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Old August 17th, 2012, 07:17 PM   #8801
Surel
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Originally Posted by geogregor View Post
Such statement is typical for countries with little trust in business, officials and every day life. I guess it is part of our culture of cutting corners and cheating. So sometimes we overcompensate.
There is no such thing as a frienldy business... nowhere. The only thing that make business look like friendly is economically efficient and working legal enviroment where legal acts and facts are enforceable. This environment cultivates the people and they in return cultivate the environment. The oppinions about whether certain situation is economically efficient might differ though. Homo homini lupus...

I don't really see into GDDKIA, but from what I see I deduce that they do the job quite good and they direct into economically efficient situation. You named space for improvements and I aggree with you, that such problems should not happen and situation can be improved. Becoming soft and friendlier doesn't improve anything though, especially when public and private sector is doing things together. Nowhere in the world. Unless the goal would e.g. be subsidize domestic construction companies, create national champions (just like China does, but also many other countries in many sectors) and make them big enough to compete on the international markets, bringing economic profit home. That is a legit strategy.

Last edited by Surel; August 17th, 2012 at 07:27 PM.
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Old August 18th, 2012, 01:32 AM   #8802
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I don't really see into GDDKIA, but from what I see I deduce that they do the job quite good and they direct into economically efficient situation.
Are you serious? You call organization which can't keep up to most of its own deadlines and milestones efficient?? What is the point of announcing dates if no one gives a damn about them?

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Becoming soft and friendlier doesn't improve anything though, especially when public and private sector is doing things together. Nowhere in the world.
Did I ever said soft of friendly? I'm asking for professional project management including budgeting risks and fast responding to changing situation. For now we have mostly bitter arguments and infighting.
I was following for a while building of Irish motorways (where per capita they built impressive network in the last few years, before the banking crisis). There were problems (like sinking stretch of M7) but I didn't hear about kicking out contractors or constant lawsuits. Most of the projects were finished before the scheduled time. But they had financial bonus for that.

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Unless the goal would e.g. be subsidize domestic construction companies, create national champions (just like China does, but also many other countries in many sectors) and make them big enough to compete on the international markets, bringing economic profit home. That is a legit strategy.
It is not only China. Try to enter the US road building market. Good luck.
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Old August 18th, 2012, 01:55 AM   #8803
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Are you serious? You call organization which can't keep up to most of its own deadlines and milestones efficient?? What is the point of announcing dates if no one gives a damn about them?
GDDKiA sets deadlines and the contractor agrees to abide by them. When delays occur, GDDKiA enforces penalties unless there is a good justification. What else would you have them do to motivate contractors to work faster? Should they break the contract on the first sight of problems or delays? Set penalties so severe that no company would risk taking the contract? Or what exactly are you proposing? There are things GDDKiA does wrong, sometimes delays are caused by faulty documentation or things like that, but most of the times they are not the ones to blame.
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Old August 18th, 2012, 02:03 AM   #8804
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I guess he is proposing that GDDKIA takes on the risks and contractors get the cream on a silver plate.
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Old August 18th, 2012, 07:34 AM   #8805
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GDDKiA sets deadlines and the contractor agrees to abide by them. When delays occur, GDDKiA enforces penalties unless there is a good justification. What else would you have them do to motivate contractors to work faster? Should they break the contract on the first sight of problems or delays? Set penalties so severe that no company would risk taking the contract? Or what exactly are you proposing?
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Most of the projects were finished before the scheduled time. But they had financial bonus for that.
It looks to me like he's proposed a carrot in addition to the stick: financial rewards for early completion. It works well in many places.
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Old August 18th, 2012, 07:18 PM   #8806
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I guess he is proposing that GDDKIA takes on the risks and contractors get the cream on a silver plate.
Could you kindly point where did I write something along these lines?

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Old August 19th, 2012, 01:46 AM   #8807
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Could you kindly point where did I write something along these lines?

I'll post some quotes. But generally you were defending the contractors and accusing GDDKIA of being responsible for their problems. I don´t know how the reality is exactly but my impressions are that GDDKIA is just playing hard business and I like it.


