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Tusk drops Chinese COVEC building the A2 motorway in Poland


PennBoy 76 | 2,437
3 Jun 2011  #1
Poland's Prime Minister Donald Tusk on Thursday threatened to drop a Chinese company contracted to build a key stretch of highway in Poland after financing problems saw the work grind to a halt.

"This contractor has problems with financing and today I'll be speaking with (Infrastructure) Minister (Cezary) Grabarczyk (...) about how to proceed if we decide to resign from the services of this company so that work on the A2 highway project isn't drastically delayed," Tusk said, adding "we don't want a situation where the project costs sky-rocket."

Construction of part of the A2 highway linking the Polish and German capitals Warsaw and Berlin by Chinese company COVEC stopped last month after the firm failed to pay Polish subcontractors.



gumishu 11 | 4,955
3 Jun 2011  #2
this is the question of Polish government not paying the building companies on time - the Chinese claim they have only received some 130 million PLN from the state while they have already spent 240 million
boletus 30 | 1,367
3 Jun 2011  #3
From the Polish language source
.....

According to Andrzej Maciejewski, a deputy director of General Directorate for National Roads and Motorways (GDDKiA), Chinese consortium COVEC has informed GDDKiA of its intention to breach the contract and asked for the interview, which would enable them to carry out further work. The Directorate is open to such talks in order to give the Chinese company a chance to meet the demands expressed in an ultimatum given to them yesterday. The meeting would be held next week.

In its ultimatum the Directorate demanded submittal of a remedial plan for the road building. During the last several weeks there has been virtually no progress on the "Chinese" sections of the road construction since the Polish subcontractors stood idly by - complaining that they had not received payments for the work done.

No reasons have been given for such a significant loss of liquidity by the Chinese consortium. The Chinese side had assured GDDKiA of their own accumulated resources of 300 million zloty. It turned out that this statement was not correct. The builders on the A2 road are still waiting for cash.

Maciejewski also emphasized that the breach of the contract authorizes the Treasury to lay claim against COVEC for the amount of about 740 million zloty.
gumishu 11 | 4,955
3 Jun 2011  #4
the Polish-Macedonian consortium that was building a section of a A4 somewhere between Kraków and Tarnów also dropped the job - the main reason the consortium stated was they haven't received payments from the GDKDiA on time - I think this is also the case here - this reflects the state of Polish finances too by the way - you just won't here it from the government especially with the elections in sight (and the success propaganda this government runs with the help of some media)
vladi - | 11
3 Jun 2011  #5
The Chinese have built so far 10% of the highway so they got 10% (130m out of 1.3bn contract) of the deal. The amount what they paid to subcontractors is their problem - it only shows they underpriced the deal while bidding.

If the deal is broken they will have to pay ZL750m fine to Poland. Idiots.
gumishu 11 | 4,955
3 Jun 2011  #6
the government of success - this is how this success looks like - motorways for EURO 2012? - crucial sections will be missing
OP PennBoy 76 | 2,437
3 Jun 2011  #7
what's up with that National Stadium gumishu? Will it be completed in time, or the first few matches moved to an another city?
gumishu 11 | 4,955
3 Jun 2011  #8
The Chinese have built so far 10% of the highway so they got 10% (130m out of 1.3bn contract) of the deal. The amount what they paid to subcontractors is their problem - it only shows they underpriced the deal while bidding.

If the deal is broken they will have to pay ZL750m fine to Poland. Idiots.

the government of success - this is how this success looks like - motorways for EURO 2012? - crucial sections will be missing

The Chinese have built so far 10% of the highway so they got 10% (130m out of 1.3bn contract) of the deal.

if you want to have the motorway built you need to be more flexible with payments - unless this is the case that we can't possibly afford to do that (because we don't have the money - read the state finances are in tatters)
Harry
3 Jun 2011  #9
the government of success - this is how this success looks like - motorways for EURO 2012? - crucial sections will be missing

Oh come on! You didn't really ever think that the roads would be ready by then did you? Next thing you'll be saying that the rail upgrade work will also be finished by then. And even the Warsaw metro too!
OP PennBoy 76 | 2,437
3 Jun 2011  #10
And even the Warsaw metro too!

