Rail infrastructure: multi-annual contracts

With the aim of optimising the quality of Community transport infrastructures, the Commission supports the use of multi-annual contracts as a long-term financing arrangement.

ACT

Communication from the Commission to the Council and the European Parliament of 6 February 2008 entitled "Multi-annual contracts for rail infrastructure quality" [COM (2008) 54 final - not published in the Official Journal].

SUMMARY

The Commission recommends extending the system of multi-annual contracts between the State and the rail infrastructure management to improve the quality and maintenance of infrastructures in this sector.

Legal framework and legal requirements regarding the rail infrastructure

Current EU legislation requires defining measures to reduce the costs of infrastructure provision and of charges for their use, taking account of safety and maintaining the quality of the infrastructure service. Nevertheless, there are no obligations at European level for monitoring infrastructure service.

Member States may choose to meet this obligation by way of regulatory measures and/or contractual agreements known as multi-annual contracts, concluded for a minimum period of three years. The situation regarding multi-annual contracts varies widely between the Member States. In fact half of all Member States do not use them, nor are they considering using them.

Apart from these rules, EU rail directives set out other provisions which may be helpful in terms of implementation, namely:

• Member States must take the necessary measures to develop their national infrastructure;
• Infrastructure managers' expenditure and revenue must balance over a reasonable period of time.

Other particular provisions apply regarding validity and transparency of financial transfers from the State, taking account of the requirement for management independence on the part of the infrastructure manager and the economic nature of its activities.

The role of multi-annual contracts

The availability and the quality of the infrastructure have a strong impact on the competitiveness of the rail sector. However, maintenance of infrastructure does not always gain the finance that railway operators expect to enable them to compete with other modes of transport. Almost one third of managers state that the finance available to them is not sufficient to maintain their network.

If properly negotiated and prepared, a multi-annual contract can bring many advantages. More particularly, its role is to:

• Provide a long-term financing framework for maintenance forcing both parties to take a long-term view and develop maintenance programmes on the basis of future service demand. In fact, it is important that the rail infrastructure corresponds with future transport demand structures in order to boost traffic and revenues. These contracts also permit trade-offs between taxpayers' and users' interests, between maintenance and quality of the network, and between short-term maintenance and renewal;
• Complementing the charging system by transfers made within the framework of these contracts so as to ensure financial stability. A multi-annual contract has to be consistent with the charging framework, which has to comply with the existing charging rules;
• Enable effective cost control by long-term planning of rail maintenance to reduce unit costs. This procedure enables the volume of work to be adapted without changing plans at the last minute. With a multi-annual allocation, the manager can actually make use of funds in a more flexible manner which is thus better suited to business needs, rather than according to the rigid rules of public spending;
• Enable benchmarking and regulatory supervision by setting performance targets more effectively. In fact, setting more precise performance targets makes it easier to gauge the relative positions of infrastructure managers and to define cost effectiveness in terms of a national infrastructure manager's cost elements and their performance in comparison with other managers;
• Improve performance based on performance-related payments and not on compensating the infrastructure manager for a particular expenditure as well as reinforcing quality control. Quality criteria can be divided into two categories: Indicators based on the quality of the train service (speed, safety) and indicators based on infrastructure provision (maintenance costs per km of track, percentage of lines under temporary speed restrictions);
• Secure the effectiveness of contractual agreements providing for, for example, sanctions applicable in cases of non-compliance. The monitoring process should be undertaken by an independent body rather than by the two contracting parties. Sanctions may consist of penalties (fines), reduced financial input or even a replacement of infrastructure managers and need to be progressive and in proportion with the infringement.

Member States and their infrastructure managers should conclude multi-annual contracts which comply with the national strategic transport plan and with the infrastructure managers' business plans. The State should consult stakeholders on any proposal for multi-annual contracts before entering into a new contract or renegotiating existing provisions.

Infrastructure managers should check track condition at least once a year on all their lines and more frequently on main lines, and should indicate cases where infrastructure quality is considered to be substandard.

Background

Some years after the adoption of the rail infrastructure package, consultations conducted by the Commission revealed concerns in the areas of sustainable financing of the existing infrastructure, the quality of infrastructure service and how to improve the performance of infrastructure managers.

Last updated: 21.04.2008