COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Council Regulation establishing the Shift2Rail Joint Undertaking
Date: 2013-12-16
Institutions: European Commission
Subjects: European Joint Undertaking, harmonisation of standards, innovation, rail transport, research and development, transport infrastructure













EUR-Lex - 52013SC0535 - EN











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52013SC0535

COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Council Regulation establishing the Shift2Rail Joint Undertaking /* SWD/2013/0535 final */









Disclaimer: This impact assessment commits only the
Commission's services involved in its preparation and does not prejudge the
final form of any decision to be taken by the Commission.
TABLE OF CONTENTS
1..... Introduction.. 5
1.1.     Policy context 5
1.2.     Scope of this impact
assessment 6
1.3.     Procedural
issues and consultation of interested parties. 8
1.3.1.       Impact Assessment
Inter-Service Steering Group. 8
1.3.2.       Review by the Impact Assessment Board. 9
1.3.3.       Consultation and expertise. 9
1.3.4.       Results of the stakeholder
consultation. 10
2..... Problem
definition.. 10
2.1.     Key challenges in the EU
rail sector 10
2.2.     The main problems that
require action. 12
2.3.     Problem drivers. 14
2.3.1.       Fragmentation of R&I
efforts. 14
2.3.2.       Low leverage of EU rail
R&D investment 16
2.3.3.       Limited and uncoordinated
participation of stakeholders along the rail value chain  17
2.3.4.       High costs, risks and lead
times of R&I investments. 19
2.4.     Most affected stakeholders and
needs assessment 19
2.4.1.       The railway community. 19
2.4.2.       Other industrial sectors. 20
2.4.3.       The European Commission
and the Members States. 20
2.4.4.       Passengers, users and EU
citizens. 20
2.4.5.       Academia, research
community and SMEs. 21
2.5.     Baseline scenario. 21
2.6.     Subsidiarity. 22
2.6.1.       Legal basis. 22
2.6.2.       Necessity and EU added
value. 22
3..... Objectives. 23
3.1.     General objectives. 23
3.2.     Specific objectives and
operational objectives. 23
4..... Policy
options. 26
4.1.     Option 1 – Baseline –
Horizon 2020 Collaborative Research Projects. 26
4.2.     Option 2 – Contractual PPP. 26
4.3.     Option 3 – Institutional PPP. 26
4.4.     Option 4 – Coordination
within ERA.. 27
5..... Assessing
the impacts. 27
5.1.     General approach to the
assessment of impacts. 27
5.1.1.       Input impacts and cost-effectiveness. 28
5.1.2.       Economic, social and
environmental outcomes. 28
5.2.     Input impacts and
cost-effectiveness. 29
5.2.1.       Focus and coordination of
research efforts. 29
5.2.2.       Leverage of EU rail
R&I funding. 30
5.2.3.       Broad stakeholder
participation and sustained networks. 32
5.2.4.       Mitigation of innovation
risks. 34
5.2.5.       Operational performance. 35
5.2.6.       Cost-effectiveness. 36
5.3.     Economic, social and
environmental outcomes. 39
5.4.     Risk assessment 42
6..... Comparing
the options. 45
6.1.     Comparison of the options. 45
6.2.     Preferred option. 47
6.2.1.       Proposed governance
structure. 48
6.2.2.       Budget 51
7..... Monitoring
and evaluation.. 52
8..... Annexes. 53
Annex I: Abbreviations. 53
Annex II: Key developments in the rail sector 53
Annex III: Overview of existing EU rail R&I projects. 53
Annex IV: EU rail R&I objectives and key priorities. 53
Annex V: Results of the Public Consultation. 53
Annex VI: Schematic comparison of the key governance
elements of the options. 53
Annex VII: Summary of the cost-effectiveness analysis. 53
Annex VIII: Technology Readiness Levels (TRL) 53
 Executive Summary Sheet 
 Impact assessment accompanying the proposal for a Council Regulation establishing a Shift2Rail Joint Undertaking 
 A. Need for action 
 Why? What is the problem being addressed? Maximum 11 lines 
 Innovation throughout the full rail value chain is a strategic enabler both to complete the Single European Railway Area – which is crucial to making rail a more attractive mode and encouraging a modal shift from road and air – and to boost the competitiveness of the European rail sector, confronted with increasing competition from the US and emerging Asian countries. Yet, past rail R&I efforts at EU level have not succeeded in supporting new technologies enabling the further integration of diverse national railway ecosystems and of different rail subsystems. This is namely due to the high level of fragmentation in national standards, the lack of a systems approach to research funding, and the difficulty in ensuring broad and coordinated participation of the different stakeholders along the rail value chain (manufacturers of rolling stock, infrastructure and signalling equipment, railway undertakings and infrastructure managers). Furthermore, the market uptake and impact of EU rail R&I projects under previous framework programmes has been low and slow, due to low operational margins of the rail industry, long product lifecycles, and funding gaps in the innovation cycle. 
 What is this initiative expected to achieve? Maximum 8 lines 
 The initiative is expected to accelerate the penetration of technological innovations that will support the creation of a truly integrated and interoperable EU railway market, thereby increasing the competitiveness of the EU rail sector, vis-à-vis both other transport modes and foreign competitors. This will, in turn, contribute to raising the quality, reliability and cost-efficiency of EU rail services. This can be achieved by effective and efficient governance mechanisms better aligning EU rail R&I efforts to support the completion of the SERA. These mechanisms include the development of a common, long-term, innovation-driven R&I agenda, with improved coordination of all key actors from the rail sector across Europe. It should also put in place adequate pathways for a more rapid commercial exploitation of research results. 
 What is the value added of action at the EU level? Maximum 7 lines 
 Levels of rail R&I funding have historically been low and what investment does take place suffers from fragmentation and inefficiencies, due to significant differences among national programmes and railway systems. The pooling and coordination of R&I efforts at EU level stands a better chance of success given the transnational nature of the infrastructure and technologies to be developed in support of the SERA, and the need to achieve a sufficient mass of resources. Action at EU level will help to rationalise research programmes and ensure interoperability of the systems developed. This standardisation will open a wider market and promote competition. 
 B. Solutions 
 What legislative and non-legislative policy options have been considered? Is there a preferred choice or not? Why? Maximum 14 lines 
 The present analysis uses H2020 Collaborative Research as a baseline against which the different forms of governance are analysed. The baseline entails a continuation of the FP7 Collaborative Research model, while integrating H2020 improvements, such as simplified monitoring arrangements and more emphasis on demonstration. The contractual PPP (cPPP) option entails the establishment of a flexible contractual agreement between the Commission and private partners to work towards a common programme, based on a roadmap drawn up by the latter, using standard collaborative research and innovation projects. The institutional PPP (iPPP) option involves creating a dedicated administrative structure for coordinating rail R&I, in the form of a Union body under Article 187 of the TFEU, thereby providing a framework for public and private players to work together and take joint decisions. The option of putting the European Railway Agency (ERA) in charge of R&I coordination entails a modification of the Agency's founding Regulation to enable it to undertake R&I activities next to its role as a regulatory authority. The four options are compared along a range of key parameters, such as focus on SERA, leverage, participation, operational performance and cost-effectiveness. The analysis concludes that, despite the longer set-up time, the iPPP option provides the most appropriate governance structure to ensure long-term strategic vision, broad participation and firm commitments.   
 Who supports which option? Maximum 7 lines 
 The public consultation reveals that there is strong and broad-based support for the iPPP option, which is judged to be nearly twice as effective as any other option, and emerges as the preferred option regardless of the type of organisation or the field of activity. Only 7.8% of respondents (from different stakeholder groups) believe it would be ineffective against 79% that believe it would be very effective or effective. In contrast, the baseline option was largely considered to be very ineffective or neutral in meeting the stated policy objectives. The cPPP and ERA options score similarly to the baseline scenario. A strong point of the ERA option would nevertheless be its capacity to improve interoperability. One concern regarding the iPPP option is the need to tailor governance arrangements adequately to ensure equal access for all stakeholders. 
 C. Impacts of the preferred option 
 What are the benefits of the preferred option (if any, otherwise main ones)? Maximum 12 lines                                       
 Under an iPPP, the coordination, programming and execution of rail R&I activities would be the responsibility of a single, dedicated administrative structure, ensuring more continuity and less fragmentation of R&I efforts. The development of a strategic long-term plan and of detailed work programmes, in close cooperation with all market players, will ensure the quality and relevance of future R&I projects in terms of supporting the competitiveness of the rail sector. The leading role played by the Commission will also ensure the alignment of the strategy with SERA objectives of high societal relevance such as standardisation, high safety levels and sustainability of EU railway systems. The stable nature of the iPPP and the firm, legally binding, commitments from the EU and industry partners will ensure a direct leverage effect at least 30% higher than other options. It will also give confidence to private partners, thus stimulating higher indirect investment levels, as well as attracting funding from other sources. The iPPP also ensures broad and balanced stakeholder participation, thanks to a flexible and transparent management of membership conditions and advisory roles. 
 What are the costs of the preferred option (if any, otherwise main ones)? Maximum 12 lines                                      
 A relative disadvantage of the iPPP is that the strong steer of the Commission would mean that the R&I agenda is aligned above all with SERA policy goals and this would reduce the short term industry relevance of the project portfolio. It also takes about 2 years to set up the relevant structures. In terms of cost-effectiveness the administrative costs of iPPP option are higher than other options, but the fact that industry commits to covering half of the running and winding down costs, means operating an iPPP is in fact 17% to 35% less costly for the Commission than other options considered. 
 How will businesses, SMEs and micro-enterprises be affected? Maximum 8 lines 
 The proposed initiative will affect all actors in the rail sector (rail supply industry, rail undertakings, rail vehicle leasing companies, rail infrastructure managers and regulatory and safety bodies), by proposing a range of novel business, operational and service solutions that support the search for a "best-in-class" profile for rail. The iPPP option will enable a targeted approach towards SMEs, with different levels of membership and specific, lighter conditions for SME participation. 
 Will there be significant impacts on national budgets and administrations? Maximum 4 lines 
 National budgets will not be directly impacted. The operational budget will be provided through H2020 and co-financed by industry. Indirectly, improved organisation of rail R&I efforts will contribute to lower infrastructure and operating costs – thus reducing the scale of subsidies paid out to the sector by national governments. Member States will also gain new possibilities to channel their rail R&I funding in a more efficient manner. 
 Will there be other significant impacts? Max 6 lines 
 Boosting and improving rail R&I investments will lead to more effective and efficient rail R&I, which in turn results in economic (competitiveness and operational efficiency of the sector, induced macroeconomic impacts for wider economy), social (employment, safety, security, service quality) and environmental (reduced pollution, noise, congestion) improvements.  Given that the exact scope of activities of the future implementing structure is still being defined, the assessment of these impacts is done only at a general level. 
 D. Follow up 
 When will the policy be reviewed? Maximum 4 lines 
 The initiative will take into account the lessons learned with existing iPPPs. An evaluation of the implementation of the Regulation would be carried out by the Commission three years after the start of the activities of the iPPP, aimed at assessing whether the partnership in its setup is efficient and effective. This evaluation would be underpinned with quarterly and annual monitoring processes at project and programme level. 

1.         
Introduction
1.1.           
Policy context

In its White Paper on a Roadmap to a Single
European Transport Area, adopted on 28 March 2011 (hereinafter the 2011 White
Paper)[1],
the Commission stresses the need to create a Single European Railway Area
(SERA) to achieve a more competitive and resource-efficient European transport
system, and to address major societal issues such as rising traffic demand,
congestion, security of energy supply and climate change. 
Consequently, in January 2013, it adopted proposals
for a 4th Railway Package[2]
aimed at removing remaining administrative, technical and regulatory obstacles
holding back the rail sector in terms of market opening and interoperability, so
as to increase the efficiency of rail transport and facilitate cross-border activities.
In parallel, it has set up a "Connecting Europe Facility"[3] to help complete the
European single market by providing funding for high-performing and sustainable
transport infrastructure.
The overarching goal of establishing an
internal market for rail will necessarily imply the emergence of innovative
approaches in business models, services and products, throughout the whole rail
value chain. This will, in turn, require a dramatic increase in research and
innovation efforts. The EU’s new programme for research and innovation
(R&I), Horizon 2020 (H2020)[4],
will run from 2014 to 2020 with an estimated total budget of EUR 70.2 billion,
of which roughly 8% would go towards support to smart, green and integrated
transport[5].
A key objective of H2020 is to improve the efficiency of EU funding and better
address societal challenges by pooling together existing R&I efforts and
expertise, namely through Public-Private Partnerships (PPPs). Under the current
Seventh Framework Programme for Research (FP7)[6],
PPPs have already been implemented in the form of:
·        
institutional PPPs (iPPPs), in the areas of
aeronautics (SESAR (Single European Sky ATM Research) and Clean Sky), pharmaceutical
research (Innovative Medicines Initiative or IMI), fuel cells and hydrogen
(FCH), embedded systems (ARTEMIS) and nanoelectronics (ENIAC) or;
·        
contractual PPPs (cPPPs), such as the Factory of
the Future Energy-efficient Buildings, Green Cars and Future internet partnerships
launched under the European Economic Recovery Plan.[7]
H2020 intends to build on this partnering approach in the period 2014-2020. In its Communication of 10 July
2013 on "Public-private partnerships in H2020: a powerful tool to deliver
on innovation and growth in Europe"[8],
the Commission proposes a "first wave" of 6 iPPPs and 8 cPPPs to be
established – or continued – under H2020. Alongside this "first wave",
the Commission also calls for a Joint Undertaking in the railway sector,
justifying such a move by the scale of R&I efforts required to consolidate
EU leadership in rail technologies and the policy need to complete the SERA. 

1.2.           
Scope of this impact assessment

This impact assessment seeks to assess how EU R&I investments in the rail sector can be better coordinated to
accelerate the penetration of technological innovations required for an integrated, efficient and
attractive EU railway market. The present analysis builds on existing studies adapting
them to the specific issue of coordinating R&I in rail, namely:
·      The impact assessment accompanying the H2020 proposals[9], which extensively
describes the beneficial impacts to Europe's economy and society of better
coordinating EU R&I funding. In particular, it highlights the relevance of partnering
between the EU and private partners to make the R&I
cycle more efficient, to improve coordination between actors and to shorten the
time from research to market.
·      The impact assessments accompanying the proposals to set up each of
the Horizon 2020 "first wave" PPPs, which assess the different
partnership approaches that can be implemented to achieve improved coordination.
This proportionate impact assessment builds
on the conclusions of the mentioned assessments (see Box 1) and, at this stage,
focuses exclusively on the impact of the governance structure that will be set
up to implement rail R&I activities. The scope of the activities that will
be covered by the future rail R&I implementing structure is not assessed as
it is still undecided. In fact, defining this very scope will be the task of
the future implementing structure once it is established. 
Previous analyses by the Commission identifying
potential rail R&I areas (see Annex IV), as well as an industry proposal
for a "Shift2Rail" initiative, describing potential
R&I activities to be carried out by 2020 in order to preserve the long-term
competitiveness of the EU rail sector[10], will serve as a valuable input when defining the future rail
R&I agenda. However, at this stage, they are only indicative and still need
to be aligned to the SERA objectives and negotiated with the full range of rail
stakeholders. 
The reason for presenting this initiative
relating to the governance structure for rail R&I, before having a precise
R&I agenda, is that it is important to ensure the
necessary legislative decisions can be taken in time to launch activities as
close to the start of Horizon 2020 as possible. This responds directly to the
call from the European Council to prioritise the impact of the Multiannual
Financial Framework on growth and jobs. This time
pressure means that work on setting up the implementing structure and on
defining the concrete rail R&I agenda must be conducted in parallel.
The absence of a concrete rail R&I
agenda means the analysis of economic, social and environmental impacts can only
be conducted at a general level. The different options, which reflect
alternative implementing structures available under the Horizon 2020 regulatory
framework (see Box 1), are instead assessed in terms of their ability to
effectively and efficiently implement the EU rail R&I agenda and achieve EU
rail transport policy goals. For each option, a proportionate
cost-effectiveness analysis is provided, quantifying the administrative costs
of the dedicated implementing structures.
 Box 1 – The Horizon 2020 regulatory framework and lessons learned under FP7 Priorities for transport and rail related research The proposed regulatory framework for Horizon 2020 identifies a number of research and innovation priorities, under the theme "Societal Challenges" that should be supported through EU funding, including the specific objective of "achieving a European transport system that is resource-efficient, environmentally-friendly, safe and seamless for the benefit of citizens, the economy and society". It argues that "accelerating the development and deployment of new technologies and innovative solutions for vehicles, infrastructures and transport management will be key to achieve a cleaner and more efficient transport system in the Union; to deliver the results necessary to mitigate climate change and improve resource efficiency; to maintain European leadership on the world markets for transport related products and services". It adds that "these objectives cannot be achieved through fragmented national efforts alone" and that activities in this field "will support the implementation of the White Paper on Transport aiming at a Single European Transport Area"[11]. 8.23% of the total Horizon 2020 budget, which is estimated at EUR 70.2 billion, would be earmarked for this specific objective. Considering existing commitment appropriations in the aviation, road, waterborne and urban sectors, as well as cross-cutting issues, it is estimated that a budget of around EUR 450-500 million may be available for rail sector research and innovation activities. Established governance options Next to collaborative research projects, the proposed regulatory framework for Horizon 2020 allows for the establishment of public-private partnerships to support the development and implementation of research and innovation activities of strategic importance to the Union's competitiveness and industrial leadership or to address specific societal challenges. Such partnerships may take one of the following forms: Joint undertakings established on the basis of Article 187 TFEU or contractual agreements between the Union and private partners. Article 19 of the Horizon 2020 Regulation sets out a number of criteria that must be met when selecting areas for public-private partnerships, namely: a.       the added value of action at Union level; b.      the scale of impact on industrial competitiveness, sustainable growth and socio-economic issues; c.       the long-term commitment from all partners based on a shared vision and clearly defined objectives; d.      the scale of resources involved and the ability to leverage additional investments in research and innovation; e.       a clear definition of roles for each of the partners and agreed key performance indicators over the period chosen. A more detailed description of the two PPP types is provided in Chapter 4. The legislation also foresees a single set of rules that will apply to all parts of Horizon 2020, including the Joint Undertakings, unless there is a well justified need for a specific derogation (see Box 2 for more information on a summary of simplification measures under Horizon 2020 compared to FP7). Lessons learnt under FP 7 There is no precedent for a PPP on rail under FP7. As a new initiative, it would have to base itself on the lessons learned from existing PPPs under FP7 (contractual PPPs and institutional PPPs). An assessment of PPPs under FP7[12] showed that they can play a significant role in mitigating market failures that are hindering R&I activities necessary for the resolution of technological challenges. In particular the stable and long-term framework of institutional PPPs through the development of strategic R&I agendas succeeds in bringing together key stakeholders from relevant industrial sectors (almost 30% of call participants in all institutional PPPs were SMEs) and to leverage significant private investment (€ 1 EU contribution was matched by about € 1.5 in private investment for all iPPPs taken together). PPPs under Horizon 2020 will differ from those created under FP7 by the possible extension of their range of activities to demonstration and deployment. They will also address several recommendations formulated for future PPPs: ·         The PPP needs to be open to new participants during its implementation; ·         The commitment from industry needs to be stronger; ·         A stronger focus is needed on generating measurable output and innovation; ·         The structures and instruments used for implementation need to become simpler and less bureaucratic[13], e.g.: o   Reduced administrative costs for participants; o   Faster processes for the selection proposals and the management of grants; o   Decreased financial error rate. 

1.3.           
Procedural issues and consultation of interested
parties

This impact assessment is prepared by the Directorate-General
for Mobility and Transport (DG MOVE), in coordination with the Directorate-General
for Research and Innovation (DG RTD) to support the legislative proposal on an
EU coordinated approach to Research and Innovation in the rail sector under
Horizon 2020 in support to the completion of the Single European Railway Area (Agenda
Planning reference 2013/MOVE/040). It also represents the ex-ante evaluation
required for legislative proposals occasioning budgetary expenditure of the
type which it accompanies.

1.3.1.     
Impact Assessment Inter-Service Steering Group 

DG MOVE was assisted,
for the preparation of this IA, by an inter-service Steering Group set up in May
2013, to which the following Directorate Generals  were invited to contribute: SG, LS, RTD, BUDG, ECFIN, ENTR, MARKT, COMP, ENV, CLIMA, CNECT,
TRADE, REGIO and EAC. The Group met 3 times[14] and SG, RTD, MARKT,
ENTR and ENV actively participated in the work of the group. The last meeting
took place on 13 September 2013, in view of discussing a draft IA to be
submitted to the Impact Assessment Board. 

1.3.2.      Review by the Impact Assessment Board

This impact assessment was reviewed by the
Commission Impact Assessment Board on 16 October 2013. Based on the Board's
recommendations, the impact assessment has been revised according to the following
lines. The scope of the initiative has been better described, outlining which elements
have already been determined under Horizon 2020 (desirable format of
coordinating mechanisms, funding, etc.), why action is needed now, and
providing more details on how lessons learned and evaluations of existing
programmes have been taken into account. In the problem definition, the logical
link exists between more R&I efforts and the completion of the Single
European Railway Area has been explained. The components that make up the
different policy options, particularly as regards governance, have been
outlined in more detail, in particular providing an explanation of the
different modalities available within the iPPP option, i.e. joint undertaking
and joint technology initiative. A clearer assessment of the expected
implementation costs for public authorities has been provided. Also, the
differences between the categories of stakeholders and specific Member States
that might benefit more from this initiative than others have been highlighted.
Finally, more references to the views of different stakeholder groups have be
provided throughout the report.

1.3.3.      Consultation and expertise

A web-based open consultation was launched
on 28 June 2013. It was open for 12 weeks, until 19 September 2013, and
provided all interested stakeholders with a possibility to express their views.
372 responses were received, including 152 responses from individual citizens
and 220 from representatives of organisations or institutions. Responses came
from 24 different EU countries and are thus highly representative of the whole EU.
60% of responses came from the five countries that currently receive the
largest shares of current EU funding for rail research, namely France, Spain,
Italy, Germany and the United Kingdom. 
The majority of respondents were private
companies (42%), followed by research organisations and universities (21.8%), industry
associations and chambers of commerce (11.5%), SMEs (10%) and public
authorities (5.5%). The remainder included NGOs, self-employed people or other.
Respondents were mostly from the rail supply industry (rolling stock, vehicle
components, construction and building), with just 5% of responses coming from
infrastructure managers and 4% from railway undertakings. A detailed summary of
the results can be found in Annex V.
This online consultation was complemented
by individual meetings with sector representatives. As the initiative was
initially led by the rail supply industry, it was important to ensure that
other segments of the rail sector were sufficiently involved in the process and
had the opportunity to express views. Between June and September 2013, the
Commission services met, among others, with the following organisations: UNIFE
(rail supply industry), CER (incumbent railway undertakings), UIP (wagon
keepers), EIM (independent infrastructure managers), UITP (urban transport
operators) and EPTO (private passenger transport operators).
A stakeholder hearing was also organised on
12 September 2013, to which 85 stakeholder representatives participated. It
follows from the above that the Commission's minimum standards of consultation
are respected.

1.3.4.     
Results of the stakeholder consultation

The vast majority of stakeholders strongly
agree with the problems identified by the Commission – that is that current
rail R&I efforts focus insufficiently on interoperability issues and
standardisation, and fail to lead to the market take-up of innovative
solutions. Fragmentation of R&I efforts along the innovation cycle, with
insufficient focus on development, prototyping and large-scale demonstration
activities is considered to be a major blocking point to developing innovative
products that can be taken up by users both in the rail passenger and freight
divisions. The current EU R&I framework is seen to have limited capacity in
terms of achieving strong leverage of EU funds and a critical mass of
stakeholders. Also, long renewal cycles typical to the rail sector are viewed
as severely restricting private investment in R&I. On all these issues, the
level of disagreement is very low, never exceeding 6.4% of respondents, and it
is difficult to highlight specific patterns, although the key trends have been
developed in Annex V. 
Based on this appraisal of the current
situation, a majority of stakeholders (53.5%) considers that the continuation
of collaborative research in its current set-up would be largely ineffective in
addressing the identified problems. Just 28% of respondents believe a status
quo could be effective. Of these, close to half represent research
organisations or academia, against just 25% of private companies, 14% of public
authorities and 9% of SMEs. 
According to stakeholders, key objectives
of any future rail R&I initiative should primarily focus on ensuring
continuity and a long-term vision for R&I investments, accelerating market
take-up, ensuring synchronicity of innovations in the rail value chain, maximising
return on investment, promoting interoperability and standardisation, and
building sustained partnerships among all relevant stakeholders.

2.         
Problem definition
2.1.           
Key challenges in the EU rail sector

Ambitious EU goals on climate change,
energy use and environmental protection mean that the railway sector will have
to take on a larger share of transport demand in the next decades. The 2011
White Paper aims for 30% of road freight over 300 km to shift to other modes
such as rail or waterborne transport by 2030, and more than 50% by 2050. It
also aims for a majority of medium-distance passenger transport to go by rail
by 2050.
However, rail still finds it difficult to
challenge the dominance of road transport. Although there have been positive
developments in some markets, such as the UK, Sweden, Denmark, France, Germany,
Austria and Belgium, namely thanks to heavy investments in high-speed train
infrastructure[15],
the modal share of both freight and passenger rail has fallen significantly in
most Eastern and Southern European countries. Overall, the modal share of intra-EU
rail freight transport fell from 19.7% in 2000 to 17.1% in 2010[16], while that of intra-EU
passenger rail remained fairly constant at 6.3%[17]. Employment in
railways (both passenger and freight) has dropped by 25% from 2000 to 2010 to
just over one million people.[18]

Reversing the trend in rail's modal share
will thus be crucial to preserving jobs in the sector. However, this will not be
easy without a step-change in the level of service as passenger satisfaction continues
to lag behind many other sectors, with more than half of respondents to the
Eurobarometer 2012 rail survey dissatisfied with their national and regional
rail systems[19].

