What will save construction industry?

The problem of construction industry is mainly due to the conflicts that arise between the person ordering a construction and its contractor. Another cause are the difficulties generated by financial institutions during collaterals.

Less and less companies enter the bids. It is caused by the rigorous conditions put up by the public people and companies ordering. Another problem are difficulties in receiving collaterals from financial institutions.

After announcing new EU business perspective, containing big financial resources for infrastructure development, there have been a few positive reactions. However the director of Związek Pracodawców Budownictwa, Marek Michałowski, comments – We have a lot of new money, but there are also a lot of requirements from the investors. They expect that the construction industry, while entering bids, will provide a guaranteed insurance, and for a big sum.

A guarantee for an insurance is becoming more and more difficult to achieve, despite the fact that it is a market’s requirement. The company entering the bid is often dependent on that. The guarantee ensures that the insurer is obliged to pay maximum guarantee sum when the contractor will not fulfil their obligations. Insurance companies have more and more difficulty accepting insurance guarantees as they think they are too risky – notes Grzegorz Kwieciński, Product Manager for Insurance Guarantees in Euler Hermes company.

It can be seen that less and less companies enter the bids. Some of them admit that they would if they could get through to financial institutions – says Marek Michałowski. It is the situation for not only the small and medium companies, but also for the biggest ones.

What can help construction industry? We must talk, so we can show what are the interests of all the parties: the investor, the constructor and the financial institutions. We must explain to each other what we expect, equalise the chances and split correctly rights and obligations of all the sides – explains Marek Michałowski.

A possible chance for the industry are also penalty insurances. The penalties are often imposed on the contractors who had a conflict with the person ordering or were unable to realise the obligation. These financial penalties can even lead to the bankruptcy of a company. Penalty insurance could be a way out as it does not concerns the whole contract, but only special situations resulting in a penalty, which are particularised in the contract.

For the person ordering, a possibility of settling a possible claim with an insurance means, that the investment process can continue, and the guarantee is not disturbed. In turn, for the contractors it is very important because of financial issues. Contractual penalties and their insurance is a very different formula than just a guarantee – says Krzysztof Mleczak, President of Supervisory Board at Exito Broker Sp. z o.o. – Including an insurance of contractual penalties in the contract can be an important element of preselection, because the financial market will automatically assess the abilities and potential of a given contractor. It might have consequences when it comes to assessing projects and offers, presented by the contractors.

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