Special infrastructure assets: how the administration manages to implement projects quickly

The special infrastructure fund creates the opportunity to catch up on years of investment backlog. There is a need for urgency. Defence capability, economic growth and decarbonization require a functioning transport and education infrastructure. Research institutes see the years-long investment backlog as a major cause of Germany’s weak economic situation. The Bundeswehr’s Operational Plan Germany sets out the requirements for upgrading our infrastructure so that Germany can function as a military hub in the event of a conflict.

The task is a national one. A volume of up to 100 billion euros has been earmarked for investments by the federal states and local authorities over the next twelve years. In addition, it is expected that the funds allocated to the Climate and Transformation Fund in the amount of a further 100 billion euros can also be used in the federal states and municipalities. The distribution mechanisms will be worked out in the short term. Finally, the scope for investment will be further expanded by the fact that the federal states will now be allowed to take on debt amounting to 0.35% of GDP.

The administration should set itself up effectively for the special tasks

The federal states and local authorities must be able to act quickly in order to plan the effective use of funds, to secure co-financing if necessary and to implement the projects efficiently and quickly with these funds.

The municipalities’ ability to act is jeopardized by their burden of core tasks. This is because municipalities are understaffed in many places and there is a lack of standards for the urgent implementation of infrastructure projects.

The money alone will therefore not be enough to achieve the investment targets. The administration should create capacities to receive the funds and spend them in a targeted manner. It should create internal structures that allow it to act quickly. And the administration should speed up planning, awarding and construction. What is the exception today should become the rule for the creation of essential infrastructure.

The law offers opportunities to accelerate projects

It remains to be seen and hoped that the legal framework will be amended to promote rapid project implementation. Following the example of the LNG Acceleration Act, for example, simplifications in planning and public procurement law could create more certainty for the administration in project implementation. However, changing the legal framework is not the key to the success of the investment program. This is because planning, procurement and construction law are not the (major) problem for rapid project implementation. Current public procurement law also offers opportunities to accelerate projects. However, these still remain unused in many cases.

The following instruments are also available under current law:

1. optimization of the project organization structure

Traditionally, most infrastructure projects are implemented in line structures. This means separate responsibilities for planning, financing, construction, awarding and legal matters, among others. There is no clear project responsibility. There are no rights to issue instructions and no common goals. Important decisions require the approval of numerous committees. This is a good model for normal mass business because it creates independence. It is not a suitable model for project business, where responsibility and quick decisions are required. The Major Projects Reform Commission sees a lack of project organization structures as a major cause of project failure. A project organization structure can be created quickly without setting up a project company. The greater decision-making freedom of the project management is legally and politically secured by a clear hierarchy of objectives, the obligation for transparent risk management, clear decision-making limits and reporting obligations as well as the establishment of project controlling. The Federal Ministry of Transport’s guidelines for major projects (p. 8 – 14) contain information on the creation of a project organization structure.

2. acceleration of planning

Planning law contains numerous instruments for shortening approval procedures. Discussion meetings as part of the approval of infrastructure projects can be held either as online consultations or as video or telephone conferences. Approval procedures under immission control law and procedures in the area of specialist planning can be accelerated by using private project managers. As an administrative assistant, a project manager can take over the preparation and implementation of almost all procedural steps from the approval authority.

Artificial intelligence (AI) can also speed up the planning process considerably. It can support both the lengthy process of checking the completeness of application documents and the decision on the involvement of authorities and public agencies. AI can systematically record and pre-evaluate the comments and objections raised about a project.

Further information on planning acceleration can be found in the first monitoring report on the status of implementation of the pact for planning, approval and implementation acceleration between the federal government and the federal states.

