Dangerous game
As politicians dither over the post-Euro 2012 future of the new facility, experts doubt whether enough time remains to build a stadium that's up to snuff
Earlier this month, Sports Minister Elýbieta Jakubiak asked for an extra year to construct Warsaw's National Stadium, but experts have warned that even that might not be enough. As multinational companies keep their distance from the high-risk project, the country teeters on the verge of losing the competition to Italy.
Legal teams are hurriedly tapping out new legislation in an attempt to clear the path for an expedited tender process that could get construction underway by next year. Unlike the other stadiums needed for the competition, the National Stadium is in the hands of the national government because the land is owned by the State Treasury.
The legacy
Determining a stadium's future use, or legacy, is one of the most pivotal and difficult decisions on any project as it has a massive impact on the design, construction, longterm operation and crucially, financing. It is also one of the most common causes of delay on stadium projects. Most famously, legacy indecision led to a two-year delay on England's Wembley Stadium. The end result was a very high-quality stadium years late and millions of pounds over budget.
"Politically, the legacy usage is the most challenging. There are very few examples of countries that have made it work," said Andrew Briggs, a stadium expert and partner at international law firm Lovells. The government and its Euro 2012 organizational committee is still stuck trying to decide on the legacy of the stadium. Earlier this month, Sports Ministry Political Office head Michaů Borowski said the stadium would be "either a 55,000-seat stadium just for soccer and Euro 2012 or a 70,000 seat stadium for Euro 2012 and other events - either of these built on the site of the stadium or next to it, or on another site altogether, such as the racetrack."
Lovells' Briggs observed, "Sitting in the middle of August with the inability to make the decision [on the type of stadium] is not good news. I suspect it stems from the government not knowing what the legacy usage is and not knowing how you are going to pay for it.
"A national white elephant will be paid for by the government," said Briggs.
"If you have carefully planned its legacy, you know who will be using it throughout its lifetime, then you can calculate how it will be paid for," he added.
It costs Ł2,500-3,000 (zů.14,030-16,833) per seat to build a reasonable stadium, and around Ł5,000 (zů.28,055) per seat for a state-of-the-art stadium. Wembley, with its delay and subsequent redesign (exacerbated by a spike in steel prices), cost Ł11,000 (zů.61,722) a seat.
"It is important to make this decision as early as possible, as there are very different designs depending on the outcome," said Briggs. "If you want a running track then you need a larger stadium and the seats will be further from the pitch. But typically football draws a larger crowd than track and field, so you would want the stadium geared towards that. The only sensible compromise is a false floor," he added.
A false floor is exactly as it sounds: It involves building a temporary floor above the first dozen or so rows of seats, thereby increasing the floor space and keeping the audience close to the action.
The head of MNA and real estate at Eversheds law firm, Michaů Kurzyński, agreed with Briggs and noted, "The state needs to decide if the stadium is to be built on the site of the 10th Anniversary Stadium or near it, because the technical experts need time to look at the demolition costs."
Law and order
Kurzyński, who is working as an adviser to the government on the legal issues around the stadium, explained that he is working on a law proposed by the Sports Ministry that seeks to separate the business from the politics.
"The law proposes the creation of two companies. One responsible for building the stadium and one for the overall Euro 2012 project - this is not definite, it could change."
He explained, "The companies would have the power to appoint people specifically to take central liabilities for the project, making them act more like a manager than a clerk. It will also help attract experts from outside the Ministry."
Kurzyński added that the new law will have the advantage of separating the companies' finances from the Sports Minister's budget. It should also make it faster and easier to sign contracts as they won't be subject to Ministry's bureaucracy.
"In the current unstable political situation it is difficult to know when the laws could be enacted. We aim to have it done as soon as possible, hopefully by the end of the year. We need to start work on the stadium early next year," said Kurzyński.
Yet other worries remain. Briggs said, "If they can delegate power to somebody who can make decisions then great, but it doesn't solve the problem of where the money is coming from."
Who pays
With the stadium potentially costing more than zů.1 billion, finding the funding and making it quickly accessible is fundamental to the success of the project.