Revitalising the railways is thus a key
goal of the EU’s transport policy. Modernising the sector — notably through the
introduction of new technologies — is essential, if rail is to be able to
compete successfully with other modes of transport and on potentially
profitable markets: in particular, long-distance container transport for
freight, and high-speed international services for passengers. Indeed, rail
transport continues to rely to a large extent on public subsidies (some EUR 46
billion annually, split more or less evenly between service operations and
infrastructure)[20]
and will increasingly be faced with governments' spending constraints. 
New technologies can do much to help
modernise Europe’s railways, while reducing operational and infrastructure
costs and creating new business opportunities for the European rail supply
industry. ERTMS (European Rail Traffic Management Systems) is a prime example
of how to improve the potential of Europe's railways and to help create a
unified railway area, while also opening significant business opportunities for
the European rail industry, both in and outside the EU. The take-up of ERTMS
projects in countries such as Argentina, China, India, South Korea and Taiwan
shows the global potential of the technology.
However, although significant investments
in high technology products (such as ERTMS, as well as high-speed trains, automated
metro systems, etc.) have been made in the EU in past years, the European rail
supply industry is coming under pressure. Although it still leads at world
level, accounting for more than EUR 49 billion of the EUR 131 billion global
rail market[21],
latest available data shows that employment in the rolling stock industry,
which employs around 160.000 people, decreased by around 2% from 2004-2008[22]. 
A recent Commission study on the
competitiveness of the railway supply industry[23]
shows that Asia is steadily overtaking Europe as the largest rail supply market,
namely thanks to massive investments in R&I. In the past decade, overall
R&D expenditure in absolute terms has fallen significantly in the EU (although
differences exist between countries – see figure 1 for data on the six main EU
countries active in the rail industry), as well as in Japan, while it has surged
in China, Korea and the US. Although the study does not provide 2008 data for
China, separate data from the EU Industrial R&D Scoreboard[24] shows that the R&D
expenditure of China Railway and China Railway Construction alone amounted to close
to 1.5 billion USD (in constant 2005 prices) in 2011. 
Figure 1: R&D expenditure in railway equipment for selected
countries (million USD in constant 2005 prices), 2000 and 2008 (2000 and 2011
for China)
The long-term competitive success of European
rail, both vis-à-vis foreign competition and other transport modes, thus depends
on continuous product, service and process innovation, which, in turn, requires
large-scale and coordinated investments in R&I. 

2.2.           
The main problems
that require action

As outlined in the 2011 White Paper, innovation
throughout the whole of the rail value chain is a strategic enabler to complete
the SERA and to boost the competitiveness of the rail sector[25]. Yet, in the past,
R&I efforts in the rail sector at EU level have suffered from two main
problems.  
1)      Firstly, R&I efforts at EU level have not been sufficiently targeted
towards the broader policy goal of completing the SERA despite the fact
that creating an internal market for rail will help to strengthen the
competitiveness of the EU industry by creating economies of scale. This problem
is highlighted in the stakeholder consultation. 89% of respondents agreed that
R&I efforts have not succeeded in supporting new technologies enabling the
integration of railway ecosystems and their different sub-systems (rail
manufacturers, railway undertakings and infrastructure managers), against just 3.4%
disagreeing. Numerous respondents to the stakeholder consultation point out
that innovation is essential for improving the interoperability of the rail
system and for overcoming the technical differences of the different railway
systems across Member States, which represent the main barriers to achieving
the SERA.
2)      Secondly, the market uptake and impact of EU rail R&I
projects under previous framework programmes has been low and slow. As in
other sectors, the commercialisation of publicly-funded research results represents
a bottleneck in the innovation process. A study of the impacts of transport research
projects in FP5 and FP6[26]
finds that the main outputs produced by transport research were academic
outputs and transport modelling tools. Neither technological nor
policy-relevant outputs were as prevalent. Furthermore, the report finds that
between 30 and 60% of transport research results go entirely unexploited[27]. A report on FP7 implementation[28] also finds that only half
of transport projects have led to reported "foreground results"[29]. This is relatively low
compared to other sectors such as health, nanotechnologies, energy, environment
or security (see table 1). Transport projects also produce relatively few
publications and Intellectual Property Rights (IPR). 
Table 1: Key outcomes of FP7 Cooperation projects
 Priority areas (FP7 Cooperation projects) || Number of processed final reports || Share of projects with at least 1 IPR reported || Average number of publications per project || Average number of reported foregrounds per project 
 Health || 206 || 26.7% || 23.4 || 0.83 
 Food & Agriculture || 52 || 15.4% || 11.2 || 0.10 
 Nanotechnologies || 119 || 39.5% || 12.3 || 1.28 
 Energy || 36 || 30.6% || 5 || 1.92 
 Environment || 92 || 7.6% || 13 || 0.84 
 Transport || 98 || 11.2% || 0.8 || 0.50 
 Socio-economic sciences || 70 || 0.0% || 4.5 || 0.36 
 Space || 26 || 3.8% || 4.4 || 0.04 
 Security || 26 || 11.5% || 1.8 || 0.65 
 General Activities || 6 || 16.7% || 42 || 0.50 
The share of unexploited research is
significantly higher if the actual commercialisation of research results is
considered. Among the reported foreground results for transport, only 24%
concerned commercial exploitation of R&D results (see table 2). 
Table 2 – Type of foreground
results per sector
 Priority areas (FP7 Cooperation projects) || General advancement of knowledge || Commercial exploitation of R&D results || Exploitation of R&D results via standards || Exploitation of results through EU policies || Exploitation of results through (social) innovation 
 Health || 62% || 25% || 1% || 4% || 9% 
 Food & Agriculture || 0% || 20% || 20% || 0% || 60% 
 Nanotechnologies || 42% || 49% || 4% || 3% || 1% 
 Energy || 74% || 23% || 0% || 3% || 0% 
 Environment || 39% || 3% || 3% || 45% || 10% 
 Transport || 39% || 24% || 0% || 33% || 4% 
 Socio-economic sciences || 12% || 12% || 0% || 52% || 24% 
 Space || 0% || 0% || 0% || 100% || 0% 
 Security || 6% || 53% || 0% || 12% || 29% 
 General Activities || 0% || 0% || 0% || 100% || 0% 
These findings are also
confirmed by an assessment of selected rail transport projects funded under
Framework Programmes 4, 5 and 6, conducted by the European Rail Research
Advisory Council (ERRAC), which finds that only 25% of rail research projects present
a strong market uptake, whereas half are qualified as having weak market uptake[30]. Furthermore, 88% of
respondents to the stakeholder consultation find that EU rail R&I focuses insufficiently on market uptake (with
just 3.1% disagreeing, mainly private companies in various sectors). Many respondents point out that the lack of market uptake is largely
due to the fact that EU funding is "estranged" from market needs. Research
needs to focus much more on business and end-user needs and include closer-to-market
activities, such as demonstration and validation activities. At the same time,
uptake of research outcomes will require the rail sector to increase
profitability.

2.3.           
Problem drivers

Four important drivers
have been identified as contributing to the two main problems discussed above.

2.3.1.      Fragmentation of R&I efforts

Fragmentation of funding for R&I is a
major issue in the EU, where 90% of R&I budgets are spent nationally,
without coordination across countries, thereby negatively affecting the
efficiency of public funding of R&I in Europe[31]. As pointed out in the
stakeholder consultation, national funds for R&I in the rail sector are largely viewed as
closer to market needs than EU funds, causing rail companies to turn primarily
to these and thereby hampering a coordinated EU R&I effort, oriented
towards achieving the SERA. What's more, coordination
of R&I efforts in the rail sector is even further constrained due to fragmentation
can be seen among national railway ecosystems[32],
among subsystems of the rail system, and along the innovation life cycle. 
1.     
Fragmentation among railway ecosystems:
The fragmentation of
R&I efforts among national ecosystems emerges as a key issue with 84% of
respondents to the public consultation agreeing or strongly agreeing that this
is a problem against just 2.5% disagreeing (mainly rail research organisations,
as well as public railway undertakings and infrastructure managers). 
The rail industry in
Europe is a patchwork of disparate systems and networks, each applying diverse technical
and operating standards, within national borders. Contrary to the US, where most rail traffic is freight-oriented, or
to Asia, where passenger traffic is predominant, the European railway network
mixes passenger and freight rail services, creating challenges in terms of
interoperability and traffic management. Also, EU
countries have 19 different signaling systems, use different widths of track
gauges and operate electrified railway networks at many different voltages.[33]. This makes the
construction of pan-European vehicles a challenging task – often ruled out as
impractical and too expensive. Instead, the sector develops small series of
vehicles, tailored to the inherent constraints of unique infrastructure,
electrification or control-command systems in relatively small national markets. 
This high level of product customisation and lack of European standardisation not only prevents
the creation of single European railway market, it also results in increased
production costs and low operational margins. This, in turn, inhibits significant investments into speculative
technology-oriented research. Indeed, total R&D investments in the rail
sector are relatively low compared to the road and air sectors (see figure 2). Low operational margins also limit market uptake
of innovations, leading to slow renewal of vehicle stocks and product ranges,
so that the average age for locomotives in Europe is 27 years[34]. Also, the small size
of the separate ecosystems makes it difficult to create a critical mass of
resources and stakeholders to undertake ambitious innovation programmes. 
Figure 2 – Total
R&D investments per mode and trends in R&D intensity[35]
That said, advances are being made, with multiple train services
operating across borders such as Thalys, Eurostar, EuroCity, TGV and
Oresundtrain. Differences in standards are usually bridged with compatible or
specially made equipment (e.g. trains capable of running on different gauges,
switchable overhead cables). Some differences are also gradually being overcome
with the introduction of a unified signaling system, called European Train Controlling System (ETCS),
developed as part of the European Rail Traffic Management System (ERTMS)
initiative, under the authority of the European Railway
Agency (ERA). Similar efforts will have to be pursued
in the future, for instance to integrate fragmented rail ticketing systems and
broader supply chain systems. This means underlying
R&I activities need to be properly coordinated and synchronised to ensure
the interoperability of solutions. 
2.     
Fragmentation among the subsystems of the
rail sector
On top of the segmentation
of railway ecosystems, the lack of coordination among different components of
the rail system – i.e. manufacturers of infrastructure, rolling stock and signalling
equipment, railway undertakings and infrastructure managers – means a large set
of disparate and sometimes conflicting technical solutions are developed. In
spite of regulatory efforts to adopt technical specifications for increased
interoperability, several points remain open due to a lack of technological
solutions (e.g. electro-magnetic compatibility between railway vehicles and the
network's electrical installations).
Past research projects
have mostly focused on just one component of the rail system, rather than on improving
the system as a whole and on creating a real EU-wide network. What's more, the
complex interactions between rail system components limit the potential of
improving one specific segment of the system without touching upon other segments.
For instance, the introduction of high-capacity or high-speed trains can only
help to increase capacity if accompanied by infrastructure changes, such as
removal of loading-gauge limits and switch and crossing constraints. 
3.     
Fragmentation along the innovation life
cycle
Projects funded
under existing EU research programmes have a typical duration of 3-4 years
which is often not enough to go through all stages of the innovation cycle,
from basic research to the competitive market. The total length of innovation
cycle depends on the sector and the type of innovation, but for highly complex
technologies, it is often 15 to 20 years long and implies high capital
intensity[36].
Hence such technologies require a consistent multiannual programmatic approach.

Previous EU
R&I projects have focused primarily on pre-competitive innovation at low
Technology Readiness Levels (TRLs) so that projects require follow-up activities
to lead to innovation [37]. As a result, a significant part of knowledge generated by EU
R&I projects never finds its way to the market. 90.5% of respondents to the
public consultation consider that EU R&I efforts are too fragmented along
the innovation cycle (against just 0.8% disagreeing), and 85-95% are in favour
of more support to development, prototyping and
demonstration activities.
These different forms of fragmentation of
rail R&I efforts thus make it difficult to develop ambitious, large-scale
and long-term innovation programmes capable of proposing breakthrough solutions
that have a real impact on the whole system and that can be deployed in the
complete SERA.

2.3.2.      Low leverage of EU rail R&D investment

For the 47 rail projects funded under the
FP7-Transport budget line, the average share of private funding was just 34%,
with only three projects obtaining more than 40% private funding[38]. This is partly due to
the relatively low participation rates of private companies, which means that
the EU has had to contribute higher levels of funding in these projects.
Indeed, the average Commission contribution for the participation of academic or
research organisations in projects was around 75% to 80%, against around 55%
for private companies (see figure 3). By increasing the participation of
industry and SMEs, the leverage and effectiveness of EU funding can be increased.
Figure 3: Amount of Commission funding
per type of participant in FP7 rail projects
Additionally, enterprises lag behind in
project coordination. Only 28% of FP7-Transport rail projects were coordinated
by private companies against 43% for university and research organisations.
This results in a situation in which most projects target relatively low
technology levels, instead of demonstration projects, thereby limiting indirect
leverage effects linked to additional private investments after project
completion. 

2.3.3.      Limited and uncoordinated participation of stakeholders along the
rail value chain

Under previous framework programmes, annual
work programmes elaborated by the Commission in consultation with stakeholders
served as the basis for ensuring coherence of rail R&I activities. However,
projects were then selected individually through competitive calls for proposals,
so that their specific objectives were not necessarily aligned with other
projects and with overall EU policy goals. 77% of respondents to the public
consultation found that EU R&I activities are not adequately coordinated
(only 6% disagreed, half of which were research organisations). Separate calls
lead to the formation of ad-hoc consortia, set up according to the specific
needs of the project. Such a system hinders continuous collaborations of
partners beyond single projects, resulting in reduced confidence and a lack of
willingness to share information – two essential factors in projects developing
outputs with direct commercial value. 
What's more, this system has resulted in
projects that do not necessarily represent stakeholders along the whole value
chain. As shown in Figure 4, transport and freight operators were involved in
less than 10% of all FP5 and FP6 transport projects, despite their
participation being essential to achieving integrated rail system solutions
that fit with market needs. The various consultation processes made it quite
clear how important it was to involve the whole rail value chain in EU-funded
projects, and users in particular to ensure R&I efforts correspond to real
business needs. 
Figure 4: Transport research
partnerships (participation in % of partnerships)
In terms of geographical representation, participation
of partners from the new Member States remains limited. The Czech Republic was
the only new Member State to have partners participate in more than 10 of the 47
rail projects under FP7-Transport (see figure 5). Partners from other new
Member States were involved in less than 5 projects. 
Figure 5: Frequency of
participation in FP7 rail consortia according to nationality (number of
projects)
The lack of balanced and coordinated stakeholder
participation results in R&I efforts that are not sufficiently oriented
towards finding integrated solutions that have a real impact on the whole
system, within the entire SERA. This finding is confirmed in the public
consultation, where stakeholders agree that a balanced involvement of all
actors, ensuring that their interests are properly respected so as to safeguard
a “system approach”, is essential. Many stakeholders stress that end users
(operators, competent authorities…) are usually not sufficiently involved in EU
R&I, which does not favour the market uptake of projects results. It was
also considered important to involve all rail market segments in rail R&I,
taking local and regional needs into consideration as well. On the other hand, respondents
warned that EC requirements to ensure that EU co-funded projects are inclusive
of a wide range of stakeholders can lead to weaker proposals, a dilution of
efforts and the inability to focus on specific business priorities. It is
therefore important to ensure a flexible approach to achieving balanced
participation.

2.3.4.     
High costs, risks and lead times of R&I
investments

Innovation is generally characterised by
high financial risks. In the rail sector these are further increased by:
·        
Complex interactions within the system. The
interdependency of the different rail segments means that a specific innovation
(e.g. a new high-speed locomotive) needs to be accompanied by timely innovation
in other segments, such as infrastructure or business models, for it to have an
impact on the whole system. Furthermore, an innovation in one segment could
have negative impacts on other segments if not coordinated properly.
Synchronicity between innovations is crucial.
·        
Long product lifecycles: A locomotive can be
used for 40 years, compared to the typical renewal cycles of 7 years in the
automotive industry or 20 years in the airline industry. 87% of respondents to
the public consultation agree that this inhibits the rapid deployment of more
innovative rail technologies. 
·        
Unequal distribution of innovation benefits: 81%
of respondents to the public consultation agree that innovation in the rail sector
creates positive externalities that cannot be reaped by the innovator, thus
reducing his incentives to invest. Furthermore, effective deployment of
innovations can require the participation of stakeholders that have no
incentive to invest in these technologies – or even a negative business case
and thus needs adequate supporting arrangements. 
·        
Lack of synergies with other innovative sectors:
The rail market makes insufficient use of technologies emerging in other industrial
sectors, leading to delays in the introduction of new technologies that could
provide advanced, customer-focused industrial solutions. For instance,
technologies developed in the aerospace and road sectors, such as composite
materials, safe wireless communications, collision avoidance systems,
positioning systems, could be adapted to the needs of rail.
These risks need to be managed carefully,
through effective risk-sharing and funding arrangements, to allow for effective
participation in innovation, along the whole value chain, to ensure that
innovations can be deployed across the system. 

2.4.           
Most affected stakeholders and needs assessment
2.4.1.      The railway community

The proposed initiative will affect all actors in the rail sector,
by proposing a range of novel business, operational and
service solutions that support the search for a "best-in-class"
profile for rail[39]. In particular, the following actors will be affected:
·        
Rail supply industry, which encompasses manufacturers of products and components for
railway operation (i.e. rolling stock and locomotives, electrification,
signalling, control command, telecommunication and track equipment), as well as
their suppliers and service companies. These companies are present in all
Member States and their future depends on the competitive edge they can derive
from the timely development and deployment of innovative
and integrated rail technologies and procedures. Such an initiative will help
open new market perspectives, offering significant employment opportunities and
reinforcing European leadership.
·        
Rail Undertakings
running passenger and freight services will benefit from innovations enabling
increased reliability and quality of services. A more efficient use of
resources and optimised operating models will help to reduce operating costs. 
·        
Rail vehicle leasing companies or Rolling
stock companies that lease out trains to rail undertakings
will benefit from increased interoperability and standardisation of products,
enabling them to broaden their client base and increase operational margins.
·        
Rail infrastructure managers, responsible for the safety, planning, construction, operation, management
and maintenance of rail infrastructure, will benefit from innovations in the
field of command and control, harmonisation of specifications and increased
line capacity, helping to overcome network saturation and ensure better
intermodal connections. Innovations in the field of assets, safety and energy
management will also help to significantly reduce maintenance costs.
·        
Rail Regulatory and Safety bodies that are responsible for promoting and/or enforcing competition and
health and safety on the railway will benefit from advances in communication (command-control
technologies, interoperability across applications, etc.), and surveillance
technologies.

2.4.2.      Other industrial sectors

The structural transformation of the rail sector thanks to the
penetration of technological innovation might also impact on players from other
industrial sectors, including actors in economic sectors that could become
tiered-suppliers to rail original equipment manufacturers (ICT and
telecommunications sectors, composite material manufacturers, etc.) and those
that make use of the goods and services provided by the rail supply industry
(transportation, public administration, civil engineering, manufacturing, etc.)

2.4.3.     
The European Commission and the Members States

Improved organisation of rail R&I
efforts will help contribute to the EU policy goal of a more integrated, efficient and sustainable transport system. Lower
infrastructure and operating costs will help reduce the scale of subsidies paid
out to the sector by national governments. Retaining European leadership in the
rail sector will also help to create new high quality European jobs in the
vehicle technology and project management fields.
It can be expected that the Member States
that currently have the highest participation rates in FP7 projects (i.e. Germany,
Italy, the United Kingdom, France, Spain, Belgium and Sweden[40]) will be the ones that will benefit most from the initiative in
absolute terms, also considering these countries represent 89% of all tonne-km
and 70% of all passenger-km in Europe. However, countries with lower
participation in FP7 rail research, in particular some Central and Eastern
European countries with an important railway industry, such as the Czech
Republic, Slovakia and Poland, could in particular benefit from a more
inclusive and SERA focused initiative.

2.4.4.     
Passengers, users and EU citizens

The initiative will indirectly affect
passenger and freight rail transport services users as it will ultimately
result in improved reliability and quality of services. Also, improved
competitiveness of the rail sector, combined with increased capacity, will help
it to take on an increased share of transport demand, thereby contributing to
reducing traffic congestion and CO2 emissions. Additionally, the introduction
of innovative technological solutions will help to improve the performance of
rail in terms of noise pollution, thereby having an indirect beneficial effect
on citizens' health and wellbeing.

2.4.5.      Academia, research community and SMEs

The initiative will provide universities,
research centres and innovative SMEs with longer-term organisational and
financial stability, generating a better environment for the development of high-value
ideas. More than 120 research institutes from 23 Member States[41] are already active in rail research at
European level (either as partners or former partners of FP6/FP7 projects
and/or as members of the EURNEX association[42]).

2.5.           
Baseline scenario

The baseline scenario implies a
continuation of the Collaborative Research model applicable under FP7,
integrating improvements foreseen in the Commission's proposals for the next EU
research and innovation programme, Horizon 2020[43]. The most notable changes include the stronger focus on innovation and
close-to-market actions, including demonstration activities, as well as a
significant simplification of procedures (see Box 1). 
 Box 2 – Simplification (Horizon 2020 compared to FP7): summary[44] ·         Single set of simpler and more coherent participation rules, which increases the accessibility and attractiveness of the programmes. ·         Moving from differentiated funding rates according to beneficiaries and activities to a simplified system consisting of a single reimbursement rate (maximum of 100 % of the total eligible costs of the research project, with a ceiling of 70 % for close-to-market actions and programme co-funded actions) for all activities and participants. ·         Replacing the four methods to calculate overhead or «indirect costs» with a single flat rate ·         Major simplification under the forthcoming financial regulation, which introduces more flexible budgetary and procurement procedures. ·         Successful applicants to get working more quickly: average time to grant to be reduced to around 250 days (from the current average of around 330 days under FP7). ·         Simplification of processes, including time-recording requirements, limited ex-post audits, no declaration on interest on pre-financing. ·         Lighter administrative requirements for beneficiaries applying for smaller grants. ·         More flexibility in grant rules to facilitate involvement of partners with specific expertise. 
The FP will be implemented through (bi-)annual
work programmes, based on inputs provided by the technology platform (ERRAC), in
consultation with Member States and stakeholders. The work programmes will be
subject to approval of Member States in the Programme Committee and will be implemented
by the Commission or an Executive Agency. Based on previous experience, the
work programmes will cover a broad range of topics, depending Member State
policies and stakeholders' interests. They will include the schedule of the
"calls for proposals" that will be published during the year. Each
call for proposals will cover a specific research area. Specific objectives
will be set at the project level, rather than programme level. Proposed
projects will be submitted by consortia composed of a range of actors from
industry and academia, coming from a minimum of three different Member States
or associated countries. The Commission will select the best proposals and
award financial support to the projects. The conditions for granting the EU
financial support will be governed through grant agreements with each
consortium. The Commission or a delegated Agency will manage these grant
agreements. Based on previous experience, projects will generally have only a
modest demonstration component and limited industrial participation.

2.6.           
Subsidiarity
2.6.1.      Legal basis

The EU's right to act in this area is set out in the Treaty on the
Functioning of the European Union, which states the overall objectives of EU industrial
(Article 173) and research policy (Title XIX). In particular, Article 187 enables
the EU to set up joint undertakings or any other structures necessary for the
efficient execution of the Union's research, technological development and demonstration
programmes. EU action in the field of rail transport is grounded in Articles
58, 90 and 100 setting the basis for internal market in the context of an EU
Common Transport Policy.

2.6.2.      Necessity and EU added value

Research and innovation in general suffer
from important market and systemic failures that justify public intervention,
in particular in parts of the innovation life cycle further removed from market
implementation[45].
In the rail sector, high risks linked to long product lifecycles,
interdependencies between the different rail segments, unequal distribution of
innovation benefits and the need for significant investments create additional
barriers, on top of generic innovation barriers, which justify additional
policy efforts.
The level of funding for rail R&I has
historically been low and what investment does take
place suffers from fragmentation and inefficiencies, due to significant differences
among national programmes[46]. The pooling and coordination of R&I efforts at EU level stands
a better chance of success given the transnational nature of the infrastructure
and technologies to be developed in support of the SERA, and the need to
achieve a sufficient mass of resources. Action at EU level will help to
rationalise research programmes and ensure interoperability of the systems
developed. This standardisation will open a wider market and promote
competition.
Numerous studies point to the added value
of EU intervention[47],
namely in helping to efficiently and effectively organise cross-border actions,
and in bringing together compartmentalised national research funding so as to
achieve the scale needed to tackle societal challenges. Also, ex-post valuation
of previous framework programmes has demonstrated that EU funding increases the
strategic importance of research projects and has a stronger additionality than
national research programmes (e.g. projects without EU funding would have a
smaller scale, reduced scope, or not be carried out at all).

3.         
Objectives 

The 2011 White Paper for Transport
emphasised the need to create a Single European Railway Area. This ambitious EU
policy goal requires the whole of the rail sector to increase its business
performance, providing its customers with the efficiency and quality of
services they demand. This cannot be done without the emergence of innovative solutions
for delivering enhanced productivity, capacity and reliability. 
The present initiative is also linked to one
of the Europe 2020 flagship initiatives – the Communication on Innovation Union[48], which states that given the scale and urgency of the societal
challenges and the scarcity of resources, Europe's efforts and expertise on
research and innovation must be pooled and a critical mass achieved to
accelerate the pace of change leading to new growth and jobs in Europe.

