## 1polea2022003 ## Source details **Canonical URL:** [1polea2022003](https://www.imf.org/-/media/files/publications/cr/2022/english/1polea2022003.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1polea2022003.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1polea2022003.pdf.json) --- ### Executive summary and context - Public investment expected to play a significant role in the post-pandemic economic recovery in Poland. - Poland lags far behind more advanced European economies in the quantity and quality of its infrastructure despite significant progress in the last decade. - The Government’s New Polish Deal foresees an extensive economic and investment plan with investments in large infrastructure programs and digital infrastructure, many expected to benefit from EU funding. - Purpose of the PIMA: assess strengths and weaknesses of infrastructure governance in Poland and identify potential bottlenecks for making the most of these investments in terms of quality infrastructure. ### EU funding and financing context (exact figures preserved) - Poland is already the largest recipient of funds from the EU cohesion funds with allocations of over 90 billion euros over the course of the 2014-2020 multi-annual financial framework, which ends in 2023. - Poland will remain the single largest recipient of EU funds in the 2021-2027 programming period, and—in addition—stands to receive almost 24 billion euros in grants under the EU’s new Recovery and Resilience Facility (RRF). - During the 2014−20 EU Multi-annual Framework Poland was the single largest recipient of European Structural and Investment Funds (ESIF) by a significant margin. - Over 90 billion euros in planned investments over that period and through 2023 has been allocated to Poland, or 1.9 times the next largest recipient (Italy). - Through the third quarter of 2021, Poland has spent 68 percent of those funds, higher than the 61 percent average for the rest of the EU. - For ESIF funds allocated to physical investment, Poland’s absorption rate was 60 percent of planned physical investments, compared to 71 percent for other spending. ### Public investment trends and composition (exact figures preserved) - Total investment peaked at the end of the 1990s at close to 25 percent of GDP and has stabilized at 19 percent of GDP on average in the last decade. - Public investment accounted for 4.6 percent of GDP on average in the last decade but remained volatile. - Public capital stock stabilized at 42 percent of GDP on average despite relatively lower investment spending since 2011. - At general government level, about half of capital investment in Poland is carried out by subnational governments (SNGs). - Economic infrastructure accounts for about half of general government capital expenditures. - Capital expenditures in social infrastructure represent about 30 percent of total capital expenditures. ### Efficiency assessment (IMF PIMA methodology — exact figures) - Estimated efficiency gap between Poland and the most efficient countries with comparable public capital stock per capita is 36 percent. - The 36 percent gap is higher than the average efficiency gap for EU countries of 13 percent and slightly below the average of Emerging and Developing Europe (EDE). - Interpretation: about one third of public investment spending in Poland did not result in the increase in the level or quality of infrastructure that would have been achieved by the most efficient comparator country. ### Institutional strengths and weaknesses (high-level) - Relatively strong areas: - National and sectoral planning. - Budgeting for investment (multi-annual programs exist). - Procurement (legal framework and high use of open tenders). - Management of project implementation at entity level and monitoring of some public assets. - Reporting of nonfinancial assets and depreciation in government entities’ financial statements. - Relatively weak areas: - Coordination between entities (central–SNGs; limited role for Voivode in investment coordination). - Budget comprehensiveness and unity (large share of capital spending executed outside the State Budget). - Maintenance funding and standardization (methodologies limited to roads and water). - Project selection and absence of a single pipeline of appraised projects. - Portfolio oversight and consolidated monitoring of major projects. - Common pattern: institutional design scores tend to be stronger “on paper” than effectiveness in practice. ### Governance fragmentation and key bottlenecks by investment stage - Planning: - Capital investment plans of SNGs are not formally discussed with central government unless they require State Budget or EU funds. - Monitoring of PCs’ financial performance and investment plans is limited and fragmented. - PPPs are not fully integrated in government medium-term investment plans. - Allocation: - A large share of capital spending is executed outside the State Budget (notably extra-budgetary funds such as the National Road Fund). - No single project pipeline of appraised projects ready for selection regardless of funding source. - Absence of standard methodologies and clear guidelines for estimating maintenance needs and costs for main asset classes, except national roads. - Implementation: - Multiple implementing agencies manage major projects within their competencies. - No consolidated monitoring of the implementation status of the portfolio of major projects. ### Ten key PIMA recommendations (verbatim) - Improve project appraisal practices by applying project appraisal mechanisms in place for EU funded projects to all major budget funded projects, and developing standardized guidelines and methodologies for project appraisal. - Strengthen oversight of public corporations and PPPs, given their significance in the provision of public infrastructure. - Provide a comprehensive and consistent view of public investment in a credible document, such as a budget annex or a separate public investment plan. - Identify maintenance needs in sectoral plans, prioritize maintenance funding, and report on its execution. - Introduce standard criteria for project selection and prioritization at the central level. - Develop a pipeline of appraised major capital projects to be considered for project selection regardless of funding source. - Compile information and monitor the implementation of large infrastructure projects from a portfolio perspective. - Set up a requirement to systematically conduct ex-post reviews of major projects in the public investment portfolio to inform future policies and procedures. - Consider options for enhancing PIM related Information Technology (IT) systems to better interface with each other to facilitate monitoring and reporting needs. - Review the legal framework pertaining to PIM to address gaps and weaknesses identified in the PIMA. ### Project appraisal, PPPs, and alternative financing (selected findings and recommendations) - No legal framework requires all major projects to be appraised, although EU-funded projects typically are appraised using EU methodologies and Blue Books. - All major road and railway projects and major energy projects by PGE, TAURON, and ENEA use cost-benefit analysis; some appraisals are externally reviewed but not publicly available. - Appraisal methodologies (EU Guides and Blue Books) include risk analysis but do not explicitly address estimation of fiscal risks; sensitivity and scenario analysis can provide insight. - PPPs: - By end-second quarter 2021 there were 158 signed PPP contracts accounting for PLN 8.3 billion (about 0.4 percent of GDP), with 91 percent implemented by SNGs. - PPP capital stock estimated at 0.6 percent of GDP by end-2019, versus about 3.0 percent of GDP for EDE peers. - Government long-term commitments from PPPs are neither reported in budget documents nor included in public sector debt reports. - By law MoF approval required before launching PPP procurement only when state budget funding is above 100 million PLN. - Recommendations: - Make EU appraisal mechanisms mandatory for all major budget-funded projects and introduce a stepwise appraisal procedure starting at profile level. - Strengthen oversight of PCs and PPPs, including annual data compilation on PCs’ investment plans and improved PPP reporting in budget documentation. ### Multi-annual programs, budgeting, and budget comprehensiveness (exact figures and procedures) - Multi-annual programs: - CoM requires budget entities to submit multi-annual programs; programs may span 10 years or more and include State Budget, EU funds, and extra-budgetary funds. - Article 136 and Article 138 of the PFA define CoM adoption and content requirements; Annex 10 (Budget Annex) summarizes multi-annual programs. - Historical accuracy: during 2018-2020, actual capital spending deviated by less than 10 percent from Convergence Programme projections. - Table excerpt (Investment plans in Convergence Programmes — percent of GDP): - 2016 Convergence Programme: 2017: 4.6; 2018: 4.8; 2019: 4.7 - 2017 Convergence Programme: 2018: 5.0; 2019: 4.9; 2020: 4.2 - 2018 Convergence Programme: 2019: 4.6; 2020: 4.3; 2021: 3.9 - 2019 Convergence Programme: 2020: 4.8; 2021: 4.4; 2022: 4.3 - Actual investment (percent of GDP): 2016: 3.9; 2017: 4.8; 2018: 4.4; 2019: 4.7 - Budget comprehensiveness and extra-budgetary spending: - National Road Fund contributed an average with one third of central government investment spending; in the road sector, 75 percent of investment is extra-budgetary spending on average. - Recommendation: - Provide a more comprehensive view of public investment in a credible document (annual budget annex or separate public investment plan) including: - (i) data on public investment spending covering central government including extra-budgetary funds, and eventually SNGs and PCs; - (ii) financing sources for public investment; and - (iii) a breakdown of major projects in each sector. ### Maintenance funding and asset management (exact figures preserved) - National roads maintenance: - To eliminate critical/poor conditions in national roads, GDDKiA estimates immediate maintenance needs of PLN 4.8 billion. - GDDKiA estimates: 59.6 percent of the national road network in good condition, 24 percent in unsatisfactory condition, and 13.9 percent in critical/poor condition (2020). - Program for Strengthening the National Road Network until 2030 covers PLN 64 billion until 2030 for routine and capital maintenance. - Table 3.3 immediate needs (end-2020) — expenses [million PLN]: - Surface treatment: Average unitary cost [thousands PLN]: 270; Length [km]: 920; Expenses: 248 - Balancing treatment: Average unitary cost [thousands PLN]: 880; Length [km]: 257; Expenses: 226 - Modernizing treatment: Average unitary cost [thousands PLN]: 2300; Length [km]: 1906; Expenses: 4385 - Total immediate need [million PLN]: 4859 - Recommendation: Identify maintenance needs in sectoral plans, establish standards/benchmarks for maintenance estimation, prioritize funding, and report execution in budget documents. ### Procurement, oversight, and audits (exact figures preserved) - Legal framework: - Public Procurement Law (PPL) of 2019 entered into force on January 19, 2021; National Purchasing Policy (NPP) under development for 2022−25. - e-GP procurement system under development; all planned modules expected completed in 2022. - Key procurement statistics (Table 3.4 — exact figures): - Total value of awarded contracts (PLN billion): 163,2 (2017); 202,1 (2018); 198,9 (2019); 183,5 (2020). - Number of awarded contracts: 139 133 (2017); 143 881 (2018); 141 023 (2019); 135 048 (2020). - Works share: 44% (2017); 46% (2018); 36% (2019); 43% (2020). - Open tender share: 86,10% (2017); 88,00% (2018); 88,97% (2019); 88,56% (2020). - Selection of the cheapest bid as percentage of tenders: 83,16% (2017); 85,32% (2018); 85,38% (2019); 85,10% (2020). - Total value of all public procurement contracts awarded in 2020: PLN 183,5 billion, or about 8 percent of GDP. - Funds spent on basis of exclusions from the PPL in 2020: over PLN 97,5 billion; of that PLN 34,8 billion was for tenders below EUR 30,000 per contract. - Appeals and adjudication: - Number of appeals submitted: 2 749 (2017); 2 714 (2018); 2 694 (2019); 3 545 (2020). - National Appeal Chamber (NAC) average time for decision: 30 days (2020), 14 days (2019), 16 days (2018). - Audits: - EU-funded project audits required for grants above € 14,000. - NIK (Supreme Audit Office) conducts audits; selected 2020 audits covered public debt management, State Treasury companies, capital-investment portfolio of Industrial Development Agency, energy sector monitoring, transport infrastructure, and environmental projects. - Observations: - Significant procurement spending occurs outside the PPL via exclusions. - PPO annual report lacks key performance indicators and deep spend analysis to assess efficiency and value-for-money. - Recommendations (selected): - Implement the National Purchasing Policy to optimize procurement approaches and limit exclusions; professionalize procurement; foster MSME access; support sustainable procurement. - Strengthen procurement performance analysis by developing KPIs, deeper spend analysis, and granular unit rates in e-GP. - Compile and monitor large infrastructure projects from a portfolio perspective and require systematic ex-post reviews of major projects. ### IT systems, data management, and capacity (selected systems and gaps) - Key PIM-related systems (selected): - Trezor — budget planning, execution and reporting for central government; planning module allows developing a 3-year Financial Plan. - Besti@ — SNG reporting to the MoF; submission of budgets, financial reports, Multi-year Fiscal Frameworks. - MonAliZa — PMO system for monitoring ~400 strategic projects; under development MonAliZa 2.0. - SL 2014 — Central ICT System operated by MDFRP supporting EU-funded projects, payment applications, procurement data for EU projects. - Pavement Management System (HDM4 functionalities) — used by GDDKiA for road planning, appraisal and maintenance. - e-Orders Platform and miniPortal — current e-procurement tools; e-GP under development (completion planned March 2022 and stabilization period). - Key observations and gaps: - No dedicated system to register investment plans, for project appraisal, project selection, project portfolio integration, or centralized public assets register. - SL 2014 is not linked to PPO systems nor to Trezor; MonAliZa not fully integrated with SL 2014, Trezor, or e-GP. - Major limitation: lack of an IT system to manage a centralized