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Correct me if I'm wrong, but are we not one of the few countries where major infrastructural contracts are not indexated to raisng costs of oil, steel and other major components? If that's the case such situations will keep happening.
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So we should be happy than most of the large Polish construction companies are either already bust or facing bankruptcy? Their problems? Hmmm...
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Originally Posted by geogregor View Post
Did I ever said soft of friendly? I'm asking for professional project management including budgeting risks and fast responding to changing situation. For now we have mostly bitter arguments and infighting.

When the companies have the feeling that GDDKIA cheated (performed poorly, not according to what was stipulated in the contract) on them they should go to the court and they will win if they are right. If on the other side GDDKIA did not, they were not competent to go into such contracts obviously, either legally competent or professionally.

I am 100 % with you that GDDKIA should allways deliver according to the contract. But I don't think that GDDKIA should intentionally bear the risks when the contractors are stupid enough to take the risks on themselves. That just results in the dream situation of any private company: private profits and socialized losses.

I think in the end maybe we have similar oppinions, but don't use the right words and I was perhaps too overshooting in my statement.


BTW, bonus on express delivery should not exceed the standard margin. If the delivery is possible in given time frame, that time frame should be marked as express delivery. Its just playing with words, it works in psychology but it doesn't in business (if you do real business). In one way its called bonus for express delivery and in other its called penalty for late delivery, both should be the same high. The date of delivery being the date of express delivery.
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Old August 19th, 2012, 02:24 AM   #8808
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I'll post some quotes. But generally you were defending the contractors and accusing GDDKIA of being responsible for their problems. I don´t know how the reality is exactly but my impressions are that GDDKIA is just playing hard business and I like it.
Not exactly, I was only saying that blaming contractors for all the problems and delays is simplistic and naive. I had impression that you idealize GDDKiA. From your statements it seems like GDDKiA does splendid job but greedy contractors screw everything up.
If that's what you meant you must be working in this institution.
Just kidding

Quote:
When the companies have the feeling that GDDKIA cheated (performed poorly, not according to what was stipulated in the contract) on them they should go to the court and they will win if they are right. If on the other side GDDKIA did not, they were not competent to go into such contracts obviously, either legally competent or professionally.
And they do, on A1 (famous Mszana bridge) Alpina is suing GDDKiA. They claim they shouldn't be kicked out of the initial contract. We'll see if they will sue about the current contract.
The problem is that Polish judicial system is one of the slowest in Europe. Additionally some contractors don't want to risk relationship with the state and try to bite the bullet hoping for the best.

Quote:
I am 100 % with you that GDDKIA should allways deliver according to the contract. But I don't think that GDDKIA should intentionally bear the risks when the contractors are stupid enough to take the risks on themselves. That just results in the dream situation of any private company: private profits and socialized losses.
I never said that GDDKiA shuld bear all the risks. However indexation of long contracts to rising costs is used around the world in public and private sector.

Quote:
I think in the end maybe we have similar oppinions, but don't use the right words and I was perhaps too overshooting in my statement.
We both have some valid points

Quote:
BTW, bonus on express delivery should not exceed the standard margin. If the delivery is possible in given time frame, that time frame should be marked as express delivery. Its just playing with words, it works in psychology but it doesn't in business (if you do real business). In one way its called bonus for express delivery and in other its called penalty for late delivery, both should be the same high. The date of delivery being the date of express delivery.
Incentives usually work better than penalties. You say that it applies in psychology but not in business. Well, I disagree again. Companies are run by people not machines and psychology is more important in business than some people might think.
Irish used incentive system in their road projects. They were usually finished well ahead of schedule, on budget and way faster than in Poland. Of course they have milder winters but on the other hand they have quite a lot of rainfall.
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Old August 19th, 2012, 05:47 AM   #8809
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But thats the point. It depends on how the contractors or GDDKIA are able to forge their contracts. No one will do it for the contractors. No one will hold their hands. Thats what I like about it. If construction companies go bust and others come and finish the same motorway it seems that GDDKIA does better job then they do. If GDDKIA would do such terrible job no one would come and tender for the projects I guess. Those are just simple market relations. I dont think we can argue about that, because there is simply nothing to argue about.

The only thing where we could have different oppinions about is whether GDDKIA really did not abide to the contracts. And I honestly say that I dont know. I don't work there nor have any inside information on the issue. So, if the GDDKIA is to blame, because it doesnt keep to the contracts, then it indeed sucks big time for the contractors.

But then again, its just as in any other business and anyone doing business must be ready for this.