3.1.           
General objectives

Innovation throughout the full rail value
chain is a strategic enabler to completing the SERA. The general objective of
the proposed initiative is consequently to better align EU rail R&I efforts
to support the completion of the SERA, while accelerating the market take-up of
innovative solutions, thereby increasing the competitiveness of the EU rail
sector, vis-à-vis both other transport modes and foreign competitors. This
will, in turn, contribute to raising the quality, reliability and
cost-efficiency of EU rail services.

3.2.           
Specific objectives
and operational objectives

Table 3 shows how the general objective has been translated into
specific and operational objectives. 
Table 3: Specific and operational objectives
 Specific objectives || Operational objectives 
 Foster focused, coordinated and long-term investment in EU rail R&I || Develop a long-term strategic vision (e.g. master plan) with detailed multi-annual work programmes and investment plans 
 Ensure the strategic vision, work programmes and projects are aligned with key EU policy objectives of achieving a SERA and industry competitiveness 
 Ensure consistency and coherence between different projects, enabling synchronicity of innovations along the rail value chain 
 Increase the leverage of EU rail R&I funding || Improve industry involvement to acquire more private co-financing 
 Ensure strong and long term ex ante commitment from EU and industry as regards financing and participation 
 Establish sustained networks and knowledge exchange between diverse stakeholders || Ensure balanced participation of diverse stakeholders along the entire value chain, all technical subsystems and all MS. 
 Ensure long-term continuity of partnerships, with enhanced trust and exchanges of knowledge between stakeholders, disciplines and projects 
 Mitigate risks linked to innovation || Develop close-to-market projects that meet industry's needs, and that include large scale system-level demonstrators to validate research results 
 Establish a strong IPR protection and management framework 
 Increase the operational performance and effectiveness of rail R&I || Ensure a rapid implementation of improved rail R&I activities 
 Ensure an adequate success rate of proposals  that ensures balance between resources and demand 
 Reduce time-to-grant to enable a rapid start-up of project activities 
 Reduce share of administrative costs of fund management 
Given
the nature of the initiative, which is to identify the optimal governance
structure of rail R&I, the operational objectives remain rather generic
indicating the scope and direction of intended change. Quantitative targets
cannot be set for these objectives; at this stage, however the progress will be
measured according to the monitoring indicators outlined in Section 7.
Figure
6 aims to illustrate how the objectives are linked to the problems and drivers
identified in Chapter 2.
Figure
6 – Intervention Logic

4.         
Policy options

Since R&I activities supporting the rail
industry are foreseen under H2020, the options considered for implementing rail
R&I activities include the continuation of Collaborative Research, as well
as the different forms of PPPs that can be created in accordance with H2020
(contractual and institutional). In addition, the report considers a fourth
option, in which R&I activities are coordinated by the European Railway
Agency. The different policy options are outlined below
and a detailed table providing a systematic description of their content and  key
components of each option can be found in Annex VI.

4.1.           
Option 1 – Baseline –
Horizon 2020 Collaborative Research Projects

As indicated in section 2.4, the baseline implies
a continuation of the Collaborative Research (CR) model applicable under FP7,
integrating H2020 improvements, such as simplified monitoring arrangements and
more emphasis on demonstration. 

4.2.           
Option 2 – Contractual PPP

The contractual PPP (cPPP) option aims to implement
a common programme through a contractual agreement, following a Commission
Decision, between the Commission and private partners. Private partners develop
a multi-annual roadmap and set out their own commitments in the contractual
agreement. They cover the costs of their own internal governance. Annual or
multi annual work programmes are developed by the Commission based on the
roadmap drawn up by the private partners. Member States are consulted. 
The implementation of the contractual PPP uses
Framework Programme collaborative research and innovation projects managed by
the Commission services or an Executive Agency. An overall tentative budget for
the period 2014-2020 is earmarked, but the cPPP relies on annual budgets
subject to an annual decision of the European Parliament and the European
Council.

4.3.           
Option 3 – Institutional PPP

The institutional PPP option (iPPP) involves
the creation of a dedicated administrative structure for coordinating R&I,
in the form of a Joint Undertaking (JU) – a Union body under Article 187 of the
TFEU – as foreseen under Article 19 of H2020, when justified by the scope of
the objectives pursued and the scale of the resources required. 
The iPPP is an independent legal entity with
a governance system of its own, as established in its founding regulation. iPPPs have an Administrative Board in charge of strategic
decision-making, and an executive director, in charge of day-to-day management,
as well as other (advisory) bodies, depending on specific operational and
governance needs. Members of the iPPP include the Commission,
industry, not-for profit research associations and, sometimes, Member States. Conditions
for membership are set out in the founding regulation. Other stakeholders,
including non-EU public or private organisations, may participate in the iPPP provided
that they fully adhere to its regulations and obligations. 
The iPPP has a dedicated budget and staff
and provides a framework for public and private players to work together and
take joint decisions. The role of public partners is to ensure alignment with
public policy goals, while private partners maintain the focus to employability
and profit maximisation. The iPPP is in charge of programming and implementing research
projects in an integrated way according to an agreed (master) plan. It pulls together funds from
different sources (including Commission contributions and legally-binding
financial commitments from members), which are jointly managed. It is
responsible for the related communication and dissemination activities. The principles applicable under Horizon 2020 should in principle be
respected in an iPPP, but derogations may be granted in exceptional and duly
justified cases. 

4.4.           
Option 4 – Coordination within ERA 

Like Option 3, this option would provide a
dedicated administrative structure for rail R&I, but within the
administrative framework of ERA. ERA would be tasked with the elaboration and
implementation of the strategy and work programme for rail R&I under the
supervision of its Administrative Board, which unites representatives of the Commission
and Member States. The rail sector would be represented on an advisory level.
This option would entail a modification of
the ERA Regulation to cater for the following aspects:
·        
providing ERA with an ad-hoc grant from the
H2020 budget, which, under the new Financial Regulations can only be accepted if
expressly provided in the relevant sector-specific acts and authorised in ERA's
basic act;
·        
enabling ERA to conduct budget implementation
tasks and to actively undertake railway research activities at Union level;
·        
providing ERA with the necessary human resources
to deal with a significantly increased operational budget, assuming an Commission
contribution of EUR 64 million per year for rail R&I under H2020, against
ERA's current annual budget of roughly EUR 25 million a year.

5.         
Assessing the impacts 
5.1.           
General approach to the assessment of impacts

The four policy options identified and
presented in Chapter 4 have been compared along a range of key parameters
selected for their relevance in assessing public intervention in R&I. 
The comparison of these parameters was
carried out in an evidence-based manner, proportionate to the scope of the
impact assessment, which focuses on the impact of the institutional set-up of
the implementing structure for rail R&I. A range of qualitative and, where
available quantitative, evidence was used, including:
·        
Findings presented in the Impact Assessments
accompanying the H2020 proposals and the proposed first wave of institutional PPP
initiatives under H2020
·        
Monitoring and evaluation results and statistical
analyses of previous and on-going Framework Programmes
·        
Literature review and various external study
results
·        
The results of the online public consultation
and various meetings with stakeholders
The four options are compared assuming the
EU will contribute to half of industry estimates of total EU rail R&I needs
for the period 2014-2020[49]
– i.e. a global allocation of EUR 450 million under H2020. It is assumed that
the remainder of these identified financial needs would be covered by industry
itself. It is also assumed that the scope of activities that will be undertaken
by each of the institutional options will be similar and in line with the H2020
strategic research agenda and the rail technology roadmap[50].

5.1.1.     
Input impacts and cost-effectiveness

Given that the scope of this impact
assessment is the type of implementing structure that will be put in place to
carry out rail R&I activities and that the exact scope of activities is still
being defined, the assessment and comparison of the four options focuses mainly
on the input impacts – i.e. on the resources invested into delivering the
results.
The parameters used are those considered as
crucial to enabling major technological advances in the rail sector and are
aligned with the specific objectives of the initiative:
1.     
Focus and coordination of research efforts. Limitations in funding mean that EU
intervention should focus on areas essential to achieving the EU policy goal of completing the SERA,
while also ensuring the long-term competitiveness and growth of the sector. Strong
coordination is essential as the
fragmentation of R&I efforts among many isolated projects with diverse
objectives reduces their capacity to serve a specific European goal. 
2.     
Leverage of EU
rail R&I funding. High leverage of private and public resources, translated
into firm commitments from all parties involved, is a key ingredient for the
success of the implementing structure. 
3.     
Broad stakeholder participation and sustained
networks. The innovation
process should gather all key players across Europe in long-term partnerships. The
involvement of the full rail value chain, including the users (railways), will
help to ensure an approach aimed at improving the system as a whole and a
greater uptake of innovations.
4.     
Mitigation of innovation risks. Low profitability, combined with the high financial and
technological risks associated with rail research, mean that risk-sharing, IPR
protection mechanisms, as well as measures aimed at a more rapid commercial
exploitation of research results, are essential to stimulate long-term and
large-scale private investment. 
5.     
Operational performance and
cost-effectiveness. The implementing structure
should provide a simple, efficient and cost-effective framework for granting
R&I funding, ensuring value-for-money and facilitating industry and SME
participation. 

5.1.2.     
Economic, social and environmental outcomes

Improvements in the above-mentioned
parameters will lead to more effective and efficient rail R&I, which in
turn results in economic
(competitiveness and operational efficiency of the sector, induced
macroeconomic impacts for wider economy), social (employment, safety,
security, service quality) and environmental (reduced pollution, noise,
congestion) impacts.
However, given that the scope of this
impact assessment is restricted to the incremental impact of the implementing structure
and does not consider the scope of the R&I activities, the analysis of
economic, social and environmental impacts can only be conducted at a very high
level. The four policy options are compared on the basis of the differences in
scale, timing and relevance of investments they will
enable.

5.2.           
Input impacts and cost-effectiveness
5.2.1.     
Focus and coordination of research efforts

In the case of a continuation of the CR model,
the work programme would be driven by the Commission, with industry and
research stakeholders providing input through various consultation mechanisms
and platforms, but having no formal decision-making powers on its content. Activities under the work programme would be funded on a project basis.
Under FP7, more than 80 rail-related projects have been funded since 2007[51], with calls funded under
different themes. This makes it
difficult for the sector to have a clear view of the available types of
funding. Also, with such a multitude of non-coordinated
individual projects, the risk
of overlap and/or of generating uncoordinated technologies or redundant rail
projects is significant. "Bottom-up" project initiation does not
allow for a comprehensive programmatic approach or a consistent coverage of the agenda and is not suited to
ambitious long-term developments requiring a large scale of investment,
coordination, synchronisation and ex-ante commitments across different
projects. As pointed out by stakeholders in the public consultation, the lack
of long term approach and the discontinuity between projects and work programmes
under the CR model means the results of previous projects are rarely taken into
account and a lot of effort is wasted. To overcome
these issues, the Commission would have to develop a substantial management
capacity and significant technical expertise to ensure coordination of
activities, partnerships and results. 
According to an evaluation of existing
research PPPs in the European Economic Recovery Plan[52], the establishment of cPPPs
enables improved coordination between the Commission and industry
representatives leading to better defined objectives and a stronger focus on a
limited number of research sectors than with CR. This is namely thanks to the
development of a multi-annual strategy in the form of a roadmap. Indeed, the
topics of calls show a strong correlation with objectives established in the
roadmap. Also, as cPPPs coordinate research activities across several FP7
themes, projects can be of a larger scale and of a cross-thematic nature,
enabling a more coherent approach than with CR. Indeed, average EU funding per project for the three
existing cPPPs in 2010 and 2011 was between EUR 3.5 and 4.1 million, which is
slightly higher than for FP7-Transport rail projects, where average EU funding
per project was around EUR 3.1 million (although similar to overall FP7 funding
levels of roughly EUR 4 million per project). The lead
role in the PPP is taken by the private partners, who define the multi-annual
roadmap. The Commission has the final say on the work programme, which ensures
it is aligned with broader EU transport policy objectives. However, given the bottom-up
approach for proposals, R&I priorities are steered by industry rather than
by the Commission. Also, as the standard rules for
calls for proposals would apply, the arguments developed above for CR in terms
of results coordination also apply.
Under an iPPP, the coordination,
programming and execution of rail R&I activities would be the responsibility
of a single, dedicated administrative structure. The development of a strategic
long-term plan (covering both the timeframe of the financial framework and
beyond), in close cooperation with all market players, would be the first task
of the new structure, helping to ensure a stronger
relevance and policy coherence of funded projects than in CR. Industry participation ensures that the
projects would be linked with the market and support
the competitiveness of the rail sector (vis-à-vis other modes and third
countries). Co-governance arrangements, with a leading
role for the Commission, would ensure that the R&I agenda is fully aligned
with the SERA objectives. Furthermore, the strategy
would be endorsed by the European Council. The iPPP would act as a single contact point for information on all rail R&I, making it
easier for the sector to know what funding is on offer, and ensuring more
continuity and less fragmentation of R&I than under CR. R&I programmes
would be managed through an Administrative Board in a transparent, coherent and
long term manner. As in other
options, a substantial management capacity and a high level of technical
expertise will be required for the structure to work effectively. Compared to
CR, one difficulty may consist of attracting such expertise to an iPPP
structure with a limited lifespan. 
In the ERA option, the established
structures, technical expertise and stakeholder networks of the Agency would theoretically
be well geared for taking on a
strong coordination role, similar to an iPPP. A strategic long-term plan would
be developed in line with EU policy goals. However, although industry would be
consulted in defining the strategic plan through existing technology platforms,
as in the CR option, its involvement would not be as direct as in the PPP
options. This could reduce the industry relevance of the R&I agenda and
work programmes. What's more, there is a risk that the strategic agenda would
focus on a restricted number of topics, such as standardisation and deployment
of interoperable railway systems, given ERA's core mandate and field of
expertise. Other areas where the Agency lacks expertise, such as
passenger information, ticketing and revenue management systems, could end up
excluded from the scope. In fact, a recent evaluation of ERA[53] highlights the tension
between ERA's role in standard-setting and any potential role it could play in
research and innovation activities. Indeed, the introduction of standards is
likely to shift the focus of innovation from the best way to meet a need to the
best way to comply with the standard. 
These findings are partially reflected in
the results of the public consultation. 50-60% of respondents felt that the CR,
cPPP and ERA options would be ineffective in developing the required long-term
vision for rail R&I or in ensuring the necessary project coordination and
synchronicity of innovations. On the other hand, 80% of respondents thought an
iPPP would be effective. Also, only 20-25% of respondents felt that the CR and
cPPP options could contribute significantly to the EU policy goal of improved
interoperability (mainly research organisations and public authorities, as well
as some private companies), while 75% believed both the iPPP and ERA options
would achieve this.

5.2.2.     
Leverage of EU rail R&I funding 

In the CR option, H2020 rules would apply.
This means EU funding would cover up to 100% of project budgets, as well as the
Commission's administrative costs and up to 25% of partners' administrative
costs. The maximum EU funding rate would be lower for demonstrating activities
(70 %), but so far these have not been so frequent. That said, the average
share of EU funding for the 47 rail projects under FP7-Transport was 66%. When
one looks at FP7-Transport projects in general, the findings are rather
similar, with an average share of EU funding of 65% - i.e. a leverage effect of
1.5. One can expect that the leverage of H2020 CR projects will be similar or
slightly higher, given the increased support to close-to-market projects, which
should attract a higher share of additional funding.
cPPPs allow
for a greater industry involvement than CR meaning their potential for
leveraging private funds should be greater. However, while
the pre-defined budget ensures some continuity, the legal commitment from
industry participants is limited to single project grant agreements. Thus,
although cPPPs established so far have announced industry
funding levels of 50%, in practice, EU grants of 50%, 75% and 100% of costs
have been awarded. Therefore the direct private leverage effect has been rather
limited and industry co-funding has not reached the 50% target. Average EU
funding levels for the combined first calls of existing cPPPs was in fact 66% -
i.e. a direct leverage effect of 1.5, similar to CR.[54]  Nevertheless, given
the strong industry involvement and focus on closer-to-market activities,
significant indirect leverage effects can be expected, with additional R&I
investments by the private sector in parallel and after programme completion,
as technologies that are mature enough to be included in privately funded
development programmes are taken up.
The stable nature of iPPPs and the
firm commitment from the EU gives confidence to both private and public partners,
thus creating the conditions to attract higher levels of financing, and from a
wider range of sources, than under CR and cPPP. Furthermore, industry
participants are required to commit themselves in a
legally-binding manner, for the full duration of the iPPP, to specific financial
contributions (in cash or in-kind) and to certain tasks and activities. The scale of the direct leverage effect will depend on the scale of
private sector commitments, which will, in turn, depend on the governance
arrangements of the iPPP and the assurances provided to private partners in
terms of return on investment. Current iPPPs under FP7 must achieve at least
50% co-financing from the industry – i.e. a direct leverage effect of at least
2, while iPPPs under H2020 are likely to be even more ambitious (see table 4). On
top of this, the iPPP will trigger even more significant indirect leverage
effects than the cPPP thanks to the strong industry commitment. 
Table 4: Current and proposed funding of iPPPs
In the ERA option, the leverage
impacts would be similar to that of CR and cPPP. Rail R&I would be mainly
financed form the EU budget and there would be no formal commitment from
industry to participate in the programme (whether in terms of financial
contribution or in terms of tasks and activities). Indeed, the structure of ERA
would difficultly allow for co-financing for private partners without leaning
towards an iPPP model or creating serious conflict of interest issues in light
of ERA's role in the fields of vehicle authorisation and certification of
railway undertakings. Lastly, given that industry would have only an indirect
influence on the work programme, the relevance of the R&I agenda could be
less pertinent and therefore assumed to reach lower leverage rates than in the
case of a PPP.

5.2.3.     
Broad stakeholder participation and sustained
networks 

Under the CR option, industry and research stakeholders would be able
to provide their input through various consultation mechanisms and platforms. Rules of participation in the open calls system would favour broad and
transnational consortia, with numerous participants, ensuring high
representativeness. However, such large consortia can be difficult to drive and
some partners are included more for representative purposes than for technical
ones, so that commitment is not always very strong. Also, the balance of participation could not be actively managed. As explained
in the problem definition, CR projects under previous framework programmes have
not achieved balanced engagement among different types of stakeholders or at a
regional level. Under FP7, research organisations and
universities absorbed on average 65% of EU funding against just 16% for large
business enterprises and 16% for SMEs. NGOs, umbrella organisations and foundations,
accounted for the remainder[55]. Rail
projects under FP7-Transport presented a more balanced picture, with 50% of
funding going to business, against 38% for research organisations and academia.
Lastly, CR does not enable the continuous collaboration
of project partners beyond single projects, resulting in reduced confidence
among partners and a lack in the willingness to share information.
There is general consensus that cPPPs,
with their system of open calls, bring together a wide range of industrial
stakeholders and are inclusive.[56]
The participation of organisations not belonging to the Industrial Research
Associations, which represent the private side of the partnership, is around
75% and they receive around 70% of the whole Commission funding. On average in
the two first calls, large industry absorbed 31% of EU funding across the three
existing cPPPs, compared with the FP7 average of 16%, while SMEs represented
22%[57].
This indicates that cPPP programmes are of higher relevance for industry and
SMEs than CR programmes. However, the current cPPP setup does not provide for
advisory mechanisms enabling all key actors of the value chain to be involved.
Given the predominance of large industrial players among the private
participants observed in current cPPPs[58],
there is a risk that actors from other segments of the rail value chain
(railway undertakings, rail vehicle leasing companies, infrastructure managers,
etc.) may be excluded. Also, cPPPs have not reached geographical parity (88% of
participations stem from the 15 old Member States, with only 5% from Member
States having joined the EU after 2004, 6% from Associated Countries, and even
less for third countries)[59].
Within an iPPP, a mix of different
governance elements (i.e. different levels of membership and consultative
committees) would ensure that stakeholders from the full rail value chain could
either be consulted or directly involved in the decision-making process. The principles of shared management by
public and private partners would be transparent to all stakeholders. The conditions for membership and advisory roles could be actively
managed by the Administrative Board so as to ensure broad stakeholder
participation along the full value chain, bringing in partners and advisers with
specific expertise, deepening strategic partnerships and building sustained
relationships. This would also enable a targeted approach towards SMEs and
geographical parity. This flexible partnership can be
developed and fine-tuned considering mutual
interdependencies and participation capability of different stakeholders. Of course, the governance
arrangements of the iPPP will be instrumental in enabling broad participation.
If these are not appropriately tailored, there is a risk that some players,
with fewer financial or human resources, could be excluded. Experience in the
Clean Sky iPPP shows that openness to stakeholders can be a problem when a
large share of funding is earmarked for the main private contributors[60], whereas other iPPPs operating through
open and competitive procedures have succeeded in bringing together a large
number of partners, including newcomers and SMEs. Budget allocations of
existing iPPPs reveal a fairly balanced multidisciplinary participation, with
research organisations and universities absorbing on average 44.5% of EU
funding whilst industry accounts for 33.5%
and SMEs for 20.5% of EU funds, which is higher than in CR. The remainder goes
to other organisations, such as NGOs, umbrella organisations and foundations.[61] 
In the ERA option, representative
organisations of the rail sector would participate in the Management Board, but
without voting rights (only the Commission and Member States have voting
rights). Although theoretically the existing governance structure could be
altered via an amendment of the ERA Regulation, in practice, it would be extremely
difficult to grant industry more power without seriously compromising the
Agency's role as a regulatory authority. At the same time, the Agency has established working parties with
representatives of rail sector organisations and national safety authorities,
which provide it with good connections to the relevant market players. However,
the network of stakeholders involved would have to be widened to include
the urban and light rail market segment, as well as business enterprises, SMEs,
the research community and academia. Given that ERA would coordinate projects
similarly to the way existing executive agencies do under FP7, one can consider
that the participation rates in projects would be broadly similar to the CR
option.
In the public consultation, none of the
options score particularly well on ensuring equal access for all stakeholders. The
CR option scores best (36% considering it to be effective), followed by the
iPPP option (30%), with ERA and cPPP scoring just 23% and 19% respectively).
The iPPP option is nevertheless considered much more effective at building
sustained networks (80% believe it to be effective, against 4% considering it
ineffective, compared to only 17-25% of stakeholders believing the three other
options could be effective).

5.2.4.     
Mitigation of innovation risks

In the case of CR, it is likely that
R&I projects would be similar to FP7, i.e. at low to medium Technology
Readiness Levels. Although H2020 emphasises the need to bring the projects
closer to the market, knowledge and technology-related objectives, rather than
direct commercialisation-related objectives, tend to prevail in CR. The
potential of deployment of projects remains modest.[62]
Projects financed would thus be with a modest demonstration component,
typically covering TRLs from 2 to 5. IPR policy would be based on the
principles set out in the H2020 rules for participation and dissemination and specific
clauses would be established within individual grant agreements. This means
companies have to put significant efforts into the proposal phase, without
having a clear view on the IP rights that will cover the results. Also, there
is no IPR framework for multiple projects, which represents a risk for
companies wishing to be involved in several projects. 
cPPPs have a
clear objective of aiming for results nearing market readiness. Although there
is not yet any statistically significant data on finished projects to assess the
actual market effects of cPPPs, it can nevertheless be said that the
participation of commercial entities in projects has been higher. Questioned
cPPP stakeholders[63]
tend to agree that that cPPPs are more effective in achieving market impact
than standard CR projects. At the same time, existing
cPPPs tend to focus on short-term actions rather than on a longer-term approach
and risk-sharing measures. IPR policy would be based on
the principles set out in H2020, with detailed specifications defined within
the contractual agreement between the Commission and private partners. Compared
to CR, this enables more clarity for companies wishing to get involved. 
iPPPs have capability to develop
projects in a synchronised manner covering all TRL levels. The inclusion of large scale demonstration activities in the research programme will
reduce the risk for private research and innovation investment compared to CR
and cPPP. Partners would
be required to commit to demonstration activities, while EU co-financing
rates would gradually drop as the projects reach market readiness so that the
operational risk is transferred to the private sector. IPR
policy would be based on the principles set out in the H2020 rules for
participation and dissemination. Specific rules would be defined within
membership agreements between the iPPP and the private partners, which, like
the cPPP, enables more clarity for companies deciding to get involved than in
CR. As a basic rule, results generated jointly would be owned by the iPPP while
results generated individually would be owned by the iPPP participant
generating these results. 
In the ERA option, the management of
IP rights and the type of research projects funded would likely be similar to
the CR option. Some higher TRL projects aimed at deployment of standardised
solutions via the Technical specifications for interoperability (TSIs) could be
anticipated. However, the Agency's lack of skills and expertise in relation to
the commercial aspects of technology development could hinder the development
of higher TRL projects.
In the public consultation, neither the CR,
nor the cPPP and ERA options score well in terms of mitigating innovation risks
and accelerating market uptake (only 13-20% of respondents viewing them as
effective). On the other hand, the iPPP option is considered effective by three
quarters of respondents, against 5% considering it ineffective. Among these,
many are active in the field of railway operations, but also in the rail supply
industry).

