Anne Grünkorn, Managing Director at LogPay Mobility Services, explains how to simplify complex funding aids without losing control
Aid packages, financial support, investment incentives, and compensation payments in response to the COVID-19 pandemic exist. They also existed before, but not at this level. The largely public-dominated mobility and transport industry has been highly affected by both public funding and the pandemic. However, we need to ask whether the funds have been called up and distributed in a targeted manner, as well as whether the public funding mechanism is working. If not, what are the reasons? What needs to be changed and improved so that the measures have the desired effect?
This article is dedicated to these questions. And it is not only because of COVID-19 crisis that these questions are of importance; they are also important because of changing societal behaviours towards mobility, the high speed at which digitalisation is taking place, and because of the way technology is changing to safeguard our environment as well as to reduce further climatic changes.
Both the European Union and the individual Member States have reacted quickly to the effects of the coronavirus, mobilising large sums of money in some cases and supporting ailing industries to secure jobs. Meanwhile, lawyers all over the world are trying to classify a pandemic in a legal sense. Until now, a pandemic has not been considered a force majeure. And yet, at the EU level, this is now set to change, and EU institutions are being called upon to act. Legally speaking, this needs to happen to help both public and private companies to reduce risks, while the available funding programmes also need adapt to these changes and become more flexible in order to have a direct impact.
Public transport in Germany
Public transport in Germany has reached record levels in recent years and has provided reliable mobility with almost no decline in supply and service levels even during the most severe COVID-19-related restrictions. Nevertheless, the pandemic hit the industry with full force, with passenger numbers plummeting by around 80% during the peak phase of initial restrictions. While 50-60% of passengers have since begun to use public transport once more, as stricter measures are brought in to help prevent COVID-19 from spreading, these passenger numbers will go down again. After all, even during the coronavirus there are many good reasons to travel by bus and train.
Through the nationwide joint campaign #BesserWeiter, politicians and public transport companies have committed to safeguarding mobility services. They are trying to win back the confidence of passengers and need, at the same time, to invest in the renewal of transport infrastructure and in the further digitalisation of operations and services. According to a study conducted by civity, the positive development in the use of public transport services is at risk (Source: civity Management Consultants (Hrsg.): Verkehrswende: aufgehoben oder aufgeschoben? — Corona-Szenarien für den ÖPNV, Hamburg, 2020, page 11).
In Fig. 1, the considerable slump in revenue caused by COVID-19 lockdowns during March to July 2020 and then again from October and November 2020 can be seen, which is having a number of effects:
- Public transport companies are losing revenue and will continue to do so for at least two to three years;
- There is a high financial burden on both public budgets and households at all levels (cities, districts, Länder, and federal states) which will continue in the coming years;
- There is a loss of trust in public transport by the population, at least during the pandemic times; and
- Travel behaviours are changing towards the higher use of individual modes of transport (bicycles, cars either with electric or conventional engines and either user-owned or rented, e-Scooters, and on-demand services).
The current funding programmes and support measures at the federal and Länder-level as well at the European level are increasing the amounts of funding, but are they helping? The answer is ‘yes’, at least partially, if one looks on the sums: to cover the financial losses due to COVID-19 in Germany €5bn has been allocated for public transport companies and €170m for travel bus companies (Source: Die Zeit, Zukunft Mobilität, 30/05/2020). This money is needed to cover the loss of ticket revenues, which have decreased by 70-80%.
The German Ministry of Transport is also supporting this rescue umbrella – the total package for mobility is about €28bn. This is a lot of money and it is the right way forward. What is lacking, however, are efficient funding mechanisms, appropriate control measures, the evaluation of projects, and measuring short- and long-term effects in order to learn lessons and design future funding programmes.
