- Rising turnover (13.9 billion euros) and record employment (56,600 employees) contrast with falling order volume (13.7 billion euros).
- The downward trend, especially in the infrastructure business, is at odds with the German coalition government's transport policy goals.
- The rail industry calls for sound financing models, agile planning procedures and modern tendering mechanisms to modernise the railways.
- The VDB study "Modern Public Tendering (MEAT): Cornerstone of the Rail Mobility Revolution" illustrates in eight case studies that tendering in accordance with innovation- and climate-friendly criteria also yields economic benefits.
The Railway Industry Association in Germany (VDB) looks back on the financial year of 2022: At 13.9 billion euros, the turnover of the railway industry in Germany increased by 8 per cent compared to the previous year. The domestic market in particular grew substantially, with an increase of 22 percent. Employment also continued to grow steadily to 56,600 direct employees in Germany alone. The vehicle business increased by 16.7 percent.
Abroad, however, crises continued to have an impact, with export turnover dropping by 17 per cent. The rail industry also suffered losses in infrastructure turnover, which fell by 13 per cent at home and abroad. "The figures show a clear picture; the picture of a strong industry that cannot pick up enough speed," said VDB President Andre Rodenbeck. Order intake also fell by 18 per cent. At a volume of 13.7 billion euros, the order books of the railway industry are still well filled, but according to Rodenbeck, the downward trend runs counter to the transport policy goals of the coalition: "There is no question that the railway industry has what it takes, but the investment boom for the railways remains unrealised. We need to get cracking.”
Against this background, the railway industry welcomes the additional 45 billion euros for the railways, which have been approved by the coalition government. "This sends a strong signal for Germany as a business location. Now it has to take on concrete form. In the current federal budget negotiations, it must be made clear where the money can come from, in addition to the revenue from the increased HGV toll," Rodenbeck insisted. Moreover, in order to build momentum, existing funds need to reach the sector more quickly and innovative technology needs to be put into operation much faster.
The Rail Industry calls for Sound Financing Models and Agile Planning Procedures
The pressure to act in order to facilitate accelerated modernisation is increasing. For example, Germany would have to digitise five times as much and electrify twice as fast to achieve its rail transport policy goals in time. “Railway modernisation is urgently in need of a tailwind. The speed of implementation depends on funding and reliable planning," said VDB Managing Director Sarah Stark.
The railway industry needs firmly committed, long-term investments from the federal government to ensure financial planning certainty in order to be able to build the necessary resources.
In the case of digitisation projects in particular, the funds for planning and construction, which have so far been separate, need to be bundled into one budget item and need to be disbursed in bundled form, via a financing agreement. New processes modelled on the fast-track programme would enable projects that take 16 years under current procedures to be accomplished in just under 4 years. Planning and implementation also need to be combined into a general contractor model when awarding contracts, instead of putting projects out to tender in the smallest of packages. "The measures recommended by the Rail Acceleration Commission to streamline complex processes must now be consistently anchored in regulations. Central to these measures are the bundling of investments into two funds and the adaptation of legal and regulatory changes in a "Modern Rail Act"," said Stark.
Modern rail mobility requires modern tendering procedures that allow the quick implementation of innovative technologies. "In Germany today, 92 per cent of public tenders in the rail sector are still awarded 100 per cent on the basis of the cheapest purchase price. Sustainability, efficiency and passenger comfort are seldom decisive factors for success in awarding contracts. Yet these aspects in particular are decisive for the success of rail in intermodal competition", criticised VDB Managing Director Axel Schuppe.
The cheapest purchase price does not necessarily guarantee the most economical bid when considered over the entire life cycle. This is demonstrated in a study on modern public procurement in the railway industry, carried out last year by McKinsey & Company on behalf of the VDB. Eight tenders for rolling stock and infrastructure projects from Germany and Europe were analysed, in which the so-called MEAT criteria ("most economically advantageous tenders") life cycle costs and sustainability, quality in implementation and operation, technical functionality and technology promotion as well as design and accessibility were weighted more heavily than the purchase price. According to the study, all the examples demonstrated positive impacts on the stakeholders involved, following one or more of the MEAT criteria.
The study concludes that awarding contracts on the basis of the MEAT criteria strengthens innovation and competition for the best solution. It also reduces the risk of higher costs in development and throughout the entire life cycle, as well as of additional work and budget overruns. "Those who buy cheaply buy twice. And the cheapest offers do not provide the best mobility. The MEAT criteria are already anchored in European and German public procurement law, they only need to be applied consistently," Schuppe stressed.