3. integration of the building into the planning

In Germany, planning and construction are tendered separately. Construction services are only awarded on the basis of detailed implementation planning. Internationally, this procedure is unusual. It does create independence in planning for the client. However, it does not allow the know-how and expertise of the executing companies to be utilized. A great deal of potential for innovation, cost savings, sustainability and acceleration is lost due to the fact that the organization of the construction process (logistics, use of machinery, prefabrication) does not take into account the needs and capabilities of the companies. In addition, a great deal of time is lost due to the implementation of (at least two) award procedures for both the planning and the construction services as well as for the familiarization of the respective contractors. At the same time, projects can be designed more quickly, with less conflict and more economically if the expertise of the construction industry is integrated right from the planning stage. The simplest instrument is to award the construction services on the basis of a functional service description. This formulates the procurement objectives and opens up competition for the most economical solution. If the client wishes to retain more influence, he can choose the two-phase model. In this model, the contractor is engaged at an early stage and the planning is developed in the first stage after the contract is awarded in a dialog between the planner, contractor and client. Only if the planning objectives are achieved does the contract enter the second stage and the construction company implements the construction project thus concretized at a lump sum price without a new award. Other models, such as the alliance model, go even further, but require the client to be heavily involved in the planning and construction phase. Information on the integration of construction into planning can be found in the report “Integration of construction into planning” by the German Construction Industry Federation.

4. general contractor award

In Germany, construction services are awarded by trade. This can also slow down projects and impair their profitability. The original aim of the regulation, the protection of SMEs, helps the broad project business, but is an obstacle to the rapid realization of essential infrastructure. In terms of public procurement law, bundled awarding and implementation is much easier than is generally assumed. The client can formulate its procurement objectives in such a way that only holistic implementation is possible, for example because sustainability, acceleration and operation are comprehensively required. If technical and economic reasons are documented and the awards are structured in such a way that medium-sized consortia can also participate, the general contractor award can often also be justified in other cases. Information on the permissibility and design of the JV model can be found in KOWID’s and KPMG Law’s guidelines on JV awards.

5. fast awarding of contracts through better project management

Procurement procedures sometimes lead to a standstill between the project idea and planning as well as between planning and project realization. From a legal perspective, this does not have to be the case. The minimum deadlines in procurement procedures add up to just 40 days in open procedures and 65 days in negotiated procedures. There is potential for acceleration above all through high transparency, great simplicity, stringent scheduling and task allocation. Even negotiated procedures, which should be standard in all complex projects, can be successfully completed in three to four months.

6. partnership contracts

Rapid project implementation requires all contracting parties to pull in the same direction. This requires that all parties involved have the same level of knowledge about the project and that an information gap is avoided. This requires incentives for communication both in the award procedure and in the implementation of the contract. Furthermore, it is necessary to deal with the fact that the parties involved naturally have different objectives. While time and quality are of primary importance to the client, the contractor’s focus is on money. These different objectives can be combined by financially rewarding speed and quality – within the limits of budgetary law – for example with an acceleration bonus. Conflicts must not lead to costs and loss of time, but should be avoided by agreeing out-of-court dispute resolution mechanisms. The Federal Ministry of Transport’s guidelines for major projects contain information on the design of partnership agreements.

7. support programs

Municipalities and federal states can also decide to pass on the funds as part of funding programs, such as the Municipal Investment Program for Climate Protection and Innovation (KIPKI) or the Regional Future Program (RZN) of the state of Rhineland-Palatinate. In these cases, it must be ensured that the funds are passed on to private recipients in accordance with EU state aid law. To this end, the federal states and municipalities can refer to the state aid manuals that the state of Rhineland-Palatinate has developed for the KIPKI and RZN funding programs.

The special fund will only achieve its goal if the management adapts its project realization form

The foundations are in place for rapid project implementation with the funds from the Special Infrastructure Fund. The reform commission and the guidelines for major projects have identified challenges and solutions. The administration is invited to familiarize itself with these instruments. They require a departure from the previous forms of project realization. This is the only way to ensure that the special fund does not become a burden on budgets, but rather the hoped-for stimulus for safety, economic growth and climate compatibility.