Examples where all of these issues have already appeared in Germany include:
Planning and current development of costs for new railway infrastructure
For example, the high-speed train and regional train railway station in the city of Stuttgart where, according to official estimates, costs are rising from the original €4.2bn to €8.2bn (and potentially more). This railway station is scheduled to begin operations in 2025, but the connecting regional railway infrastructure and stations will not be ready by that time, meaning that ‘Stuttgart 21’ will only begin in a step-by-step process, even though the original plan was for operations to begin in 2021 (Source: Frankfurter Rundschau, Stuttgart 21: Die Wunde von Stuttgart, 02.02.2020).
Public-funded projects for bicycle network infrastructure
For example, in Gelenau near Kamenz, Saxonia, the ADF (German Bicycle Club) has been calling for the creation of a consistent cycle path following the road 95 between Pulsnitz and Kamenz for the last 20 years. During a period of modernisation, the railway crossing for road traffic, along with a bicycle and pedestrian crossing using an automated barrier control was built 50 metres away in 2010. Yet, the project for the bicycle lane has still not moved beyond the planning phase despite the fact that the cycle network has high priority in Saxonia and, indeed, the fact that each year it costs a four-figure sum to control, maintain, and service the automated barrier.
What is missing and why is it that the administration at all levels needs to change current funding structures and procedures? The COVID-19 virus is serving to highlight the deficits of these funding mechanisms, making it visible that many public and private sectors still have a long way to go in terms of the digitalisation process. It is evident that in recent years Member States have developed the necessary skills to be able to utilise digital tools and processes, and that this has been achieved at different speeds. However, it is not correct to simply point the finger of blame at public administrations in general for being too slow and too bureaucratic; we need to look deeper and the public and private sectors need to be willing to work together to achieve change.
Reducing confusion in the funding landscape
Of the approximately €690m that the federal state budget had earmarked for broadband expansion in 2017, only a small amount was actually paid out to the municipalities at the end of the year. This phenomenon can be seen in many funding programmes, whether they relate to the urban development, refurbishing schools, establishing and maintaining nature reserves, or the modernisation of transport infrastructure.
The reasons for this perhaps lie in the complexity of the funding landscape and the duration of grant applications, as well as the fact that municipalities, communities, and counties have to contribute a co-payment. Thus, financially weak potential applicants are simply unable to participate. Of course, each Euro can only be spent once, and so projects need to be prioritised by communities with the realisation that not all public needs can be serviced.
In addition, there is an inefficient exchange of information between parties participating in the projects – if information is exchanged at all. To return to the example of broadband expansion: here, in one of the participating districts the public party had no idea where the existing electrical lines had been distributed by the mobile network infrastructure providers.
The requirements of each funding programme should therefore be checked by all parties. Indeed, a consultation process should be considered for a pre-check before publishing on how to improve the funding mechanisms and how to address the identified challenges in order for the project to be successful.
Reduce long tender procedures
A significant challenge for the applicant is that they only have a short time to find their partners – all of whom must meet the project’s requirements – and for them to sign up for the published tender. On the public side, the administration needs to decide what type of tender is required. However, it is frequently the case that the types of tender being used are not wholly suited to the projects they are seeking to fund.
The next challenge is the timeframe of the project. Here, publication deadlines for EU or national tenders last for months and this cannot be accelerated without breaking the rules. Regarding infrastructure, each component must submit a call for tender separately. What is more, these calls cannot be made in parallel but must be made one after the other in a certain order: concept, planning, design, and then each part of the building phase. In addition, there are also legal uncertainties around which rules apply for what. Finally, the tender itself has to be 100% waterproof in order to ensure unsuccessful applicants are unable to make claims against it.
How to speed things up
The process runs thus: first is the call for tender, second the expression of interest, third the non-binding offer, fourth the round of negotiations, and then the final call for tender and the final binding offer, before one of the applicants is selected. Thus, in addition to having to wait to see whether one of the unsuccessful applicants makes a claim, takes time.
There is thus a clear need to simplify and streamline these procedures as, currently, they are too costly in terms of time, energy, and finances. Furthermore, it should be ensured that any selected project is economically sound.