pipeline of appraised capital investment projects and data of all major projects being implemented; neither Trezor nor Besti@ register data about physical implementation progress. - Recommendations: - Consider options to enhance PIM-related IT systems to better interface with each other (Trezor, Besti@, e-GP, MonAliZa, SL 2014). - Expand MonAliZa use to allow sector ministries to supervise portfolios of projects implemented by agencies under their supervision. - Strengthen training coverage and consider establishing a central entity to develop appraisal guidelines and provide support and training. ### Portfolio oversight, ex-post reviews, and legal framework - No legal/regulatory framework for systematic compilation/monitoring of major infrastructure projects from a portfolio perspective; no formal requirement for ex-post reviews. - The PFA is the main law regulating PIM but there is no legal framework pertaining to project appraisal, project selection, portfolio management and oversight, and management of project implementation. - Recommendation 11 (verbatim): Review the legal framework pertaining to PIM to address gaps and weaknesses identified in the PIMA. ### Selected implementation actions and timing (Annex 1 entries — exact timing preserved) - Assign task to develop guidelines and methodologies for project appraisal and provide support and organizational training — CoM/MoF/PMO High (2022). - Introduce stepwise project appraisal procedure with profile-level appraisal before inclusion in investment plans — Central entity Medium (2022). - Apply EU project appraisal mechanisms to all major budget-funded projects — Central entity/entities involved in PIM High (2022). - Compile, analyze, and report annual data on investment plans of main PCs — MSA High (2022). - Develop a document presenting public investment spending covering central government including EBEs, broken down by financing sources — MoF and relevant entities High (2022). - Develop a pipeline of appraised major capital projects regardless of funding source — Central entity/relevant entities Medium (2022−2023). - Optimize procurement approaches and implement NPP — MoEDT, PPO (2022−2023). - Compile information and monitor large infrastructure projects from a portfolio perspective — CoM High (2022). - Set up requirement to conduct ex-post reviews of major infrastructure projects — Central entity Medium (2022−2023). - Consider options for enhancing existing systems (Trezor, Besti@) and expanding MonAliZa use — Relevant entities / MoF, PPO Medium (2022−2023). - Review legal framework pertaining to PIM — Central entity/relevant entities Medium (2022−2023). *IMF staff PIMA mission to Poland, September 28 to October 27, 2021. Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1polea2022003.pdf* ### PREFACE ___________________________________________________________________________________________________ 6 ### PREFACE ### Mission background and team - IMF Fiscal Affairs Department (FAD) staff undertook a remote Public Investment Management Assessment (PIMA) during September 28 to October 27, 2021. - Mission team led by Torben Hansen (FAD) and included Sagé de Clerck and Isabel Rial (both FAD staff), Karim Foda (EUR staff), Eduardo Aldunate and Duncan Last (both FAD short-term experts), and Iwona Warzecha and Barbara Ziolkowska (both World Bank staff). - The mission also benefited from input of the resident PFM Advisor, Vijay Ramachandran. ### Principal counterpart meetings and stakeholders engaged - Meetings at the Ministry of Finance (MoF) with Mr. Tadeusz Kościński, Minister of Finance; Tomasz Skurzewski (deputy director) and staff from the International Cooperation Department; Piotr Dragańczuk (deputy director) and staff from the State Budget Department; Marek Skawiński (director) and Joanna Bęza Bojanowska (deputy director) from the Macroeconomic Department; Barbara Styczeń (deputy director) and staff from the Paying Authority Department; Marek Szczerbak (deputy director) and staff from the Public Debt Department; Zdzisława Wasąznik (deputy director) and staff from the Local Government Finances Department; and staff from the Economic Policy Support Department; Economy Financing Department; Value for Money and Accounting Department; and Guarantee Department. - Meetings with representatives of the Ministry of Infrastructure and Polish Water, including directors Wojciech Skowyrski, Grzegorz Szymoniuk, and Jarosław Waszkiewicz. - Meetings with representatives of the Ministry of Development Funds and Regional Policy, including deputy directors Katarzyna Kromke-Korbel, Michał Piwowarczyk, and Joanna Gajda Sobieszczańska. - Meetings with Błażej Olek (director) and staff of the Project Monitoring Office’s Analyzes Department at the Prime Minister’s Office. - Meetings with representatives of PGNiG, including director Piotr Szlagowski; Mr. Wojciech Krawczyk at the Ministry of State Assets; representatives of the Ministry of Climate and Environment, including director Paweł Pikus; Izabela Gibała, director from the EU Funds Office. - Meetings with Paweł Borys, President of the Polish Development Fund; President Roman Szełemej and officials from the City of Wałbrzych; representatives of the Supreme Audit Office (NIK); representatives of the General Directorate for National Roads and Motorways, including directors Anna Mróz and Tomasz Smoleń; representatives of the National Fund for Environmental Protection and Water Management, including manager Ernest Hyś and director Piotr Makuch; and representatives of the Public Procurement Office; the Energy Regulatory Office; and the European Union Delegation. ### Acknowledgements - Mission expresses gratitude for frank and open discussions and close cooperation. - Special thanks to Tomasz Skurzewski and his team, especially Marta Skrzyńska, Damian Szostek, and Dominik Skopiec for coordinating and outstanding support. - Special thanks to Joanna Rheindorf-Zaorska and Bozena Glowacka for interpretation and translation assistance. --- ### EXECUTIVE SUMMARY ### Context and significance - Public investment expected to play a significant role in the post-pandemic economic recovery in Poland. - Poland lags far behind more advanced European economies in the quantity and quality of its infrastructure despite significant progress in the last decade. - The Government’s New Polish Deal foresees an extensive economic and investment plan with investments in large infrastructure programs and digital infrastructure, many expected to benefit from EU funding. ### EU funding context (numeric details preserved) - Poland is already the largest recipient of funds from the EU cohesion funds with allocations of over 90 billion euros over the course of the 2014-2020 multi-annual financial framework, which ends in 2023. - Poland will remain the single largest recipient of EU funds in the 2021-2027 programming period, and—in addition—stands to receive almost 24 billion euros in grants under the EU’s new Recovery and Resilience Facility (RRF). ### Purpose of the PIMA - Authorities requested a public investment management assessment (PIMA) to assess strengths and weaknesses of infrastructure governance in Poland and identify potential bottlenecks for making the most of these investments in terms of quality infrastructure. ### Efficiency assessment - Based on the IMF methodology, the estimated efficiency gap between Poland and the most efficient countries with comparable levels of public capital stock per capita is 36 percent, higher than the average efficiency gap for EU countries. - Interpretation: about one third of public investment spending in Poland did not result in the increase in the level or quality of infrastructure that would have been achieved by the most efficient comparator country. ### Institutional strengths and weaknesses (high-level) - Overall, public investment institutions compare well in several areas to the average of European countries and the group of emerging market economies. - Relatively strong institutions: national and sectoral planning, budgeting for investment, procurement, management of project implementation, and monitoring of public assets. - A common pattern: institutional design scores tend to be stronger “on paper” than effectiveness in practice. - Relatively weak institutions: coordination between entities, budget comprehensiveness and unity, maintenance funding, project selection, and portfolio oversight and management. ### Public investment governance complexity and fragmentation - Infrastructure governance involves an extensive web of public entities with different and potentially overlapping roles, causing fragmentation that affects planning, allocation, and implementation both in institutional design and effectiveness. - Planning stage issues: - Capital investment plans of subnational governments (SNGs) are not formally discussed with central government unless they require financing from the State Budget or EU funds. - Monitoring of financial performance and investment plans of public corporations (PCs) is limited and fragmented. - Public-Private Partnerships (PPPs) are not fully integrated in the government’s medium-term investment plans. - Allocation stage issues: - A large share of capital spending is executed outside the State Budget. - There is no single project pipeline of appraised projects ready for selection regardless of source of funding. - Absence of standard methodologies and clear guidelines for estimating maintenance needs and costs for main asset classes, except for the national road network. - Implementation stage issues: - Multiple implementing agencies manage major investment projects within their competencies. - No consolidated monitoring of the implementation status of the portfolio of major projects. ### Recommended enabling improvements - Strengthened information flows and more standardized guidance would facilitate better coordination and decision making across the public sector within existing mandates and responsibilities. - Benefits: identify common issues affecting large and strategic infrastructure projects, harmonize methodologies used in public investment management, create a feedback loop for future investment cycles, and help protect the value of existing assets by approaching the budget process from a portfolio perspective. - Emphasis: improvements can be developed gradually as information and capacities improve. ### Ten key PIMA recommendations (verbatim items preserved) - Improve project appraisal practices by applying project appraisal mechanisms in place for EU funded projects to all major budget funded projects, and developing standardized guidelines and methodologies for project appraisal. - Strengthen oversight of public corporations and PPPs, given their significance in the provision of public infrastructure. - Provide a comprehensive and consistent view of public investment in a credible document, such as a budget annex or a separate public investment plan. - Identify maintenance needs in sectoral plans, prioritize maintenance funding, and report on its execution. - Introduce standard criteria for project selection and prioritization at the central level. - Develop a pipeline of appraised major capital projects to be considered for project selection regardless of funding source. - Compile information and monitor the implementation of large infrastructure projects from a portfolio perspective. - Set up a requirement to systematically conduct ex-post reviews of major projects in the public investment portfolio to inform future policies and procedures. - Consider options for enhancing PIM related Information Technology (IT) systems to better interface with each other to facilitate monitoring and reporting needs. - Review the legal framework pertaining to PIM to address gaps and weaknesses identified in the PIMA. *IMF staff PIMA mission to Poland, September 28 to October 27, 2021.* ### 1. Poland’s total investment has been broadly stable over the last decade, with public ### 1polea2022003 - 1. Poland’s total investment has been broadly stable over the last decade, with public ### Overview and key trends - Total investment peaked at the end of the 1990s at close to 25 percent of GDP and has stabilized at 19 percent of GDP on average in the last decade. - Public investment accounted for 4.6 percent of GDP on average in the last decade but remained volatile. - The large acceleration in public investment observed in the early 2000s, after Poland’s EU accession, allowed for the increase in the public capital stock, stabilizing at 42 percent of GDP on average despite relatively lower investment spending since 2011. ### Composition of investment and government role - At the general government level, capital investment is evenly split between central government and subnational governments (SNGs); about half of capital investment in Poland is carried out by SNGs. - Economic infrastructure (roads, bridges, airports, dams, etc.) accounts for about half of general government capital expenditures. - Capital expenditures in social infrastructure (e.g., schools, hospitals) represent about 30 percent of total capital expenditures. - General government investment composition is broadly in line with Emerging and Developing Europe (EDE) peers. ### Fiscal context and cyclicality - Between 2010 and 2016, fiscal consolidation drove declining general government expenditures, from 46 percent of GDP to 41 percent of GDP, while the share of expenditures allocated to public investment remained broadly stable. - Public investment has been somewhat procyclical: annual changes in public investment have broadly moved in the same direction as GDP and are broadly correlated with annual changes in net inflows of EU funds since EU accession in 2004. ### EU funds and overall financing - During the 2014−20 EU Multi-annual Framework Poland was the single largest recipient of European Structural and Investment Funds (ESIF) by a significant margin. - Over 90 billion euros in planned investments over that period and through 2023 has been allocated to Poland, or 1.9 times the next largest recipient (Italy). - Through the third quarter of 2021, Poland has spent 68 percent of those funds, higher than the 61 percent average for the rest of the EU. - For ESIF funds allocated to physical investment, Poland’s absorption rate was 60 percent of planned physical investments, compared to 71 percent for other spending. ### Public-Private Partnerships (PPPs) and private participation - By end-second quarter 2021 there were 158 signed PPP contracts accounting for PLN 8.3 billion (about 0.4 percent of