More than just a builder

Rafał Ostrowski, ‘Eurobuild CEE’: What position does Karmar have on the Polish market today?

David Lebot, CEO of Karmar: In terms of turnover, we are not yet in the top ten companies in Poland. Our objective is not to be number one but to be different. Developing in specific sectors, such as industrial buildings, shopping centres, the healthcare sector, working on added value projects, promoting design & build or PPP projects, are key elements to our growth and will enable us to develop and strengthen the trust with our clients. For the past few years, we have also become more selective, concentrating on building activities – as opposed to civil projects, such as bridges or roads – and mainly working for the private sector. Comparing our turnover to other key players in Poland is more meaningful if it is worked out within a similar perimeter. As far as the figures are concerned, our turnover last year came to app. PLN 350 mln and I am convinced there is still room for growth. Our target for 2015 has been set at PLN 400 mln, with the objective of going beyond PLN 500 mln within the next two years.

How are you going to do that?

We are not only developing in specific sectors but also in the regions, targeting Poland’s major cities. That includes Warsaw, where our headquarters is located and where we have been operating for years, as well as Wrocław, Kraków and Katowice. We are well established in the first two cities and our main challenge for 2015 is to strengthen our presence in Kraków region, while maintaining a good activity level in other cities. Our commercial, technical and production organisation must clearly reflect our objectives. In terms of our portfolio, looking back at 2013 and 2014 around 70 pct of our activity was carried out in residential, offices and mixed-use projects. The remaining 30 pct, covering industrial buildings, shopping centres, laboratories and public administration buildings, was rather more opportunistic development, i.e. either from a client’s specific request, in market niches or from successful bids. The Polish construction market’s dynamism and the maturity, expertise and professionalism of Karmar, convinced me that there is the right momentum to set up a specific strategy and an ad hoc organisation to develop our activity. The residential and office sectors will remain our core business, while adequate resources and means are dedicated to other sectors and tender procurement processes.

In February 2015, you were awarded a contract by Vantage Development to build a residential project on ul. Konstruktorska in Warsaw. The interesting thing about it is that it is a design & build contract, in which the building permit responsibility has also been given to Karmar – an approach that is not very common in the residential sector in Poland.

Yes, I believe it might even be the first of a kind in Warsaw’s residential sector and maybe one of the very few in this sector in Poland. When I was working in France, I had the chance to work on a large number of design and build projects. They are much more popular
over there than here, but I think it’s just a matter of time – in a year or two there will be many more design & build contracts in Poland.

What is so good about design & build?

It is much more time and cost efficient for the developer and relies on a balanced risk sharing philosophy with the general contractor. The developer is still responsible for the commercialisation process, while the contractor bears the “industrial risk”.

When is this price commitment made?

In this type of procurement process, the general contractor is responsible for the building permit and the execution design. As such, it is in a position where it can provide the client with the costs for the project and the schedule of the work at a very early stage. Based on the functional programme established by the developer, detailing the specific expectations in terms of the quality standard, the number of floors, number of apartments, etc… the contractor, working in an integrated team with its selected architect and specialists, submits an architectural and technical design concept, including drawings of the building, the interiors and external design together with the related specifications. The client’s choice is then not only determined by the price but also on other criteria, such as the architectural aspects, the efficiency of the design, the suitability of the proposed project vs their own expectations, the sustainability aspects, etc... One of the biggest advantages for the client is to be proposed several different projects by the competitors together with a price commitment at the same time. Furthermore, if the client’s budget is known and defined as a target to achieve, the design is developed accordingly.

And what about time saving? How long does all this take compared to a traditional process?

In a traditional tender process, the investor first launches an architectural contest and after a while selects a project drawn up by an architect. The tender design documentation on which the competitors will submit their offers is then drawn up. One would not expect this first step to last less than three months, but this only constitutes the first round. In most cases, especially when it comes to residential projects, the competitors are then invited to revise their bids according to the execution design subsequently prepared and often adjusted based on the first quotations received. It usually takes at least another two months for the client to develop this execution design and receive the corresponding updated offers, not to mention the fact that this design development might not be completed nor even launched by the developer before obtaining the building permit. In other words, from day one, four to five months is the minimum needed to obtain relevant and adequate offers from the competing companies, and as a result the choice of the concept design and the building permit preparation have to be made by the developer long before the price commitment is made. And, last but not least, once selected – and only at this stage – the company chosen really starts mobilising. There is therefore not as much anticipation and preparation as one would hope for: until a project is signed, no one in fact knows who is going to build it! When a design & build approach is adopted, this is all different because as soon as the contractor is selected, i.e. upon the concept design, the technical and price submission and after a few negotiation rounds, it can start mobilising and preparing all the necessary steps for entering the project with the best conditions, preparing the building permit submission, anticipating the execution design and dedicating adequate resources a good time in advance. Throughout the entire process, workshop meetings are also held with the client to ensure that a common objective is shared between the parties, that the work can start smoothly and that a team spirit can be developed. So if you go down the line, the time saving is probably between four to six months for this type of project. Design & build obviously does not only apply to the residential sector. It can also be very effective for hospital projects, offices or industrial buildings for instance. The time saving would then be comparable, and the involvement of the general contractor even more fruitful for these more complex projects. Finally, to avoid any misunderstanding, we need to bear in mind that this process is not meant to be deployed in overall construction activity, but it does offer a very interesting alternative to our clients.