How to reduce complexity
Each of the phases of infrastructure projects such as Stuttgart 21 are so large and complex and take place over such lengths of time that they tend to become unmanageable and, indeed, come in dramatically over budget. New formats for large-scale infrastructure projects and tender structures should reflect these dimensions and dependencies.
How to deal with changes
Quite often, communities are required to write down exact numbers, area definitions and locations, and technologies. However, during the concept and planning phase it is not unusual for new possibilities to occur, which means that the requirements published in the tender no longer fit, but it is extremely difficult, if not impossible, to change them. Here, more flexible procedures are required whereby changes can be implemented more easily.
How to improve public tenders
In recent decades, public tenders have been developed for administrations in many sectors, not only for transport and digitalisation. This has resulted in a complex process with significant pressure being placed on administration staff, meaning that in many cases they are fearful of making decisions without consulting externally. Thus, public expenditure continues to increase.
Here, knowledge and expertise should go back into the public administration and decisions should not be taken by just one administration but by an independent public and private industry board composed of several experts qualified according to the tender’s requirements.
How to allow for balanced funding between the EU and federal levels
At the EU level, the funding programmes have their own rules and are essentially very comprehensive formal procedures. Most importantly, these programmes are based on a 50:50 solution, meaning that only half of the project costs are funded by the EU, with the other 50% financed by the applicant. As EU public funding is quite complex, applicants need specialised knowledge to deal with it. Here, regional support and project managing offices established by each Länder could be of assistance. This is already the case in places such as Brandenburg and Lower Saxony, as part of regional state development.
The most significant challenge here concerns the overflowing controls: ministries with subject-specific supervision, the internal audit service, inspectors for repeating local controls, the certifying body, paying authorities, and several audit divisions. Above all, if mistakes are detected then quite severe sanctions can be taken by the EU, and in large projects or those with unexperienced staff this can happen quite quickly.
All project partners have to be aware of so many regulations, decrees, and instructions that it is difficult to find suitably qualified staff to handle security. This means the money does not always go where it is most needed. If public administrations or companies lack experts in funding procedures, then it is unlikely that they will be successful in an EU tender application. More training and an enhanced education are thus necessary for administrative staff on both the local and regional levels, while EU institutions need to review the level and details of their rules (see also ‘All die ungenutzten Millionen’, Arne Schulz, Deutschlandfunk, 29.05.2018).
Future-oriented funding for mobility services
An exploration of the finance sector reveals some interesting and future-oriented examples of funding programmes, such as the German KfW funding programme for KMU called ‘Go-Digital’. This supports small to medium-sized companies who would like to improve their business procedures with the help of digital solutions, whether service-oriented, customer-oriented, or in relation to efficiency and safety. Official authorised Bundesministerium für Verkehr und digitale Infrastruktur, the German Federal Ministry of Transport and Digital Infrastructure (BMVI) consulting offices help with the formalities – from the application through to the proof of expenditures. In this way the companies benefit from custom-fit consultations based on three modules:
- The digitalisation of business process;
- Digital market development; and
- IT security.
This module-based funding programme could be adopted to other business sectors and to other applicants, i.e. cities and districts, public transport companies, and mobility and other related service providers in the transport sector.
LogPay is looking into funding programmes because we have been working in the transport and mobility services sector for some 17 years, serving as a payment service provider for both public and private companies. It is therefore part of our business to participate in public tenders on all levels. As a transport-oriented payment services provider, we have developed IT solutions and fitting legal models and services for all digital sales channels and our customers’ products.
We also invest in our own digitalisation because we want to be the most efficient solution provider on the market and we also want to bring the biggest possible benefit to our customers. In our view, we can be only successful if we work together with our customers and business partners.
COVID-19 has been a painful game changer, and so we now need to work together – the public and the private sector – to not only boost the level of aid but to change the mechanisms, structures, and procedures of funding programmes by involving all relevant experts.
Please note, this article will also appear in the fourth edition of our new quarterly publication.