5.2.5.     
Operational performance

The assessment of the operational
performance of the different options is based on an analysis of the average
set-up time, success rates of calls for proposals and time-to-grant.
In CR, no time will be lost in
setting up new structures and a new wave of rail R&I calls under H2020 can
be launched as of 2014. The average success rate of calls for proposals for CR
projects in FP7 is 19%[64],
which is considered to be quite low. On the one hand, this can be a sign of the
high attractiveness of the programme and the application of stringent selection
criteria (113,508 proposals were submitted for a total of 379 concluded calls
over the period 2007-2012, out of which 20,190 were retained for negotiations).
On the other hand, low success rates can indicate lack of sufficient funding or
overly vague and broad definition of priorities. Reasons differ for each
specific programme but over- (or indeed under‑)subscription indicates
that there is a problem in the balance between resources and demand. Low success rates mean considerable efforts are dissipated in
unsuccessful proposals and this
acts as a serious deterrent to industry, in particular to SMEs. It can
nevertheless be mentioned that success rates of FP7-Transport projects have
been higher (25%)[65]
and it is also anticipated that the success rate in general may improve under
H2020 given the possibility to fine-tune procedures and the larger focus on
demonstration and close-to-market activities. The average time-to-grant for CR
under FP7 has been improving steadily but remains high, at 320 days in 2012[66]. The Commission
expects that time-to-grant will be reduced to 250 days (i.e. 70 days less) under
H2020 thanks to simplification measures, enabling successful applicants to get
to work more quickly.
Compared with CR, the cPPP will take
slightly longer to launch the first series of cross-thematic calls – likely
around 9-12 months, based on experience of the first three cPPPs[67]. The outcome of calls in
existing cPPPs is slightly higher, with 30% of successful proposals in
2010 (out of 251 submitted proposals), but just 21% in 2011 (out of 400
submitted proposals).[68] Average time-to-grant was also shorter than under FP7, at 280 days[69]. It is likely that, similarly to CR, new rules under H2020 will
enable cPPPs to improve success rates and shorten time-to-grant by around 70 days.
The iPPP entails the establishment
of a new structure, following the adoption of a Council
Regulation, which is likely to take 6-9 months. For past iPPPs the set up time after the adoption of the regulatory
framework has been of just over 2 years on average. It is nevertheless assumed
that the set-up time for a new iPPP could be reduced quite significantly (to
around 1.5 years[70]),
both thanks to previous experience and thanks to new provisions under the updated Financial Regulation[71] that allow
new structures to share resources with existing iPPPs (including buildings, IT
functions, internal control functions, etc.). We therefore assume that the total
set-up time of the rail iPPP will be of 2 years. The
targeted nature of the calls for proposals, as well as the stronger focus on
close-to-market activities, would enable a higher success rate than under CR.
Average success rates of existing iPPPs are indeed very high compared to CR at
36% overall (60% for Clean Sky, 37% for FCH, 70% for ENIAC, 22% for ARTEMIS,
23% for IMI).[72] The administrative board would be able to adapt procedures to
improve the success rates even further, e.g. by more resort to two-stage calls,
where the second stage could have a 30-50% chance of obtaining funding, while
also ensuring the conditions for calls are kept broad and inclusive, supporting
diverse categories of applicants. Furthermore, the setting up of a dedicated
administrative structure would entail a faster time-to-grant. As a means of comparison, the average time-to-grant of the Clean Sky iPPP is 240 days[73], while the Sesar iPPP's time-to-grant ranges between 160-240 days depending on the type of project. IMI's
time-to-grant record has
systematically improved for each call, going from over one year to 160 days[74]. 
Concentrating all
rail R&I within ERA would entail a modification of the ERA
Regulation, as the current rules, decision and management processes, and
operating structures do not allow it to manage grants. The normal regulatory
procedure for such a modification lasts around 2 years. Furthermore, the Agency
would also require significant additional resources and would need time to
adjust internally to the new tasks assigned to it. One can therefore assume
that the total set-up time for ERA would be of close to 3 years. Once up and
running, the ERA would likely enable a faster time-to-grant than under the baseline thanks to the existence of a dedicated administrative structure. Furthermore,
close involvement of all stakeholders in setting the R&I agenda and the
larger focus on demonstration and close-to-market activities could lead to
improved success rates.

5.2.6.     
Cost-effectiveness 

This cost-effectiveness analysis focuses
exclusively on the costs incurred by the Commission for the implementing
structure, which include:
·        
the establishment cost;
·        
the running costs (including staff expenditure,
meetings, missions and communication expenses, IT expenditure, buildings and
installations, and other administrative costs). These costs are considered over
the 7-year period covered by the H2020 period;
·        
winding down/legacy management costs. 
A detailed overview of cost calculations summarised
in the following paragraphs can be found in Annex VII.
For CR, there would be no establishment or winding down costs
as the programmes would be managed
within existing structures. Cost calculations are based
on the experience of managing the FP7-Transport budget, while including costs
to develop an additional management capacity within the
Commission to ensure coordination of activities, partnerships and results with
a view to achieving its political objective of supporting the completion of the
SERA. Including costs relating
to managing the legacy of programmes, the total
annual equivalent implementation cost of CR is estimated at around EUR 4.71 million.
In case of cPPP, as for CR, there
would be no establishment or winding down costs. The
overall running costs would be marginally higher than in case of CR, because of
the cost of the additional stakeholder consultation process borne by the Commission
and external evaluation costs. Including costs relating to managing the legacy of
programmes, the total annual equivalent implementation
cost of the
cPPP option is estimated at around EUR 4.95 million, which is marginally higher than the baseline option.
In the case of an iPPP, quite
considerable establishment costs need to be taken into account, linked to the two-year set-up
period, during which programmes would be run under the CR approach. Running costs have, in the past, been globally higher in an iPPP
than with in-house implementation by the Commission[75], due to
the fact that the Financial Regulation requirements are designed for EU
institutions and, as such, are not suited to the needs and size of relatively
small structure iPPPs. For instance, under current regulation, each iPPP is
expected to have a data protection officer, a local information security
officer, an internal control coordinator, an accounting officer (and a back-up),
an authorising officer (and back-up), initiating agents (and back-ups),
validating agents (and back-ups), an internal auditor and an IT manager. Those
requirements are difficult to apply to entities which employ between 13 and 31
staff and lead to situations where on average 50% of the iPPP's staff is
dedicated to work on administrative tasks. Moreover, the recruitment rules and
public procurement rules are similar to those used by the European Institutions
hindering flexibility/responsiveness of the JUs operations[76]. Based on
these findings, the Commission is preparing proposals for a delegated
regulation applicable to iPPPs under the updated Financial Regulation[77]. These make room
for a significant increase in the operational efficiency of iPPPs under H2020,
thanks to: the streamlining of reporting requirements, the simplification of
budgetary procedures, the sharing of internal audit and internal control functions
with the Commission and the pooling of resources between iPPPs. 
Given these considerations, one can assume
that the internal administrative costs of a future iPPP for rail R&I would
represent roughly EUR 24.9 million over its 5-year lifespan. 50% of this will
be financed by industry. This corresponds to staffing levels of 20 full-time
equivalents. On top of the administrative costs of the iPPP
itself, the Commission would incur costs for the supervision of and
participation in the iPPP, as well as one-off external evaluation costs. Including
costs relating to
managing the legacy of programmes and winding down, the total
annual equivalent implementation cost of the iPPP option is estimated at around EUR 5.46 million. This is more than for
CR or cPPP. However, the higher costs also partly relate to the larger budget
that will be managed under the iPPP (roughly EUR 900 million, rather than EUR
690 million, given the stronger direct leverage effect). Also, as industry
commits to covering half of the running and winding down costs, the total annual equivalent implementation cost to the Commission is limited to EUR 3.18 million. For the Commission, operating an iPPP is thus less costly than CR
or a cPPP. 
In the ERA
option, rail R&I programmes would only be transferred to the new structure
in 2017 given set-up delays. All administrative costs would be covered by EU
and Member States. The administrative structure would
be linked to the ERA structure, which provides for
scale efficiencies, given that existing horizontal functions (e.g. internal
audit, accounting, management of human resources) can be used to support the R&I activities,
providing for a possibly more cost-effective administrative structure than the
cPPP and iPPP options – thereby similar to the baseline option. At the same
time, lower costs of Agency staff mean the option is cheaper than the baseline,
with a total annual equivalent implementation cost of around EUR 3.83
million per year. However, the Agency would require significant additional resources
(estimated at around 15 full-time equivalents) to carry out the coordination
and management of the foreseen EU rail R&I budget of EUR 450 million, i.e.
EUR 64 million per year – which is 3.5 times ERA's current annual budget. This
fact alone hinders feasibility of this option given that according to a Joint
Statement of the European Parliament, the Council and the Commission on the
future management of decentralised agencies, adopted in July 2012,[78] no additional
resources can be allocated to EU agencies. 
Table 6 summarises the equivalent annual
administrative cost relating to each option. 
Table 6 – Equivalent annual implementation costs of the options
under assessment (kEUR)
The above table distinguishes between the implementation
costs incurred by the Commission and the total implementation costs only in
case of iPPP. In reality, of course, industry also bears participation and
management-related costs in all other options. However, it is impossible to
quantify these costs. The iPPP option therefore offers
the advantage that industry has more certainty regarding the costs it will
incur for R&I activities in the long term.

5.3.           
Economic, social and environmental outcomes

The ulitmate goal of this initiative are  economic,
social and environmental benefits induced by more effective rail R&I
projects. However, given that this IA does not consider
the scope of the R&I activities, but just the implementing structure, the
expected economic, social and environmental impacts cannot be assessed in
concrete terms. Nevertheless, an overview of some of
the major impacts to be achieved through investment in rail R&I can be
found in Table 7. 
Table 7: Summary table of expected economic, social and
environmental impacts of increased investment in rail R&I:
 Economic benefits || Competitiveness || Improved competitiveness of EU rail industry on global markets 
 Promotion of innovative enabling technologies 
 Economic efficiency || Cost reduction in rail applications through optimised energy use, reduced lifetime infrastructure costs, increased performance and automation 
 Economic growth || Increase in line and vehicle capacity to support enhanced freight and passenger volumes 
 Expansion of vehicle leasing markets to the benefit of operators and manufacturers 
 Infrastructure || Contribution to the Trans-European Network through better intermodal connections and harmonisation of specifications 
 Revitalisation of existing infrastructure 
 Increased utilisation of existing infrastructure and reduction of maintenance costs 
 Social benefits || Employment || Creation of high-quality jobs in the rail sector 
 Creation of high-quality jobs in other related sectors, such as telematics, IT, etc. 
 Security || New design of stations with very low perceived and actual risk 
 Secure handling and management of transported goods 
 Improved surveillance of freight through traceability and tracking innovations 
 Safety || Self-adjusting and self-reparing infrastructure 
 Safer and more reliable vehicles 
 Easier and cost-competitive authorisation processes for all railway applications 
 Optimisation of signalling systems 
 Consumer impacts || Reduction of travelling times through optimised trips and increased interoperability of networks 
 Improved punctuality of trains 
 Improved accessibility to passengers with reduced mobility 
 More affordable transport through increased cost-effectiveness of the rail system 
 Real-time traffic information thanks to improved communication systems 
 Environmental benefits || Air pollution and greenhouse gases, congestion || Modal shift towards cleanest transport mode in Europe leading to reduction of pollutant and CO2 emissions 
 Noise || Reduced noise and vibration railway annoyances 
 Energy efficiency || Reduced final energy consumption through lighter vehicles and energy-efficient infrastructure 
The benefits of
EU R&I in general have been largely documented in the Impact Assessment
accompanying the H2020 proposals, which estimates the long-term macro-economic
impact of FP7 at an extra 0.96 percent of GDP[79].
In the rail sector, one
example of the benefits of EU-driven innovation is the ERTMS/CBTC[80] projects. Studies[81] highlight
that the market share of ERTMS/CBTC in the global signalling market increased
from 14% to almost 22% in the period from 2007 to 2011 and the expectation is
for a market share of 25% in 2017, helping to sustain the overall
competitiveness of EU industries. Similar effects on a much larger scale can be
expected from a large-scale rail R&I programme. 
First estimates from
industry[82]
suggest that a coordinated investment effort of EUR 1 billion in rail R&I
in the 2014-2020 period could have the following impacts:
·          
100% increase in rail
capacity leading to increased user demand;
·          
50% increase in reliability
leading to improved quality of services;
·          
50% reduction in life-cycle
costs, leading to enhanced competitiveness.
Economic returns linked
to these improvements include[83]:
·          
An indirect leverage on
industry R&I related to the development of industrial products exploiting
H2020 innovations, worth EUR up to 9 billion in the period 2017-2023;
·        
Creation of additional GDP at
EU level worth up to EUR 49 billion in the period 2015-2030, and spread among a
large number of Member States;
·          
Creation of up to 140,000
additional jobs in the period 2015-2030;
·          
Additional exports worth up
to EUR 20 billion in the period 2015-2030 thanks to the worldwide
commercialisation of new rail technologies developed under H2020;
·          
Life-cycle cost savings
worth around EUR 1 billion in the first 10 years and then, through continued
implementation, worth around EUR 150 million per year.
Of course the exact impact of R&I
funding will depend on the scope, scale and timing of investments, which vary
according to the policy options.
Compared to the baseline option, the cPPP
option should entail a similar level of funding (given the similar leverage
effect), but with a better focused agenda and a speedier implementation,
meaning the first results could be expected several years earlier.
In an iPPP, funding levels are
likely to be 30% higher than in the baseline option, given the higher leverage
effect. Although the set-up time (roughly 2 years) means results will initially
take longer to emerge than under a cPPP, the focus enabled by the iPPP and the
fact that partner commitments are binding mean results are still likely to
emerge faster than in the baseline option. Compared to cPPP, the scale of
impacts should be higher and geared toward step-changes with long term impacts.
With ERA in the lead, funding levels
are likely to be similar to the baseline option, but a better focused agenda
could speed up implementation. However, the length of time required to modify
the ERA structure and to build up the necessary internal expertise, is likely
to counterbalance the effect of the better focused agenda.

5.4.                
Risk assessment

The risks associated with the four
different options that have been analysed are mapped in Table 8. This table
provides an overview of events that may reduce confidence EU rail R&I
activities and consequently represent a potential obstacle towards the
implementation of the SERA and the competitiveness of the European rail sector.
For each risk, potential mitigation actions are presented. 
Table 8 – Assessment of risks associated to the rail R&I
implementation tool and mitigation measures.
 Risk || Description || Most impacted options || Cause || Outcome || Probability || Impact || Mitigation 
 1 || EU R&I activities are not focused on the goal of completing the SERA || Option 1-CR Option 2-cPPP || •  High degree of R&I fragmentation •  Lack of coordination  of R&I activities and results •  No or little involvement of key rail stakeholders in planning  and synchronisation of activities •  Limited partnerships between stakeholders. || •  Reduced  effectiveness of rail R&I activities •  Objective of completing the SERA is delayed or missed altogether   || Very High || Very negative: the R&I programme does not contribute to the overall objective || •  Establish appropriate governance and leadership of the EU in R&I implementation. •  Enshrine the SERA objective in the strategic master plan. •  Involve all key stakeholders in the decision making process 
 2 || Conflicting and overlapping EU R&I activities || Option 1-CR Option 2-cPPP || •  Lack of coordination, fragmentation of R&I activities and results •  No involvement of R&I partners in planning or in synchronisation of activities •  No commitment from stakeholders to political objectives || •  Reduced  effectiveness and efficiency of rail R&I activities •  Objectives of completing the SERA and market uptake of innovations are delayed or missed altogether   || High || Negative: delay in performance delivery of the technological innovations necessary to achieve an integrated, efficient and attractive EU railway market; Loss of confidence in the potential benefit of R&I leads to users' reluctance to buy in. || •  Establish appropriate governance and leadership •  Monitor the needs and business plans of all stakeholders and prepare strategic Master Plan accordingly •  Develop partnerships between all actors, develop sustained networks •  Involve all key stakeholders in the decision making process 
 3 || Limited involvement and uneven stakeholder representation. || All   || •  Limited accessibility of R&I funding (e.g. low success rate of proposals) and coordination •  Non-transparent and restrictive participation rules || •  Scope and uptake of R&I outputs is limited   || Very High || Very negative: the SERA objectives are jeopardised. || •  Set transparent and flexible participation rules for all key stakeholders in the strategic process •  Ensure advisory mechanisms allow for broad participation of stakeholders •  Avoid trade-off between high leverage and broad participation (for instance by not awarding decision-making powers purely on financial contribution) 
 4 || Limited investment and lack of long-term financial commitment by EU rail stakeholders. || Option 1-CR Option 4-ERA || •  No way to guarantee long term (financial) commitment of Commission and key industrial stakeholders. •  Innovation risks are not properly mitigated. •  Focus on low TRL projects   || •  Overall R&I targets cannot be achieved •  Public funding is not used efficiently   || Very High || Very negative: competitiveness of rail vis-à-vis international competitors and other modes is reduced || •  Set up sound and robust funding mechanisms that stimulate multi-annual commitments by the EU and key stakeholders •  Set up mechanisms to reduce innovation  risks (e.g. focus on demonstration projects, IPR management) 
 5 || R&I management and activities are ineffective and inefficient || All || •  Unsuitable coordination structure •  Poor prioritisation of R&I activities leading to ineffective use of funds •  Inability to manage R&I activities to ensure timely delivery of adequate products and solutions •  Projects risk monitoring not systematic and ineffective •  Stakeholders not committed to the R&I programme || •  Future European rail system does not deliver the required performance improvements •  European rail supply industry fails to maintain competitiveness vis-à-vis foreign competitors, with a direct impact on European GDP •  Additional costs leading to budgetary issues. || High || Negative: significant impact on achieving the objectives || •  Establish processes for coordination of R&I •  Prioritise R&I activities to develop the adequate technologies •  Ensure that the Master Plan and associated R&I initiatives are updated in the event that R&I results do not sufficiently contribute to the performance targets. •  Implementation tool geared towards performance delivery and monitoring achievement of performance targets 

6.         
Comparing the options
6.1.           
Comparison of the options

The assessment of the four policy options
led to the following observations: 
Under CR, the changes foreseen under
H2020 will lead to a single set of simpler and more coherent participation
rules, increasing the accessibility and attractiveness of the programmes,
facilitating access to specific expertise, and enabling successful applicants
to get working more quickly. There will be more emphasis on innovation and
close-to-market activities and a shift to bi-annual work programmes will enable
enhanced continuity. However, projects financed are
likely to remain at lower TRL levels and the synchronicity
and coherence of projects will continue to be hindered by individual calls. Ad-hoc
project-level participation will limit the possibility of involving the full
value chain of stakeholders and of building sustained networks of cooperation.
What's more, the lack of a clear IPR framework for
multiple projects and the absence of firm industry
commitment mean the leverage of EU funds will remain similar to current levels.

Under a cPPP, contractual
arrangements between the Commission and private partners would help to set
clear objectives with a focus on a limited number of research sectors and coordination
across several research themes. The work programme would be fully aligned to
industry needs, containing detailed IPR rules and including demonstration
activities, favourable to strong market uptake. This would make the option more
coherent with the goals of Horizon 2020. Given the
bottom-up approach and the absence of co-governance
arrangements with the Commission, R&I priorities
would be less geared towards EU policy goals. The pre-defined
budget, with pre-determined industry commitment ensures some continuity and
increased leverage of EU R&I efforts, although the legal commitment will
remain limited to the duration of single projects. The system of individual
calls could hinder the synchronicity of projects, as well as the involvement of
actors from the full rail value chain. 
Under an iPPP, the coordination,
programming and execution of rail R&I activities would be the
responsibility of a single, dedicated administrative structure, ensuring more
continuity and less fragmentation of R&I efforts. The development of a
long-term strategy, in close cooperation with all market players, will ensure
that R&I projects support the competitiveness of the rail sector. At the
same time, the Commission's leading role will ensure the coherence of the R&I
agenda with Horizon 2020 and SERA objectives. A relative disadvantage of the
iPPP is that the strong steer of the Commission could reduce the short term
industry relevance of the project portfolio. Also, the lengthy set-up time
(roughly 2 years) means results will initially take longer to emerge.
Nevertheless, the stable nature of the iPPP, the clear definition of IPR rules,
and the firm commitment from the EU will give confidence to private and pulbic
partners, thus stimulating higher investment levels. At the same time, legally
binding commitments from industry participants to match EU funding will ensure
a direct leverage effect at least 30% higher than other options. As the
conditions for membership and advisory roles could be managed by the
Administrative Board, in a transparent and flexible manner, the iPPP would be
able to ensure broad stakeholder participation and a targeted approach towards
SMEs, although there will necessarily be a trade-off between the level of
openness of the structure and the leverage effect it can create.
Putting ERA in charge of R&I
coordination would ensure that the long-term strategy would be in line with EU
policy goals, although it could overly restrict it to standardisation and
interoperability issues given ERA's current mandate and lack of commercial
expertise. The existence of a dedicated structure, with strong technical
expertise and established networks, charged with programme management would
ensure strong leadership and coordination. Nevertheless, given the absence of formal
commitments from industry the direct leverage effect of EU funds is likely to
be relatively low. More importantly, the combination of ERA's role as a
regulatory authority with a role of R&I coordination and management could
pose a severe conflict of interest. ERA could find itself in a situation where
it is charged with collaborating with industry to determine and implement the
research agenda, while also being tasked with controlling the very same market
players and the outputs produced by this research. The risk will be even
greater if ERA's mandate is expanded to the fields of certification of railway
undertakings and vehicle authorisation, as proposed under the Fourth Railway
Package[84].Lastly,
concentrating all rail R&I within ERA would entail a modification of ERA's
governance structures and the hiring of significant additional resources
(estimated at around 15 full-time equivalents). This fact alone hinders
feasibility of this option and would be incoherent with the current position of
the European institutions not to allocate any additional resources to EU
agencies[85].
In light of these issues, it is suggested that ERA's involvement in rail
R&I activities should be limited to encouraging technical harmonisation or
to specifying areas for research, rather than delivering innovation itself. 
In terms of cost-effectiveness, although an
iPPP would cost marginally more than other options overall, the fact that industry
commits to covering half of administrative costs means an iPPP is in fact 17%
to 35% less costly for the Commission than other options.
Table 9 presents the assessment of the
different policy options compared to the baseline. 
Table 9 – Summary of the impact assessment of the alternative policy
options
 Parameters || Baseline || cPPP || iPPP || ERA 
 Effectiveness 
 Focus and coordination || Long-term strategy || = || + || + || + 
 Relevance to EU || = || = || + || = 
 Coordination || = || + || ++ || ++ 
 Leverage of EU rail R&I funding || Direct leverage (private co-funding) || 1.5 || =/+ 1.5 to 2 || ++ at least 2 || 1.5 
 Firm commitment || = || + || ++ || = 
 Broad participation and sustained networks || Representation of the full value chain || = || = || + || = 
 Sustained partnerships || = || + || ++ || = 
 Mitigation of innovation risks || Relevance to industry and TRLs || = || ++ || + || - 
 IPR protection || = || + || ++ || - 
 Operational performance || Set-up time || No start-up delay || - 9-12 months || -- 2 years including legislative procedure || -- 3 years including legislative procedure 
 Success rates || 20% || + 20-30% || ++ 30-40% || = 20% 
 Average time-to-grant || 250 || + 210 || + 160-240 || = 250 
 Efficiency 
 Cost-effectiveness || Annual equivalent cost to the Commission || EUR 4.7 million || + EUR 4.9 million || ++ EUR 3.2 million || ++/-- EUR 3.8 million 
 Economic, social and environmental outcomes || = || + || ++ || = 
 Coherence || = || + || ++ || -- 
Legend:                 =                              : baseline or
equivalent to the baseline
+ to ++                   : low to high improvement
compared to the baseline
- to - -                     : low to high worsening
compared to the baseline

6.2.           
Preferred option

Based on the assessment, it emerges that,
despite the longer delays required to implement the structure, the iPPP option
would be the most appropriate policy option to achieve the objectives
formulated in Chapter 3. 
The iPPP option is also the preferred
option according to the results of the public consultation. It is judged to be nearly twice as effective as
any other option (see Figure 7), with four in five
respondents judging it would be effective or very effective in responding to
the identified challenges. It is interesting that the iPPP option is the option
that receives the strongest support regardless of the type of organisation,
although public authorities and research organisations consider it to be
equivalent to the continuation of collaborative research. The iPPP also emerges
as the favoured option within all activity categories. 
Figure 7 –Stakeholder's preferred institutional option[86]
Nevertheless, 7% of respondents fear that
the iPPP option could be ineffective. Among these, are
mainly representatives of the rail operating community at large (i.e. NGOs,
research organisations, public bodies, private companies and SMEs active in
railway transport sector, whether as railway undertakings, infrastructure
managers, wagon keepers, and other services to the rail transport sector). The
key concern voiced by these players is that the governance structure of the
iPPP option must be sufficiently open and balanced to ensure that the content
is designed to achieve added value for all rail sector stakeholders, and is
sufficiently oriented towards business needs and end-user needs, so as to
ensure that innovation does not only stem from a "push" approach from
the rail supply industry. To overcome these concerns, it is important that  railway
undertakings, urban rail operators, infrastructure managers, wagon keepers, as
well as the final users will be involved in the definition of the strategic
orientation of the Joint Undertaking and in the definition of functional
requirements of the different projects. This will be ensured via a representative
structure of the future Joint Undertaking, as indicated in section 6.2.1 below.

Asides from this concern, roughly one fifth
of respondents specified in their open comments that, the creation of a strong
managing instrument such as the Joint Undertaking should be coupled with
mechanisms ensuring that key investors would have the assurance of obtaining an
EU financial contribution for the entire duration of the work programme. It is
suggested that this could be done by earmarking funds to named beneficiaries.
Among these respondents, the majority represent the rail supply industry in
broad terms (rolling stock, infrastructure, equipment and component
manufacturers). However, as indicated in section 6.2.1. below, this concern
must be balanced with the above concerns relating to broad
stakeholder involvement and fair participation. 