Incentives: Again, if such tricks as bonus on express delivery work it just shows that there is inefficiency and the government is paying more then necessary in this particular case.

As I sad the size of bonus and penalty has to be the same if the contract is efficient, therefore there is no difference between those two cases. In one case firm delivers on the date A and gets profit X instead of delivering late on the date A+T and having profit 0 or less. In the other firm delivers "ahead of schedulle" on the same date A and gets bonus of the same size X instead of delivering on the schedulled date A+T and having zero or negative profit.

Obviously if such arrangement works the company is paid more than X in the second case while delivering on the same date A. Thus its just overpaid.

Its completely different situation than examining whether motivation to earn or to lose produces the same result.
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Old August 19th, 2012, 07:05 AM   #8810
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It depends on how the contractors or GDDKIA are able to forge their contracts.
Yes, I agree: much (but not all) of the problem is due to poorly structured contracts, with the wrong incentives (I don't just mean the amounts are wrong). GDDKIA is 100% responsible for the structure of the contracts.

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The only thing where we could have different oppinions about is whether GDDKIA really did not abide to the contracts.
I disagree 100%. Game theory predicts that poorly structured contracts will not be adhered to. I believe (but do not know with certainty) that the GDDKIA contracts we're discussing are so poorly structured.

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Incentives: Again, if such tricks as bonus on express delivery work it just shows that there is inefficiency and the government is paying more then necessary in this particular case.

As I sad the size of bonus and penalty has to be the same if the contract is efficient, therefore there is no difference between those two cases. In one case firm delivers on the date A and gets profit X instead of delivering late on the date A+T and having profit 0 or less. In the other firm delivers "ahead of schedulle" on the same date A and gets bonus of the same size X instead of delivering on the schedulled date A+T and having zero or negative profit.
Economists used to believe that. Kahneman won the Nobel prize in economics (Tversky was disqualified by being already dead) for proving that argument wrong in this paper:
Prospect Theory: An Analysis of Decision under Risk
by Daniel Kahneman and Amos Tversky
Econometrica, 47(2), pp. 263-291, March 1979
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Old August 19th, 2012, 01:36 PM   #8811
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Route Planning and Mapping Hell

Tomorrow I'll be driving from Warsaw to Vienna. Google thinks the A2 hasn't yet opened between Warsaw and Lodz. Bing thinks the A1 has already opened over the MA532 bridge at Mszana. I'm impatiently waiting for Apple's mapping software based on Openstreetmaps.

My tentative plan is to leave Warsaw about 06:00, take the A2 to Lodz, then the A1 south. I hope to get through Lodz before the morning commute traffic slows down. Then my plan is to take the DK930 south from Swierklany to the DK933 in order to have a look at the infamous bridge. Are both the DK930 and DK933 open to traffic? Will I have any problem getting to the DK78 that way? Would it be better to take DW5021 (Ulica 1 Maja / Ulica Mszanska)? Any other suggestions?
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Old August 19th, 2012, 01:39 PM   #8812
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Yes, I agree: much (but not all) of the problem is due to poorly structured contracts, with the wrong incentives (I don't just mean the amounts are wrong). GDDKIA is 100% responsible for the structure of the contracts.
First what do you mean exactly with wrong contracts? Wrong for whom? GDDKIA or contractors? If they are not working out for the contractors anyway the contractors are 100 % responsible for accepting poor contracts... I have been saying this all around.

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I disagree 100%. Game theory predicts that poorly structured contracts will not be adhered to. I believe (but do not know with certainty) that the GDDKIA contracts we're discussing are so poorly structured.
Again as I said, if contractors are so stupid that they accept disadvantageous contracts, then its no wonder that GDDKIA takes advantage of them.

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Economists used to believe that. Kahneman won the Nobel prize in economics (Tversky was disqualified by being already dead) for proving that argument wrong in this paper:
Prospect Theory: An Analysis of Decision under Risk
by Daniel Kahneman and Amos Tversky
Econometrica, 47(2), pp. 263-291, March 1979

I dont think you read my answer carefull enough. I know that paper and theory. And in this case the logic doesnt apply because the reference point is the same as well as the date. The date that the GDDKIA would set up as the bonus day or the delivery day is the same day. Its not possible to distinguish here the loss and gain as well. Its a gain in both cases. The only certainty equivalent here is not getting anything if not going into business and the only certain date here is the data on which government wants to have the project ready. The date is the same date in both cases.