How's that WILSON station there Harry? ;)
gumishu 11 | 4,955
3 Jun 2011  #11
what's up with that National Stadium gumishu? Will it be completed in time, or the first few matches moved to an another city?

there is some flaws in the design - it will postpone the opening of the stadium well beyond the 6th of September (the planned Poland-Germany match) - it is not the only problem though -

gumishu:
the government of success - this is how this success looks like - motorways for EURO 2012? - crucial sections will be missing

Oh come on! You didn't really ever think that the roads would be ready by then did you? Next thing you'll be saying that the rail upgrade work will also be finished by then. And even the Warsaw metro too!

it was one of the PO goverment promises to have the motorways ready for the EURO 2012 - and there is some circumstancial evidence GDDKiA is not living up to this (also financially - but not only)
boletus 30 | 1,367
3 Jun 2011  #12
if you want to have the motorway built you need to be more flexible with payments

This does not make any sense. If I hire a roofer I do not pay him up front more than we agreed upon before his work started. Yes, some contractors are devils' incarnate and try to take you hostage - which works sometimes. In such a case - shame on me for hiring the wrong company (since I have been warned over and over again via media), but that's about it.

Have you actually seen the contract? If yes, what does it actually say about partial payments?
Harry
3 Jun 2011  #13
How's that WILSON station there Harry? ;)

I prefer the name it used to have, back when it was named after commie collaborating traitors. I'm surprised that you don't prefer that name too.
gumishu 11 | 4,955
3 Jun 2011  #14
This does not make any sense.

if you insist on having the roads built in time for EURO 2012 then you should be a little bit more flexible - even if you have chosen the wrong company in spite of being warned (and the government was most probably wrong) - if they are not flexible Poland will end up with no motorways ready to move people around the stadiums - and this means a DISGRACE - young Poles in their masses voted for PO instead of PiS to end up a perceived disgrace - the rule is the more you fear something the more you attract it - we have put an end to a perceived disgrace and we will end up with a very real one

then there is evidence GDDKiA was delaying payments for other contractors on different sections of the motorways in construction - there must be something really bad with the state of state finances in my oppinion
OP PennBoy 76 | 2,437
3 Jun 2011  #15
I prefer the name it used to have, back when it was named after commie collaborating traitors

You do? you seam to have a hidden affiliation with the communists and that system, now we understand ur outbursts.

EU, European standards and deadlines are supposed to mean something, organization, skills, quality competence. No ifs, whens or buts. Can't complete a stadium in time, motorway, purchase trains properly.
Harry
3 Jun 2011  #16
You do? you seam to have a hidden affiliation with the communists and that system, now we understand ur outbursts.

Not really, I just like Paris. And I don't have much time for Poles who know so little about history that they think Wilson was in any way responsible for Poland regaining her independence.
boletus 30 | 1,367
3 Jun 2011  #17
if you insist on having the roads built in time for EURO 2012 then you should be a little bit more flexible

Since you did not answer my question whether or not you have actually seen the contract between GDDKiA and COVEC I did some finger walking searching for an "evidence (that) GDDKiA was delaying payments". Yes I found some reference regarding "Polish NDI and Macedonian SB Granit" complaints (2011-02-11), but frankly I still have no clue which side was in fault.

wbj.pl/article-53179-update-a4-highway-builders-want-out.html

As to "not being flexible enough" - how much flexibility do you want - considering this: BRE Bank Securities report, about Q1 2011 financial forecast for Budimex.

The highlight of Budimex's Q4 2010 report was an impressive operating cash flow totalling PLN 944m (after consortium partner stakes). Historically, the company's cash flows did not correspond with earnings, and they came from differences between accounts payable and accounts receivable (ca. PLN 1.5bn) such as contract advances received from the national road authority (GDDKiA) or overdue payments to contractors.

So, GDDKiA was quite generous with contract advances in Q4 2010, and yes - Budimex was delaying payments for its contractors - not GDDKiA. It seems that this is a standard practise in Poland

Virtually all large road builders reported strong operating cash flows in Q4 2010 which we believe came from contract advances received thanks to the national road authority's (GDDKiA) end-of-year spending rush. This year, government advances toward road contracts will most probably be much less generous given the GDDKiA's high expenses and the tight national budget.