GDP), with 91 percent implemented by SNGs. - PPPs are concentrated in number and size in water and waste-management, transport, and telecom sectors. - The PPP portfolio is granular: only 4 projects with a value above PLN 500 million. - Estimated PPP capital stock accounted for 0.6 percent of GDP by end-2019, compared to an average of about 3.0 percent of GDP for EDE peers — indicating limited private participation relative to peers. ### Efficiency of public investment (PIMA findings) - Based on the IMF methodology, the estimated efficiency gap between Poland and the most efficient countries with comparable public capital stock per capita is 36 percent. - The 36 percent gap is higher than the average efficiency gap for EU countries of 13 percent and slightly below the average of EDE. - The results suggest about one third of public investment spending did not result in the increase in level or quality of infrastructure that would have been achieved by the most efficient country. ### Public Investment Management Institutions — design, effectiveness, and challenges - The IMF’s PIMA framework assesses 15 institutions across planning, allocation, and delivery stages; each institution is scored on institutional design, effectiveness, and reform priority. - Poland has well-developed practices in several areas: - National and sectoral planning. - Open and transparent procurement processes. - Investment projects are appropriately funded. - Nonfinancial assets—including depreciation—are reported in government entities’ financial statements. - Fragmentation and complexity in infrastructure governance create key challenges across the investment cycle: - Planning: Capital investment plans of SNGs are not formally discussed with central government unless they require State Budget or EU funds; monitoring of public corporations’ (PCs) financial performance and investment plans is limited and fragmented; PPPs are not fully integrated into government medium-term investment plans. - Allocation: A large share of capital spending is executed outside the State Budget; no single pipeline of appraised projects ready for budget allocation exists regardless of funding source; absence of standard methodologies and clear guidelines for estimating maintenance needs and costs for main asset classes (except national road network). - Implementation: Multiple implementing agencies manage major projects within their competencies, but there is no consolidated information on implementation status of all major projects. ### Policy implications and institutional recommendations - Develop a central monitoring function for major investment projects to: - Facilitate information gathering and sharing. - Feed implementation status and risks into long-term national infrastructure planning. - Complement, not duplicate, ministry-level functions. - Consider establishing a central PIM unit (examples and common tasks noted) to: - Strengthen legal and institutional PIM framework. - Develop standardized methodologies and guidelines for project preparation, appraisal, selection, implementation monitoring, and ex-post evaluation. - Determine parameters for economic appraisal (social discount rate, value of time, shadow prices, valuation of GHG emissions). - Provide sector ministries and entities support on project appraisal and implementation management. - Organize trainings on appraisal, selection, ex-post evaluation, and implementation. - Review appraisal studies of major projects and manage a single project pipeline. *Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1polea2022003.pdf* ### 11. Procurement ### 1polea2022003 - 11. Procurement ### Central Public Investment Management (PIM) Units — Examples (concluded) - Some PIM Units are also in charge of monitoring project and portfolio implementation and reporting to government authorities or parliament. - Examples cited: - United Kingdom: National Infrastructure Commission (established 2015) reviews infrastructure needs and provides advisory services; Infrastructure and Projects Authority (IPA) (created 2019) monitors progress in implementing major projects and is part of the Treasury. - Ireland: National Development Finance Agency provides financial advice to State authorities for public investment projects with a capital value over €75million; procures and delivers PPP projects as requested; provides contract management and operation and maintenance support for certain PPP facilities. - Australia: Infrastructure Australia conducts strategic audits of nationally significant infrastructure projects; develops 15-year rolling infrastructure plans; determines inclusion in Australia’s Infrastructure Priority List; enjoys operational independence from the executive by law. - New Zealand: Infrastructure Transactions Unit Te Waihanga supports procurement and delivery of major infrastructure; provides best practice guidance and documentation; has specialist expertise in alternative financing models, including public private partnerships. - Chile: Investment Department of the Under-Secretariat of Social Evaluation evaluates investment initiatives requesting State financing to determine social profitability. - Angola: National Directorate of Public Investment of the MoF prepares the Public Investment Program in conjunction with State central and local administration bodies and other budgeted bodies. - Source: IMF staff. ### Investment Planning — overview - The chapter provides a detailed assessment of Poland’s PIM institutions with aggregate scores for institutional design and effectiveness (referenced as shown in Figure 3.3). - Sections present supporting evidence for the institutional ratings under Investment Planning. ### 1. Fiscal Principles or Rules (Strength— High; Effectiveness—Medium) - Legal and constitutional anchors: - Article 216 of the Constitution: loans may not be contracted, and guarantees not issued, if this would lead to public debt exceeding 60 percent of GDP. - Articles 86 and 87 of the Public Finance Act (PFA): comprehensive precautionary and remedial procedures if public debt exceeds 55 percent of GDP. - Additional restrictions on SNGs debt applied to municipal councils, county councils, regional councils and local government units. - Some exemptions in precautionary and remedial procedures related to public investment, notably investments co-financed by the EU (PFA, Article 86). - Public debt performance: public debt levels have generally been within the limits over the last decade (Figure 3.4a). - Operational fiscal rules: - EU rules include: debt limit of 60 percent of GDP; deficit limit of 3 percent of GDP; structural balance rule (MTO) for Poland stands at a structural deficit of 1 percent of GDP. - National stabilizing expenditure rule (SER) set out in Article 112aa of the PFA aims to stabilize the fiscal deficit at the MTO. - SER comprises a non-binding part (currently applies to around 90 percent of general government spending) and a binding part (around 70 percent of general government spending) which excludes SNGs. - SER includes automatic correction mechanisms when deficits and debt levels are above certain thresholds. - Capital spending is included in the SER, but expenditures financed by EU funds are omitted from the ceilings. - Since introduction in 2015, performance under the SER has been mixed: the binding ceiling has generally been observed, the non-binding ceiling has been breached on some occasions, and some expenditures were moved to extrabudgetary entities to comply with the binding ceiling. - The SER was suspended in 2020 due to COVID-19. - Additional fiscal rules for SNGs: - Current Budget Offsetting rule: planned current expenditures may not exceed planned current revenues plus the budget surplus of previous years. - Medium-term fiscal framework (MTFF): - Embedded in the annual Convergence Programme Updates. - Articles 103 and 104 of the PFA require a Multi-annual Financial Plan in the Convergence Programme in compliance with EU fiscal legislation and guidelines. - The Multi-annual Financial Plan contains macroeconomic outlook, medium-term fiscal prospects and scenarios, planned discretionary measures, and projected fiscal aggregates four years ahead. - It includes a high-level narrative on capital spending and medium-term projections of capital spending and other expenditure components but does not distinguish between ongoing and new projects. - According to Article 105 of the PFA, the Multi-annual Financial Plan shall constitute the basis for the draft budget law for the following financial year. - Historical accuracy: during 2018-2020, actual capital spending deviated by less than 10 percent from the projections in the Convergence Programme (Table 3.1). - Table 3.1. Poland: Projected Multiyear Capital Spending versus Actual Capital Spending (investment refers to gross fixed capital formation) - Investment plans in Convergence Programmes (percent of GDP): - 2016 Convergence Programme: 2017: 4.6; 2018: 4.8; 2019: 4.7 - 2017 Convergence Programme: 2018: 5.0; 2019: 4.9; 2020: 4.2 - 2018 Convergence Programme: 2019: 4.6; 2020: 4.3; 2021: 3.9 - 2019 Convergence Programme: 2020: 4.8; 2021: 4.4; 2022: 4.3 - Actual investment (percent of GDP): 2016: 3.9; 2017: 4.8; 2018: 4.4; 2019: 4.7 ### 2. National and Sectoral Plans (Strength—High; Effectiveness—Medium) - Planning framework: - Based on strategic documents flowing from the government’s political vision and international commitments (Box 3.2). - Framework consists of an overarching national strategy supported by sectoral strategies. - Sectoral strategies cover domestic and EU funds and potential borrowing from lenders such as the European Investment Bank, EBRD, and IBRD. - Strategies are operationalized through multi-annual programs adopted by the Council of Ministers (CoM), which identify individual investment projects where required. - Multi-annual programs define the multi-annual financing program reflected in annual budget documents; financing covers all sources, not just the State Budget. - Alignment with EU planning and funding cycle: - Poland’s planning framework was developed in the context of the EU 2014-2020 Structural and Investment Funds and has been maintained for the next EU funding cycle, expected to be completed by 2030. - Poland has had one of the highest absorption rates among EU member countries. - Box 3.2 highlights: - National Strategy: Strategy for Responsible Development 2020 with perspective to 2030 (adopted CoM February 2017) — broad policy document with limited specification of major projects and costs. - Main Sectoral Strategies include: - Energy Policy of Poland until 2040 - National Environmental Policy 2030 - Human Capital Development Strategy to 2030 - Social Capital Development Strategy to 2030 - National Regional Development Strategy to 2030 - Sustainable Rural Development, Agriculture and Fisheries Strategy to 2030 - Sustainable Transport Development to 2030 - Strategies vary in specificity; sectoral strategies are closely aligned with the EU planning framework for Structural and Investment Funds. - Multi-annual Programs: operationalize sector strategies with formal CoM approval; identify financing plans covering State Budget, EU structural funds, extra-budgetary funds, other resources including borrowing; provide lists of projects with respective costs. - Sectoral strategy detail and implementation: - Infrastructure-focused sectoral strategies (e.g., transport) include detailed financing tables and project costing. - Sectoral strategies with limited investment focus provide fewer details unless a multi-annual program is required to cover State Budget costs. - Multi-annual programs for the transport sector provide effective ceilings for annual budgets; budget allocations tend to be somewhat lower than the limits in multi-annual plans. - Example: total allocations for National Roads Program in budget documents have averaged around 86 percent of planned amounts over the last 4 years; National Railways Program allocations reflect plan value set by previous year’s CoM decision, but 10 percent above current year decision. - Sectoral strategies include objectives and measurable targets; key output targets are included in the annual budget document related to operational programs. - Strategic project monitoring office (PMO) at the Prime Minister’s Office tracks a broader range of indicators for strategic programs, but reports are only available within the PMO. - Sector ministries monitor implementation and prepare annual implementation reports; limited evidence that performance data are used systematically and extensively. ### 3. Coordination between Entities (Strength— Medium; Effectiveness—Medium) - Intergovernmental coordination: - No institutional requirement specifically for sharing and coordination of capital spending plans between central government and SNGs. - Constitution Art. 171, Sec. 1 and 2: activities of local government are subject to supervision from the point of view of legality; supervision authorities include the Prime Minister and voivods; Regional Chambers of Audit (RIOs) oversee financial matters. - SNGs have high autonomy to plan and implement investments; no formal coordination mechanisms appear to be in place. - In practice, coordination occurs around allocation of special purpose transfers, including EU funds managed by central government institutions; access typically through application/competition. - Role of the Voivode: - Voivode (appointed by Prime Minister) heads central government’s local administration; reviews all SNG council decisions. - Voivode issues building permits within the region and represents the State Treasury at regional level, acting as primary contact point between MoF and SNGs. - Voivodes do not seem to play a significant role in coordinating SNG investment plans within their region or with central government investment. - Transfers and borrowing: - General grants from central government are rule-based; targeted transfers are usually provided on a competitive basis governed by separate legal acts. - Grant amounts formula-based should be notified to SNGs within 21 days of publication of the Budget Act. - PFA requires funds to be transferred in time to perform tasks; processing applications for targeted transfers may take time. - SNGs may borrow for capital spending from: - Central government through a SNG loan fund administered by Bank Gospodarstwa Krajowego (BGK), - Other lenders such as European Investment Bank and European Bank for Reconstruction and Development, typically with a state guarantee. - SNGs may borrow as long as they remain within their debt limit. *Source: IMF staff.