If there are incentive differences then it only means that the contract is wrongly priced. I.e. government is paying a real bonus for real early delivery.


case 1) contract firm is penalized for delay.

Contract firm gets 100 for delivery on date A, if delivering later than date A there is a penalty of 80. The choice is thus:
Getting 100 on date A or getting 20 later or not going into contract and getting 0.


case 2) contract firm gets bonus for early finish.

Contract firm gets 20 for delivery later than on the date A, if it manages to deliver on A it gets bonus of 80. The choice is thus
Getting 100 on date A or getting 20 later or not going into contract and getting 0.


There is no different reference point in both cases, thus the prospect theory is not applicable here.
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Old August 19th, 2012, 01:52 PM   #8813
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First what do you mean exactly with wrong contracts? Wrong for whom? GDDKIA or contractors? If they are not working out for the contractors anyway the contractors are 100 % responsible for accepting poor contracts... I have been saying this all around.
I mean that the contracts may be structurally broken by providing better payoffs (in the game theoretic sense) for failing to perform than for performing.

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Originally Posted by Surel View Post
Again as I said, if contractors are so stupid that they accept disadvantageous contracts, then its no wonder that GDDKIA takes advantage of them.
It's not a question of disadvantageous. The contractors have no power to negotiate the structure of the contracts. They can only bid (or not bid) on the parameters. I'm suggesting that the choice of parameters may not be optimal to maximize contract performance.

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I dont think you read my answer carefull enough. I know that paper and theory. And in this case the logic doesnt apply because the reference point is the same as well as the date. The date that the GDDKIA would set up as the bonus day or the delivery day is the same day. Its not possible to distinguish here the loss and gain as well. Its a gain in both cases. The only certainty equivalent here is not getting anything if not going into business and the only certain date here is the data on which government wants to have the project ready. The date is the same date in both cases.

If there are incentive differences then it only means that the contract is wrongly priced. I.e. government is paying a real bonus for real early delivery.


case 1) contract firm is penalized for delay.

Contract firm gets 100 for delivery on date A, if delivering later than date A there is a penalty of 80. The choice is thus:
Getting 100 on date A or getting 20 later or not going into contract and getting 0.


case 2) contract firm gets bonus for early finish.

Contract firm gets 20 for delivery later than on the date A, if it manages to deliver on A it gets bonus of 80. The choice is thus
Getting 100 on date A or getting 20 later or not going into contract and getting 0.


There is no different reference point in both cases, thus the prospect theory is not applicable here.
You just gave an argument according to the premises of von Neumann / Morgenstern Expected Utility Theory, which is exactly what Kahneman and Tversky disproved. If you read their paper, it seems you may have missed their point. Actors (in this case the contractors) behave differently when faced with a perceived possible gain than they do when faced with a perceived possible loss, even though the outcomes are the same in each case.
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Old August 19th, 2012, 02:33 PM   #8814
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It's not a question of disadvantageous. The contractors have no power to negotiate the structure of the contracts. They can only bid (or not bid) on the parameters. I'm suggesting that the choice of parameters may not be optimal to maximize contract performance.
Thats certainly possible. However, that was not the argument. The argument was, that contractros blame GDDKIA for entering contracts they can't fullfill. If the contracts are not in their favor they should not enter. The GDDKIA would have to restate the conditions in follow up bidding process.

I am 100 % with you that the parameters could be optimized, as well as bidding process, like e.g. auction is better... but thats different discussion.

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Originally Posted by mcarling View Post
You just gave an argument according to the premises of von Neumann / Morgenstern Expected Utility Theory, which is exactly what Kahneman and Tversky disproved. If you read their paper, it seems you may have missed their point. Actors (in this case the contractors) behave differently when faced with a perceived possible gain than they do when faced with a perceived possible loss, even though the outcomes are the same in each case.
Well, I advise you to check on the reference point in their theory (Kahneman and Tversky). Their theory is here simply not applicable because there is not gain or loss reference point, there is only gain before the contract is closed under both contracts.

Even after the contracts are closed, any efficient contracts would make crystal clear that there is no difference between them, thus the theory would not apply. The profit on any given date is the same under both contracts and any delay is perceived as loss under both contracts.