The report shows the table of GDDKiA "generosity" towards major industry players. Ratios of their cash flows to the GDDKiA advances in Q4 2010 look like this:

Budimex - 30.2%
Hydrobudowa Polska - 34.7%
Mostostal Warszawa - 19.6%
PGB - 28.8%
Polimex Mostostal - 32.4%

Overall, the report presents plenty of interesting facts - if one only wants to find them, rather than just complain.

With respect to bids, according to Wyborcza:

The consortium presented and offer half as cheap than the estimates by officials. Two sections with a total length of nearly 50 km were to be built for 1.3 billion zł (on average about 26.5 million zł / km). For comparison Mostostal will take 843 million zloty for 17km section B (about 49.5 million zł / km), and Strabag - 643 million zloty - for the 17.6-km section D (about 36.5 million zł / km .)

Yes, here was the bad choice: the offer was too good to be true.
gumishu 11 | 4,955
3 Jun 2011  #18
Yes I found some reference regarding "Polish NDI and Macedonian SB Granit" complaints (2011-02-11), but frankly I still have no clue which side was in fault.

read this - especially the last paragraph
gumishu 11 | 4,955
3 Jun 2011  #20
gumishu: Read what?

sorry -
AdamKadmon 2 | 508
3 Jun 2011  #21
named after commie collaborating traitors

What???!
Antek_Stalich 5 | 997
3 Jun 2011  #22
I prefer the name it used to have, back when it was named after commie collaborating traitors. I'm surprised that you don't prefer that name too.

Harry, I have to correct you. The Wilson's square was named after Paris Commune. You must have confused that with Plac Bankowy, formerly named after Feliks Dzierżyński, indeed a commie and a traitor.
Harry
3 Jun 2011  #23
No, I'm perfectly well aware of what its name used to be, hence my comment "I just like Paris". Although it is a pity that Dzierżyński doesn't have anything named after him any more, he still holds the record for 'most Russians killed by a Pole'.
Antek_Stalich 5 | 997
3 Jun 2011  #24
Did you know Harry the monument of Dzierżyński was hauled off by a crane as he were hanged, his neck broke and the head and body got separated? ;-) That was a great day I wont' forget!

The scene is here:


Harry
3 Jun 2011  #25
I didn't know that. I was wondering what happened to the statue, whether it ended up down in the storage near Lublin (Kozwołka, or something like that).
Antek_Stalich 5 | 997
3 Jun 2011  #26
The statue turned out to be made of concrete and empty inside, just like the communism was.
boletus 30 | 1,367
4 Jun 2011  #27
sorry

Mods: Most of the "quoted" fragments are in fact my translation from Polish sources, so please do not erase.

I read the article you pointed at, and I repeat what I have said before: I have no clue which side is to be blamed.

We always pay - assures Hadaj Martin, and emphasizes that GDDKiA, as a government body, is bound by specific rules that do not permit for any delays in the payments. - We do not pay only in cases where work done is inconsistent with the provisions of the contract.

But your article is old - 2011-02-11. Here is something newer: from 2011-04-21: "Consortium NDI SA - SB Granite abandoned construction site A4". GDDKiA clearly points its finger at NDI SA - SB Granit. In any event - this does not look good.

Going back to the "Chinese" problem with Highway A2:

The Chinese consortium COVEC announced Friday its intention to opt out of further construction of the A2 motorway between Stryków and Konotopa - told PAP Andrzej Maciejewski of the General Directorate for National Roads and Motorways. The contractor asks for more talks , but the government is preparing two backup options .

This is an unprecedented situation . Never before government General Directorate for National Roads and Motorways ( GDDKiA ) did not were replaced by the main contractor of the contract in his duties. Yesterday, officials of the de facto started manually manage the construction of endangered sections of the A2 highway . China Overseas Engineering Group , which is building two of the five sections of the highway from Lodz to Warsaw , is on the verge of losing the contract. Foreign shoulder China Railway Engineering - construction giant behind the Great Wall , reaching over 20 billion dollars in revenue a year - can not cope with the implementation of 50 km highway for 1.3 billion zł .

The contractor asks for more talks, but the government is already preparing two backup options.

