Surcharge for additional work is clear, for profound changes in projects – no

If during the construction of the bridge, after flooding the supports or strengthening the abutments, the investor suddenly changes his mind and says that he wants an object in a different place and a completely different place, it is clear to everyone that it is the cost of extra materials and additional work from the contractor, for which you have to pay. In the case of designers, contracting authorities assume that iterations and major changes are simply inherent in the design process and that no additional fee is due for them, which is not true – says Renata Mordak, director of the transport department of Multiconsult Poland. Sometimes it only turns out to be unprofitable once the project has been completed. – That’s why we so rarely hear about a contract designer or contract engineer who breaks a contract – adds our interlocutor.

Elżbieta Pałys, There has been a lot of talk lately about drastic cost increases in construction. There is implicitly a construction phase here, because we are talking about the prices of materials, for example, but they are not the only ones that are getting more expensive. Does the problem of rising costs also affect design companies? What does it look like from Multiconsult Polska’s perspective?

Renata Mordak, Multiconsult Polska: The past few months have brought us all many unexpected events. Initially we struggled with the Covid-19 pandemic and now we are looking closely at the situation beyond our eastern border. These factors caused sudden and unexpected macroeconomic changes in Poland, the most dangerous of which is the currently recorded record inflation, which has reached more than 15% in a short period of just a dozen months and continues to grow. It is the highest recorded indicator in 25 years. This circumstance has a direct and radical impact on the design and engineering services contracts performed by Multiconsult Polska, which are crucial for the development of Polish infrastructure investments, making the economic situation of the design and engineering industry almost critical. .

Our company is not based on materials and semi-finished products, such as contractors, but on human resources and professional, dedicated software. Salary expectations are rising, not only for the reasons mentioned above, but also because our staff is increasingly experienced and has broader competencies. It is therefore not surprising that such people would like to earn more.

At the same time, we implement design themes for the biggest clients, which were won 3 or even 5 years ago and their values ​​have never been valorized. Some projects under the author’s supervision are carried out at the rates that were valued several years ago. It is a very difficult situation for us, therefore we expect our contracting authorities to have a similar understanding for contractors and to work out a clear valorisation system not only for the currently announced topics, but also for the ongoing topics.

A contractor who is going to pay extra for the contract will most likely leave the construction site so as not to generate additional costs. What does the design agency do in a similar situation – will it also terminate the contract?

Construction contracts are settled with much more precision and detail than design contracts. There are several reasons – the contractor usually knows exactly how many tons of steel or concrete will be needed and can carefully estimate when individual types of work will be completed. It is possible to continuously update the valuation of materials and works required to complete the investment.

Design is a process that is more difficult to capture in tables and formulas. Especially when investors change their mind during the design process, changing the size of the investment or the detailed design solutions. It is very difficult for a designer to negotiate time and amount commitments for such changes, which means that we often only discover how unprofitable a project is after completion.

That’s why we so rarely hear of a contract designer or contract engineer canceling a contract. The priority is always to complete the topic, even if you have completed several or a dozen variants and iterations of a particular project at the original flat rate. We often compare it to the construction of a bridge or structure, when after flooded supports or reinforced abutments the investor suddenly changes his mind that he would like the object in a different place and preferably a hanging, no truss. In such a situation, it is obvious to everyone that this is additional work for the contractor, new materials and works are required, as well as the settlement and payment of the work already performed. Unfortunately, contracting authorities assume that iterations and major changes are simply inherent in the design process and that no additional fee is due, which is not true.

What are the consequences of this?

Unfortunately, the negative effects of such an approach have long been visible in the market, if it has been observed for years. Many foreign design concerns, successful in many countries, have stopped providing services here and withdrawn from the market or, despite their presence, are not allowed to offer them to the largest public ordering parties, with all risks leading to multiple iterations of the design process are entered on the designer side.