* ### 31. The MoF publishes an annual report on contingent liabilities on its website as part ### 1polea2022003 - 31. The MoF publishes an annual report on contingent liabilities on its website as part ### Contingent liabilities reporting - The MoF publishes an annual report on contingent liabilities on its website as part of its EU reporting obligations. - The report covers state-guaranteed loans to SNGs and to State-owned PCs, as well as SNG guarantees to SNG PCs. - The table does not list any contingent liabilities related to PPPs, which the MoF does not monitor (see also under Institution 5). - Monitoring of PPP is the responsibility of the Ministry of Development Funds and Regional Policy. ### Project appraisal (Strength— Medium; Effectiveness—Medium) - There is no legal framework requiring major projects to be subject to project appraisal, although in practice project appraisals are often carried out. - Most major investment projects are co-financed with EU funding and therefore subject to appraisal as required by the specific funding mechanism. - All major road and railway projects are appraised using cost-benefit analysis, as well as all major energy projects implemented by Polska Grupa Energetyczna (PGE), TAURON Polska Energia, and ENEA. - Some of these appraisals are subject to external independent review, but the analyses are not publicly available. - While agencies are expected to apply the same procedures as for EU funded projects to projects fully financed from local funds, there is no regulation requiring it and no evidence it is done in practice for all projects. - There is neither central support for project development and for appraisals done by implementing agencies, nor efforts for standardization. ### Appraisal methodologies and applicability - Methodologies exist for appraisal of EU funded capital projects, which could also be applied for locally funded projects. - The EU’s “Guide to Cost-Benefit Analysis of Investment Projects,” published in June 2015, serves as a general methodology. - The “Guide to cost-benefit analysis of investment projects Structural Funds, the Cohesion Fund and the Pre-Accession Instrument”, published in 2008, includes a chapter outlining appraisal of projects in different sectors, including transport, water supply and sanitation, industry, energy and telecommunications, education, and health. - Specific methodologies, known as Blue Books, were developed under the EU JASPERS program for road infrastructure, railway infrastructure, and public transport in cities, agglomerations, and regions. - The Blue Books include chapters on identification of project options, economic and financial appraisal, and risk assessment, and include recommendations about the financial and economic discount rates to be used. - It is not clear to what extent these methodologies are applied in practice, particularly for locally funded projects. ### Risk analysis in appraisal methodologies - Methodologies include chapters on risk analysis. Potential project related risks to be analyzed include: - demand risks, design risks, administrative risks, land acquisition risks, procurement risks, risks during construction and operation, regulatory risks, financial risks, management risks and political risks. - Qualitative risk analysis includes estimation of probability of occurrence and assessment of severity of impact for each identified risk. - Identification of prevention, mitigation and remedial actions is suggested, as well as preparing a plan for risks monitoring. - Estimation of fiscal risks created by a project is not addressed in any of the methodologies, but sensitivity analysis and scenario analysis can provide some insight into fiscal risks due to under performance of a project or cost overruns. ### Strengthening project appraisal - Strengthening arrangements for project appraisal would contribute to greater efficiency of capital investments. - Appraisal mechanisms in place for EU funded projects should be mandatory for all major budget funded projects. - A stepwise project appraisal procedure, where all projects are appraised at the profile level before being included in investment plans, could help discard projects with low returns before being included in investment plans. - Box 3.3 provides an example of the stepwise project appraisal process used in Chile (procedural stages from Profile to Execution depending on complexity and cost). ### Alternative infrastructure financing (Strength— Medium; Effectiveness—Medium) - Increased competition has occurred in most economic sectors, but main markets responsible for provision of infrastructure are still dominated by PCs with majority shares owned by the government. - Poland has gradually reformed national legal and institutional systems in main infrastructure markets in line with the EU regulations. - Regulators exist in main infrastructure markets, with different levels of experience, independence, and interventions in the markets. - A detailed annual report of the Office of the Competition and Consumer Protection (UOKIK) is available online describing trends and measures taken in support of market liberalization. - Large shares of key infrastructure markets are dominated by PCs, hindering competition. - The Government Policy for the Development of PPPs, adopted by the CoM in 2017, aims at increasing the scale and effectiveness of PPP projects and sets out principles and roles for implementing PPPs; it is consistent with the Strategy for Responsible Development. - The Ministry of Development Funds and Regional Policy (MDFRP) performs the function of a central PPP unit carrying out advisory services, developing standards, guidelines, and related legislation, and providing opinion on the rationality of implementing a project as a PPP. - The PPP Guidelines for project preparation, tender procedure, and project management were developed by the MDFRP in 2018 and 2019. - The mandate of the MoF to assess fiscal sustainability of PPP projects is stated by law, but in practice is quite limited. ### PPPs and fiscal reporting - By law approval from the MoF is required before launching a PPP project to procurement only when funding from the state budget is above 100 million PLN. - Therefore, PPPs that do not require immediate budget support are outside the scope of the MoF oversight function. - Government long-term commitments arising from PPPs are neither reported in budget documents nor are PPP related guarantees included in the public sector debt reports. - Government financial statements and finance statistics are prepared following European System of National and Regional Accounts, 2010 (ESA 2010) guidelines, which typically exclude most PPPs from the government accounts. - Poland does not report data to Eurostat on the stock of liabilities related to PPPs recorded off-balance sheet of government. - The government has a PPP project pipeline of 9.5 billion PLN (about 0.4 percent of GDP) of which half of the contracts are already under negotiation and tendering. - As of June 2021, none of the 15 larger PPP projects, accounting for 5.5 billion PLN (about 67 percent of the value of the whole PPP portfolio), required direct state budget funding above 100 million PNL, therefore they were signed without the MoF oversight. - Based on information of PPP signed projects published by the MDFRP, only 3 of the 15 larger PPP project could potentially be recorded in the government financial statements following ESA 2010 guidelines. ### State-controlled PCs and oversight - The government does not systematically oversee the investment plans of PCs or monitor their financial performance. - There are 254 PCs operating under the responsibility of seven different line ministries, including a few under direct supervision of the Prime Minister’s Office. - The government identifies 27 PCs of “significant importance for the economy”, of which only 13 operate in the main markets for infrastructure provision, such as energy, mining, transport, and housing; all of them are under the responsibility of the Ministry of State Assets (MSA). - The MSA performs a shareholder function for those PCs under its portfolio, while the sectorial line ministries are responsible for developing strategies and policies. - PCs discuss investment plans with their relevant line ministries, but without a formalized coordination framework. - In energy infrastructure, network investment plans of transmission system operators (TSOs) and distribution system operators (DSOs) are also discussed and agreed with the Energy Regulatory Authority (URE). - There is no consolidated oversight or reporting of PCs financial performance and/or investment plans, neither by the MSA or the MoF. - Investment projects of PCs are not included in the list of strategic projects monitored by the PMO. - Limited oversight and reporting on major infrastructure projects from a consolidated portfolio perspective do not allow the government to fully benefit from potential complementarities across projects and sectors, leading to inefficiencies in public investment. ### Recommendations for Planning Institutions - Issue 1. Coordination between entities: - Finding: While criteria for tax sharing and general transfers to SNGs are set out in law and well understood, information on potential central government financial support/transfers for investments is spread across targeted transfer schemes appropriated to different MDAs. These transfers are usually accessed on a competitive basis at the start of the budget year, creating uncertainty for SNGs over their ability to implement their investment plans within the fiscal year. - Recommendation 1. Review arrangements for targeted public investment transfers to SNGs, including access criteria to ensure timely implementation of SNG investment plans. - Issue 2. Project appraisal: - Finding: There is no legal framework requiring all major projects to be subject to rigorous, technical, economic, and financial analysis. While there is a general methodology for project appraisals, and specific methodologies for transport projects, there is no coordinated support for applying these methodologies. - Recommendation 2. Create a legal framework that supports improved project appraisal practices by requiring that: - Project appraisal mechanisms in place for EU funded projects are applied to all major budget funded projects, based on a general methodology or sector specific methodologies; - A stepwise project appraisal procedure is introduced, where all projects are appraised at the profile level (project concept) before being included in investment plans; and - An institution or entity is assigned the task of developing guidelines and methodologies for project appraisal and providing support and organizational training. - Issue 3. Alternative infrastructure financing: - Finding: Main infrastructure markets are still dominated by PCs either fully owned or with majority ownership of the government. Monitoring of PC’s financial performance and investment plans is limited and fragmented. There is no consolidated information on major infrastructure projects undertaken by PC. The MoF has a limited mandate to monitor or manage fiscal implications of PPPs. - Recommendation 3. Strengthen the oversight of PCs and PPPs, given their significance in the provision of public infrastructure, including: - Compile, analyze, and report annual data on investment plans of the main PCs, particularly those that are responsible for the provision of large and strategic infrastructure assets and services; and - Gradually improve data compilation and reporting (in budget documentation) of firm and contingent liabilities arising from PPPs by expanding the MDFRP database to include: - (i) construction cost of the related nonfinancial asset; - (ii) construction period; - (iii) type and face value of explicit state guarantees provided to PPP projects; and - (iv) road concession projects procured before the update of the legal framework. ### Investment allocation — Multi-year budgeting (Strength— Medium; Effectiveness—Medium) - Multi-year programming of capital investment has been around for much longer than multi-year budgeting. - The CoM requires budget entities to submit multi-annual programs for the implementation of their sector strategies for the CoM’s review and approval. - The programs, some spanning 10 years or more, are reviewed by an inter-ministerial committee, including the MoF. - Programs include funding from the State Budget, EU funds passed through the budget, and other sources including extra-budgetary funds (e.g., the National Road Fund) financed through earmarked revenues and/or borrowing. - Multi-annual programs cover important sectors but do not cover all investment spending, and within programs there can be relatively large deviations between different updates of the multi-year plans, budget allocations for individual projects, and execution. - Example deviations: total CoM approved costs of the National Roads Program went from 168 PLN billion in 2015 to 225 PLN billion in 2020; total CoM approved costs of the National Railways program went from 50 PLN billion to 65 PLN billion over the same period. - EU funding represented 29 percent of the total costs of the National Road Program and 62 percent of the total costs of the National Railway Program (explaining part of the changes). - The PFA, under Article 136, provides for the adoption of multi-annual programs and specifies that: - A budget law may lay down, within the limits of expenditure for a financial year, limits on expenditure on multi-annual programs. - Multi-annual programmes are established by the CoM to implement CoM-adopted strategies, including in defense and state security; the CoM shall indicate its contractor. - Implementation of multi-annual programmes may be divided into stages. - Bodies implementing a multi-annual programme may make commitments to finance, in each year of implementation, up to the total amount of expenditure determined for the whole programme. - Article 138 of the PFA prescribes that a summary of multi-annual programs is to be included in budget documents – Budget Annex 10, which sets out information for each program including: - Title and details of program, including implementing entity(ies); - Key output indicator with baseline and targets for budget year plus two forecast years; - Program timeframe and total costs, with breakdown by implementing entity; - Total funding allocated for budget year plus two forecast years, broken down by implementing entity; - State Budget contribution to funding for budget year plus two forecast years, broken down by implementing entity. - Programs are published in the State Budget Execution Report (usually annex 47), which provides information at the same level as State Budget Annex 10, showing budget, revised budget, execution amount and rate for each implementing entity as well as the output achieved for the budget year. *Source: IMF staff summary of chapter content.