6.2.1.      Proposed governance structure

A carefully designed governance structure
is a key factor to ensure that public funds are used in a way that contributes
efficiently to EU policy objectives and long-term industry needs. Among
existing iPPPs, different governance models have been put in place, which are
customised according to context and objectives of each sector. 
 Box 3 – Variations of the iPPP model A distinction is traditionally made between iPPPs referred to as "Joint Undertakings" (JUs) and those referred to as "Joint Technology Initiatives" (JTIs). These two types of bodies are in fact both emanate from the same legal basis (Article 187 of the TFEU), although the first are typically considered to be more driven institutionally, while the latter are considered to be led by industry. An analysis of existing Joint Undertakings and Joint Technology Initiatives shows that the governance structures of each separate body is tailored to the specific needs of the sector, however some differences can be found between those considered as Joint Undertakings (SESAR) and those considered as Joint Technology Initiatives (Clean Sky, FCH, IMI, ENIAC and ARTEMIS), namely: •          the research agenda of the Joint Undertaking is developed by the Joint Undertaking itself, whereas the research agenda of the Joint Technology Initiatives emanates from the European Technology Platforms. •          in the existing Joint Technology Initiatives, the Governing Board is dominated by industry, while the Commission had a leading role in Joint Undertakings. However, in the proposals for the "first wave" Joint Technology Initiatives under Horizon 2020, the Commission will have 50% of voting rights in the Governing Board. Therefore, industry will no longer dominate the Governing Boards in new Joint Technology Initiatives, making the distinction between the two forms of iPPPs less clear. Based on this analysis, it was decided not to differentiate between these apparent two forms of iPPPs – and therefore also not to consult stakeholders formally on this question, although a number of questions in the public consultation were indirectly related to the governance set-up and open comments on this subject were also received. 
Based on the assessment of impacts in
Chapter 5 and on the results of the stakeholder consultation, the following
principles should be taken into account when developing the governance
structure of the future iPPP for rail R&I:
·        
Strong link with EU policy: The need to ensure a strong linkage with EU policy and the goal of
creating a single market for rail means that the EU must play an important role
in the future iPPP, with the capacity to orient the strategic work programme and
research activities according to the EU policy goals of  integrating the Single
European Railway Area, enhancing the competitiveness of the European rail
system and promoting a modal shift from road to rail. Decision-making
procedures should reflect this predominant role of the EU, while also reflecting
the level of public and private financial commitments. This also reflects the
fact that the Commission
will be held accountable for the quality of programmes implemented by the iPPP.
·        
Strong strategic framework: To achieve a step-change, research has to be coordinated and synchronised
between different rail subsystems, and backed up with long term commitments of
all stakeholders. Therefore the first task of the iPPP should be to propose and
negotiate a strategic master plan that is agreed with all parties and that
tackles the rail system as a whole, rather than its individual sub-systems.
This top-down approach will help to deliver a common vision that will ensure
greater integration of the rail sector, increased standardisation and stronger
market uptake of innovations. Ths plan should be endorsed by the Council to
ensure it has the strong backing of the Commission and of Member States.
·        
Broad stakeholder participation: Membership should be open, enabling all actors of the rail sector
to participate, including third country organisations and smaller companies
that have fewer human and financial resources to invest in such an undertaking
but nevertheless have significant expertise that needs to be leveraged in order
to ensure a system approach to innovation, integrating all components of the
rail value chain. One way of enabling this is to allow different levels of
membership and to establish specific, lighter conditions for SME participation
(for instance, enabling in kind contributions only or the pooling of resources
through consortia). Broad stakeholder involvement also means that earmarking of
funds for major contributors to the iPPP budget should be limited. 
·        
Expertise:
Scientific and advisory bodies can be set up to provide relevant technical
expertise to the iPPP. Also, the Commission will need to retain sufficient
expertise to carry out its own obligations under the PPP agreement and to
monitor performance of the private sector and enforce its obligations.
Furthermore, even if the ERA in lead option is discarded due to feasibility
issues, it will be essential to ensure the involvement of the Agency in the
work of the iPPP given its extensive expertise on interoperability issues and
integration of the railway system. 

6.2.2.     
Budget

The current industry estimation is that the
cost of strategic rail R&I programme is EUR 800 million to EUR 1 billion.
The EU would cover 50% of this cost, which would put its contribution to an
estimated EUR 450 million. The activities undertaken by the iPPP will mainly be
research and innovation activities. Therefore, EU funding should be paid from its
Horizon 2020 budget for research and innovation. Nevertheless, funding from
other EU instruments, such as the Connecting Europe Facility or the Risk
Sharing Funding Facility of the European Investment Bank, for example, could
also be considered, namely for later-stage activities, including the deployment
of mature outcomes of the iPPP.
Given the expected timeframe for
establishing and setting up the Joint Undertaking, an amount of EUR 70 million
from within the foreseen EUR 450 million, will be set aside for funding
collaborative rail research under the H2020 Transport Work Programme for
2014-2015. Once the iPPP achieves financial autonomy, it will take over these
collaborative projects and integrate them into its stategic work programme. 
The industrial partners will contribute the
remaining budget of EUR 450 million, through in cash and in kind contributions.
Private members will also contribute on a 50/50 basis to all administrative
costs.
Based on the cost-benefit analysis
conducted in this document, it can be estimated that the future structure would
require roughly 20 full-time equivalents and that administrative costs would
account for roughly 3% of operational expenditure. An indicative estimate of
the annual budget of the iPPP can be found in Annex VII. 

7.         
Monitoring and evaluation

Under existing practices, the focus of
monitoring tends to concentrate
on verifying if funds are spent correctly rather than on fostering efficiency.
Priority has been given to an audit-oriented approach rather than to a managerial,
results-based approach. At the same time, audit evaluations are often
implemented in a routine manner and do not seek to exploit the findings of
these checks, for instance by providing beneficiaries with feedback from audit
missions in a way that would enable remedial action and measures for
improvement. A possible explanation could be that audit efforts are mainly
driven by the obligations towards the Court of Auditors
and the Budgetary Authority, rather than by a strategic
approach to increase the efficiency of internal (management) procedures[87].
The future monitoring and evaluation system
should maintain a strong focus on the legality and regularity of transactions
carried out by the new structure, but it should also be built to keep track of
the performance of R&I activities to ensure that these contribute to the
strategic work programme. 
The detailed framework for monitoring and
evaluation will be developed by the iPPP, but the processes should include:
·        
Project level and work package monitoring and
reporting on a regular (quarterly) basis, based on
a concise set of reliable key performance indicators
(KPIs) defined by the Executive Director and validated by the Administrative
Board, including: data relating to financial and effort
consumption, achievements made in the last reporting period, completion status
of specific tasks, significant issues, risks or gross deficiencies for the
successful outcome of the project, with their status and corrective actions. Monitoring of risks will also give specific attention to the
research phases (real-time demonstrations with all possible risks attached) and
to the research areas. Specific
monitoring systems should be established for the large-scale demonstrations.
These processes are managed by the project or work package leaders and results
are provided to the Executive Director and the
Administrative Board.
·        
Programme level monitoring and reporting, based on project and work package data, and including the
monitoring of the quality of deliverables against a set of satisfaction
criteria; the monitoring of project management to verify its overall quality and
the compliance with the strategic work programme. The
objective of the Programme monitoring and reporting is to measure and compare
results at different levels, from different viewpoints and for various
audiences. This second layer of monitoring includes regular reviews that ensure
that, in all projects, risk mitigation action plans are on track and effective
and that in case of failure in any projects the relevant adjustments will be
made in other linked projects. This process is managed by the Executive
Director and his team and results are provided to the Administrative Board.
In addition, evaluations
of the implementation of the Regulation should be carried out by the Commission
every three years from the start of the activities of the iPPP and at least one
year before expiry term of the iPPP, aimed at assessing whether the partnership
in its current setup has been efficient and effective. These evaluations have
to be underpinned with monitoring processes at project and programme level.
Table 11 identifies key monitoring
indicators linked to the operational objectives identified in section 3. As
mentioned above, key performance indicators relating to the results achieved by
the iPPP will be defined by the Administrative Board once the strategic master
plan is defined. An idea of potential KPIs can be found in the section on
expected outcomes of rail R&I in Annex IV). 
Table 11 – Proposed indicators for monitoring progress towards
objectives
 Operational objectives || Core indicators 
 Develop a long-term strategic vision (e.g. master plan) with detailed multi-annual work programmes and investment plans || ·  Existence of a strategic master plan with a vision covering at least 20 years ·  Existence and regular update of multi-annual and annual work programmes ·  Existence and regular update of multi-annual and annual investment plans 
 Ensure the strategic vision, work programmes and projects are aligned with key EU policy objectives of achieving a SERA and industry competitiveness || ·         Participation of the Commission and the ERA in decision-making procedures relating to the strategic master plan, the work programmes and the calls for proposals ·         Endorsement of the master plan by the Council 
 Ensure consistency and coherence between different projects, enabling synchronicity of innovations along the rail value chain || ·  Existence and regular update of multi-annual and annual work programmes identifying the links between different projects ·  Existence and regular update of a detailed long-term calendar for grants and calls for tenders ·  Assessment of alignment between grants and calls for tenders with the work programme and the master plan ·  Existence of monitoring processes and information exchanges between project managers within a programme and between programme managers ·  Number of projects under initiation, initiated, suspended, cancelled and closed ·  Detailed reports on project and programme deliverables 
 Improve industry involvement to acquire more private co-financing || ·  Number, size and market share of member companies ·  Number, size and market share of associated companies (through strategic partnerships, advisory boards, participation in calls, etc.) 
 Ensure strong and long term ex ante commitment from EU and industry as regards financing and participation || ·  Number of signed agreements with private companies (membership and partnership agreements) ·  Multi-annual and annual commitments from member companies ·  Annual payments made by member companies 
 Ensure balanced participation of diverse stakeholders along the entire value chain, all technical subsystems and all MS. || ·  Nationalities of member companies and associated companies ·  Types of organisation of member companies and associated companies (private company, SME, research organisation, university, etc.) ·  Fields of activity of member companies and associated companies (private company, SME, research organisation, university, etc.) 
 Ensure long-term continuity of partnerships, with enhanced trust and exchanges of knowledge between stakeholders, disciplines and projects || ·  Number of signed membership and partnership agreements with all types of stakeholders ·  Assessment of stakeholder participation in projects ·  Number and frequency of reports from advisory bodies to the Administrative Board ·  Existence of data exchange platforms between participants 
 Develop close-to-market projects that meet industry's needs, and that include large scale system-level demonstrators to validate research results || ·  Strong participation of private partners in defining the strategic master plan, the work programmes and the calls for proposals ·  Number of demonstrators and real-time demonstrations ·  Share of projects having tested their outputs in a real-life environment ·  Number of project amendments following demonstrations ·  Number of validated research results ·  Number of commercially exploited IPR ·  Assessment of value-for-money of projects undertaken 
 Establish a strong IPR protection and management framework || ·  Existence of a general IPR framework ·  Existence of IPR clauses in membership and partnership agreements ·  Number of IPR generated jointly by the iPPP 
 Ensure a rapid implementation of improved rail R&I activities || ·  Time required to determine the composition of the Administrative Board and hold first meeting ·  Number of days between regulatory creation of the iPPP and financial autonomy ·  Respect of deadlines for the launch of the first calls for proposals ·  Level of completion of activities and tasks per programme and project 
 Ensure an adequate success rate of proposals  that ensures balance between resources and demand || ·  Number of calls for proposals and number of grants ·  Number of grants signed ·  Success rate of calls for proposals 
 Reduce time-to-grant to enable a rapid start-up of project activities || ·  Time-to-grant for projects ·    
 Reduce share of administrative costs of fund management || ·  Number and cost of employees ·  Share of administrative expenditure in total expenditure ·  Breakdown of administrative costs (staff, IT, buildings, etc.) ·  Existence of resource sharing agreements with other organisations 
 Establish mechanisms for systematic monitoring of project progress and outcomes || ·  Definition and validation of monitoring and evaluation processes by the Administrative Board ·  Existence of monthly, quarterly and annual monitoring reports ·  Existence of annual internal evaluations ·  Existence of tri-annual external evaluations 

8.         
Annexes
Annex I: Abbreviations
 
 ARTEMIS || Joint Technology Initiative on embedded systems 
 CER || Community of European Railway and Infrastructure Companies 
 cPPP || Contractual public private partnership 
 CR || Collaborative Research 
 ENIAC || Joint Technology Initiative on nanoelectronics 
 ENTR (DG) || European Commission Directorate General for Entreprise and Industry 
 ENV (DG) || European Commission Directorate General for the Environment 
 ERRAC || European Rail Research Advisory Council 
 ERA || European Railway Agency 
 ERTMS || European Rail Traffic Management Systems 
 ETCS || European Train Controlling System (a basic component of ERTMS) 
 EU || European Union 
 EUR || Euro 
 EURNEX || European rail Research Network of Excellence 
 FCH || Fuel Cells and Hydrogen 
 FP6, FP7 || Sixth and Seventh Framework Programme of the European Community for research, technological development and demonstration activities 
 GDP || Gross Domestic Product 
 GSM-R || Global System for Mobile Communications - Railway 
 H2020 || Horizon 2020 the Framework Programme of the European Community for research and innovation (2014-2020) 
 IA || Impact Assessment 
 ICT || Information and Communication Technologies 
 IMI || Innovative Medicines Initiative 
 iPPP || Institutional public private partnership 
 JTI || Joint technology initiative 
 JU || Joint Undertaking 
 KPI || Key Performance Indicator 
 MOVE (DG) || European Commission Directorate General for Mobility and Transport 
 OECD || Organisation for Economic Development and Cooperation 
 PPP || Public-Private Partnership 
 REGIO (DG) || European Commission Directorate General for Regional Policy 
 R&I || Research and innovation 
 RSI || Railway Supply industry 
 RTD || Research and Technological Development 
 RTO || Research and Technology Organisation 
 RU || Railway Undertaking 
 SERA || Single European Rail Area 
 SESAR || Single European Sky Air Traffic Management Research 
 SME || Small and Medim-sized Entreprise 
 TFEU || Treaty of Functioning of the European Union 
 TRL || Technology readiness level 
 TSI || Technical Specification for Interoperability 
 UIC || International Union of Railways 
 UITP || International Association of Public Transport 
 UNIFE || Association of the European Rail Manufacturing Industry 

Annex
II: Key developments in the rail sector

Introduction
In its White Paper "Roadmap to a
Single European Transport Area - Towards a competitive and resource efficient
transport system" adopted on 28 March 2011 ('2011 White Paper'), the
Commission unveiled its vision to establish a genuine Single European Transport
Area and it clarified that this objective implies creating the true Single
European railway Area. A crucial condition to meet this goal is the removal of
all obstacles of administrative, technical or regulatory nature still holding
back the rail sector. As announced in the 2011 White Paper, the Commission has
prepared a set of proposals, to be adopted sequentially within the Fourth
Railway Package.
Additionally, the European Council
conclusions of January 2012 highlight the importance of releasing the
growth-creating potential of a fully integrated Single Market, including as
regards network industries.[88]
More precisely, the Commission Communication on Action for Stability, Growth
and Jobs adopted on 30 May 2012[89]
stresses the importance of reducing further the regulatory burden and barriers
to entry in the rail sector, making therefore country specific recommendations
in that direction. In the same vein, the Commission adopted on 6 June 2012 the
Communication on strengthening the governance of the single market, which
stresses the importance of the transport sector with a special attention to
rail.[90]

This Annex gives a brief background of the
development of EU railway acquis and clarifies the necessity and
objectives of the Fourth Railway Package within this context. It presents all
the elements included in the Package (a chapeau communication and seven
legislative proposals accompanied by three impact assessments) and explains how
different pieces fit together.[91]
In the
context of the adoption of the 4th railway package on 30 January 2013
(cf.infra), the
Communication "The Fourth Railway Package – Completing the single European
railway area to foster European competitiveness and growth" indicates that
a more European approach to rail is also intended to provide a single market
for rail equipment suppliers with lower costs and explicitly refers to the industry-led
Shift2Rail initiative as a means to contribute to developing rail as a
transport mode by promoting step-change innovations for passenger rolling
stock, freight transport, traffic management systems and rail infrastructure. 
Development of EU railways acquis
In the past decade, the European legislator
has considerably developed the EU acquis encouraging competitiveness
and market opening. The overarching idea has been that greater
competition makes for a more efficient and customer-responsive industry. In
parallel measures have been taken to improve the interoperability and safety
of national networks; and encourage the development of well integrated rail
system leading to 'European', rather than 'national', railways.
Rail legislation in the early nineties
introduced some limited degree of market opening and prompted the railways to
improve efficiency by introducing management independence of railway
undertakings from the state and separation of accounts between infrastructure
management and transport operations. Since 2000, however, the European
Commission has put forward further initiatives in the shape of packages of
legislative measures.
The First Railway Package, adopted in 2001, was designed to:

 open the international rail freight
     market,
 establish a general framework for the
     development of European railways, and clarify the relationship between (a)
     the state and the infrastructure manager; (b) the state and railway
     undertakings and (c) the infrastructure manager and railway undertakings
     (Directive 2001/12/EC);
 set out the conditions that freight
     operators must meet in order to be granted a licence to operate services
     on the European rail network (Directive 2001/13/EC); and
 define policy for capacity allocation and
     infrastructure charging (Directive 2001/14/EC). 

The Second Railway Package was adopted
in 2004. Its aim was to determine:

 a common approach to rail safety (Directive
     2004/49/EC)
 requirements for interoperability of the
     European high speed and conventional rail systems (Directive 2004/50/EC)
 the opening of national and international
     rail freight markets on the entire European network (Directive 2004/51/EC) 
 the establishment of the European Railway
     Agency (Regulation (EC) 881/2004, amended
     by Regulation 1335/2008).

The Third Railway
Package was adopted in 2007, to open up
international passenger services to competition. The objective of the package
was:

 opening the market for international
     passenger services to competition (Directive 2007/58/EC) 
 setting the conditions and procedures for
     the certification of train crews operating locomotives and trains
     (Directive 2007/59/EC); and 
 ensuring basic rights for rail passengers
     (Regulation 1371/2007), for
     example, with regard to insurance, ticketing, and for passengers with
     reduced mobility.

The Recast of the First Railway Package was proposed by the Commission in 2010. Following a final vote of
approval in the European Parliament on 3 July 2012, the new EU rules should
come into force by the end of 2012. The recast aims to simplify and consolidate
the rules by merging three directives and their amendments into a single text.
Importantly, the Recast also seeks to clarify existing provisions and tackle
key problem areas which have been identified in the market over the last ten
years. In particular, the new legislation will strengthen the power of national
regulators, improve the framework for investment in rail, and ensure fairer
access to rail infrastructure and rail related services.
The 4th railway package was adopted
by the Commission and is currently being negotiated with the Council and the
European Parliament. As explained further ahead, it contains proposals in 3
different domains:

 opening domestic passenger market to
     competition, including open access lines as well as the routes under PSOs
 improving the infrastructure governance
 establishing a common approach to safety
     and interoperability rules to remove remaining administrative and
     technical barriers 

Developments in EU rail market
Despite the considerable development of the
EU acquis and rail markets, the modal share of passenger rail in
intra-EU transport has in average remained more or less constant since 2000, at
around 6%. The latest Euro-barometer survey suggests that only 6% of Europeans
uses the train at least once per week.[92]
It should be noted that there are marked differences between Member States, but
in overall rail loses out in terms of modal share compared to other modes,
reflecting a (real or perceived) low level of efficiency, service levels and
quality compared to other transport modes. In the Consumer Scoreboard 2011[93],
train services score worst of all transport services and four in ten consumers
consider the choices in that service category to be inadequate. 
Improvements will be necessary in all
rail segments
As demonstrated by the EVERIS study[94],
to improve the overall modal split in favour of rail, improvement will be
necessary in all rail segments, including conventional long-distance and urban
train services.
The 6% modal share for rail in the EU has
remained fairly stable in spite of the impressive development of high-speed
train networks. The latter have managed to gain some markets at the expense
of air transport services, but at the same time air transport has maintained
important flows of passenger traffic on routes competing with rail[95].
Since the mid-nineties, local and
regional passenger train services in most Member States that did not open
up their market have fallen in a downward spiral of continuous operational
losses and subsequent reduced service offer. This decline has been exacerbated
in the EU12 Member States by the decay of old infrastructure and rolling stock
on the one hand, and wealth driven high-growth of car ownership, on the other
hand. 
Although commuter transport around
urban agglomerations experiences growth in some Member States, cars still
secure an important share of urban transport – 59% of Europeans never use
suburban trains. This situation contrasts with the 75% urbanisation rate of the
EU27 and therefore indicates a huge market development potential for suburban
and regional passenger rail transport, especially given the raising congestions
on roads.
The rail freight markets within the
EU have been opened for a number of years, and the industry’s stagnation cannot
therefore be simply explained by the existence of legal barriers of the kind
that continue to restrict competition in domestic passenger services. The
problem to be addressed therefore also needs to be defined in terms of
technical, physical capacity and institutional barriers, which have frustrated
action to open markets taken at the EU level.
What are the problems that led to the adoption of the 4th Railway
package?
According to available studies, the modest
development of the rail sector, as explained above, can be attributed to the
presence of several administrative, technical, institutional and legal
obstacles, which still hamper market access and operational efficiency of
service providers.
Domestic
passenger markets are closed
Whereas markets for rail freight services
have been fully opened to competition since January 2007[96] and those
for international passenger transport services as of 1 January 2010[97],
national domestic passenger markets, which represent 94% of all passenger-km
remain largely closed[98].
However, by removing the legal barrier by allowing open access to
infrastructure for domestic passenger services, would have rather limited
effects given that major part of the domestic rail market is covered by public
service contracts (PSC). The rules on the provision of transport services under
public service obligations (PSO) are laid down in Regulation 1370/2007[99]
which gives the possibility to competent authorities to exclude rail transport
services from the obligation to award PSCs through an open tendering procedure.
This means that most local and regional services, and certain long-distance
services, are operated under PSO and attributed to operators through direct
award. In addition, the actual impact of market opening depends on the specific
requirements imposed for and within PSCs, making the call either attractive or
disguisedly non-attractive for new entrants in tendering procedures (e.g. with
the aim to protect the incumbent railway undertaking).
Interoperability
and safety
Specific EU legislation exists to promote
interoperability in order to overcome national historic differences in the
field of technical specifications for infrastructure (gauge widths,
electrification standards and safety and signalling systems[100]). EU
legislation also sets the framework for a harmonised approach to rail safety in
the EU[101].
Furthermore, it obliges the Member States to set up the system of national
authorities, consisting of national safety authorities, notified bodies,
national investigation bodies and regulatory bodies. 
The European Railway Agency (ERA)[102],
established by the Second Railway Package, plays a central role in promoting
interoperability, harmonising technical standards, and developing common
approach to safety, all requiring close interaction with the Member States and
rail sector stakeholders.
While the level of safety on EU railways
has gradually increased, and therefore safety levels as such are not an issue,
stakeholders have drawn the Commission's attention to the fact that certain technical and administrative hurdles still persist, creating
excessive administrative costs and market access barriers, especially for new
entrants. This suggests that the highly decentralised
system of railway authorities in place may not have fully coped with the
European dimension of the rail services. Firstly,
existence of largely non-transparent national technical and safety rules, which
overlap and/or are in conflict with the EU legislation, creates unnecessary
complexities for RUs. Secondly, there are marked discrepancies in how the
national safety authorities (NSAs) conduct vehicle authorisation and safety
certifications processes, some NSAs being less efficient and effective than
others. This has led to reflections on how to further enhance the role of the
ERA in the integration processes.
Infrastructure
governance
The First Railway Package established a
distinction between infrastructure managers (IM), who run the network, and
railway undertakings (RUs), that use it for transporting passengers or goods.
The legislation requires that infrastructure charging and capacity allocation,
being key factors in opening up the market, must be performed independently of
the incumbent RU so as to ensure fair and non-discriminatory access of all
operators to infrastructure. Independence of essential functions of
infrastructure management has to be ensured in legal, organisational and decision-making
terms as to allow for all railway undertakings an equal access to
infrastructure and related services. Member States must also have independent
regulatory bodies in place to monitor railway markets and to act as an appeal
body for rail companies if they believe they have been unfairly treated.
There are, however, problems with the
transposition and enforcement of these requirements and the Commission has
initiated several infringement procedures, on which it expects the Court of
Justice of the EU to express its view by the spring 2013. The interactions
between railway undertakings and infrastructure managers, where these
independence rules have not been implemented, have created conflicts of
interest still resulting in access barriers and market distortions at the
expense of new entrants, such as access denials to infrastructure and
discriminatory charges.
However, even where the existing
legislation has been respected, there remain certain problems related to the
use of infrastructure and related services. Partially these issues are expected
to be solved through the more precise provisions provided in the Recast of the
First Package, especially through the strengthened role of rail regulators.
However, certain issues appear to require further legislative intervention. For
instance, according to the structure and economics of the railway sector, it
could be necessary for the purpose of efficient infrastructure management to
keep certain IM functions together, rather than allowing them to be performed by
separate (though independent) bodies (e.g. it could be useful to couple traffic
management with planning of maintenance works). Furthermore, today the
independence requirements apply only to the essential functions (infrastructure
charging and capacity allocation), but it might be necessary to extend these
requirements also to certain other activities of the IM crucial for
competition, such as infrastructure investments planning, financing and
maintenance. The optimal governance structure has also led to reflections on
the degree of institutional separation between infrastructure management and
service provision. 
Consequences for the railway equipment
manufacturing industry
Railway undertakings and infrastructure
managers purchase some 50 billion EUR of goods and services, out of which a
substantial part is provided by the railway equipment industry. The closure of
domestic passenger markets and the problems of interoperability perpetuate the
fragmentation of railway systems along national lines and prevent the emergence
of a true internal market of railway equipment. Railway manufacturers are
constrained to tailor their goods to each national market, which prevent them
from benefitting from economies of scale. This continuous customisation of
products weakens incentives for interoperability. The railway manufacturing
industry finds itself then in a vicious circle of specialisation along national
lines. At the same time, the emergence of large railway markets like China,
India and the US expose the EU railway manufacturing industry with new
manufacturers from these countries that sell to large single markets with
single safety and interoperability requirements and therefore enjoy from
substantial economies of scale.
Action taken in the Fourth Railway Package
The main objectives of the Fourth Railway
Package is to enhance the quality and efficiency of rail services by removing
remaining legal, institutional and technical obstacles, fostering the
performance of the railway sector and its competitiveness. As announced by the
2011 White Paper, these issues will be addressed by the different initiatives
in three main domains:
-       
Domestic passenger market opening – opening domestic rail passenger market to competition, including
open access lines as well as the routes under PSOs;
-       
Infrastructure governance - ensuring that the infrastructure manager performs a consistent set
of functions that optimises the use of infrastructure capacity, and its
organisation guarantees non-discriminatory access to the infrastructure and rail
related services.
-       
Interoperability and safety - removing remaining administrative and technical barriers, in
particular by establishing a common approach to safety and interoperability
rules to decrease administrative costs, to accelerate procedures, to increase
economies of scale for RUs and to avoid disguised discrimination.
What
about infrastructure?
Obviously, to contribute to the growth of
the modal share of rail, new rail infrastructures need to be built across
Europe. The 2011 White Paper calls for completing the European high-speed rail
network by 2050, so that it would be fully connected to airports enabling the
majority of medium-distance passenger transport to be performed by rail. Future
EU strategy for infrastructure development has been already set out in the
Commission proposals for Connecting Europe Facility[103] and the new TEN-T Guidelines[104] and therefore remains out of the scope of the Fourth Package..
The technological and research pillar of the 4th railway package
The idea of a package approach in the 4th
railway package was that there are synergies to be achieved between its own
objectives and the effects of better coordinating research and innovation
efforts in the rail sector and the impacts. Some examples of such synergies are
provided below.
-       
Effectiveness of de jure market opening
depends on allowing for certain 'framework conditions', such as access to
infrastructure, rolling stock, stations, train path allocation, etc. Some of
these framework conditions will be addressed within the domestic passenger
market opening initiatives, while the others via the proposal on infrastructure
governance.
-       
One way to improve rolling stock availability is
to support development of rolling stock leasing market (as considered under in
the domestic passenger market opening IA). However, a necessary condition for
that is more standardised equipment and the on-going standardisation process[105]
is expected to be enhanced by the European "passport" for vehicles,
considered within the interoperability and safety initiatives.
-       
All initiatives would, in their own terms,
contribute to a more predictable business models for RUs operating across the
borders of EU Member States:
o  
interoperability initiative by harmonising approach to safety certification and
authorisation of rolling stock,
o  
 market access initiative by
introducing universal licence for provision of passenger services throughout
the EU and setting common principles for PSO definition, and
o  
infrastructure governance initiative by
proposing a more harmonised institutional setup of infrastructure
managers in different Member States. 
-       
Better infrastructure governance should improve
the operational efficiency of railways and possibly allow to improve the travel
times for passengers and freight.
Overall, the different operational gains expected as a result of each
initiative should allow a better value for public money, on which the
functioning of railways is still heavily reliant.
In this context, the development of
specific R&I efforts in the rail sector in support of increased quality of
railway services, efficiency of railway systems (including interoperability)
and interoperability will be an essential driver in the implementation of the 4th
railway package.

