays in road construction
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Key projects included in the National Road Construction Programme (PBDK) should enter the decisive phase of implementation, while market information is worrying. In 2019 to date GDDKiA has terminated 9 large road contracts totalling approximately PLN 4.1bn (€0.9bn). This, and the fact that numerous contracts remain unawarded due to bids coming in over budget, increases the risk that some PBDK projects will not be completed within the Programme’s timeframe, according to the latest PMR report: Construction sector in Poland H2 2019. Market analysis and development forecasts for 2019-2024.
Necessary verification of plans
GDDKiA’s official plans and announcements for 2019 were very optimistic. As many as 490 km of new roads were planned to be completed. As the year progressed, though, these plans were steadily cut down due to slippage on a significant number of projects. First the road commissioning plan for 2019 was cut to 475 km, and at the end of August it was reduced further to 450 km. GDDKiA already at that point considered approx. 450 km to be more realistic. The first half of the year was particularly disappointing. More than 182 km of roads had been planned to be put into service, but only 54 km actually were. Road builders significantly accelerated in the subsequent months, however, and by mid-September a total of 144 km had been completed.
9 terminated contracts
In the first half of 2019 GDDKiA withdrew from 9 large contracts (out of 108 in progress) totalling approximately PLN 4.1bn (€0.9bn), citing contractors’ failure to meet their contractual obligations. The contractors in question were Salini Impregilo, Impresa Pizzarotti, and Toto Costruzioni Generali of Italy, and Rubau of Spain. Among the abandoned sections were the Czestochowa bypass within A1, and sections of the S3, S5, and S7. Despite GDDKiA’s reassurances that work on all four projects would resume quickly, only in the case of the A1 section (from the Czestochowa North interchange to the Blachownia interchange) did this scenario materialise: a new contractor has taken over the job and is finishing the project. In the case of the remaining three contracts, tenders have either just been announced, or will be in the coming weeks.
Only 6 new tenders
In the early months of 2019, new road contracts signing activity was much slower than planned. Bids exceeding the investor’s cost estimate were a common phenomenon, resulting in the need to repeat the tender procedure. The first half of 2019 was not particularly impressive. Only 6 tenders were announced for roads with a total length of nearly 86 km and a value of construction works of over PLN 2bn (€457m).
Expenditures increased by PLN 7 bn
Most of the tenders planned for this year are to be announced in the second half of 2019. GDDKiA plans to announce tenders concerning 11 tasks with a total length of approx. 250 km and a total value of PLN 12bn (€2.7bn) as part of the newly implemented PBDK investments.
In order to increase the chances of timely PBDK implementation (speeding up the selection of contractors in the event of bids exceeding the investor’s cost estimate), the government in late September adopted an amendment to the PBDK Act under which the outlays on the programme will be increased by PLN 7bn (€1.6bn).
Forecasted decrease in the value of construction and assembly output
Taking into account the above factors and analysing the execution of projects under construction, PMR developed a forecast for construction-assembly output in road construction for the coming years. According to the forecast, presented in a new report titled Construction sector in Poland H2 2019. Market analysis and development forecasts for 2019-2024, in 2019 the value of road construction output generated by firms employing more than 9 people will fall by over 3%.