* ### 41. Multi-annual programs are not approved by the Sejm (the Polish Parliament), but ### Multi-annual programs are not approved by the Sejm (the Polish Parliament), but ### Multi-annual programs: legal status and practice - Multi-annual programs, including project-level costs, are not submitted to the Sejm for approval but are published in the Official Gazette as decisions of the CoM. - Project level costs included in the approved multi-annual programs are seen as limits for the tendering and contracting stages of the individual projects, and changes have to be approved by the CoM. - Total and annual costs for other projects are neither presented to the Sejm nor published. - With the exception of defense and security programs, which are classified as confidential, multi-annual programs are published; consideration should be given to providing a comprehensive and consistent view of public investment in a credible document (e.g., inclusion of a public investment annex in the budget documents or a separate document), eventually covering central government, SNGs, and PCs, and setting out investment programs by sector/function with details on financing sources, time frames, and major projects for each sector covered. - Annex 4 provides a possible template for a budget annex. ### Box 3.5. The 2016 Budget Reform Plan (key elements) - In July 2016, the CoM approved a six-point plan (“Assumptions to Budget System Reforms”) for budgetary reform, based on a proposal submitted by the MoF. The plan is currently under implementation, supported by IMF advice, including a resident advisor to help develop a new chart of accounts and budget classification. - Key elements of the plan include: - Implementation of a medium-term budget framework (MTBF). - Integration of annual and multi-annual planning processes, and modifications to the budget calendar and budget formulation process. - Redefinition of the role of the CoM, its members, and the Minister of Finance in the budget process. - Elimination of the existing dual classification and the introduction of a new state budget structure and uniform performance-based classification. - Improved data collection for budget and financial reporting. - Institutionalization of spending reviews and other instruments into the budget process. ### Budget comprehensiveness and unity — findings - A large part of public investment spending at the central government level is undertaken through off-budget spending entities, notably special purpose funds entrusted to the BGK. - The financial plans of these funds are not presented to the Sejm alongside the budget and are effectively extra-budgetary spending. - The total share of extra-budgetary spending on public investment is difficult to establish, but the National Road Fund alone contributed an average with one third of central government investment spending (Table 3.2). Therefore, just in the road sector, 75 percent of investment is extra-budgetary spending, on average. - These funds are allocated outside the budget process, but their resources are fully included in the funding of sector strategies and their related multi-annual programs prepared by sector ministries and approved by the CoM. - Extrabudgetary spending is primarily in the transport sectors and is included in the State Budget Annex; presentations are highly aggregated and provide little detail on specific allocations from the funds. - Individual capital projects are not presented in budget documents. The Sejm is presented with program level summary projections for multi-annual programs but not projections for individual projects under each program. - Annual allocations for any loan funded projects are presented; investments made by PCs are not included, neither is any investment using the PPP modality nor investments by SNGs. - Project level information may be available elsewhere but in a fragmented manner: Official Gazette for multi-annual programs, line ministry websites for sector projects, SNGs websites for SNG projects, the MDFRP website for EU projects and PPPs, and PC websites for their capital investment programs. ### Key statistics on road funding (Table 3.2) - Central Government Gross Capital Formation (GCF) (Billion PLN): 2016: 37.3; 2017: 41.8; 2018: 46.7; 2019: 48.2 - GCF on roads (Billion PLN): 2016: 15.7; 2017: 16.1; 2018: 15.1; 2019: 13.8 - Funded by State Budget (Billion PLN): 2016: 2.9; 2017: 4.3; 2018: 4.2; 2019: 4.2 - Funded by the National Road Fund (Billion PLN): 2016: 12.8; 2017: 11.8; 2018: 10.8; 2019: 9.6 - GCF on roads as percentage of central government: 2016: 42%; 2017: 39%; 2018: 32%; 2019: 29% - Percentage of total GCF funded by National Road Fund: 2016: 81%; 2017: 74%; 2018: 72%; 2019: 70% ### Budgeting for investment — legal and procedural features - There is no legal requirement for the Sejm to appropriate total costs of individual projects. The PFA provides for the approval by the CoM of multi-annual programs. - CoM decisions, with supporting documentation including the financing plan and the associated list of costed projects, are published in the Official Gazette. - Multi-annual programs formally set indicative limits on commitments that can be made each year; the total cost submitted for each project establishes a ceiling for tendering and contracting purposes. - The PFA does not require that the budget include an annex on public investment projects. - Virements to or from capital spending appropriations require the consent of the MoF, while in-year transfers related to multi-annual programs are not allowed. - The CoM approves revisions to multi-annual programs, but these are changes only beyond the current budget year. - Any savings that may accumulate in a program can only be redeployed by CoM decision to another multi-annual program or used to reduce debt. - Unspent appropriations may be carried over into the next year provided it is used within three months and provided it relates to contracts close to completion at year end; carried over tasks must be completed by March 31 of the following year. - Funds reserved for on-going projects with active contracts require MoF approval for any changes; once tendered and contracted the budget execution system locks in the approved resources for that contract for the budget year and changes cannot be made without MoF approval. ### Maintenance funding — findings and estimates - Methodological guidelines to estimate routine and capital maintenance needs and costs exist in a few sectors (roads and water). - For national roads and motorways, GDDKiA monitors road conditions through annual regular inspections and electronic testing methods to determine maintenance requirements. GDDKiA estimates are comprehensive including routine and capital maintenance needs. - To eliminate critical/poor conditions in national roads, GDDKiA estimates maintenance needs of PLN 4.8 billion (Table 3.3). - Budget allocations for GDDKiA national road maintenance are adequate, covering above 90 percent of identified needs. - In 2020, GDDKiA estimated that about 59.6 percent of the national road network under its supervision is in good conditions, 24 percent in unsatisfactory conditions, and 13.9 percent in critical/poor conditions. - The 2019−20 NIK audit of bridge structures and culverts found guidelines were not consistently applied by some SNGs; inadequate maintenance works were concentrated at the district and municipal level attributed largely to lack of funding. - The 2019 NIK audit found that maintenance spending by Polish Waters covered about 50 percent of identified needs mainly due to limited funding. - The Program for Strengthening the National Road Network until 2030 covers both routine and capital maintenance for PLN 64 billion until 2030. - Table 3.3: National Roads and Highways immediate maintenance needs estimated at end-2020 to eliminate sections classified in poor/critical condition - Treatment group: Surface treatment — Average unitary cost [thousands PLN]: 270; Lengths of episodes demanding treatment [km]: 920; Expenses [million PLN]: 248 - Treatment group: Balancing treatment — Average unitary cost [thousands PLN]: 880; Lengths of episodes demanding treatment [km]: 257; Expenses [million PLN]: 226 - Treatment group: Modernizing treatment — Average unitary cost [thousands PLN]: 2300; Lengths of episodes demanding treatment [km]: 1906; Expenses [million PLN]: 4385 - Total immediate need [million PLN]: 4859 ### Project selection — findings - Major capital projects are neither reviewed centrally before inclusion in the budget nor subject to independent review. - Budget users have their own procedures for reviewing and selecting projects which can vary by source of funding or type of project. - MDFRP reviews and provides opinion on projects proposed for PPP financing, but only at the request of the promoting agency and the opinion is not binding. - There are neither standard published project selection criteria nor a standard procedure for selection of large projects. Selection criteria and processes can be defined by each institution, for each funding program, and for each competitive process. - Projects are included in multi-annual programs based on needs identified in sectoral diagnostics, but without previous appraisal. - No single pipeline of appraised projects exists; lists are kept and managed in different MDAs. Examples of existing lists/databases include: - A list of 76 possible PPP projects managed by the MDFRP. - GDDKiA maps by province showing projects in preparation, being tendered, in progress and completed. - “Map of investments in railway stations until 2023” for PKP station projects. - The Portal for European Funds presents an Excel sheet listing all projects ongoing or completed with EU funding; information on EU funded projects is also managed in the SL 2014 system (only for ongoing projects). ### Recommendations (Issues 4–6) - Issue 4. Budget comprehensiveness and unity: Information on public investment is fragmented within the State Budget and across the public sector, making it difficult to establish a reliable and comprehensive view on public investment in Poland. There is little project-level information in the budget documentation. Investment spending from own funds of extra-budgetary funds managed through the BGK is not presented alongside the budget. - Recommendation 4. Provide a more comprehensive view of public investment in a credible document, such as an annual budget annex or a separate document (public investment plan) to include: - (i) data on public investment spending covering central government including extra-budgetary funds, and eventually SNGs and PCs; - (ii) financing sources for public investment; and - (iii) a breakdown of major projects in each sector. - Issue 5. Maintenance funding: There is currently no standard methodology to determine maintenance requirements or to track maintenance funding systematically, except in the road and water sectors. Even in these sectors, methodologies are not applied consistently by SNGs, which are responsible for 95 percent of the road network. - Recommendation 5. Identify maintenance needs in sectoral plans, prioritize maintenance funding, and report on its execution. Measures could include: - Identifying maintenance needs in sectoral strategies, including estimates of the costs to execute them, as is currently done in the national roads sector; - Establishing a strategy, benchmarks, and standards for estimating routine and capital maintenance in key infrastructure sectors; - Ensuring that for major roads at the subnational level, GDDKiA provides technical support in line with the methodologies and guidelines developed by them; and - Assessing and reporting data on maintenance expenditures in the budget documents. - Issue 6. Project selection: There is no central review of major projects prior to their inclusion in the budget; no standard published project selection and prioritization criteria; no standard procedure for selection of large projects; and no single pipeline of appraised projects to be considered for inclusion in the budget. - Recommendation 6.a. Introduce standard and transparent criteria for project selection and prioritization at the central level, regardless of funding source. - Recommendation 6.b. Develop a pipeline of appraised major capital projects to be considered for project selection regardless of funding source. *Source: 1polea2022003 - Chapter/Section on multi-annual programs and investment budgeting (from the provided IMF PDF content).