Annex
III: Overview of existing EU rail R&I projects

During the last decade, R&D investment
by the European Commission through the Framework Programmes for Research
Development has resulted in outputs that have been and are still being taken up
by the market. Under the FP7, funding priorities for rail research projects
have largely focused on the following issues:
·        
Intelligent mobility: Intelligent mobility capabilities now represent one of the most
important areas of research in the rail sector. The application of intelligent
systems is a powerful means to overcome some of the inherent shortcomings of
public and rail transport. Quality of services, both for passengers and
freight, would be greatly enhanced if all stakeholders could take on board just
some of the new and exciting developments in this area.
·        
Safety and security: Train accidents result in an average of 100 passenger and crew
fatalities per year within the EU. In 2002, the European Commission proposed a
new package of measures to revitalise European railways, based on the Transport
White Paper. One of these measures is the development a common approach to rail
safety. In order to ensure continued improvement in both railway safety and
security, an overall systems approach is clearly necessary, including a full
analysis of the interrelated elements and determination of risks. The main
targets for research activities in this area include hazard reduction. Among
other things, hazard reduction is directly linked to improvements in quality.
Thus, improving the overall quality management system is also a key priority.
·        
Environment: Although
the rail sector already has a positive image in comparison with other transport
modes, the weight of public opinion continues to demand that further
improvements be made. One area of particular ongoing concern is noise abatement.
Research on improving noise performance in the rail sector is heavily dependent
on collaboration between infrastructure managers, train operators, suppliers,
national governments and supranational legislators. Others areas of concern
include reducing harmful emissions, reducing operational energy consumption and
designing for the environment, i.e. designing for easy recycling and reducing
the amount of hazardous materials used in construction processes. Finally,
emphasis is also placed on further work on emerging technologies, including
fuel cells as power sources and levitation technologies that can further reduce
the impact of rail transport on the environment.
·        
Interoperability: The main goals for research on interoperability are to establish,
guarantee and continuously improve the conditions for the operational and
technical integration of the different national railway systems in the European
Union and associated countries. Work focuses primarily on:
o  
Finding cost-effective technical and operational
solutions for interoperability
o  
Creating the conditions for seamless transport
and enhancing the capacity of the network
o  
Reducing migration times for the implementation
of interoperability solutions
o  
Developing new interoperable concepts for
dedicated freight transport
o  
Developing innovative and modular concepts for
increasing system simplification
o  
Considering intermodality to enhance overall
transport system performance.
·        
Innovative materials and production methods: This research priority sets out to achieve cost reductions for both
newly built products and maintenance. Within this framework, a list of future
research topics has been established, specifying the expected benefits for rail
transport and the milestones for the introduction of innovation.
Although there is no single report
presenting the evaluation results of all rail projects funded under FP7 or 
previous framework programmes, we have used findings presented in the following
reports, relating to EU-funded research projects in general or to EU-funded
transport research projects, to support our analysis:
·        
Interim evaluation of EU FP7 Transport research
notably within Theme 7 of the cooperation programme “Transport (including
aeronautics)”, February 2011
·        
FP7 Annual Monitoring Reports 
·        
SITPRO Plus: FP7-funded study on the Impacts of
the Transport RTD Projects in FP5 and FP6, November 2010
·        
Market-up : FP7-funded study on transport
research market uptake, December 2011
·        
ERRAC Roadmap: FP-7 funded study on the
evaluation of market uptake and lessons learnt from past project results
·        
JRC report on R&D efforts of the EU
automotive and rail industry and the public sector, 2010
We have also used the extensive evidence
compiled in the Horizon 2020 impact assessment.
On top of this, we gathered available data
relating to projects funded under the FP7-Transport Work Programme that could
be attributed to the rail sector. Project data relates to the types of partners
in the consortia and their countries of origin, the budget contributions of the
Union and of other partners, and the duration of projects. Data concerning the
field of activity of the partners was not available meaning that it was not
possible to provide evidence pertaining to the participation of the full rail
value chain in current framework programme projects.
The following table provides an overview of
the 47 rail-only projects funded under the FP7-Transport budget. The total
value of these 47 projects so far was EUR 221,615,609, to which the Commission
contribution amounted to EUR 146,393,043 – i.e. 66% of total project costs
overall.
On top of these projects, various
FP7-Transport intermodal projects have covered rail aspects. Some rail projects
have also been funded under other budget lines, including FP7-SME, FP7-People,
FP7-Security and FP7-ICT.
 Project Acronym || Project Title || Project Description || Coordinator's Legal Name || Coordinator's Country || Coordinator's Organisation Type || Project Start Date || Project End Date || Project Total Cost || Project EC Contribution 
 ACEM RAIL || Automated and cost effective maintenance for railway || Automated and cost effective railway infrastructure maintenance || Centro de Estudios Materiales y Control de Obras S.A. || Spain || SMEs || 01-Dec-2010 || 30-Nov-2013 || 3,849,273 || 2,501,315 
 ACOUTRAIN || Virtual certification of acoustic performance for freight and passenger trains || Rail system interoperability (regulatory and non-legislative interoperability based on technological innovations || UNION DES INDUSTRIES FERROVIAIRES EUROPEENNES - UNIFE || Belgium || Other || 01-Oct-2011 || 30-Sep-2014 || 3,217,920 || 2,091,220 
 AEROTRAIN || AEROdynamics Total Regulatory Acceptance for the Interoperable Network || Interoperable rolling stock || UNION DES INDUSTRIES FERROVIAIRES EUROPEENNES - UNIFE || Belgium || Other || 01-Jun-2009 || 31-May-2012 || 4,042,239 || 2,499,998 
 ALARP || A railway automatic track warning system based on distributed personal mobile terminals || Human components || ANSALDO STS S.p.A. || Italy || Private Companies || 01-Jan-2010 || 30-Apr-2013 || 3,941,877 || 2,626,610 
 AUTOMAIN || Augmented Usage of Track by Optimisation of Maintenance, Allocation and Inspection of railway Networks || Automated and cost effective railway infrastructure maintenance || PRORAIL B.V. || Netherlands || Private Companies || 01-Feb-2011 || 31-Jan-2014 || 4,077,603 || 2,499,971 
 CARGOVIBES || Attenuation of ground-borne vibration affecting residents near freight railway lines || Attenuation of ground-borne vibration affecting residents near railway lines || NEDERLANDSE ORGANISATIE VOOR TOEGEPAST NATUURWETENSCHAPPELIJK ONDERZOEK - TNO || Netherlands || Research Organisations || 01-Apr-2011 || 31-Mar-2014 || 4,909,795 || 3,667,614 
 CETRRA || Actions to stimulate participation of cooperation partners in surface transport research || Stimulating participation of small and medium size enterprises (SME) || TSB Innovationsagentur Berlin GmbH || Germany || SMEs || 01-Jun-2008 || 30-Sep-2010 || 506,337 || 505,622 
 CLEANER-D || Clean European Rail - Diesel || Emission reduction technologies for diesel locomotives || UNION DES INDUSTRIES FERROVIAIRES EUROPEENNES - UNIFE || Belgium || Other || 01-Jun-2009 || 31-May-2013 || 13,333,093 || 7,975,574 
 D-RAIL || Development of the Future Rail Freight System to Reduce the Occurrences and Impact of Derailment || Reducing the occurrences and impacts of freight train derailments || UNIVERSITY OF NEWCASTLE UPON TYNE || United Kingdom || Higher or Secondary Education || 01-Oct-2011 || 30-Sep-2014 || 4,766,522 || 2,998,465 
 DYNOTRAIN || Railway Vehicle Dynamics and Track Interactions Total Regulatory Acceptance for the Interoperable Network || Interoperable rolling stock || UNION DES INDUSTRIES FERROVIAIRES EUROPEENNES - UNIFE || Belgium || Other || 01-Jun-2009 || 31-May-2013 || 5,543,718 || 3,258,795 
 EATS || ETCS Advanced Testing and Smart Train Positioning System || Innovation and standardisation in the field of signalling to accelerate a European Train Control System rollout || CENTRO DE ESTUDIOS E INVESTIGACIONES TECNICAS || Spain || Research Organisations || 01-Oct-2012 || 31-Mar-2016 || 3,902,076 || 2,989,591 
 ECUC || Eddy CUrrent Brake Compatibility || Rail system interoperability (regulatory and non-legislative interoperability based on technological innovations) || CENTRO DE ESTUDIOS E INVESTIGACIONES TECNICAS || Spain || Research Organisations || 01-Sep-2012 || 31-Aug-2015 || 3,253,188 || 2,050,179 
 ERRAC ROAD MAP || ERRAC Road Map || Competitive transport operations || UNION INTERNATIONALE DES CHEMINS DE FER || France || Other || 01-Jun-2009 || 31-Jul-2012 || 1,683,513 || 1,540,994 
 EURAXLES || EURAXLES: Minimizing the risk of fatigue failure of railway axles || Minimizing the risk of fatigue failure of railway axles || UNION DES INDUSTRIES FERROVIAIRES EUROPEENNES - UNIFE || Belgium || Other || 01-Nov-2010 || 31-Oct-2013 || 4,717,900 || 2,899,998 
 EUREMCO || European Railway Electromagnetic Compatibility || Rail system interoperability (regulatory and non-legislative interoperability based on technological innovations || UNION DES INDUSTRIES FERROVIAIRES EUROPEENNES - UNIFE || Belgium || Other || 01-Oct-2011 || 30-Sep-2014 || 3,686,492 || 2,144,829 
 FREIGHTVISION || Vision and Action Plans for European Freight Transport until 2050 || Preparatory action on Innovative Transport Networks || AustriaTech - Gesellschaft des Bundes für technologiepolitische Maßnahmen || Austria || Research Organisations || 14-Aug-2008 || 13-Feb-2010 || 2,737,916 || 1,999,623 
 FUTURAIL || Job Opportunities for the Railway Community of Tomorrow || Raising Awareness of potential job opportunities in the Surface Transport sectors || INSTITUTO SUPERIOR TECNICO || Portugal || Higher or Secondary Education || 01-Jan-2009 || 30-Jun-2010 || 262,080 || 262,080 
 INESS || INtegrated European Signalling System || Delivering ERTMS-compliant Interlocking Systems || UNION INTERNATIONALE DES CHEMINS DE FER - UIC || France || Other || 01-Oct-2008 || 31-Mar-2012 || 15,734,414 || 10,015,379 
 INFRAGUIDER || Infrastructure Guidelines for Environmental Railway Performance || The greening of transport-specific industrial processes || CONSORZIO NAZIONALE INTERUNIVERSITARIO PER I TRASPORTI E LA LOGISTICA || Italy || Research Organisations || 01-Jan-2009 || 31-Dec-2010 || 1,138,665 || 1,138,665 
 INTERAIL || Development of a Novel Integrated Inspection System for the Accurate Evaluation of the Structural Integrity of Rail Tracks || Advanced and cost effective infrastructure construction, maintenance and monitoring || INSTITUTO DE SOLDADURA E QUALIDADE || Portugal || Research Organisations || 01-Oct-2009 || 31-Mar-2013 || 4,991,523 || 3,281,750 
 LIVINGRAIL || Living in a sustainable world focused on electrified rail || Planning rail towards 2050 || FRAUNHOFER-GESELLSCHAFT ZUR FOERDERUNG DER ANGEWANDTEN FORSCHUNG E.V || Germany || Research Organisations || 01-Dec-2012 || 31-May-2015 || 1,240,912 || 985,259 
 MAINLINE || MAINtenance, renewaL and Improvement of rail transport iNfrastructure to reduce Economic and environmental impacts || Cost-effective improvement of rail transport infrastructure || UNION INTERNATIONALE DES CHEMINS DE FER - UIC || France || Other || 01-Oct-2011 || 30-Sep-2014 || 4,466,361 || 2,972,953 
 MARATHON || Make Rail The Hope for protecting Nature || Fast implementation of innovative/effective rail technologies to improve rail freight services || D'APPOLONIA SPA || Italy || Private Companies || 01-Apr-2011 || 31-Mar-2014 || 4,386,346 || 2,699,992 
 MAXBE || INTEROPERABLE MONITORING, DIAGNOSIS AND MAINTENANCE STRATEGIES FOR AXLE BEARINGS || Rail system interoperability (regulatory and non-legislative interoperability based on technological innovations) || UNIVERSIDADE DO PORTO || Portugal || Higher or Secondary Education || 01-Nov-2012 || 31-Oct-2015 || 4,595,999 || 3,000,000 
 MERLIN || Sustainable and intelligent management of energy for smarter railway systems in Europe: an integrated optimisation approach || Management of energy in railway systems || UNION DES INDUSTRIES FERROVIAIRES EUROPEENNES - UNIFE || Belgium || Other || 01-Oct-2012 || 30-Sep-2015 || 7,121,486 || 4,499,325 
 MERLIN || Development of Aero Engine Component Manufacture using Laser Additive Manufacturing || Aerostructures || ROLLS ROYCE PLC || United Kingdom || Private Companies || 01-Jan-2011 || 31-Dec-2014 || 7,122,572 || 4,886,561 
 MODSAFE || Modular Urban Transport Safety and Security Analysis || Integrated safety and security for urban rail || TUEV RHEINLAND INTERTRAFFIC GMBH || Germany || Private Companies || 01-Sep-2008 || 31-Aug-2012 || 5,180,841 || 3,469,161 
 NEAR2 || Network of European – Asian Rail Research capacities || Europe to Asia: rail research collaboration || CENTRE FOR RESEARCH AND TECHNOLOGY HELLAS || Greece || Research Organisations || 01-Dec-2012 || 30-Nov-2014 || 962,832 || 887,003 
 ON-TIME || Optimal Networks for Train Integration Management across Europe || A system approach for railway operations management to increase capacity and decrease delays for railway customers’ satisfaction || D'APPOLONIA SPA || Italy || Private Companies || 01-Nov-2011 || 31-Oct-2014 || 7,970,833 || 5,381,969 
 OPTIRAIL || Development of a smart framework based on knowledge to support infrastructure maintenance decisions in railway corridors || Next generation tools for optimised infrastructure asset management || VIAS Y CONSTRUCCIONES || Spain || Private Companies || 01-Oct-2012 || 30-Sep-2015 || 3,916,343 || 2,700,000 
 OSIRIS || Optimal Strategy to Innovate and Reduce energy consumption In urban rail Systems || Energy consumption reduction in urban rail systems || UNION DES INDUSTRIES FERROVIAIRES EUROPEENNES - UNIFE || Belgium || Other || 01-Jan-2012 || 31-Dec-2014 || 7,408,302 || 4,299,951 
 PANTOTRAIN || PANTOgraph and catenary interaction Total Regulatory Acceptance for the Interoperable Network || Interoperable rolling stock || UNION DES INDUSTRIES FERROVIAIRES EUROPEENNES - UNIFE || Belgium || Other || 01-Jun-2009 || 31-May-2012 || 3,534,167 || 2,166,370 
 PUBTRANS4ALL || Public Transportation - Accessibility for All || New mobility concepts for passengers ensuring accessibility for all || RODLAUER CONSULTING EU || Austria || SMEs || 01-Sep-2009 || 30-Nov-2012 || 2,750,614 || 1,807,662 
 RESTRAIL || Reduction of Suicides and Trespasses on RAILway property || Mitigation measures and good practice to reduce human fatalities and disruption of services resulting from suicides and trespasses on railways property || UNION INTERNATIONALE DES CHEMINS DE FER - UIC || France || Other || 01-Oct-2011 || 30-Sep-2014 || 3,868,393 || 2,816,243 
 RIVAS || Railway Induced Vibration Abatement Solutions || Attenuation of ground-borne vibration affecting residents near railway lines || UNION INTERNATIONALE DES CHEMINS DE FER - UIC || France || Other || 01-Jan-2011 || 31-Dec-2013 || 8,235,633 || 5,199,995 
 SAFERAIL || Development of Novel Inspection Systems for Railway Wheelsets || Safety and security by design || TWI LIMITED || United Kingdom || Research Organisations || 01-Oct-2008 || 30-Sep-2011 || 4,448,701 || 3,000,000 
 SECUREMETRO || Inherently secure blast resistant and fire safe metro vehicles || Safety and security by design || UNIVERSITY OF NEWCASTLE UPON TYNE || United Kingdom || Higher or Secondary Education || 01-Jan-2010 || 31-Dec-2012 || 3,769,504 || 2,710,714 
 SECURESTATION || Passenger station and terminal design for safety, security  and resilience to terrorist attack || Safety and security by design in transport stations and terminals || INGENIERA DE SISTEMAS PARA LA DEFENSA DE ESPANA SA-ISDEFE || Spain || Private Companies || 01-Jun-2011 || 31-May-2014 || 3,119,919 || 2,287,712 
 SKILLRAIL || Education and Training Actions for high skilled job opportunities in the railway sector || Shaping the New Generation of Sustainable Surface Transport Mobility for Europe || INSTITUTO SUPERIOR TECNICO || Portugal || Higher or Secondary Education || 01-Dec-2009 || 30-Nov-2011 || 483,941 || 454,525 
 SMART RAIL || Smart Maintenance and Analysis of Transport Infrastructure || Cost-effective improvement of rail transport infrastructure || UNIVERSITY COLLEGE DUBLIN, NATIONAL UNIVERSITY OF IRELAND, DUBLIN || Ireland || Higher or Secondary Education || 01-Sep-2011 || 31-Aug-2014 || 3,823,676 || 2,782,055 
 SPECTRUM || Solutions and Processes to Enhance the Competitiveness of Transport by Rail in Unexploited Markets || Step changes in rail freight logistics: new technologies and methods to increase freight competitiveness in the emerging low density, high value market || UNIVERSITY OF NEWCASTLE UPON TYNE || United Kingdom || Higher or Secondary Education || 01-May-2011 || 30-Apr-2015 || 4,317,499 || 2,785,539 
 SPIDER PLUS || Sustainable Plan for Integrated Development through the European Rail network – Projecting Logistics & mobility for Urban Spatial design evolution || Planning rail towards 2050 || Hacon Ingenieurgesellschaft mbH || Germany || SMEs || 01-Dec-2012 || 31-May-2015 || 4,077,187 || 2,969,325 
 SUSTRAIL || The sustainable freight railway: Designing the freight vehicle – track system for higher delivered tonnage with improved availability at reduced cost || The sustainable freight railway: Designing the freight vehicle – track system for higher delivered tonnage with improved availability at reduced cost || CONSORZIO PER LA RICERCA E LO SVILUPPO DI TECNOLOGIE PER IL TRASPORTO INNOVATIVO || Italy || Research Organisations || 01-Jun-2011 || 31-May-2015 || 9,347,579 || 6,599,933 
 TIGER || Transit via Innovative Gateway concepts solving European-Intermodal Rail needs || Rail transport in competitive and co-modal freight logistics chains || CONSORZIO PER LA RICERCA E LO SVILUPPO DI TECNOLOGIE PER IL TRASPORTO INNOVATIVO || Italy || Research Organisations || 01-Oct-2009 || 30-Sep-2012 || 17,054,428 || 10,316,063 
 TREND || Test of Rolling Stock Electromagnetic Compatibility for cross-Domain interoperability || Rail system interoperability (regulatory and non-legislative interoperability based on technological innovations || CENTRO DE ESTUDIOS E INVESTIGACIONES TECNICAS || Spain || Research Organisations || 01-Nov-2011 || 30-Apr-2014 || 2,825,600 || 2,042,026 
 VEL-WAGON || Versatile, Efficient and Longer Wagon for European Transportation || Fast implementation of innovative/effective rail technologies to improve rail freight services || TECHNISCHE UNIVERSITAT BERLIN || Germany || Higher or Secondary Education || 01-Dec-2010 || 31-Dec-2012 || 1,107,704 || 831,687 
 VIWAS || Viable Waggonload production Schemes || Tools and conditions for attractive, efficient and competitive single wagonload traffic and its interaction with road and intermodal transports || Hacon Ingenieurgesellschaft mbH || Germany || SMEs || 01-Sep-2012 || 31-Aug-2015 || 4,182,092 || 2,892,748 
The analysis of the data from the 47 rail
projects funded under FP7-Transport enables us to see that nearly all EU
countries have been involved in at least one of these research projects, with
the exception of Estonia, Latvia and Malta. 
The following graphs provide an overview of
the number of project participations per country, as well as the total
Commission contribution per country. As can be seen, Germany, the United
Kingdom, Italy, France, Spain and Belgium have the highest number of
participations, and benefit from the largest share of Commission contributions.
With regard to the types of organisations
involved in research, the following table shows that private companies account
for 35% of EU funding, against 15% for SMEs, 18% for research organisations,
20% for universities, 5% for public bodies and 7% for other. 
Existing evaluations of EU-funded research
and innovation projects, in general and in the transport and rail sectors have
found that:
•        
The approach adopted for the FP7 is an
improvement compared to the previous FPs (FP7 interim evaluation)
•        
European Technology Platforms (ETPs) add value
to the FP7 Transport programme, help focus the research efforts in the
different modes and contribute to gearing public and private research towards
common goals. The regularly updated versions of the Strategic Research Agendas
(SRAs) are important input for the FP7 Programmes and strongly reinforce the
relevance and legitimacy of the FP7 Transport Programme (FP7 interim
evaluation)
•        
The capacity of the FP7 to attract the most
important players in research and innovation in transport is uneven among
sectors. A significant share of large R&D performers do not participate in
FP7. Therefore there is an untapped reservoir of R&D leaders in the field
that are potential FP partners. Their relationships with EC-led research should
be further investigated in order to find ways to attract them. (FP7 interim
evaluation)
•        
FP7 funds applied mid-term research for projects
that will need follow-ups to lead to innovation. Most of the projects are
applied research projects with a mid-term horizon. This intermediate
positioning of FP research has two strong implications:
o  
FP7 research will only marginally lead up to
radical innovation. Reflection should be carried out concerning the role of EC
research in transport open collaborative research.
o  
Many projects will need a phase of technological
development before they eventually result in an innovative marketable product
or a service. Although it is still a very new initiative, an analysis of Clean
Sky suggests that Joint Technology Initiatives are a very promising tool to
fill this gap, bringing results up to the demonstration stage. Clean Sky is
tackling a major gap through the commitment of a critical mass of public and
private resources towards the development of demonstrators (FP7 interim
evaluation).
•        
The role of the Small and Medium Enterprises
(SMEs) in the projects is important. Even though the objective of 15% of SME
participation has been reached in research funded under the Transport Work
Programmes 2007 and 2008, the analysis of the evaluation team shows that only a
minor share of EU innovative SMEs are involved in FP projects (5.6% in FP6 and
2.2% in FP7 so far) (FP7 interim evaluation).
•        
FP7 research and innovation has not contributed
sufficiently to tackling societal challenges. If each Member State provides its
own response in an uncoordinated way, there is a danger of missing important
opportunities for generating scale and interactions. To be successful Europe
must stimulate coordinated research aimed at addressing these challenges and
improve the way it is transformed into new products and processes. And it must
enhance the interaction between research and innovation actions and the
sectoral policies related to the challenges (H2020 impact assessment).
•        
Among the various factors that can explain the
efficiency of public support for science and technology, one of them is
specific to the EU: the fragmentation of public funding. Almost 90% of public
support for civil R&D is decided directly by the Member States without any
prior cooperation or even coordination. Only 12% of public funding is allocated
through cooperative schemes - such as EU Framework Programmes, Eureka or
intergovernmental collaborative measures - which help to avoid duplication
between different national and regional funding actions (H2020 impact
assessment).
•        
Applied research targeting industrial
applications, often in collaboration with universities, is the standard and
mainstream type of research within the transport field unlike in other research
areas (SITPRO Plus study).
•        
There is a gap between the stated and actual use
of transport research results by relevant stakeholders or users. Between 30 and
60 percent of research goes unexploited. Exploitation in this context means
‗documented use as through reference or acknowledgement in documents. The
degree of lack of exploitation is higher if the actual implementation of
research results is considered instead. The fall-out rate of the use of
transport research is high not only among policy institutions (such as the EU
institutions or national public administrations) but also within the industry—a
surprising finding considering that the industry is the main beneficiary of
transport research contracts (SITPRO Plus study).
•        
Transport research continues to produce two main
types of outputs: academic outputs such as publications and methods on the one
hand; and transport modelling tools and components, on the other. Neither
technologies nor policy-relevant outputs are as important, contrary to the
rhetoric of some Framework Programme documents on the subject (SITPRO Plus
study).
•        
The policy impact of transport research is often
more by name than real. Six out of ten projects consider their results
policy-relevant and four out of ten projects think that their research
contributes to policy harmonization. However the policy relevance dwindles when
specific transport policy objectives such as rail harmonization, road policy or
the TEN-T are considered. The gap, which cannot be explained away by the
thematic variation of the projects, is the combined result of two factors,
namely, the comparatively low specific knowledge of transport policy issues
among some project coordinators in conjunction with the transport modelling paradigm
still dominant among those in charge of designing the European transport
research programme (SITPRO Plus study).
•        
Projects which are large in terms of partnership
(often also involving users and stakeholders in their consortia) and diffused
in terms of contents (i.e. having more than one topic and a broad scope) are
more likely to consider themselves as policy-relevant. This is in line with the
present logic of policy-design which emphasizes cross-sectoral integration.
However, insofar as specific policy output is concerned, projects which are
more focused in terms of topic and research design are more likely to produce
real policy outputs. This is the case for both small and large projects (in
terms of number of partners) but more so the case for large projects (SITPRO
Plus study).
•        
A great effort needs to be made to achieve the
objective of orienting European R&D investment towards addressing societal
challenges. In FP7 there seems to be an unbalanced investment split across
modes, in which air transport appears to be benefiting from a high proportion
of R&D investment while cross-modal issues, which are critical to achieve
“smart, green and integrated transport” seem to be underfinanced (Market Up
study).
•        
The analysis of transport related funding
instruments provides evidence for the existence of the “valley of death”, i.e.
a funding gap at an intermediate stage of the innovation process, between basic
research and commercialization of a new product. It seems easier to find
research funding mechanisms for the phases of basic or applied R&D and
demonstration than for the market pull phases of commercialization, market
accumulation or diffusion. Moreover, most funding schemes analysed showed
little focus on financing closer-to-market activities, market analysis and
development plans (Market Up study).
•        
Funding instruments oriented towards engaging
industrial partners, research organisations and/or education institutions in
collaborative projects and that have specific provisions to ease the
involvement of SMEs, present an important mechanism to involve weak players in
transport research and can potentially play a prominent role in increasing the
market uptake of research results (Market Up study).
•        
Key blocking mechanisms to market uptake in the
transport sector include problems in the area of market formation, lack of
legitimation of innovations, negative impacts from alternative technologies
already on the market, insufficient resource mobilisation, lack of customer
awareness, timing and cost-related issues (Market Up study).
•        
Key inducement mechanisms to market uptake in
the transport sector include government support, usefulness of the innovation
to society, lack of opposition to the innovation, and presence of the necessary
infrastructure (Market Up study).
•        
The transport sector is the largest industrial
R&D investor in the EU and at global level, and road in particular is the
largest investing sector, although all modes show relatively high R&D
intensities (JRC study).
•        
Data problems exist pertaining to rail sector
R&D investments which make it difficult to have a proper overview of
R&D efforts in the rail sector. (JRC study).
•        
The uptake of projects funded under FP5 and FP6
is weak in 55% and strong in only 30% of cases. Out of 44 evaluated projects,
the13 projects with a strong market uptake are in the domains of Greening of
Surface Transport (Design for Environment), Train- Bus Communication Control
Systems and Improving Safety and Security. The 24 projects with weak market
uptake are mostly in the domain of Railway freight operation relating to modal
shift (ERRAC Roadmap). 
•        
Projects will present a better market uptake if
they are aimed at solving issues of general acknowledged interest (eg.
technical, safety, of harmonisation, business cases), if there has been strong
interaction between partners and relevant stakeholders, and if the scope and
objectives have been clearly defined at the beginning (ERRAC Roadmap).

