IRISH engineering and construction firm Siac has been forced to cancel a €400m Polish project due to a dispute with the local road authority.
Siac will now seek €22m compensation from the Polish roads authority and has referred its case to the European Commission, which was part-funding the project.
Siac won the €400m tender to build 35k of motorway and bridges from Kruz to Debica in Poland at the start of 2010, in partnership with listed Polish contractor PBG. Work started on the project in July of that year.
The project, due for completion in 2012, was plagued by problems, not least of which was PBG, which was leading the project and providing working capital, going bust.
"A huge big programme of works is being done all over Poland and most have got into serious problems, a terrible mess," Siac boss Finn Lyden said.
"There were various things the client was supposed to do it didn't do. So we pressed the button to terminate the contract. It was quite a dramatic move but we really had no choice. We didn't want to put a load of money into it. Our partner and its bank were supposed to do that," he added.
Lyden says that under the project's contract conditions Siac is entitled to 10 per cent of the contract sum as a penalty, which works out at around €22m for its share.
"We made a complaint to the European commission is investigating it. It has asked the Polish government to do an independent investigation which we expect it to proceed with fairly quickly. We expect that this is how the matter will get resolved.
"The Polish road system is a total and absolute mess and we felt we were better off out of it," he added.
Siac is not the only Irish company to have experienced these difficulties. Building contract giant Sisk and Limerick-based Roadbridge have jointly launched an action against the Polish roads authority, it was reported in September, following financial disagreements.
Sisk and Roadbridge had joint tender contracts to build 92km of roads in Poland over three separate road projects. One was completed while the other two were only partially completed.
The exit is thought to have cost Sisk around €50m. It had put around €90m into its Polish operations. Again difficulties with the Polish road authority were cited by Sisk as a reason for the withdrawal.
Sisk also had partnerships with PBG, prior to its collapse. PBG had built two of the three stadiums used during Euro 2012 but got into difficulties blamed on rising materials costs. A road-building boom ahead of Euro 2012 was followed by the collapse of several companies, resulting in half finished roads and other infrastructure.
Siac's Finn Lyden said that the Polish government was aware that difficulties and delays in contract completion were costing Poland valuable infrastructure projects and were also in danger of damaging the country's reputation as a place to do business.
"This is something that it will urgently seek to address," he said.
Siac, which has operations in Ireland, Belgium, Britain and Canada, reported profits of €5m last year.
Sunday Indo Business