* ### 11. Procurement (Strength— High; Effectiveness—Medium) ### 11. Procurement (Strength— High; Effectiveness—Medium) ### Legal and institutional framework - Public procurement is based on the Public Procurement Law (PPL) of 2019, which entered into force on January 19, 2021, and implements features in line with EU directives of 2014. - The PPL refers to the National Purchasing Policy (NPP), currently under development and to set strategic policy objectives for procurement to be implemented during 2022−25. - An e-GP procurement system is under development; all planned modules are expected to be completed in 2022. - The Public Procurement Office (PPO) is in charge of public procurement policy and was established by the Act on Public Procurement of 10 June 1994. - All tender notices: - Below EU thresholds: published in the national Public Procurement Bulletin. - Above EU thresholds: published in the EU Tenders Electronic Daily. - All documents pertaining to the tender process (including copies of bids and protocol from conducted tender procedures) are publicly available on procuring entities’ websites/procurement platforms and are made available upon request. ### Market structure, use of procedures, and exclusions - Total value of all public procurement contracts awarded in 2020: PLN 183,5 billion, or about 8 percent of GDP. - Over 88 percent of tenders conducted used an open tender procedure; the public procurement market is significantly decentralized with over 32,000 procuring entities. - Funds spent on the basis of exclusions from the PPL in 2020: over PLN 97,5 billion. - Of that, PLN 34,8 billion was spent by procuring entities for tenders below EUR 30,000 per contract. - The remainder was on the basis of other exclusions stipulated in the PPL. - Tender processing time (Table 3.4 data): - Number of days for tender processing below EU thresholds: 38 (2017), 40 (2018), 41 (2019), 41 (2020). - Number of days for tender processing above EU thresholds: 93 (2017), 96 (2018), 90 (2019), n.a. (2020). - Average number of bids (Table 3.4 data): - Below EU thresholds: 2,42 (2017), 2,24 (2018), 2,48 (2019), 2,78 (2020). - Above EU thresholds: 2,23 (2017), 2,09 (2018), 2,12 (2019), n.a. (2020). ### Key public procurement statistics (Table 3.4) - Total value of awarded contracts (PLN billion): 163,2 (2017); 202,1 (2018); 198,9 (2019); 183,5 (2020). - Number of awarded contracts: 139 133 (2017); 143 881 (2018); 141 023 (2019); 135 048 (2020). - Type of procurement (share): - Works: 44% (2017); 46% (2018); 36% (2019); 43% (2020). - Goods: 31% (2017); 30% (2018); 31% (2019); 31% (2020). - Services: 25% (2017); 24% (2018); 33% (2019); 26% (2020). - Procurement methods used (share): - Open tender: 86,10% (2017); 88,00% (2018); 88,97% (2019); 88,56% (2020). - Restricted tender: 0,40% (2017); 0,34% (2018); 0,34% (2019); 0,42% (2020). - Negotiations with publication: 0,05% (2017); 0,04% (2018); 0,06% (2019); 0,06% (2020). - Competitive dialogue: 0,02% (2017); 0,02% (2018); 0,03% (2019); 0,02% (2020). - Negotiations without publication: 0,14% (2017); 0,11% (2018); 0,11% (2019); 0,11% (2020). - Direct contracting: 9,67% (2017); 9,45% (2018); 8,65% (2019); 8,90% (2020). - Request for Quotation: 3,29% (2017); 1,86% (2018); 1,68% (2019); 1,80% (2020). - Innovative partnership: 0,01% (2017); 0,01% (2018); 0,00% (2019); 0,00% (2020). - Electronic auction: 0,32% (2017); 0,17% (2018); 0,16% (2019); 0,13% (2020). - Selection of the cheapest bid as percentage of tenders: 83,16% (2017); 85,32% (2018); 85,38% (2019); 85,10% (2020). - Number of appeals submitted: 2 749 (2017); 2 714 (2018); 2 694 (2019); 3 545 (2020). ### Oversight, audits, and appeals - The PPO monitors the public procurement system via a central public procurement portal and prepares an annual procurement report with basic analysis and statistical information on market share, volume, methods and types of procurement used, competition level, and number and outcomes of appeals. - The annual report does not include established key performance indicators nor deep spend analysis to assess efficiency and value-for-money. - Procurement oversight and auditing: - Supreme Audit Office (NIK) conducts oversight and auditing. - EU funded projects audited by managing authorities, intermediate bodies, and the National Revenue Administration, which reports directly to the Auditing Institution (the Department for Protection of the EU's Financial Interests in the MoF). - Complaints and appeals: - National Appeal Chamber (NAC) reviews public procurement appeals. NAC is an independent quasi-court established in 2007. - A party not satisfied with the NAC ruling may complain to the court against the Chamber’s ruling. - NAC decisions are published and easily accessible. - NAC comprises about 50 professional members (lawyers) who deal with approximately 3 000 appeals per year on average. - Average time for review and issue of decision by NAC: 30 days in 2020, 14 days in 2019, and 16 days in 2018. ### Observations on performance and gaps - Despite a modern legal framework and high use of open tenders, significant procurement spending occurs outside the PPL via exclusions, including substantial amounts for contracts below EUR 30,000. - The decentralized procurement market (over 32,000 procuring entities) and broad list of exclusions contribute to large off-PPL spending. - PPO reporting lacks key performance indicators and deep spend analysis to evaluate efficiency and value-for-money. - There is no legal or regulatory framework for systematic monitoring of the public investment portfolio during implementation; monitoring is fragmented across EU-funded programs, the PMO (monitoring 400 strategic projects), and sectoral ministries. - The lack of a portfolio perspective limits ability to identify systemic issues, cost overruns, project delays, and to learn from past mistakes. ### Related governance and project management arrangements (selected) - PMO in the Prime Minister’s Office monitors a portfolio of 400 strategic government projects (or programs), which include capital projects but are mainly projects with social policy objectives; monitoring uses project information uploaded by MDAs in the MonAliZa IT system. - Inter-ministerial Committee on EU Funds meets once a quarter to ensure effective use of EU funds and reviews utilization under operational programs and absorption of funds. - Monitoring Committees are established for each EU program in line with EU regulations to assess progress and issues affecting program implementation. - Sectoral ministries oversee investment programs executed by entities under their jurisdiction. - The PFA (Public Finance Act) provides for reallocation of funds during implementation (Article 171), with specific consent requirements for reallocations in EU funded programs and ongoing construction contracts; reallocations are not supported by a systematic monitoring system. - Ex-post reviews: - No formal requirement to conduct ex-post reviews, though the PMO and Inter-ministerial Committee on EU Funds annually conduct ex-post reviews for monitored projects focusing on costs, outputs and outcomes. - Project implementation and management: - Project implementation is the responsibility of implementing entities; project managers are routinely appointed and implementation plans are prepared describing activities, timelines, and financial plans. - No specific standardized rules, procedures, or guidelines for project adjustments beyond general PFA rules for re-allocation of budget expenditure. - Audits of capital projects: - NIK carries out external audits (financial, performance and compliance) included in its annual work program; most audit reports are publicly available, with confidential reports reportedly only in approximately 5 percent of cases. - The NIK President reports annually to the Sejm on NIK activities and audit outcomes; individual entities are held accountable for implementing audit recommendations. *Source: 1polea2022003 - 11. Procurement (Strength— High; Effectiveness—Medium) PDF chapter.* ### 70. In addition to the audits performed by NIK, audits are required for EU-funded ### 1polea2022003 - 70. In addition to the audits performed by NIK, audits are required for EU-funded ### Audits and project-level controls - EU-funded project audits are required for all projects which receive grants of more than € 14,000, according to specific guidelines and regulations. - External auditors check projects while they are being implemented at each stage and include aspects such as: - eligibility costs; - recording of expense; - accounting documentation; - bidding procedures; - supplier selection processes; - project promotions. - Proposals for potential audits are generated from: - the President of the Republic of Poland; - the Speakers of the Sejm; - the Senate; - the President of the CoM; - other public bodies; - internal proposals by NIK staff. - The list of potential audits is reviewed and priorities are determined using directions issued by the NIK Council; NIK management selects audits to be performed in line with the adopted priorities. - Selected NIK Audit Activities in 2020 related to public investment included audits on: - management of public debt and liquidity of public finance entities; - supervision over State Treasury companies, purchase procedures implemented by those companies and management of State Treasury properties; - management of the capital-investment portfolio of the Industrial Development Agency and related entities; - monitoring of the Polish energy sector and safety of energy supplies in Poland; - audits on transportation focusing on the transport infrastructure and sustainable transport development; - evaluation of environmental protection projects. - Source for Box 3.8: Annual NIK Report to the Sejm, 2020. ### Monitoring of public assets (Strength— High; Effectiveness— High) - A comprehensive State Treasury Asset Report is compiled and published annually in line with Article 42 of the State Asset Management Act; the President of the General Prosecutor’s Office of the Republic reports on it to the Sejm. - Balance sheets of individual reporting entities of the State Treasury feed into the report and it is supplemented with information on additional State assets not specifically allocated to individual government reporting entities. - The report includes all asset categories specified in the State Asset Management Act and contains a general disclaimer that the report should not be considered a complete register of all assets and that valuation of all assets should not be seen as precise. - State-owned enterprises and SNGs are required to compile their own asset registers, include asset values on their balance sheets, and report to their councils or boards. ### Nonfinancial assets and accounting practice - Nonfinancial assets are included in financial statements at book value (original acquisition costs, less depreciation and any impairment costs accounted for). - Lack of recognizing appreciation of assets, such as real estate, could introduce a downward bias in reported assets. - Financial statements have additional disclosure requirements on the market value of such assets. - Consolidated financial statements for the general government sector are not yet prepared but are under development. ### Depreciation of fixed assets - Depreciation is recorded in operating statements of all reporting entities. - There is no uniform depreciation policy; entities determine their own accounting policy. - In practice, the majority use depreciation rates allowed in the tax laws of Poland to align tax and accounting treatment. - Currently, ten basic depreciation rates have been established, ranging from 1.5−2.5 percent for residential and nonresidential buildings to 30 percent for computerware. - Depreciation rates used can be the basic rates determined in the Tax Law, or entities may increase or decrease the rate by a factor based on asset circumstances; example factors: - factor of 1.2 could be used for the 2.5 % per annum allowed depreciation rate for a building; - factor of 1.4 could be used if the building is in a very bad condition. ### Procurement, portfolio management, and project implementation — Issues and recommendations - Issue 7. Procurement: decentralized procurement market; large portion of public funds spent via various exclusions from public procurement law; procurement analysis underused to identify savings and policy interventions. - Recommendation 7.a. Implement the National Purchasing Policy under preparation to: - Optimize procurement approaches to limit the volume of contracts awarded based on exclusions; - Strengthen the professionalization of public procurement; - Develop MSME potential and access to public procurement market; - Support sustainable and innovative procurement processes. - Recommendation 7.b. Strengthen analysis of procurement performance data by: - Using existing data to conduct deeper analysis of performance of the procurement system; - Developing key performance indicators to monitor projects’ time and cost overruns; - Establishing more granular unit rates data in the new e-GP system to allow improvements in assessment of value for money in procurement. - Issue 8. Portfolio management and oversight: no legal/regulatory framework for systematic compilation/monitoring of major infrastructure projects from a portfolio perspective; no formal requirements for ex-post reviews. - Recommendation 8.a. Compile information and monitor large infrastructure projects from a portfolio perspective by: - Developing criteria to select large and strategic infrastructure projects in Poland; - Compiling key financial and performance information on selected projects; - Developing a report with basic project-level statistics, status of implementation, and summary narrative of key challenges and success factors; - Publishing the report. - Recommendation 8.b. Require systematic ex-post reviews of major infrastructure projects in the public investment portfolio. - Issue 9. Management of project implementation: other than the PFA, no formal requirements or guidelines for project management arrangements nor general rules/procedures for significant project adjustments. - Recommendation 9. Strengthen project management by: - Issuing minimum requirements for project management to be adhered to by all implementing agencies; - Developing general rules and procedures to follow for significant adjustments of major projects. ### Legal framework (Cross-cutting) - The PFA is the main law regulating PIM in Poland; it establishes general principles for management of public finances, regulates use and management of debt, defines content of the Multi-annual Financial Plan of the State and the Budget Act, regulates use of European and other non-recoverable funds, and defines how internal audits should be developed. - Other laws regulate specific PIM aspects: PPL for public procurement; Act on Public-Private partnership (December 19, 2008) describing assessment criteria for PPPs; Act on Concession for Works or Services (October 21, 2016) specifying rules and procedures for concessions. - There is no legal framework pertaining to project appraisal, project selection, portfolio management and oversight, and management of project implementation. These gaps contribute to fragmentation and do not guarantee resources are assigned to the best projects. - Recommendation 11. Review the legal framework pertaining to PIM to address gaps and weaknesses identified in the PIMA. ### IT systems and data management - Key systems managed by the MoF: - Trezor — for budget planning, execution and reporting for central government budgetary entities; modules for planning/executing budget, reporting, and system administration; users upload data monthly manually, via predefined files, or by web-based interface; communicates electronically with single treasury account IT system managed by NBP. - Besti@ — for SNG reports on implementation of tasks commissioned in the field of government administration; enables electronic submission of budgets, financial reports, financial plans and Multi-year Fiscal Frameworks of SNGs to the MoF. - Central ICT System (CST), operated by the