Evolution of the construction industry in the face of climate challenges. Artur Popko, President of the Budimex SA Group
Achieving ambitious EU goals, among others in the context of mobility, requires successive investment announcements and a steady flow of funds. If we want to talk about real development, the situation with the KPO should not be repeated – says Artur Popko, CEO of Budimex.
What were the main challenges and changes encountered by the construction industry in 2023?
2023 brought partial stabilization after the pandemic and the outbreak of war in Ukraine. The industry struggled with inflation and difficulties in building an investment portfolio. Nevertheless, there was single-digit growth in construction output, particularly in infrastructure, although some segments, such as residential construction, experienced declines. In terms of the valorization of large public contracts, we certainly took a big step forward compared to the previous year. The lack of financing for railroad investments and the struggle to win new contracts in infrastructure construction with new entrants have complicated the market. We look to the next few months with moderate optimism, but it will not be a challenge-free time for the industry.
What were the consequences of the shortage of funding sources for some construction contracts?
The lack of funding for rail investments and the struggle for new infrastructure contracts complicated the situation. There have been serious delays in the announcement of tenders, including in the railroad segment. Nevertheless, we see positive developments, such as the launch of KPO funds at the end of 2023, which should revive railroad investments. What will happen in the regulatory environment, especially in public procurement, is important for the future of the industry. The crisis has taken its toll on the condition of many companies. Now that investments are being unlocked, competition is getting tougher, which is reflected in the profit margins of projects, among other things. On top of that, Polish companies have to increasingly compete for contracts with non-EU entities. Without systemic solutions, such as certification of contractors, we may witness an even greater slump in the industry than we have seen in recent years. The continuity of project financing and tendering by large public procurers and local governments is a separate issue. Achieving ambitious EU goals in the context of mobility, among other things, requires successive announcements of investments and a steady flow of funds. If we want to talk about real development, the situation with the KPO should not be repeated.
“We have made our first investments in the RES segment as a developer, including the completion of a 7 MW wind farm.”
What are the industry’s prospects and future plans?
Despite the challenges, the industry is looking to the future with moderate optimism. For us, effective cost management, innovation and geographic expansion will be key. Also, green growth and investments in RES are an important direction of development. The foundation of Budimex’s business remains construction in Poland, but our offer is much more comprehensive. We close the balance of the year with more than 150 connected electric car charging stations. We completed our first investments in the RES segment, including the completion of a 7 MW wind farm. Another investment, this time a 14 MW photovoltaic plant, is under construction. Our successful geographic expansion is also worth mentioning. We are carrying out general contracting projects in Germany, the Czech Republic and Slovakia, and we are starting a contract for the construction of the “Rail Baltica” railroad line in Latvia, worth nearly PLN 4.9 billion. At the end of last year, we signed our first contract in the Czech Republic, worth PLN 113 million. This is a hydro-technical contract, which will include the construction of a 146-meter-long dam. Moreover, the value of contracts in the so-called “waiting room” in the Czech Republic and Slovakia exceeds PLN 3 billion.
What do you expect from the construction market this year?
It is important to improve the valorization conditions in local government tenders. We observe the lack of consistent approach by local governments in the area of introducing effective valorization provisions in contracts. We are keen on ensuring that the process of valorization is only a recipe for extraordinary cost increases, and does not become a tool to bail out companies undercutting prices in tender bids. In many tenders, we see that companies that do not have adequate potential and experience in Poland, including non-EU entities, submit much lower price bids than experienced contractors that have been operating in our market for many years. There have been cases in which bids so blatantly low, in our estimation, were selected as the most advantageous. Out of 20 recent tenders for the construction of sections of expressways, such bids were selected in 35% of them.
“Construction now generates nearly 40 percent of global emissions – that’s more than transportation. Implementing green solutions is no longer just a matter of responsibility – it’s also a condition for having access to financing.”
Is the construction industry coping with the challenges of climate change?
Construction now generates nearly 40 percent of global emissions – that’s more than transportation. Implementing green solutions is no longer just a matter of responsibility – it’s also a condition for having access to financing and generating leads while competing for new contracts. In our strategy, we declared the achievement of climate neutrality by 2050. The scale of the changes to be made is enormous – it’s high time to turn declarations into action.
“To change the image of the construction industry as a future employer, we should make greater use of robotics, AI, 3D printing.”
What new technologies and innovations are currently being implemented in the construction industry?
To change the image of the construction industry as a future employer, we should make greater use of innovative solutions, robotics, AI, 3D printing and more. Innovation, unfortunately, costs money. Thus, we as an industry should invest in them, and contracting authorities should start evaluating contractors’ bids from this angle as well.
What changes are underway in terms of employment and worker competence in the construction industry?
The construction industry needs hands to work. Automation and innovation are a trend in themselves, but they will not solve staffing problems, nor will they replace experience and knowledge, which are of considerable importance in our profession. The announced investment plans and EU funding up to 2030 for Poland are worth nearly a trillion zlotys. This is a positive perspective for our country, but also means the need to secure human resources. That’s why we have signed agreements with more than 40 universities and technical schools for cooperation. We are working for a positive image of the industry in the eyes of the younger generation, and we will intensify these activities in the near future.
Artur Popko – a graduate of the Faculty of Civil and Environmental Engineering of the Bialystok University of Technology with a specialization in Communication Construction. In the years 2000 – 2002 he worked as a Construction Engineer in the Road and Bridge Company Olecko, then until 2004 he managed the implementation of one of the largest infrastructure projects – the construction of the A2 motorway on behalf of NCC Polska. Since mid-2004, he has been associated with Budimex Dromex, where he was the construction manager and then the contract manager. In 2009 he was promoted to the position of District Director. Since 2011 Director of Communication Construction. In 2014, he became the director of Infrastructure Construction of Budimex SA. Since 2019, Vice President of the company and Chief Operating Officer. From 2021, President of the Budimex SA Group.
Last Updated on April 12, 2024 by Anastazja Lach