Dispute over construction costs of S3 section. Contractors wrote to the Prime Minister

The leader of the consortium that is building the 16-kilometer S3 section Dargobądz – Troszyn appealed to the prime minister to “recapitalize the contract.” This is about over PLN 40 million. Without a guarantee of financing, two expressways will not be ready for the summer. GDDKiA is analyzing the contractor’s claims.

An open letter to the head of government and the ministers of infrastructure, finance and national defense, as well as the governor and local government officials was published on Thursday by PRD Nowogard SA, the leader of the consortium that is building the section of the S3 expressway Dargobądz-Troszyn north and south of Wolin (West Pomeranian Voivodeship). "The full passability of the S3 road before the summer holidays is at risk" - the appeal to the prime minister was entitled.

"We appeal for urgent recapitalization of the contract and guaranteeing coverage of extraordinary, unforeseeable investment costs. Without this, the continuation of work in a time that would allow full traffic on the S3 route before the summer holidays is questionable," it was written.

The threat of financial problems

It was warned that companies working on the construction of the S3 section "are at risk of serious financial problems". It was indicated that "the sum of the above-planned costs", in material claims alone, reaches PLN 35.7 million. This is caused, as explained, by an extraordinary increase in the prices of building materials: steel, aggregates, asphalt.

It was also pointed out that the consortium is incurring “unplannable” costs of around PLN 1 million per month due to the extended contract deadline. It was supposed to be completed in mid-2024, but due to the economic turbulence caused by the pandemic and the war in Ukraine, construction is delayed.

"One million złoty per month are the average overhead costs of the extended contract execution period. It is not the contractor's fault," Katarzyna Łazarz-Brzezińska, vice-president of the PRD Nowogard board, explained in an interview with PAP. "These are overhead costs, including the construction office, construction site insurance, environmental supervision, geodesy, bank guarantees, etc. Until December last year, they were recognized by GDDKiA. Now they are not," she emphasized.

Łazarz-Brzezińska noted that the construction of the Troszyn-Dargobądz section has been completed in 95%. The original value of the contract is PLN 552 million net (PLN 679 million gross). The bid in the tender was submitted in March 2020, the contract was signed in August. However, the increase in the prices of raw materials, materials and labor caused the contractor and GDDKiA to repeatedly index the contract. The costs of its implementation are PLN 173 million higher than planned.

"We paid the increased expenses on an ongoing basis from our own funds so as not to cause delays in the implementation of the works. In this way, we financed a public investment from private funds," argues Łazarz-Brzezińska.

An open letter is an expression of desperation

GDDKiA agreed to increase the indexation from 5 to 10, and then 15 percent. This meant an additional PLN 83 million net (PLN 102 million gross). "The last positive decision of GDDKiA in this matter was made in September 2023," informed the vice-president of PRD Nowogard.

She recalled that the construction consortium had repeatedly asked GDDKiA to increase the fee by more than 15 percent indexation, and had applied four times for mediation before the Arbitration Court at the General Prosecutor's Office of the Republic of Poland. Several dozen meetings were held with GDDKiA and at the Ministry of Infrastructure. In a letter to the Prime Minister, PRD Nowogard assessed that it was a "pretend dialogue."

“The open letter is an expression of our desperation and determination,” admitted Łazarz-Brzezińska.

She stressed that if the contractors of the S3 section have to pursue their claims in court, many companies may end up declaring bankruptcy earlier.

Krzysztof Czura, president of PRD Nowogard, told PAP that 260 subcontracting companies have been involved in the construction of the Troszyn-Dargobądz section. Now, over 90 are working. "There is not much left to complete the second "strand" of the S3 and make it passable. However, we need a guarantee of financing," Czura said. "We pay subcontractors on an ongoing basis," he added.

When asked about the date of achieving the so-called passability for two carriageways of the new S3, he indicated mid-July.

The work has not been stopped

The spokesman for the Szczecin branch of the GDDKiA, Mateusz Grzeszczuk, emphasized in an interview with PAP that work on the S3 Dargobądz – Troszyn section “has not been suspended.” He explained that “in the near future” changes to traffic organization are planned, “which are to make travel on the new S3 as smooth as possible at the beginning of the holiday season.” He announced that two carriageways north of Wolin should be opened at the turn of June and July.

“The entire section should be passable on two roadways with two lanes in each direction during the summer holidays,” Grzeczuk announced, without specifying the exact date.

The spokesman noted that talks with contractors are conducted "all the time". "We make every effort to resolve problematic issues. We are obliged to act in the scope of a uniform approach to all GDDKiA road investments and the adopted principles of indexation, applicable financial limits and legal regulations," he emphasized.

He noted that changing the indexation limit would require increasing the financial limit of the Government Programme for the Construction of National Roads, which requires a decision of the Council of Ministers.

Grzeszczuk informed that in addition to the indexation (PLN 102 million gross), GDDKiA paid the contractor of the Dargobądz – Troszyn section approximately PLN 8 million "for the costs incurred in carrying out the construction during the extended time for completion". Until December 2024.

"The contract conditions specify the reasons for the extension, for which the contractor is entitled to additional time and costs in the extended period, while for others only the extended period is due," Grzeszczuk explained.

In the opinion of GDDKiA, the contractor's claim, which was the reason for the extension from December to April, is not due. "Of course, if the contractor presents evidence that circumstances occurred that would also qualify for recognition of costs after December, we will analyze this issue," the GDDKiA spokesman concluded.

Copyright