Winning Public Tenders in Poland – An Overview

1. Winning Public Tenders in Poland – An Overview The Ireland Poland Business Association 4 March 2011 Michael Shelly

2. Poland in Context • Largest beneficiary of EUfunds amongst the most recent 12 accession countries with €67.3bn over the period 2007-2013 • Poland, as the biggest new member of the single European market, offers a good balance between low business risk and high growth opportunity • Attractive domestic market of 38m consumers – larger than the other seven 2004 EU entrants combined in terms of population and GDP • CEE gateway to regional sales, manufacturing and logistics hub – EU expansion opportunity • Human capital – young, skilled,ambitious workforce

3. EU Funds – Comparison with Neighbouring countries

4. EU Funds in Poland 2007 - 2013

5. PM Group – Our Experience in the Public Sector in Poland The period 2003 to2008: • PM Group developed a strong position in the Public sector in Poland (EU funds of €11bn+ provided backbone 2002-2005) • Mainly winning Construction Supervision Services (FIDIC Contract Engineer) - environmental/roads / airports/public buildings • Design Services in Public Sector – bid selectively (3rd level Education facilities/Lifesciences / Research) • Public sector consultancy – steadily growing capacity and presence on the market since 2006 • In parallel we continuedto build a strong position in the private sector primarily in industrial FDI projects

6. PM Group Polska – PublicSector Clients Nowa Ruda Szczecin Poznań Opole Wrocław Legnica Brzeg Gdańsk Kraków Krosno Jelenia Góra Kielce JCI Sp. z o.o. Uniwersytet Jagielloński Kołobrzeg (Karlino)

7. Foreign Direct Investment in Poland

8. Overview of public sector market - 2008-2010 Year 2008 – Economic crisis hits Poland! While Poland did not officially go into recession, there was an immediate and definite impact on the construction sector Many projects suspended or cancelled in the private sector (Commercial Sector stalled totally and many Industrial FDI projects slowed or suspended) Most international and local consultants turned to the public sector to win work (instances of over 25+ proposals being submitted for some bids) Average winning fee levels dropped dramatically - now as low as 25% of the Public Client’s stated budget

9. Overview of public sector market - 2008-2010 Other Factors impacting on Public Sector tenders • Timeandmoney – difficult public procurement procedures, (demanding legal support & monitoring of frequent changes) consume significant time and money • Polish Procurement Law –a moody animal! Frequent changes, confusing tender rulesandregulations • Low technicalandcapacity requirements and 100% price-evaluation criteria make it very difficult for sizeable, experienced companies to compete with low cost operators (dumping prices)

10. Poland Market Status 2009/2010 • Steady decrease in charge out rates and margins in both public and private sector • Engineering and Architecture unemployment rate going up (lay offs in some sizeable International companies) • International companies biddingat low margins to keep staff • Quality standards threatened due to low pricing • European Football Championships – need to make up for lost time in infrastructure development – some oppportunities for experienced and sizeable companies • Procurement of Public Sector Projects is seriously behind schedule

11. Dealing with Polish Procurement law • To speed up the procurement process,the Government introduced changes to Polish Procurement Law in December 2009 • Significant changes re the use of another entity’s knowledge and experience. Bidders may utilise subconsultant’s experience, resources, and financial strength to meet tender requirements. • This opens new opportunites for joint bidding - yet the Contracting Authority may still require complete formal documentation from the subconsultant • Assembling formal documentsfor foreign companies is a laborious task - Every document needs to be signed “True to copy” by the company owning the copy of the references. A proxy can be appointed only for legal activities

12. PM ‘s View of the Market –Areas of Concern There is definitely opportunity in Public Sector projects in Poland, BUT • Although Procurement law allows other tender evaluation criteria, (e.g. 60%technical/40% price) usually 100%price evaluation criteria used – leads to exceptionally low bids • Tender technical and capacity requirements are very often too low for the actual scope of the project • Service Contracts - no standard template in Poland (white book FIDIC rarely used) can result in unacceptable T&C’s for International Companies

13. PM ‘s View of the Market – Areas of Concern • Level of responsibility required very often too high for the budget set by the Public entity • Additional activities required from company due to external auditing • Red-tape and Bureaucracy- projects require significant additional written recordsandprocedures compared to norms elsewhere • Variation orders difficult to achieve – rarely do Public entitiesagree variations or agree to pay additional monies even thoughmany changes are Client initiated

14. Public Sector Depends on EU Funds FOR THE YEARS: 2007 – 2013: • Poland receives €67bn co-financing from theEU • Projects budgeted for 2011 – €16bn • Projects still to be contracted up to 2013 will involve €32bn of EU co-financing • Operational Programme Infrastructure & Environment - Basic list – 348 Projects; value – €49bn - Reserve list – 73 Projects; value – €14.7bn

15. Operational Programme Infrastructure and Environment

16. Our view of the Public Sector – Suggestions • Build relationships and try to convince Public Sector clients to see value in high technical/financial requirements in Complex project Bids (JCI a good example) • It is not an easy market. There is no mercy from clients – Don’t assume that you will get a fair hearing or tolerance if something isn’t right • PPP projects surfacing –opportunity to work with either Private Entity or as technical support to Public Entity (Healthcare & Energy sectors) • But the key issue ……….. Be selective in what you bid

17. Thank you!