That is why we are also actively working, both as Multiconsult Polska and as a member of the Association of Polish National Designers and Engineers (ZOPI), together with the contracting parties to develop such provisions of contracts and basic documents in tenders that project managers on the public side to openly order additional iteration or design work to be performed. There is still a lot of work to be done and we are counting on the understanding and continued cooperation of our ordering parties.

In a situation of cost pressure in the implementation phase, is the emphasis on cheaper design? Where can you possibly save and when is this direction good and when does it start to become a dangerous trend where “cheap design” simply means cutting the budget for this stage of work?

Fortunately, the stage of “cheaper design” and therefore cheaper construction is already behind us. It was visible in the previous financial perspectives of the European Union, where there was relatively little money and the needs, especially in the railways – enormous. At the time, the belief was that many projects had to be prepared, where changes and improvements to the existing lines would be insignificant, but at the same time enough money to make more investments. With this assumption, feasibility studies were carried out, among other things, which were prepared until 2014. Fortunately, in the design phase, in the following perspective, these assumptions were verified and it was decided to introduce more interference and changes, which may be expensive, but will keep the infrastructure working for decades to come.

We should not cut corners on strategic projects of national or intervoivodeship importance. On the other hand, I would look for savings and “cheaper design” where the goal is to meet basic transportation needs, and an example of this could be the Kolej+ program. Due to the same guidelines and requirements for large investments, a number of oversized projects have been developed that local governments simply do not have the money for. At the same time, in Switzerland and other European countries we see light rail buses running on a cheap track sufficient for their needs and not built to be used by heavy conventional railways.

The idea for a really “cheaper” design can also be greater use of prefabricated elements. Prefabrication is visible in every construction segment. As designers, we see this in both road and rail projects. It seems that, under pressure from the timely disbursement of EU funds, contracting authorities have noticed the great advantage of prefabricated elements over traditional solutions. Thanks to the ease of installation, prefabricated products can significantly shorten the investment process and make it independent to some extent from weather conditions, while maintaining the same or even better quality parameters. That is why I expect a further renaissance of prefabrication.

In your opinion, how big is the market for infrastructure prepared investments – are we focusing more on building or thinking about what to do in a few years?

It seems that our investment need as a country is still huge. Much has already been done in terms of roads and highways, and the map of Poland has become much denser in recent years. There is still a lot to do in the area of ​​bypasses and roads of a category lower than the highest. However, in the railways, the needs are still very high, especially when it comes to new railway lines and point infrastructure, such as recharging points or intermodal terminals. I therefore expect that the entire industry will have many years of work to do and that the demand for design and guidance services will not decrease.

On the other hand, the huge swings in infrastructure investment are a major pain for the entire industry, from design to execution. Every few years there are lows, which have a very strong impact on the industry. We are now experiencing such a depression, now that there are not too many tenders for design, supervision or implementation and the investments announced a few years ago are being completed. Contractors, but also subcontractors and suppliers have a great implementation potential and at the same time have to wait in the starting blocks until public clients first receive confirmation of financing sources and then prepare tenders.

As a result, the first proceedings after such a depression are settled with really low prices filed by companies already on the verge of bankruptcy and struggling to survive. Only after some time do prices normalize so that at the end of the programming period, when the granting entities want to allocate EU funds quickly, they increase and significantly exceed the budgets of the granting entities.

This promotes the disturbing and unfavorable phenomenon that only financially strong entities that can calculate and execute a pricing strategy can survive in the market. Others run the risk of underestimating the contract and having to leave the construction site. It is also not conducive to the development of smaller entities, including Polish entities, which could join the group of major players but are unable to compete with them because they do not have such large project portfolios or such stable financial situation, often guaranteed by foreign capital.

Therefore, it would be ideal for the largest contracting authorities to plan and implement consistently a number of investments of various sizes, planned for many years, and to present these plans for three years, broken down into quarters. So that the whole market can plan both development and investment, and feel relatively confident, which translates into the stability of staff employment.

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