Annex
IV: EU rail R&I objectives and key priorities 

In the context of the goals of the 2011
White paper, the performance of the rail sector compared to other modes is not
yet satisfactory. The growth of passenger traffic by rail since the early
2000's has been insufficient to increase its modal share, which has remained
fairly stable since the 90s, in comparison to cars and aviation. Railway
services perform badly compared to the remaining services in the economy, as
shown by the Consumer Scoreboard. It is therefore necessary to improve the
quality of rail services by responding to the needs of rail passengers and
freight forwarders.
At the same time, the rail sector, which
absorbs substantial public funding (some 45 billion EUR annually), needs to
adapt to a more competitive and market-driven environment to cope with an era
of constrained public finances. In this context, it is necessary to improve the
efficiency of railway services by increasing revenues and decreasing
operational, as well as the costs of assets like rolling stock and
infrastructure - in particular the latter's maintenance, renewal and development.
In line with this, and as explained in
Annex II, the rationale of the 4th railway package is to increase the modal
share of rail through increases in the:

 Quality of rail services
 Efficiency of railway systems
 
 The structure of costs and revenues of the rail sector Revenues Railway undertakings revenues are composed of: -          Revenues from rail passenger services (which represent some 30-35 billion EUR in the EU) -          Revenues from rail freight services (which represent some 10-15 billion EUR in the EU) -          State subsidies to cover the operational costs of public service contracts (which represent some 20 billion EUR in the EU), which are mostly run on regional and suburban rail services Infrastructure managers’ revenues are composed of: -          Revenues from infrastructure charges (which represent some 15 billion EUR) -          Network grants (which represent some 25 billion EUR) Operational costs Railway undertakings operational costs are composed of: -          Labour costs -          Costs of goods and services, in particular energy costs In addition, railway undertakings have to cope with the costs of rolling stock. Infrastructure managers’ operational costs are composed of: -          Labour costs -          Costs of goods and services, in particular of enhancement, renewal and upgrade of infrastructure. The operational costs of railway system amount to some 100 billion EUR yearly. 
How can research contribute to the
overall competitiveness of the rail sector?
To support the increase of rail modal
share, rail research must in particular and inter alia help to:

 Reduce the cost of infrastructure development, maintenance and
     renewals, in particular through reduced life cycle-cost of infrastructure.
 Reduce the cost of railway services, in particular public
     service obligations, by reducing the costs of operation and maintenance of
     rolling stock, lighter and less noisy trains, and savings in energy
     consumption.
 Optimise traffic management to reduce transaction costs of
     railway undertakings and infrastructure managers, increase capacity and
     reduce delays.
 Increase the demand for passenger railway services thanks to
     reliable rolling stock adapted to consumer needs and easily accessible for
     persons with reduced mobility, as well as ticketing solutions that
     facilitate and integrate railway services
 Increase the demand for rail freight services by integrating
     them into supply chains

Proposed research topics
In order to fulfil its potential of playing
a significant role in meeting future transport needs, railways need to
radically progress in terms of service, cost, interoperability, capacity,
carbon footprint and competiveness. Set against such uphill challenge, crafting
the right innovation strategy will require moving well beyond just technology.
Novel business, organisational and logistic solutions as well as new
partnerships with service and technology providers from more advanced sectors
are deemed essential to support new economies of scale and the needed
search-for-excellence by rail. The goal will be to rapidly address manifest
weaknesses that hamper rail services and operations and to engage in a number
of game-changers in rail services and operations.
Analysis undertaken by the Commission
recently[106]
has served to identify the following priority areas for R&I with a view to
achieving a competitive, integrated and interoperable EU railway system.
1. New generation of rolling stock
It is necessary to develop a new generation
of rail vehicles that substantially reduces the cost of rail passenger
services, drastically improves the capacity of rail to take on a larger modal
share and facilitates the use of trains throughout various Member States. 
Research in this area must lead to slashing
operational costs of rail like energy or life-cycle costs (for instance through
improved production and certification processes) as well as to reducing
externalities like noise and damage to tracks. This is essential for the
continuity of rail services in a context of growingly constrained public
budgets – rail services absorb some EUR 20 billion of public subsidies every
year. 
To improve the modal shift, the quality of
rail services – which compete with car and also low-cost airlines – must be
irreproachable and it is necessary to boost the reliability of rail vehicles.
At the same time, rail vehicles must be able to adapt to an ageing and more urban
customer basis, as well as to persons with reduced mobility. 
Finally, as long as rolling stock is
technically confined to a specific Member State, railway undertakings can't
reap the benefits of economies of scale, nor benefit from the cost and finance advantages
of a proper leasing market develop (today only 10% of rolling stock is leased),
which reduces the entry costs for new entrants and public subsidies. It is
essential that research in this area solves some of the critical areas where
rolling stock interoperability has not been technically feasible.
2. Cost Efficient-High Capacity Infrastructure
Taking into account the expected growth in
transport demand, the need to reduce life-cycle infrastructure costs, and the
ever-rising customer expectations in terms of quality of service, research
should aim at identifying relevant infrastructure-related challenges and
develop solutions that result in reduced investment and recurring operational
costs and improve the reliability and availability of rail operations.
Research must focus on new concepts, e.g.
for infrastructure condition monitoring and predictive maintenance, with a view
to improving reliability, capacity, resilience, cost-effectiveness,
accessibility and safety, and minimising noise and vibrations.
3. Intelligent Traffic Management and
Control Systems (ERTMS)
There will be a need to step-increase the
productivity of the legacy infrastructure assets, requiring the latter to be
managed in a more holistic and intelligent way, using lean operational practices
and smart technologies that can eventually contribute to improving the
reliability and responsiveness of customer service and whole economics of rail
transportation.
The ultimate goal of research in this area
is to contribute to enhancing the competitiveness of the European rail
transport (interoperability, safety, performance, quality, cost, Europe 2020).
To this end, the four following objectives should be supported:
·      The deployment of ERTMS in Europe on the European Core Network by
2030 (1) by providing time-to-market "plug-and-play" standardised
products with standardised interfaces (and closing open points of the Control
Command and Signalling Technical Specifications for Interoperability), (2) by
matching the management and maintenance of modern safety-critical software
based systems with the long life expectancy traditionally associated with the
complex and shared railway system, (3) by addressing cross-border issues and
facilitating the migration from legacy systems to ERTMS/ETCS[107], (4) by making ETCS
independent from the communication bearer and relying on internet protocol  in
view of the obsolescence of GSM-R (Global System for Mobile Communications –
Railway) in 10-15 years' time.
·      Making a positive business case for (small and medium) railway
undertakings by decreasing costs of ERTMS related to life-cycle costs in
general (in all phase: design, build, placing in service, operation,
maintenance), integration with other rail subsystems, retrofitting existing
locos, conformity assessment and authorisation procedures of on-board systems,
etc.
·      Contributing to increase the operational efficiency of the European
rail system taking into account a more competitive environment on high speed
lines and corridors, and a growing commuter traffic that coexist with rail
freight services, fully integrated with European supply chain, that have to
deliver goods on time; that includes (1) increasing the performance (capacity,
reliability, punctuality, safety, accuracy) of the traffic management, which
would contribute to fix the remaining coordination issues between
infrastructure managers and RU, (2) improving interaction/integration with
other structural and functional subsystems, (3) finding synergies with Galileo
to boost the quality of railway services with accurate positioning information,
important for urban dense area, and cheap position information for low-density
area. 
·      Contributing to improving the efficiency of energy usage in rail
systems, embracing vehicles, infrastructure and operation within a whole-system
perspective. This will imply notably the development of smart concepts in
intelligent design and management of energy systems for rail applications which
should be pursued from a whole-of-life perspective - from concept to
implementation through the design, procurement, manufacturing, construction,
operations and maintenance phases.
·      Contributing to the multimodal smart mobility system, in particular
in finding synergies with urban train control systems to make them
interoperable and interconnected.
4. Customer Experience Support Systems
for seamless travel
Research should contribute to enabling
passengers to travel across borders and in travel chains, involving
long-distance as well as regional/local trains of different service providers,
as well as adjacent modes. Passengers should be able to purchase tickets for
such journeys in a single place and single operation in a station or online
from an electronic device (PC or smartphone) anywhere in the EU.
Common solutions must be conceived (to be
laid down in specifications - TAP TSI) to allow the different stakeholders
involved to build the necessary interoperable infrastructure and develop ticket
and travel information and selling systems that can provide these services
everywhere in the EU.
5. New supply chain concepts for freight
The objective of research in this area is
to develop and test innovative solutions enabling rail freight (1) to increase
its cost competitiveness, (2) to improve the reliability of freight services in
line with market demands and (3) to add new service features to rail freight
responding to logistical requirements, in order to secure and strengthen rail's
market position in current markets while at the same time enabling it to
(re-)enter into new/lost market segments. Freight research shall help to foster
new business approaches in rail freight and take into account the specificities
of the rail freight sector characterized by medium-sized enterprises.
6. Talent Management Systems
The objective of research in this area is to develop skills and
on-the-job training and maintain the high-level technical know-how required for
triggering product, service and process innovations, bearing in mind that the
sector is confronted with an ageing workforce (some 30% of the rail workforce
is expected to retire in the 10 years to come).
Expected outcomes of rail R&I 
Research is expected to concur to an
indicative surge in the utilisation of capacity within a range 70-90% as well
as in a reduction in the recurrent costs of rail operations within a range
25-45%. Part of the latter will evolve from reductions in the power supply operational and maintenance costs (~25%), reductions in
transmission and distribution losses (~20%) and increases in reliability of
operation (~20%). 
This is to be considered, in parallel, with
potential savings in investment costs for the delivery of major infrastructure
projects and related systems through the adoption of lean design and
implementation strategies that may amount up to 30% of total costs.
In freight, research should eventually be
aimed at reaching a 98% level in terms of on-time delivery, placing rail
amongst the "best-in-class" of the logistic operators. This latter
over-arching goal will imply reaching significant gains from a diversification
of the freight business, a re-engineering of the production processes towards a
leaner and service-focused stance capable of delivering significantly higher
levels of productivity – e.g. a doubling of both the revenue per employee and
the annual load-runs per wagon, reduction of up to 50% in dwell times and a
two-fold increase in the load factor for trains/wagons.
In passenger transport, research should be
geared towards increasing passenger train capacity up
to 15%, reductions of downtime by increased reliability (~+50%) and reductions
of infrastructure charges thanks to lighter trains - whilst delivering superior
performance in terms of overall service quality, safety and customer experience
in rail transport.

Annex
V: Results of the Public Consultation

1.     
Overview of the consultation process
The stakeholder consultation process
consisted of the following elements:
·        
a web-based open consultation, launched on 28
June 2013 and open for 12 weeks, until 19 September 2013, to which 372 responses
were received.
·        
bilateral meetings with sector representatives between
June and September 2013, including the following organisations: UNIFE (rail
supply industry), CER (incumbent railway undertakings), UIP (wagon keepers),
EIM (independent infrastructure managers), UITP (urban transport operators) and
EPTO (private passenger transport operators). These meetings provided sector
associations with the opportunity to share their views on the type of
implementing structure that should be set up, as well as providing some first
insights into the scope of activities that might be covered.
·        
a stakeholder hearing, organised on 12 September
2013, to which 85 stakeholder representatives participated. 
2.     
Online consultation
The public consultation was opened on 28
June 2013 and closed on 19 September 2013 (12 weeks). It
was held in the form of an electronic questionnaire, with both multiple choice
and open questions.
2.1.   Coverage
372 responses were received, including 152 responses
from individual citizens and 220 from representatives of organisations or institutions.

While interpreting the consultation
results, it needs to be considered that with nearly half of responses coming
from individuals, some organisations are represented more than once. Also, it
should be noted that a significant share of respondents have collaborated in
providing their responses. Of all individual comments, roughly 15-20 % were
duplicates or near duplicates and an important number of comments was assigned
several times.
Responses came from 24 different EU
countries and are thus highly representative of the whole EU. 60.5% of
responses came from the five countries that currently receive the largest
shares of current EU funding for rail research, namely France, Spain, Italy,
Germany and the United Kingdom, which represented 69% of Commission funding for
rail research under FP7-Transport. 
The majority of respondents were private
companies (42%), followed by research organisations and universities (22%),
industry associations and chambers of commerce (11.5%), SMEs (10%) and public
authorities (5.5%). The remainder included NGOs, self-employed people or other.