Above that, perceived possible loss leads to increased performance and perceived possible gain leads to underperfomance under complete contracts. Such contracts as motorway construction are quite approaching the status of the complete contracts. The situation may be opposite under incomplete contracts.

I recommend this article:
http://aaajournals.org/doi/abs/10.2308/accr-50219

Notice please I am not agruing about the K-H theory, it certainly is empirical fact. It just doesnt apply to this case.
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Old August 19th, 2012, 02:49 PM   #8815
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http://dl.dropbox.com/u/81504012/Odliczanie-hetman.png

Many deadlines of road projects have expired, but there haven't been many openings since Euro 2012. When can we expect the next stream of motorway and expressway openings?
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Old August 19th, 2012, 04:12 PM   #8816
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S3 Świebodzin:
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Panorama:


Duży rozmiar: http://www.fmix.pl/zdjecie/3394584/panorama

Na panoramie jest WS-17 fotografowany z "Rio de Świebodzineiro".
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Old August 19th, 2012, 04:53 PM   #8817
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First what do you mean exactly with wrong contracts? Wrong for whom? GDDKIA or contractors? If they are not working out for the contractors anyway the contractors are 100 % responsible for accepting poor contracts... I have been saying this all around.

Again as I said, if contractors are so stupid that they accept disadvantageous contracts, then its no wonder that GDDKIA takes advantage of them.
The whole discussion is becoming very academic. Do you have some economy background?
I don't.
But looking at what is happening in Poland in the last few years it seems that GDDKiA is putting much more emphasis on saving taxpayer's money than on delivering road projects. Maybe it's right but I would prefer more balanced approach as roads not finished for 2 or 3 years (like A1 near my home town) are costing Poland's economy (and life in some cases).

As I said, construction is complicated business with many things unexpected or which might change. Geologic conditions, weather, regulations etc. It is difficult if not impossible to write water-tight contracts which contains all the clauses which might be needed. That's where responsible sides, who both want to finish project, sit behind the negotiating table.

It looks like it is not happening in Poland. They go straight to accusations, threats, haggling etc. In my opinion both sides (GDDKiA and contractors) are equally guilty in most cases. Contractors look only for profits (which could be understandable) and officials in GDDKiA don't want to make any decisions which could be used against them as accusation of corruption or other wrongdoing.
And then we have endless stalemates where both sides play waiting games.

And from posts on Polish forum it seems that disagreements are often about absolutely trivial details. Like unexpected waste dump on route, required changes into foundations of some small bridge, due to different hydro-geologic conditions on the ground than on maps etc.
I really wish more cooperation and less war-like attitudes on both sides.
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Old August 19th, 2012, 10:29 PM   #8818
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Wrocław skyline from an almost finished S8 towards Warsaw:


Foto: lookash80
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Old August 20th, 2012, 10:36 AM   #8819
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^When this and other sections of the S8 scheduled for this year opens, you can drive from Zgorzelec in the southwest to Bialystok in the northeast on a route that is more than 50 percent motorway/ekspressway. Who would have thought so 10 years ago . This is interesting because the polish 'diagonal routes' were never explicitly part of the grand masterplan for the trunk roadnetwork, like the big three motorways.
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Old August 20th, 2012, 09:57 PM   #8820
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Tomorrow I'll be driving from Warsaw to Vienna. Google thinks the A2 hasn't yet opened between Warsaw and Lodz. Bing thinks the A1 has already opened over the MA532 bridge at Mszana. I'm impatiently waiting for Apple's mapping software based on Openstreetmaps.

My tentative plan is to leave Warsaw about 06:00, take the A2 to Lodz, then the A1 south. I hope to get through Lodz before the morning commute traffic slows down. Then my plan is to take the DK930 south from Swierklany to the DK933 in order to have a look at the infamous bridge. Are both the DK930 and DK933 open to traffic? Will I have any problem getting to the DK78 that way? Would it be better to take DW5021 (Ulica 1 Maja / Ulica Mszanska)? Any other suggestions?

I personally always go from Warschau to Vienna, over S8 till Piotrkow, further on 1 or sometimes S1 down till Bielsko-Biala, then S1 to CZ/PL border, and Brno.
When going or passing on south of Vienna I further go from Brno over Bratislava.
This way you have all the way at least 2x2 roads.
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