MDFRP, supports implementation of EU-funded projects and includes the “Application for handling payment applications” or SL 2014 module: - SL 2014 enables access to information on implemented projects, electronic submission of payment applications, and communication with the institution providing support; - SL 2014 includes a module for gathering data about public procurements within projects and about contractors, but SL 2014 is neither linked with the current systems of the PPO nor connected with the Trezor system. - MonAliZa (Monitoring-Analysis-Management) is a tailor-made IT system supporting the PMO for monitoring around 400 projects designated as strategic by the Government: - MonAliZa collects data uploaded by designated persons/units in ministries; - Features include resource allocation, team data, risk identification and monitoring, and version control for scope changes; - Data can be aggregated in project portfolios and by institution; - MonAliZa requires well trained staff to maintain complete and good quality data; - MonAliZa 2.0 is currently under development and it would be useful to include data exchange abilities with SL 2014, Trezor and the new public procurement e-GP system. - e-procurement system (e-GP) under development by the PPO: - Existing e-Orders Platform is used for publication of announcements and functionalities related to procedural plans and contracts; - miniPortal provides free electronic services for handling electronic communication, including submitting offers and applications per the new PPL Act, and automation of encryption and decryption of offers and requests; - Development of the new e-GP is planned to be completed in March 2022, after which a period of 3 months will be required for stabilization of the system and transition; - No legal obligation for contracting authorities to use the new e-GP; authorities using their own platforms must still provide all their information to the central e-GP Platform. - Major limitation: lack of an IT system to manage a centralized pipeline of appraised capital investment projects and data of all major projects being implemented; neither Trezor nor Besti@ register data about physical implementation progress. - Recommendation 10. Consider options to enhance PIM-related IT systems to better interface with each other, including: - Enhancing existing systems (Trezor, Besti@) with functionalities to exchange data with the e-procurement system, MonAliZa, and the Central ICT System for EU-funded projects; - Expanding use of MonAliZa to allow sector ministries to supervise portfolios of projects implemented by agencies under their supervision. ### Capacity - Staff capacity for PIM is uneven across entities due to decentralized/fragmented nature of public investment; capacity varies from small municipal entities to large organizations like GDDKiA. - Staff shortages and staff turnover have been identified as issues in some cases. - No central function is responsible for fostering capacity development in PIM. - PPO provides training and support to contracting authorities and manages a Knowledge Repository with online training; KSAP implements the “Academy of Project Management in Public Administration” (AZPAP) in cooperation with the PMO. - No central support or training is provided in key issues like project appraisal and project selection. - Recommendation: strengthen training coverage and depth (AZPAP and other programs) and consider establishing a central entity to develop guidelines and methodologies for project appraisal and provide support and training. ### Annex 1 — PIMA summary recommendations (selected entries, responsibilities, and timing) - Assign a task to develop guidelines and methodologies for project appraisal and provide support and organizational training — X CoM/MoF/PMO High (2022). - Introduce a stepwise project appraisal procedure with profile-level appraisal before inclusion in investment plans — X Central entity Medium (2022). - Apply EU project appraisal mechanisms to all major budget-funded projects — X Central entity/entities involved in PIM High (2022). - Compile, analyze, and report annual data on investment plans of main PCs — X MSA High (2022). - Develop a document presenting public investment spending covering central government including EBEs, broken down by financing sources — X MoF and relevant entities High (2022). - Develop a pipeline of appraised major capital projects regardless of funding source — X X Central entity/relevant entities Medium (2022−2023). - Optimize procurement approaches to limit contracts awarded based on exclusions; strengthen professionalization; develop MSME access; support sustainable procurement — X X MoEDT, PPO (2022−2023). - Compile information and monitor large infrastructure projects from a portfolio perspective — X CoM High (2022). - Set up requirement to conduct ex-post reviews of major infrastructure projects — X Central entity Medium (2022−2023). - Consider options for enhancing existing systems (Trezor, Besti@) and expanding MonAliZa use — X X Relevant entities / MoF, PPO Medium (2022−2023). - Review the legal framework pertaining to PIM to address gaps and weaknesses identified in the PIMA — X X Central entity/relevant entities Medium (2022−2023). *Source: 1polea2022003* ### Annex 2. PIMA Questionnaire ### Annex 2. PIMA Questionnaire ### Main Regulators in Infrastructure Markets - Telecommunication - Regulatory authority: Office of Electronic Communications (UKE). - Regulatory framework has encouraged competition by encouraging operators to secure spectrum through transparent auctions and by ensuring access to cable and fiber infrastructure. - The independence of UKE is currently being challenged by EC. - Footnote: UKE was established in 2006 as an independent legal entity responsible for telecommunications and postal activities, frequency resources management and compliance with the criteria related to electromagnetic compatibility. In September 2021 Poland was referred to the EU Court of Justice for breaching EU law safeguarding the independence of UKE. - Energy - Regulator: Energy Regulatory Authority (URE), established by law in 1997, responsible for monitoring the functioning of the whole energy market, including electricity and gas markets. - Electricity generation - The three largest producers are partially owned by the government and together are responsible for about 63.8 percent of the domestic market. - Identified companies: PGE S.A. (57% owned by government), TAURON Polska Energia S.A (30%), and ENEA S.A. (52%). - Transmission and distribution - Transmission system operators are fully owned PCs: OGP Gaz-System S.A and PSE S.A. (Polskie Sieci Elektroenergetyczne). - Several private and public companies operate as distribution system operators (DSOs). The gas distribution sector includes PSG Sp (subsidiary of PGNiG) as the largest DSO and 52 other energy companies. The electricity distribution sector is comprised of five large DSOs and 184 other companies. Large DSOs are subject to unbundling rules in both markets. - Market functioning - Energy wholesale market is broadly competitive with trade done through the commodity exchange operator (TGE S.A). Participants have access to energy sales and information on volumes and prices contracted in the markets, on a non-discriminatory basis. - In the gas market a large share of the transactions is executed between entities from the PGNiG — a 73 percent state-owned corporate group. - Retail tariffs and market concentration - In the gas retail market tariffs for end consumers are proposed by the companies operating in the market while their final amounts are set and approved by the regulator (URE). - PGNiG supplies gas to over 90 percent of households; tariffs set for PGNiG are critical. - In the retail market for electricity the government froze the prices for consumers households, vulnerable consumers (e.g., hospitals) and micro- and small enterprises for one year in 2019 (for the first half of that year – for all end-consumers), while suppliers were entitled to apply for relevant compensation. - Transport - Regulator: Rail Transport Authority (UTK), established in 2003 as an independent entity. - Rail operators and infrastructure - The Polish Railway PKP Group—a 70 percent state-owned corporate group—is the main provider of railway services, setting prices and holding almost a complete monopoly on long-distance passenger services; cargo operators are predominantly privately owned. - The Polish Railway Network PKP-PLK (Polskie Linie Kolejowe S.A.), a company mostly owned by the State Treasury, manages railway infrastructure including tracks, railway platforms, and underground passages. PKP S.A. owns 17.9 per cent of shares in PLK. - Roads - The National Directorate for Roads and Highways (GDDKiA) is the central administration authority responsible for issues with the national road system. - Sub-national governments (SNGs) are responsible for road infrastructure projects for their own communities. - Water - Entity: Polish Waters (PGW WP)—a fully state-owned corporate group—established in 2017 as part of legal and institutional reform to strengthen the sector. - Polish Waters is a state legal person which includes the previous regulatory authority, the National Water Management Authority (KZGW), as one of its organizational units. - Financing: Polish Waters is financed mainly from water services charges and significant subsidies from the state budget. ### Current Practices in Poland: Public Investment Annex in Annual Budget Documents - Legal requirement and purpose - Presentation of a public investment annex in annual budget documents is a legal requirement in most countries to provide Parliament an overview of on-going and new investment projects which can be tracked over time. - Poland’s current practice - Poland’s PFA requires summaries of multi-annual programs to be presented in a budget annex – this is Annex 10 of the State Budget documents. - The presentation was 43 pages long for the 2021 budget. - Annex 10 includes: total costs, timeframe, progress indicators over three years, annual costs over three years with a breakdown of the State Budget contribution. Projected costs are split between implementing entities where there are more than one. - Gaps in current practice - Multi-annual programs are not limited to capital investments; summarized costs do not accurately reflect capital investment spending by the Central Government. - Multi-annual programs are not compulsory for all public investment spending. - Missing capital investment: projects funded through borrowing or PPPs, and capital spending in PCs (with the exception of Polish Railways). - Public investment in PCs is not being systematically monitored by Central Government, although information is often available in sector ministries. - Sub-national governments’ capital investment programs, which make up half of Poland’s public investment spending, are not summarized in State Budget documents. Sub-national governments are excluded from the multi-annual programming process. - Information on sub-national investment plans is made available to the MoF for fiscal planning and fiscal rule compliance purposes. ### Presenting a Comprehensive View of Public Investment in Poland — Recommended Actions - Legal and reporting actions required - a change to Article 138 (6) of the PFA to require an annex on public investment to be presented to the Sejm in support of the State Budget Act, the format of which should be subject to a regulation of the Minister of Finance; - the identification of multi-annual programs (or parts thereof) focused on capital investment; - the identification of public investment spending of the State, which is not included in multi-annual programs, including any public investment projects funded by extra-budgetary entities; - strengthening the reporting of PPP projects; - establishing a regular reporting requirement for capital spending by PCs; - consolidating sub-national government investment plans; - specifying the minimum project-level details to be reported as part of the annual budget preparation. - Presentation and scope considerations - Given the volume of projects at central level and sub-national level (nearly 2874 SNGs each with their own set of projects) focus on major projects for individual presentation; smaller projects could be aggregated by function and sector, and by implementing entity for central government. - Decision required on definition of major project: an across-the-board floor on project cost could exclude sectors; listing top 5 largest projects per sector/program may omit some large projects. - Suggested annex structure: start with an overall summary showing total public investment spending over the next three years under each part, then break down into four parts: - Part I: Central government table summarized by function, sector, multi-annual program and implementing entity with - breakdown of total costs, timeframe and key outcome indicator and targets of program, and costs for year to date, budget year, and two subsequent years; - breakdown of sources of financing separating State Budget own resources, State Budget EU funds, extra-budgetary funds/entities, and loan financing; - list of major projects showing latest total costs, latest start and end dates, output indicator and targets, spending to date, and costs for budget plus two years; compare changes to total costs and dates with the previous year’s annex. - Public investment of all central government entities should be presented here irrespective of whether they are budgetary entities or not. - Part II: Public corporations table summarized by government level (central government and sub-national government), sector, public corporation or groups of PCs of the same type, with: - breakdown by total costs, timeframe, spending to date, and plans for 3 years; - breakdown of sources of financing including State/local Budget transfer, State/local Budget capitalization, own resources, borrowing from State/local government, borrowing without guarantee, borrowing with guarantee. - Part III: Consolidated SNGs public investment summarized by function, sector, program (if any), with: - breakdown of total costs, costs for year to date, budget year, and two subsequent years; - breakdown of sources of financing separating State Budget grants by type of grant, State Budget EU funds, borrowing from State Budget, external grants, and loan financing. - Part IV: PPP projects broken down between central government, SNGs and PCs, with details including key partners, timeframe, any