This is an unprecedented situation. Never before has the government's GDDKiA replaced the main contractor in its contract obligations. Yesterday the GDDKiA officials started de facto manually managing the construction of the vulnerable sections of the route A2. China Overseas Engineering Group, which builds two of the five sections of the highway from £ódź to Warsaw, is on the verge of losing the contract. Foreign arm of China Railway Engineering - a construction giant behind the Great Wall, reaching more than 20 billion dollars of revenue a year - can not cope with the implementation of 50 km highway for the 1.3 billion zł.

Yesterday, Prime Minister Donald Tusk met with Minister of Infrastructure Cezary Grabarczyk and GDDKiA. According to our information, he did not mince any words.
- The Prime Minister gave us his permission for very decisive actions - says Radoslaw Stepien, Deputy Minister responsible for road infrastructure.
Regardless of the ongoing procedures GDDKiA and Ministry of Infrastructure are working on the backup options. - The overall aim is to maintain the goal of highway readiness for the end of May 2012.

Backup plan 1: direct management of subcontractors

According to our information, the safest option for now is to continue the work of subcontractors present at the construction site under the supervision of GDDKiA.
This is the most likely scenario in words of Konrad Jaskóła, head of Polimex-Mostostal, which builds the B fragment of the A2 highway separating the "Chinese" sections of the route.
- The is the only realistic option if the highway is to be built on time. Any other scenario leaves us with no chance to finish. A new tender would take at least six months - and then the construction site will be covered by snow - says Konrad Jaskóła.

According to our information, GDDKiA is taking over the control right now. Yesterday in Warsaw the agency met with more than twenty subcontractors, which interrupted their work on the highway A2 in mid-May. The GDDKiA executives, even before meeting with the Prime Minister, had assured the companies that the overdue money will be paid and encouraged them to return to work.
- We will be able to settle down with the subcontractors, bypassing the Chinese contractor, provided that a reliable proof of work is presented to us - we were told tonight at GDDKiA office.
The on-site work will be coordinated by the two project managers, under the guidance of a so-called contract engineer; that is, a consortium of consulting firms supervising the construction and led by DHV company.

Backup plan 2: "Pospolite ruszenie", "levée en masse"

Another backup solution is to involve contractors working on other sections of A2: Polimex-Mostostal, Budimex and Strabag.
- We are able to bring on site additional machines and workers - says Dariusz Blocher, president of Budimex. To make this possible, GDDKiA - after throwing the Chinese out of the site - would have to conduct negotiations with the invited companies and to sign the contract on the fly.
- It has been done with the stadium in Wroclaw, when the first contractor did not handle the project properly . It was a similar scenario and it is possible to execute it quickly - says Konrad Jaskóła.

I wish them the best - even just to play with the nerves of those black ravens that just appeared on TV - cawing and enjoying themselves. "Whatever Midas touched, it turned into gold, whatever Tusk touches it turns to the one - you know what" - says Kurski. Clever!
gumishu 11 | 4,955
4 Jun 2011  #28
I wish them the best - even just to play with the nerves of those black ravens that just appeared on TV - cawing and enjoying themselves. "Whatever Midas touched, it turned into gold, whatever Tusk touches it turns to the one - you know what" - says Kurski. Clever!

I still think the GDDKiA has little money which reflects the state of Polish finances - they probably now bet on getting those 700 million penalty fee off the Chinese - we will see what happens if the state (GDDKiA) takes the construction over (if there is enough money to pay to those subcontractors so they continue the work)

I am no expert on economy but according to official data tax revenues dropped between 2009 and 2010 by over 10 per cent - at the same time GDP was claimed by the government to raise over 1 per cent - maybe GDP calculation methodology allows for such results - I don't know - still you can expect financial trouble looming (the spendings haven't been cut that much so you end up with higher budget deficit)
Ironside 47 | 9,587
4 Jun 2011  #29
That was a great day I wont' forget!

have you been there ?

I still think the GDDKiA has little money which reflects the state of Polish finances

I would like to know whats really going on! There is definitively something rotten ....
delphiandomine 84 | 17,703
4 Jun 2011  #30
I still think the GDDKiA has little money which reflects the state of Polish finances

Could be that they're simply trying to screw over the Chinese - after all, paying late is a Polish national tradition ;)

Does this mean though, that the GDDKiA will be the concessionaire for Lodz-Warsaw, like they are on the bit of A2 between Lodz and Konin?


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