Investors bail as project-management firms feel pinch

With quality jobs increasingly in short supply, project management companies say they've hunkered down for better days. But exactly when they'll arrive, nobody's too sure. "It's a pretty desperate situation," said Colin Guerrini, partner with project management firm Davis Langdon Polska. Industry executives say the drop-off in project management demand is a result not only of sagging domestic and global economic conditions, but the złoty's relative strength over the latter half of 2001. Those factors on top of Poland's burgeoning national debt, approaching 60% of gross domestic product (GDP), have left many potential foreign investors cold. The Central Statistical Office's (GUS) construction climate index hit minus 15 in February; up slightly from January but off nearly 15 points year on year and 32 points behind 2000's pace. "Private investors are much more cautious than, say three years ago," said Marek Kiersznicki, marketing director with Prochem, a project management firm that saw a 20% year-on-year decline in services in 2001. "Investors are delaying projects until the situation clears out ... we hope it will be better this year but we're not expecting miracles."

Aside from the economy, competitive factors continue to eat into project management companies' bottom line. "We're finishing one building (Centrum Królewska at the intersection of ulica Królewska and ulica Marszałkowska) but apart from that, we have no orders for office buildings," said Robert Beme, director of the investment realization office at Przedsiębiorstwo Usługowo-Consultingowe Wadeco (PUCW). "Companies that want new buildings have their own subcontractors, so there's no longer a place for us." Furthermore, some say competition is so fierce that companies are low-balling costs in public tenders, causing inevitable price overruns, just to remain visible. "It's just not possible within ordinary bids that prices differentiate by 500%," said PUCW's Beme. "Companies will sell below their costs to be able to display their logo on the fence."

Project management misunderstood The project management industry - from engineering better hamburgers and french fries to leading construction projects from pre-design phases through an often tedious, and sketchy, municipal approval process before completion - is not well understood, industry watchers say. With construction-related business taking up most project management companies' time in Poland, firms endeavor to be advocates for the clients backing the project financially, from the initial planning to hiring architects and engineers. "I represent owners as opposed to construction companies," Davis Langdon's Guerrini said. Companies working with general contractors still serve similar functions. "We're sitting in the middle (between the client and general contractors)," said Dorota Chudykowska, business development manager at Bovis Lend Lease. "We're there to make sure all clients' interests are observed by general contractors, who try and change the terms of contracts during projects. Our role is to prevent that type of abuse." That role begins at the earliest possible stages and the struggle for clients - especially given today's investor weariness - is intense. Companies keep ears close to the ground for rumors about prospective newcomers to the Warsaw scene or simply follow up on local press reports. Clients rarely initiate the contact with project management firms, local officials said. "Fighting for new projects is quite a job," Chudykowska said. "If it's a private investor, they're cautious about announcing intentions, and only do so when they've (secured) a builder."

The joy of giving Once on board, companies say a project's success starts in the planning stages but perhaps investors' real value for their money comes when various permits are needed from municipal authorities - a process that takes three months or longer. This period also invites corruption - a subject few of the local players are eager to discuss in any depth. "There's a certain art to it," one Warsaw project management official said of municipal permitting. The official, who asked not to be named, said such scenarios take much more subtle forms than common images of cash-stuffed envelopes being passed during business lunches. A gift, here and there, can still go a long way in Poland to grease the wheels of the municipal process. "It just secures preferential treatment, and they can do much more for you," the official said.