payments from budget, public funds or public corporation to date and over next 3 years, and any guarantees issued. ### Good Practices for Maintaining Infrastructure Assets - Maintenance definitions and rationale - Maintenance covers two categories: routine maintenance (to ensure assets operate as initially intended) and capital maintenance (rehabilitate or renovate to extend life and capacity). - Empirical evidence: benefits include longer asset life spans, reduced fiscal costs in the medium and long terms, and economic and social benefits for users. - Maintenance remains a low strategic priority—an “unloved line item”. - Key steps to ensure proper maintenance - (i) develop capacities to identify needs for each key asset class early in the investment decision process; - (ii) guarantee consistent and sustainable access to funding; - (iii) monitor asset conditions; - (iv) collect and analyse data related to asset performance. - Appraisal and budgeting - Maintenance costs should be considered through a cost-benefit analysis (CBA) during the appraisal that informs the public investment decision (OECD 2001, 2011). - A government’s annual budget often provides most funding to maintain public infrastructure; other mechanisms include dedicated funds. - Dedicated funds: strengths and weaknesses - Dedicated funds (e.g., road funds) secure revenue for maintenance but have governance and management weaknesses: unclear relationship with consolidated financial statements, procurement integrity concerns, and possibly lower scrutiny than other government spending. - Example: United Kingdom operates specific-purpose funds (Local Highways Maintenance Challenge Fund; Local Highways Maintenance Incentive and Efficiency Fund) to spur innovation and reward councils that guard affordability and value for money. - Asset registers and data - Keeping records on public assets up to date is technically demanding; many countries do not reflect nonfinancial assets in government financial statements. - Absence of comprehensive records or asset registers usually goes together with insufficient maintenance; lack of monitoring exacerbates bias against maintenance, contributes to declining capital stock, and raises future replacement costs. - Collecting, analysing, and disclosing asset performance data is crucial; assessments should adopt a systemwide perspective and operational approach enabling collection, analysis, and reporting of performance-based data. - Technology is important for collection and automatization of data, including simulation analyses to inform maintenance needs. - Asset and maintenance standards are needed to measure variations in quality and functionality and to estimate maintenance costs. - Conclusion - Tackling the maintenance challenge requires going beyond data, funding, and technical solutions; a strong governmental commitment for maintenance is required to ensure infrastructure is more durable, sustainable, and economical over time. ### Legal Framework Related to PIMA Institutions — Selected Entries - 1 Fiscal targets and rules - Act on Public Finances (8/27/2009) - Defines principles and procedure for preparation and adoption of the Multi-annual Financial Plan of the State. Article 104 specifies content of the plan which shall contain the Convergence Programme drawn up in accordance with Council Regulation (EC) No 1466/97/EC of 7 July 1997. - 2 National and Sectoral Planning - No dedicated legislation regarding investment planning. - Act on Public Finances (8/27/2009) Chapter III regulates preparation of the Multi-annual Financial Plan of the State and the Budget Act. Article 103 states the Plan shall be drawn up for a given financial year and three consecutive years. - 3 Coordination between entities - Act on Public Finances (8/27/2009) - Articles 112, 114, 127, 128, 129, 132, 143, 148, 168, 170, 216, 225, 230, and 257 relate to transfer from the state budget and SNGs. - Law on the income of local government units (11/13/2003) specifies rules for determining and transferring the general transfer and the targeted transfers from the state budget to local government units. - Announcement of the Marshal of the SEJM of the Republic of Poland of 11 August 2021 updates some articles of the above-mentioned Act. - 4 Project appraisal - No specific legal act or regulation. - 5 Alternative infrastructure financing - Act on Public Finances (8/27/2009) — Articles 41 (2-3), 132 (3-3), 133b, 133c, 133e, 162 (4), 221a, and 226 (4-2) relate to PPPs. - Act on PPPs of December 19, 2008 — defines principles of cooperation between the public entity and the private Partner; covers transport, energy generation, transmission and distribution, water supply, sewerage and waste management, and social infrastructure; includes assessment criteria to assess whether PPPs offer value for money. - Act on Concessions for Construction Works or Services of October 21, 2016 — specifies rules and procedures for concluding contracts for concessions for works or services by public authorities. - Public Procurement Law 2019 (PPL) — Non-concession PPPs must be awarded under the PPL. - 6 Multiyear Budgeting - Act on Public Finances (8/27/2009) — Article 32 indicates that financial plans should be prepared for the financial year and the two following years. - 7 Budget comprehensiveness and unity - Act on Public Finances (8/27/2009) — Article 4 indicates provisions apply to public finance sector entities and other entities to the extent that they use or dispose of public funds. - 8 Budgeting for investment - Act on Public Finances (8/27/2009) — Articles 132 to 134, 181(3), 221, 235 and 236 among others. - 9 Maintenance funding - Act on Public Finances (8/27/2009) — Article 124 indicates current expenditure of budgetary entities shall comprise, among other, maintenance costs. - 10 Project selection - No specific legal act or regulation. - 11 Procurement - Public Procurement Law 2019 — introduces legal basis for state purchasing policy, simplified procedures, defined indexation of contracts and rules of obligatory application of advance payments or partial payments in specific contracts. - Act of 8 July 2021 amending the Act PPL and other acts. - 12 Availability of funding - Act on Public Finances (8/27/2009) — Article 104 on multi-annual financial plan of the State; Article 110 indicates the state budget shall determine total amount of planned expenditures and the planned balance of revenues and expenditures of the state budget. - 13 Portfolio management and oversight - No specific legal act or regulation. - 14 Management of project implementation - No specific legal act or regulation. - Act about the Supreme Audit Office (12/23/1994) — entrusts auditing activities of government administration bodies, the National Bank of Poland, state legal persons, local government bodies, self-government legal persons and other state and self-government organizational units. - 15 Monitoring of Public Assets - Act on the principles of managing state property (12/16/2016) — defines rules for the management of state property, to the extent not regulated in special regulations. *Source: Annexes 2–6 of the supplied IMF document.* ### Annex 7 . Overview of PIM-R elated IT Systems ### Annex 7 . Overview of PIM-R elated IT Systems ### Inventory by functional area - 1. Fiscal targets and rules - System/application: Eviews - Comments: - Eviews is used for forecasting and modeling. - Data is uploaded from Excel spreadsheets. - Source of data is statistical office and Eurostat and is uploaded automatically. - 2. National and sectoral planning - System/application: No dedicated system to register investment plans. - Other systems: - Pavement Management System (with functionalities as HDM4) - Used by GDDKiA for analysis, planning, management and appraisal of road maintenance, improvements and investment decisions. - Trezor is use for financial planning - The planning module of Trezor allows developing a 3-year Financial Plan. - 3. Coordination between entities - System/application: Besti@ - Comments: - The Besti @ system ensures that the Ministry of Finance acquires reporting data and long-term financial forecasts of local government units submitted to the Ministry of Finance through regional accounting chambers. - 4. Project appraisal - System/application: No dedicated application. - Comments: - Some tools by sector. - GDDKiA uses its Pavement Management System for planning and appraising projects and maintenance. - 5. Alternative infrastructure financing - System/application: - Pipeline of 76 possible PPP projects searchable and presented by voivodship. - Managed by the MDFRP. - https://www.ppp.gov.pl/baza-potencjalnych-projektow-ppp/ - Database of PPP projects with signed contracts. - Available in Poland’s Open Data Portal - https://dane.gov.pl/en/dataset/1260,baza-projektow-partnerstwa-publiczno-prywatnego-z-zawartymi-umowami/resource/25929/table - 6. Multiyear Budgeting - System/application: Trezor - Comments: - Allows planning budget for the next budget year plus forecasts for 2 more years. - 7. Budget comprehensiveness and unity - System/application: No dedicated system - Partial support by Besti@ and Trezor - Comments: - The Besti @ system ensures that the Ministry of Finance acquires reporting data and long-term financial forecasts of local government units submitted to the Ministry of Finance through regional accounting chambers. - Trezor manages current and capital spending appropriations for budget users. - SOEs and extra-budgetary funds manage their own IT systems and data is not consolidated. - 8. Budgeting for investment - System/application: Trezor - Comments: - The planning module allows budget holders to upload their annual financial plans as well as their monthly forecasts on a daily basis for next month and the following two months - 9. Maintenance funding - System/application: Pavement Management System for roads - Comments: - Used by GDDKiA to plan maintenance. - 10. Project selection - System/application: No dedicated system. - Comments: - No single project pipeline. - There are some pipelines or list of projects by sector or funding source, but these are not used for selection. - GDDKiA presents by province projects in preparation, being tendered, in progress and completed. - https://www.gov.pl/web/gddkia/mapa-stanu-budowy-drog4 - The program Bridges for Regions includes a list of projects, but with no detailed information. - https://www.gov.pl/web/fundusze-regiony/program-mosty-dla-regionow - The Portal for European Funds managed by the MDFRP presents in an Excel sheet a list of all projects ongoing or completed with EU funding. - https://www.funduszeeuropejskie.gov.pl/strony/o-funduszach/projekty/lista-projektow/lista-projektow-realizowanych-z-funduszy-europejskich-w-polsce-w-latach-2014-2020/ - Pavement Management System supports selection by GDDKiA of projects for maintenance or reconstruction of roads. - 11. Procurement - System/application: - e-Orders Platform and miniPortal - e-Orders Platform (https://ezamowienia.gov.pl/en/) is used for publication of announcements and other procurement information. - miniPortal (https://miniportal.uzp.gov.pl/) allows electronic submission of an application/offer. - Comments: - For the Platform work schedule, see: https://www.uzp.gov.pl/e-zamowienia2/informacje - An e-GP procurement system is under development. Final acceptance of the Platform will take place at the turn of the second and third quarter of 2022. However, using it is optional. - 12. Availability of funding - System/application: - Model managed by the Debt Department of MoF - It allows the Debt Department to forecast cash needs. Based on the forecasted cash projections, needs for liquidity are projected. - Trezor - Manages the cash flow plan and actual requests for payment. - 13. Portfolio management and oversight - System/application: - MonAliZa - "MonAliZa" (Monitoring - Analysis - Management) is a "tailor-made" IT tool for management of a portfolio of strategic projects by the Chancellery of the Prime Minister. Manages data at the project, program and institutional levels. - https://www.gov.pl/web/zarzadzanie-projektami/system-teleinformatyczny-monaliza - Central ICT system SL 2014 - Managed by the MDFRP supports the implementation of operational programs and projects co-financed from EU Funds. Data from projects can be aggregated for portfolio monitoring. - https://www.funduszeeuropejskie.gov.pl/strony/o-funduszach/centralny-system-teleinformatyczny/ - 14. Management of project implementation - System/application: - MonAliZa - Allows detailed monitoring of projects at the activity level using Gantt chart and activity network diagrams. Risks monitoring is also available. For now, it is focused on 400 strategic projects. - SL2014 - Supports project implementation of EU funded projects, notably payments from EU funds (submission of payment claims, correspondence with the institution responsible for their verification), and provides other data to monitor project implementation. - 15. Monitoring of Public Assets - System/application: No centralized register of public assets exists. - Comments: - Assets are kept at the entity level and are aggregated at the budget holder level. - Information is kept by each budget holder which provide annual reports that are consolidated by the MoF into the annual financial statements of the State. - Financial information related to assets formation is obtained from the Trezor system. ### Key observations and gaps - Multiple functions are supported by bespoke or sectoral systems rather than a unified PIM-R platform (examples: Eviews, Pavement Management System, Trezor, Besti@, MonAliZa, SL2014). - No dedicated system exists for: registering investment plans (2), project appraisal (4), project selection (10), project portfolio integration (10), and centralized public assets register (15). - Trezor is recurrently used across multiyear budgeting, budgeting for investment, managing appropriations, and cash flow processes. - Pavement Management System and GDDKiA tools provide strong sectoral capabilities for roads (planning, appraisal, maintenance, and selection). - PPP information is split between a pipeline of 76 possible projects (managed by MDFRP) and a separate database of PPP projects with signed contracts on Poland’s Open Data Portal. - Portfolio monitoring for strategic projects is supported by MonAliZa (focused on 400 strategic projects) and SL2014 for EU-funded project implementation. *Annex 7 . Overview of PIM-R elated IT Systems* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1polea2022003.pdf_