Briggs explained, "If they are simply looking to recover the money with games or events in the future, then I think they may struggle, as I don't think the stadium could command a high enough gate price."
There are three areas the stadium could find funds from: an anchor tenant, such as a local football club, or a grant from the national government or credit from the City of Warsaw for the long term benefits of the stadium. Otherwise it will be left to the national government to simply write a check.
The Sports Ministry's Borowski said, "Currently, it is estimated that it will take four years to build the stadium - 45 months precisely and it is 60 months till the opening match - 1.5 years for design and 2.5 years for construction."
He added, "The project phase is so long because it will take a lot of planning and negotiation to establish the exact specifications that will satisfy UEFA standards and also subsequent legacy concerns."
Briggs said, "The time scales on the project are very aggressive. They don't have a lot of time to put in an organizational structure or construct a complicated credit structure, as they will need to draw a lot of money down very quickly to get the project underway."
Most stadiums are now built using design and build contracts - which effectively hands much of the project's risk to the winning tenderer - or on design, build, finance and operate (DBFO) contracts that give the construction firm responsibility for the long-term success of the stadium.
"But to put in place a contract for that kind of construction is complicated and time- consuming," said Briggs.
A little tender
"Another fly in the ointment is the public-procurement and tender laws. There are minimum time scales that have to be adhered to unless you want to breach EU law," said Briggs. In the past, breaching EU tender laws has resulted in a project being demolished during construction.
Eversheds' Kurzyński said that his office is also working on new tender laws to try and cut the bureaucracy.
"The right to appeal in tenders should be limited to certain aspects of the tender. This should cut the tender period," said Kurzyński He explained that in major projects, the time needed for companies to put together a tender is significant, so the investor needs to be reasonable with the time allowance - one to two months at least.
He added, "We will consult with the technical experts to find out how long they will need."
According to Briggs, under EU tender law, a typical project of this size and complexity would take 12-18 months to tender. "I have occasionally seen it done in nine," he said. "The Poles have five months. The legal minimum is something like 60 days, but it is practically impossible to do it in that time."
Kurzyński remains optimistic. "If we manage to limit the whole [tender] process to three months, then it will be a success," he said. "But we cannot just ignore EU law. We will not contradict it because we do not want any challenges going to the EU commission, that will only delay things further."
But he added, "the tender issue is just one aspect. What ever the law is, it is still up to the people submitting the tender to avoid mistakes that are expensive in both time and money."
International involvement
Multinational giants are keeping a close eye on the development of the championship but are keen to keep their distance, fearing the project could easily turn sour. One senior source in a multinational firm said, "I can tell you we're not bidding for it. We see another Wembley there."
"If they do something quick and dirty," Briggs said, "international companies won't be attracted to it, they could find Polish firms to do that kind of project."
"If it's more complicated and they want the builder to bring the finance [in a DBFO style project] then I doubt there is a Polish player who could manage that," added Briggs. "It would require big international lenders and they would feel more secure lending to an international company. But I am really doubtful there is enough time for anything of that complexity."
Substitute player
UEFA declined to comment on the competition, saying it "is currently focusing on Euro 2008, although we have regular contacts with both the Polish and Ukrainian FAs. The exact set-up for the organization of the tournament has not been finalized yet so we cannot give you more details on this at this stage of the project."
UEFA will likely give Poland a bit of slack. With Italy as the designated reserve country, which experts say could run Euro 2012 with very little development, there is little to worry about at the moment.
"Italy could do it with two years' notice," said Briggs, "It would just need time to sort out things like the ticketing and the policing."
But he added, "there is a real danger that if Poland doesn't have the flagship stadium under construction by the end of next year, then UEFA will have no choice but to pull [the tournament]. It takes more than two years to build a stadium."
"The Polish government was surprised to have won the competition. What it really needs now is for them now to decide that they really want it and to make it happen," said Briggs. "Poles have a terrible reputation for this. Motorway tenders have been known to take as long as 10 years."
And in the current political climate, with everyone focused on the election campaign, Euro 2012 could very easily drop off the radar.