You also mentioned PPP – this is also something that Bouygues group has considerable experience in from other markets. How can you make use of this in a country like Poland?

I had the chance to work on a very famous PPP project in France, the Stade Vélodrome football stadium in Marseille. We are not only
responsible for the design & build part of the project but also for the financing and the operation of the stadium for 25 years. We have in addition developed a shopping centre close to the stadium, as well as a hotel, apartments and offices. Once you have been involved in such types of really complex projects and when you have the opportunity to work in a country like Poland with great potential, you think there is something that can be done in this direction. Bearing in mind what Bouygues Construction is doing as a group worldwide, and looking at our know-how in the UK, in France, in Southeast Asia or in America, for example, we are convinced that we have an added value for this type of development scheme, acting not only as a builder but also as company able to take on PPP projects.
As a matter of fact, we signed our first PPP contract in Poland at the end of 2014 with the Jagiellonian University Medical College in Kraków to build student accommodation.

What about the public sector?

We are very interested in the public sector – especially when it comes to building activity (university, administrative buildings, hospitals, museums, etc…). We have to be very selective, positioning ourselves only for projects for which we can provide added value for our clients, considering the different criteria that can allow us to differentiate ourselves from our competitors. We are currently targeting public projects with pre-qualification processes, taking into account the references of the bidders and their capacity to build the project, and for which the schedule, the technical aspects, the quality and the sustainable development, for instance, form part of the selection criteria. It seems that such criteria are going to be increasingly taken into consideration, therefore we shall become more active in the public sector in the next few years.

What margins would you be looking at?

In the construction sector, and more generally in the industrial sector, the margins are quite low. Our target is to become one of the key players, developing our turnover while securing a reasonably positive and regular margin.

What is it like to operate within such a big group like Bouygues?

It is all about sharing values, know-how and a common understanding of the group’s objectives. Several times a year, the different managers operating in different countries share their experiences, difficulties and successes, while presenting their strategic plans. This a great opportunity to get feedback not only from the top management but from all the other country managers and regional directors, and to learn from their different experiences.
For instance, one good practice that we have directly imported from Turkmenistan and Hong Kong is our training centre. We set it up last year, and it is actually a mini-construction site where our staff is regularly trained on safety and quality issues. The group is working in more than 40 countries, and beyond the group’s financial strength, which is regarded as an important asset to some of our clients, another key advantage is our worldwide network through which we are not only sharing our technical expertise and resources but also bringing benefit to some of our clients working in different countries: they know the group, its values, its way of working and most of the time have a clearly identified and reliable contact person in Paris or in some other country, so that they might consider developing in countries that are new to them and where the Bouygues Group is already active. Our managers and senior staff are deeply involved and are able to introduce our clients to any country where we are active. This is also an advantage for those clients who only operate in Poland, since they can benefit from the same know-how and expertise from the group. Karmar really reflects this, being part of an international group and working on a national scale in Poland.

Karmar’s leader

David Lebot – has been the CEO of Karmar since May 2013. Prior to that he held the position of commercial director of French construction company GFC Construction, part of the Bouygues Group. In 2009 and 2010, he was deeply involved in a large private public project (PPP) – the refurbishment of the Stade Véldrome in Marseille. He started his career in 1995 with the Bouygues Group in Southeast Asia, where he worked for six years. He graduated from the ESTP (École Spéciale des Travaux Publics).

The french connection

Karmar is a Warsaw-based engineering and construction company and since 2007 a member of French group Bouygues Construction. Its flagship projects as a general contractor include the Miasteczko Orange business centre in Warsaw (investor, Bouygues Immobilier), the Centre of New Technologies (University of Warsaw), the Silver Tower Centre mixed-use project in Wrocław (Wisher Enterprise), the Nowy Świat 2.0 business centre (Centrum Bankowo-Finansowe), Karolkowa Business Park (Asbud Group), and a number of residential projects, including Scandinavian House in Warsaw’s Wilanów district (Sjaelso), Puławska 111 (ECC River View), Rezydencja Foksal (BBI Development) and Rezydencja Naruszewicza (Platinum Properties Group).