Respondents were mostly from the rail
supply industry (rolling stock, vehicle components, construction and building),
with just 5% of responses coming from infrastructure managers and 4% from
railway undertakings. 
However, it emerges from the large share of
respondents classified as "other" (117 respondents) that the
categories defined in the questionnaire were too narrow and restrictive. 
The majority of respondents in this field were
active in a broader scope of activities than those identified in the
questionnaire. They included, in particular, broader rail & research
activities, the broader rail supply industry, broader railway undertaking and
infrastructure management activities, as shown in the following chart.
The main rail sector representative bodies
at EU level participated: UNIFE (rail supply industry), CER (incumbent railway
undertakings), EIM (independent infrastructure managers), UIC (International
Union of Railways), UITP (urban transport operators), UIP (wagon keepers), European
Passenger Federation, European Federation of Railway Trackworks Contractors, as
well as the European Economic Interest Grouping of ERTMS Users (EUG) and EURNEX
(European rail Research Network of Excellence).
Many of the leading companies in the rail
sector participated, including: Ansaldobreda, Alstom, Bombardier, Siemens, Swedtrain,
Talgo, Thales Group, Construcciones y Auxiliar de Ferrocarriles (CAF), Cetest
Group, CFD, Actren, Trenasa, VTG, etc.
Also, numerous railway undertakings and
infrastructure managers participated, including: ÖBB-Group, SNCF, SBB and SBB
Cargo, London Underground, Ferrovie dello Stato Italiane, Network Rail Limited,
Polish State Railways (PKP), Portuguese National Rail Infrastructure Manager
(REFER), etc. 
52% of respondents have been involved in EU
co-funded rail research & innovation projects.
2.2.   Results of the public consultation
2.2.1.     
Problems to be addressed
The results of the consultation showed that
there is a broad consensus among stakeholders with regard to the core problems affecting
rail R&I identified by the Commission.
As seen in the following chart, most
stakeholders agreed or strongly agreed that R&I efforts are not
sufficiently focused on supporting new technologies oriented towards
interoperability or towards further integrating rail operators, infrastructure,
rolling stock, signalling and other subsystems and services of the rail system
necessary for completion of the SERA. Only 3.4% disagreed with this statement,
consisting mainly of private companies active in the rail supply industry as
well as some organisations active in the fields of railway operations and
infrastructure management.
Participants also broadly felt that the
level of standardisation in the European railway area is too low and that this
holds back innovation, although 4.5% of respondents disagreed. These were
mainly stakeholders active in railway undertakings and infrastructure
management or in general railway research.
In addition, stakeholders strongly agreed
that R&I efforts are not sufficiently focused on the market take up of
innovative solutions. Only 3.1% of respondents disagreed with this statement,
consisting mainly of private companies in various sectors (banking, ICT,
construction, services to the rail sector, tiered suppliers and vehicle
component manufacturing). 
As regards interoperability and
standardisation, it was pointed out that the development and introduction of new
interoperability systems such as ETCS have been steered by the supply industry rather
than the EU or users, which has led to the development of a wide landscape of
different ETCS solutions that are, in many cases, non-interoperable. Also, it
was highlighted that national technical and operational constraints continue to
play a large role in the development and market introduction of new products
and that there is still too little harmonisation within the EU. If R&I
efforts are to help to bridge these incompatibilities and complete the SERA, a
clear EU leadership and vision is required. 
As regards market uptake, many respondents
pointed out that EU R&I is "estranged" from industrialisation
processes and business needs. This results in rail companies turning primarily
to national funds, viewed as closer to market needs, which hampers a
coordinated EU R&I effort and leads to the development of differentiated
national solutions. 
In fact, R&I efforts in the EU are considered
to be highly fragmented, in particular in terms of their objectives and distribution
along the innovation life-cycle, as seen in the
following chart, with just a few respondents disagreeing, (mainly organisations
conducting rail research, as well as those active in the fields of railway operations
and infrastructure management, and those providing services to the rail sector).
Stakeholders broadly consider research
topics to be overly segmented, with too many projects running in parallel, and
too many entry points (with open calls for proposals emanating from different
research programmes led by different DGs: DG R&I, DG Move, DG Connect, DG
Energy, etc.).
In order to overcome this fragmentation,
respondents repeatedly stated that a common, long-term vision (10-20 years),
based on a clear understanding of the rail sector's market needs is required.
This common agenda should be accompanied with clear EU targets (for instance on
modal shift, interoperability, accessibility, etc.) to drive the innovation
process. Many stakeholders called for a more coordinated approach to EU R&I,
with a clear structure and a strong point of reference for the whole sector.
It was further stressed that EU R&I
efforts should cover more fully the entire innovation life-cycle. It was felt
that there is too much focus on projects that are far
from the market and that closer-to-market activities,
including development, prototyping and demonstration activities require
increased support. The following chart shows the stages of the innovation cycle
that respondents feel should receive more support[108].
Major barriers to private investment in
rail R&I activities were considered to be the long renewal cycles, the
limited economies of scale, as well as the low operational margins in the rail
sector (see graph below).
Asides from these barriers, it was also
felt that rail-specific innovation constraints (such as the difficulty to share
the benefits of innovations among investors and the lack of economies of
scale), as well as the current set-up of rail R&I activities, limits the
leverage of EU funding (see graph below). Less than 6.5% of respondents
disagreed, of which mainly research organisations.
Many stakeholders highlighted the fact
that, on the one hand, the uncertainly of the system of open calls for
proposals does not allow a company to commit dedicated resources to an EU
multiannual and multi-project related framework. On the other, the set-up does not allow for participation of all relevant stakeholders and is
insufficiently focused on market needs.
Current R&I partnerships were viewed as
restrictive to effective R&I (see graph below), principally because not all
stakeholders are adequately committed (less than 3% disagreed, with no
particular pattern identifiable), because of a lack of coordination among
stakeholders (only 6% disagreed, half of which were research organisations, the
rest being mainly representatives of the rail supply industry or of
organisations active in railway operations and infrastructure management), and
because the H2020 financial and participation rules are inadequate (only 6%
disagreed, mainly organisations in charge of research, but also private
companies and SMEs active in the rail supply industry). 
Many stakeholders highlighted the fact that
rules of participation in the open calls system tend to favour very broad and
transnational consortia, with a large number of participants. This means that
some partners are included more for representative purposes than for technical
ones, and that their commitment is not always very strong. Also, such large
consortia are difficult to drive and a lot of time and effort needs to be
invested in ensuring that all partners have sufficient knowledge of the topics.
For a more efficient process, it is felt that more sustained partnerships of
key partners are required.
On the other hand, a large number of
respondents disagreed that participation in EU rail R&I is not
representative of the entire value chain. At the same time, many respondents openly
stressed the importance of involving the whole rail value chain in EU funded
projects. This includes not only rolling stock and vehicle components
manufacturers but also signalling, infrastructure and all construction and
maintenance related sub-suppliers and manufacturers, and, in particular the end
users – i.e. infrastructure managers and railway undertakings. Indeed, the
involvement of end users in defining business needs and validating research
results is considered essential to ensure strong market uptake. 
Although it is difficult to see a pattern
in the responses, it does emerge that it is mainly private companies and
rolling stock manufacturing companies (who represent a large share of overall
respondents) that consider the rail value chain to be sufficiently represented
in current rail R&I activities, while public authorities, research
organisations and SMEs, as well as railway undertakings, but also organisations
active in construction and services to the railway sector, consultants and
tiered suppliers, tend to consider this is not the case, as seen in the
following graphs. 
Another key problem highlighted by
stakeholders was that the overall level of EU investment in rail R&I is
largely insufficient in comparison with the needs and that this low level of
funding does not enable the visibility required for significant leverage.
Combined with the large size of consortia, this leads to an over dispersion of
EU funds and lack of corporate strategy behind the projects.
3.
Priority areas
The results of the consultation showed that
there is a broad consensus of stakeholders with regard to the core R&I
areas that would be best coordinated at EU level. The
following chart shows the fields that respondents feel are of most importance.[109] 
88%-95% of respondents consider the first
three topics to be important or very important, while customer experience
support systems and new supply chain concepts get strong support from 75% of
respondents. Talent management systems are considered less important with just 27%
considering them important against 46% considering them irrelevant.
It was also highlighted that these areas
needed to be brought together to ensure that the system as a whole is fully
effective. This could be ensured by creating a system-wide demonstration
platform.
It was further stressed that R&I
efforts should focus less on short-term solutions and more on exploring
radically new concepts with potential for breakthrough innovation. Synergies
with other sectors, such as automotive and aeronautics, should also be sought
out.
Respondents also commented that research
should take into account the need to raise productivity as much as possible
while reducing operating costs. For instance, as regards rolling stock, it was
highlighted that research should seek to develop low cost solutions to upgrade
existing vehicles and make them interoperable rather than seeking to develop
new vehicles as there is not enough money available for renewal of rolling
stock. Projects should therefore focus not only on product development, but
also take into account aspects of retrofitting, upgrades, maintenance, and
impact on the lifecycle, performance, and safety. At the same time, it was
stressed that current projects tend to focus on products only, and that future
projects should focus also on processes and services.
Another attention point should be that of travellers
and users, exploring what options are desirable and feasible from a customer
perspective and evaluating the traveller experience of new solutions by
prototyping and evaluating them in vivo. For the rail freight sector, the
approach should be similar, aimed at integrating the supply chain and providing
end-to-end journeys.
Stakeholders also stressed the need to pay
attention to ensuring interoperability with other transport modes as the future
is multi-modality. 
Regarding talent management systems, it was
highlighted that these are still too dependent on traditional national
operators. The contribution of all actors of the value chain in the academic
training process, could make the sector more attractive and enable the
emergence of a new generation of workers capable of developing innovative
products and solutions. 
Lastly, it was pointed out that research
activities should also include underlying transport economics, behavioural
studies and financial analyses relating to innovative business models, as well
as supporting innovation in the fields of legislation and taxation to reduce
obstacles to the use of railway.
4. Policy objectives
According to respondents, the most
essential objectives for EU rail R&I policy should be to enable the
development of a long-term vision, based on the rail sector's business needs, and
to ensure market uptake. Other crucial objectives include ensuring
synchronicity of innovations and return on investment, as well as interoperability
and sustained partnerships. The following chart shows
the objectives that respondents feel are of most importance.[110]
The interoperability of the rail system is
considered as essential by most stakeholders, who regard it as one of the main
driving forces for both innovation and cost reduction. On the one hand,
interoperability should allow closing open points (achieving interoperability
as legally defined by the EU directives). On the other hand, R&I should
focus on achieving real interoperability in operations through technical
harmonisation with a view to reducing barriers for cross-border operations.
This will enable significant cost reductions, which is key for the
competitiveness of the EU rail industry. 
The importance of guaranteeing a systems
approach to R&I was also highlighted given the inter-dependency of the rail
sub-systems. This means that projects in any given area need to cover the
system interface as practically any innovation point will have a system level
interaction. 
In terms of completing the SERA,
respondents felt that rail R&I can be of most use in removing technical
obstacles, but also in creating international railway corridors (for freight),
in implementing the TEN-T network and harmonising standards, and in simplifying
vehicle authorisation processes.
It was also stressed that completing the
SERA should not be achieved without also focussing on cost efficiency, meeting
customer needs and cross-modal synergies.  
 5. Policy options and their impacts
Although each of the options received some
support from stakeholders, the option that emerged as having, by far, the most
backing was the institutional PPP option (see chart below). 
79% of respondents judged that this option
would be effective or very effective in responding to the identified challenges
and it is interesting that the iPPP option is the option that receives the
strongest support regardless of the type of organisation with the exception of public
authorities and administrations (including public research bodies), who support
the baseline CR option. 
When looking at the different fields of
activity, the iPPP is also broadly supported all around, with the exception of intermodal
operators (which represent just two respondents) consider ERA to be more
relevant. 
In the field "other", 8
respondents view the iPPP option as ineffective including organisations
representing railway operation and infrastructure management activities, research
activities, rolling stock leasing activities, financing and safety activities.
Overall, just 28% of respondents believe the
continuation of Collaborative Research could be effective, among which close to
half represent research organisations or academia, against just 25% of private
companies, 14% of public authorities and 9% of SMEs. The following chart shows
how stakeholders consider the CR option could support the main policy
objectives identified above. As can be seen, asides from the promotion of standardisation
and stakeholder participation, where stakeholders are more reserved, the CR
option is considered to be broadly ineffective in meeting all of the stated
policy objectives. 
The cPPP option also only gets the support
of 26% of respondents. Support comes mainly from public authorities, NGOs and
research organisations, although there are no clear trends. The following chart
shows how stakeholders consider the cPPP option could support the main policy
objectives identified above. As can be seen, asides from the promotion of
standardisation and stakeholder participation, where stakeholders are more
reserved, the cPPP option is considered to be broadly ineffective in meeting
all of the stated policy objectives, similarly to the CR option, although it
scores slightly less badly on some areas, such as ensuring synchronicity.
The ERA option gets the support of just 18.5%
of respondents. Support comes mainly from public authorities and SMEs. The following
chart shows how stakeholders consider the ERA option could support the main
policy objectives identified above. As can be seen, asides from the promotion
of standardisation and stakeholder participation, where stakeholders are more
reserved, the ERA option is considered to be broadly ineffective in meeting all
of the stated policy objectives, similarly to the CR option. The only major
difference identified is ERA's strong capacity to improve interoperability,
where 75% of respondents consider it to be effective, against just 5%
disagreeing.
The following chart shows how stakeholders
consider the iPPP option could support the main policy objectives identified
above. As can be seen, the iPPP option is considered to be effective or very
effective in meeting all stated policy objectives. The only weakness that is
identified appears to be its capacity to allow equal access for all
stakeholders, where respondents are more reserved, although the iPPP option
nevertheless scores better than the cPPP and ERA options here, obtaining a
score slightly lower than the CR option.
Despite this weakness, many respondents
pointed out that an iPPP structure has the capacity to be inclusive towards
rail sector actors, as well as towards new entrants, and participants from
other sectors, given the critical mass it would create and the commitment of EU
rail industry players over an ambitious multiannual R&I programme. For this
to be guaranteed, it was highlighted that the governance arrangements would be
crucial.
Lastly, roughly one fifth of respondents
specified in their open comments that mechanisms should be put in place to
ensure that key investors in a rail iPPP would have the assurance of obtaining an
EU financial contribution for the entire duration of the work programme, namely
thanks to the earmarking of funds to specific beneficiaries. Among these
respondents, the majority are large private companies and industry
associations. The majority represent the rail supply industry in broad terms
(rolling stock, infrastructure, equipment and component manufacturers).
3.     
Stakeholder hearing
A stakeholder hearing was organised on 12
September 2013, to which 85 stakeholder representatives participated. During
this meeting, very broad support was voiced in favour of the institutional PPP
option, with a strong accent on the need to involve the whole rail sector in an
equal, transparent and fair partnership. The minutes of the meeting are
transcribed hereafter.
Introduction by the EC – DG MOVE
Mr Jean-Eric PAQUET, Director of DG
MOVE/B – European Mobility Network, opened the
meeting, underlining that the Commission considers this initiative as
absolutely critical to help the sector – in its entire dimension – both to
deliver more and better services to citizens and to meet its internal
challenges. The initiative will also be crucial in helping to make the Single
European Railway Area a reality.
Although there are innovations in the rail
sector, if one compares the sector to others, it appears that both the rail
industry and the existing frameworks for research and innovation (R&I) at
national and EU levels are lagging behind. There is a need to boost efforts in
this area and to create a long-term process for driving innovation in the
sector. The time horizon considered for this process should go beyond 2020,
looking at the longer term – although it will of course be important to reap
the opportunities available already from the beginning of the new Horizon 2020
framework programme for research and innovation.
The legislative process launched by the
Commission focuses mainly on the instrument that will be created to drive this
project. The governance structure is a critical point as it will very much
influence the way the rail sector and the EU can interact on the R&I agenda
and define priorities together. The proposal presented by UNIFE in July 2012
has been extensively discussed with the Commission over almost two years and
has served as valuable input to the Commission work, although the Commission
legislative proposal is being developed in parallel to the industry initiative.
In terms of substance, the technical proposal is still evolving. The exact
scope of the initiative will be defined by all actors when the future
governance structure is set up.
There is great interest in this initiative
both on the side of the Commission and of the European Parliament – both in the
TRAN and ITRE committees. Also, there has been great mobilisation in the Member
States, namely thanks to efforts of the rail industry to drive the process.
This support should enable an effective handling of Commission proposals so
that they can hopefully to be adopted during the Greek Presidency.
Presentation of the Impact Assessment
and preliminary key findings
Mr Gerhard TROCHE, DG MOVE/B2 – Single
European Rail Area, Ms Bernadette FREDERICK, Acting Head of Unit, DG MOVE/C2 –
Research and Innovative Transport Systems, and Ms Rachel SMIT, DG MOVE/ C2 –
Research and Innovative Transport Systems gave respective presentations. The
key messages presented by the EC can be found in the presentation available
online at: http://ec.europa.eu/transport/modes/rail/events/2013-09-12-hearing-rail_en.htm.
Stakeholder presentations
Mr Philippe CITROËN, Director General of
the Association of the European Rail Industry (UNIFE) highlighted the fact that for the rail supply industry, the "big
issue" is global competition. The good results achieved in FP7 and
previous FP in normal R&D collaborative projects need to be taken at a
further step to significantly contribute to the Railway overall
competitiveness. Research and innovation needs to deliver products, not only
concepts and reports, and support increased market uptake. 
The structure that can enable this is a
Joint Undertaking (institutional PPP) that involves the entire rail sector, as
well as the logistics and other sectors (aerospace, ICT, etc.). Rail supply
industry, operators, infrastructure managers, urban operators would be
involved, as well as research centres and clusters. The structure will also
need the support of the European Railway Agency (ERA) – whose role is essential
as far as interoperability and ERTMS are concerned. UNIFE has tabled a proposal
for the proposed structure. This can be seen in more detail in the online
presentation available at: http://ec.europa.eu/transport/modes/rail/events/2013-09-12-hearing-rail_en.htm.
The JU will enable a strong focus on
industry needs in co-governance with the EC, to ensure commitment towards
creating a Single European Railway Area. Clear targets would be at system level
with key performance indicators.
According to UNIFE, the concept of Named
Beneficiaries is essential to enable rail stakeholders companies to commit
resources from the inception to well identified R&I for 6-7 years
(including future exploitation of its results), to create the critical mass for
research activities and funds, and to properly cover the industrial risks
associated with long term innovation and investment size. Nevertheless, 25% of
funds would be reserved for calls targeted at SMEs. With estimated needs
estimated at 1.15 billion EUR, this would mean 300 million EUR would be
available to SMEs through open calls.
Mr. Citroën further stressed the importance
of setting up this instrument very rapidly. In the meantime, the sector will
need more information on foreseen lighthouse projects under the Horizon 2020
Work Programme for 2014-2015, to see how the link can be made with the future
structure.
Mr Jean-Eric PAQUET responded that the Commission will, when deciding on the future
implementing structure and on governance issues, need to take on board the huge
amount of work that has already been done by UNIFE, but also draw inspiration
from the structure of other initiatives that have already achieved tangible
results, such as the SESAR Joint Undertaking.
Mr Enno WIEBE, Senior Advisor on ERA and
research-related issues, Community of European Railway and Infrastructure
Companies (CER) highlighted that his organisation
had not yet responded to the public consultation and that his views were
therefore not yet reflected in the preliminary findings presented by the
Commission. The CER would respond to the public consultation on September 19th,
to present the views of the railway undertakings and infrastructure managers.
He pointed out that the sector has already
published a common vision called "Challenge 2050", as well as a
common roadmap on how to get there (ERRAC roadmap). The whole sector put a lot
of effort into these projects. All these ideas have to be combined to feed into
the future R&I agenda.
For the CER, the key goal is to increase
attractiveness for customers (passenger and freight) and to cut costs. The
focus must be on improving the railway system as a whole. A system view is
therefore essential.
The implementing structure would need to
provide a very clear vision, with a clear focus on rail business needs. This
vision must be developed jointly with all actors, on the basis of an equal,
fair and transparent partnership. Operators must play a major role in defining
business needs, in defining requirements, validating results, assessing results
on life-cycle costs and operations, as ultimately they will be the end users of
the research results. Products, processes, standards and concepts developed
must fit into the existing system.
Based on this, the CER concludes that:
·        
Collaborative Research has not always
been fully satisfying but there is potential to continue
·        
The ERA should focus on vehicle
authorisation and safety certification and on standardisation. Research should be
one part of it, but should not be the heart of it.
·        
A contractual PPP could be promising but
needs further examination
·        
A Joint Undertaking seems to be the most
promising option, with clear programme, clear deliverables, to ensure
continuity and market uptake. However, equal partnership is essential. We need
the right balance and we need to make sure it focuses on business needs.
The CER's presentation is available online
at: http://ec.europa.eu/transport/modes/rail/events/2013-09-12-hearing-rail_en.htm.
Mr Andy DOHERTY, Chairman of the
European Infrastructure Managers (EIM) Support Group, represented the view of independent infrastructure managers. He
pointed out that railway research has historically been very low in comparison
to air and road. Therefore it is maybe not surprising that rail's ability to
innovate has been slightly lower. Many FP projects have been conceptual
research (Technology Readiness Levels 1-3), i.e. developing result that are far
from market ready.
The key goals under Horizon 2020 should be
to increase capacity, improve reliability and performance while reducing costs.
However this will not be easy as increasing capacity also means reduced access
to carry out maintenance.
EIM is very supportive of increasing
funding to rail R&I to help the sector to move forward. It believes funding
should be channelled through two pathways: Framework Programme projects at
Technology Readiness Levels 1-3 and, in parallel, a Joint Undertaking to enable
projects at Technology Readiness Levels 4-7, which are much closer to market.
Therefore the EIM supports a Shift2Rail Joint Undertaking.
EIM further believes that parallel
development of appropriate TSIs and ENs is essential to enable fast take by
railway operators. 
The involvement of all railways (operators,
undertakings, intermodal operators, etc.) is essential and there is a need for
an "ERRAC process" to ensure this. Indeed, if the vision meets the
railways (users’) needs, then the uptake will be much greater. Therefore the
ERRAC represents a good structure for strategic definition of R&I.
The institutional PPP option is essential –
it ensures that EIM members can participate, but also allows the structure to branch
out to wider sectors that are needed to find innovative solutions
EIM members therefore believe it is
essential that an institutional PPP be established, with named beneficiaries,
as it must enable collaboration/contracting with partners to deliver. This will
allow infrastructure managers to be full members of the initiative. 
The EIM's presentation is available online
at: http://ec.europa.eu/transport/modes/rail/events/2013-09-12-hearing-rail_en.htm.
Dr. Josef DOPPELBAUER, Chairman of the
European Rail Research Advisory Council (ERRAC) pointed
out that, from past experience, the two main problems of collaborative research
are the lack of investment and the fragmentation of the structure. If both
issues are resolved with this initiative, it will result in increased market
uptake.
ERRAC represents the entire European rail
sector and all forms of rail transport. Therefore, in the context of this
initiative, it will be important for ERRAC to push cooperation across the whole
sector. ERRAC needs to be strongly involved in a future Shift2Rail Joint
Undertaking, with an independent overview of activities, through the strategic
council of ERA. There is already a very good alignment between ERRAC objectives
and roadmaps and the Shift2Rail Strategic Rail Research Agenda that is
currently being developed.
However, the scope of ERRAC goes beyond the
Shift2Rail focus on technological innovation. It is therefore important not to
forget activities that are outside scope of Shift2Rail. H2020 should provide
the instruments from small collaborative research projects to large initiatives
like S2R to cover all research needed by all partners. This will require
appropriate budgetary resources.
ERRAC will continue to operate on medium
and long-term aspects and provide a framework for discussion and coordination
of research efforts.
ERRAC's presentation is available online
at: http://ec.europa.eu/transport/modes/rail/events/2013-09-12-hearing-rail_en.htm.
Mr. Jean VERRIER, Spokesman of ERCI
(European Railway Clusters Initiative) pointed out
that there are many cluster initiatives in all Member States, but that there is
little or no communication or cross-fertilisation between them. They remain
fragmented. They need to work together as not all clusters have critical size
to remain sustainable. Also, inter-clustering cooperation can help to avoid
redundancy and promote efficiency.
Cooperation has already begun on a large
number of topics: energy management, interoperability, standardization,
passenger information, intelligent traffic management and control systems, etc.
The objective for ERCI is to reach out to research clusters in other European
countries.
ERCI has solid experience in involving SMEs
in collaborative research projects. This is a difficult feat. Indeed, framework
programme projects are hardly affordable for SMEs. There are SMEs involved but
most of them are consultants, not industrial SMEs (technology providers,
equipment manufacturers, suppliers, etc.). It is essential to boost their
cooperation. SMEs cannot afford a stop and go policy. They need continuity and
a Joint Undertaking ensures continuity for all stakeholders. 
ERCI hopes for a quick decision. It wishes
to be involved in the future structure, potentially in visionary advisory
groups, but also in the benefits.
ERCI's presentation is available online at:
http://ec.europa.eu/transport/modes/rail/events/2013-09-12-hearing-rail_en.htm.
Mr. Giorgio GULIENETTI, Chief Technical
Officer, SELEX ES outlined his company's
long-standing experience in European R&I. Having participated in the Sesar
JU, it is eager to bring this experience into a rail Joint Undertaking.
It is essential to develop our internal
market to be able to play on the outside markets: The bigger the “national”
market the better for industry. 
Developing IT solutions for a seamless
attractive railway is essential and can help to provide the Commission with a
cockpit for following the various KPIs linked to the work of the future Joint
Undertaking.
A holistic, systematic approach is key. The
sector must agree on architectures and systems and how it should all come
together, not only on a technical level but also in time (synchronicity of
innovations).
Preliminary activities ahead of the JU
should be devoted to a clearer definition of the strategy and to the approval
of all stakeholders. It should not only be led by industry, but also by those
that have to implement the systems and run them.
EU direction is also essential, as in the
SESAR Joint Undertaking: the EC needs tools to motivate Member States to adhere
to legislation.
SELEX ES's presentation is available online
at: http://ec.europa.eu/transport/modes/rail/events/2013-09-12-hearing-rail_en.htm.
Open discussion
Imrich KORPANEC of the European Federation of Railway construction companies,
representing 162 private contractor companies, ranging from very small, to
SMEs, to very large companies (including integrators conduction public works,
etc), highlighted the very strong competition from outside of Europe.
Therefore, opening of the European markets, standardisation and harmonisation
are essential to support the efficiency of construction workers and generate
savings in infrastructure costs. We need to make sure that these savings are
equally shared and also that there is a risk-sharing. Any innovation should be
also on the accounts of the users not only the producers. Participation of
infrastructure managers should be balanced with participation of construction
companies that produce the infrastructure for them.
It is not only technology development that
is important. In parallel, a proper implementation of the technologies in
decision-making, planning and processes is required. With this, significant
savings of 10 to 30% overall costs can be achieved.
Long-term planning and contracting is
essential to ensure that resources are available and committed. If there is no
money available in the sector then there will be no market uptake. Innovation
will be supported if it contributes to cutting costs, optimisation of
operations, more efficient use of infrastructure. Project management,
collaboration between managers and contractors, cross-border contracting, are
essential.
With this in mind, Mr. Korpanec expressed
strong support for a Joint Undertaking, saying he was convinced it would
improve market uptake. However, critical mass and balanced involvement of all
stakeholders are essential.
Antonella SEMERANO of MERMEC, a supplier to the rail sector, underlined that risk-sharing and
IPR protection instruments needed to be appropriate for companies to access
innovation. For this, a Joint Undertaking and the concept of Named
Beneficiaries are key. In current collaborative research the main problems are:
-         
During the building phase of a proposal,
companies have to bet on some results that are unknown because they have no
clear view on multiannual programmes
-         
During the project phase: if a company
wants to make amendments, it is a heavy procedure
-         
Access to grants: the procedure is too
long. Even 250 days is still too long.
The ability to
manage IPR in a joint way is an essential point of the Joint Undertaking.
Giovanni BOCCHETTI of Ansaldo STS believed that a funding system with named beneficiaries is the only
way to allow industry to plan both the technical and the financial aspects in
the long term. He pointed to the Clean Sky initiative which works very well to
produce innovation in products that are rapidly marketable. Although one of the
weaker points of the Clean Sky was the involvement of all European countries,
this is not an issue in the rail sector where many European countries are
involved. Named Beneficiaries is not only good for big companies, but also for
SMEs. It will enable them to build sustained networks. 
Luc ALIADIÈRE of the French Railway
Industry Association (FIF) said the Named
Beneficiaries system is certainly the most efficient to manage the different
subjects that will be addressed by a Shift2Rail Joint Undertaking. He stressed
the involvement of SMEs is a major subject to which his association was fully
engaged. Although it is true that UNIFE members are mainly large integrating
companies, the pull through national associations, which have more and also
smaller members, will enable a much broader outreach to companies. The Named
Beneficiaries will enable the big companies to drive the process while bringing
in the required competences from SMEs, thanks to the intermediary of national
federations. All the identified R&I topics are essential to the rail
industry. 
Dan OTTEBORN of Bombardier commented that the Named Beneficiaries concept already de facto
helps to maintain interoperability. Although not presented in this manner, the
development of specifications for ERTMS was conducted by groups of supplier
companies and railways, with continuous funding from DG MOVE. In a sense this
was a form of Named Beneficiaries. If funding had been interrupted each year,
interoperability would still not be achieved. Such a system is essential if we
want interoperability – especially in signalling.
Bo OLSSON of Trafikverket, commented that the open rail sector in Sweden enabled long-term
partnerships with the supply industry. According to him, rail is a system where
a weak link can stop innovations and hinder the whole system. Yet, both at
national and EU levels, there is a tendency to work in good but fragmented
projects. Rail needs sufficient funding up to sufficient Technology readiness
levels (6-7). This will also require a sufficient timeframe: 6-7 years is at
least what we need.
Named Beneficiaries is the way to do
achieve stability, continuity and commitment. The sector cannot take a chance
to invest money in the beginning and not have funding all the way through.
Nevertheless, open calls should also be a necessary part of the approach to
enable other partners to contribute.
Giacomo POTENZA of Ferrovie dello Stato stressed that, as a railway undertaking, it believed the creation of
a Shift2Rail Joint Undertaking was essential. The initiative is important in
terms of content but also in terms of the structure. The sector needs a
strategy, a vision. It is essential to ensure collaboration from all
sub-systems of the rail sector to ensure interoperability. Interoperability
depends on standards. Some people may feel that we don’t need more standards
and it is true that we have too many standards. But what we don’t have is a
standardisation process. For this, we need a longer-term view, and therefore we
need protection from the risk that a long-term view entails. Therefore a Joint
Undertaking with named beneficiaries is the required instrument.
Simon FLETCHER from the UIC expressed the opinion that the initiative should be open to as wide
a possible number of UIC members – not only the larger, more affluent
companies, also the SMEs that are not able to be involved independently but
have important innovation capacity.
José GORTAZAR – CAF said a Shift2Rail Joint undertaking would be an essential instrument
for SERA due to its impact on interoperability:
-         
Innovation is essential to improve
interoperability, along with standardisation efforts by ERA
-         
Cost reduction is a key objective and
this will improve interoperability
-         
R&I within a strong structure will
help to move from a fragmented research to a systems approach
Bernard ALIBERT of SNCF expressed strong support to a Shift2Rail Joint undertaking and Named
beneficiaries. The link between the rail industry and operators is much
stronger than often thought, namely due to the importance of maintenance: This
is key to the operators and infrastructure managers. Life-cycle costs are
essential. Standardisation is also essential in reducing costs. Therefore, as a
large buyer of components and rolling stock, SNCF strongly supports a
Shift2Rail Joint undertaking.
Michael MEYER ZU HÖRSTE of DLR said collaboration between industrial partners and research /
academic partners is essential and works well in a Joint Undertaking,
especially in stages with high Technology Readiness Levels. He therefore fully
supports the concept of a Shift2Rail Joint undertaking.
Brigitte Ollier of UITP stressed the need for an attractive R&I programme for mobility,
including rail. New technical solutions are important, but also different types
of mobility services (integrated mobility services that are attractive to
customers that enable them to travel differently but easily and at a lower
cost). She pointed out that urban and suburban requirements are quite different
from long-distance rail and very different from high-speed rail (no reserved seats,
no tickets for specific trains, etc.). Thus, the way UITP looks at technical
needs will be a bit different from other rail actors.
Integration with other modes is very, very
crucial to UITP. R&I must look at the whole travel chain, which may begin
with a bike and end with a train journey. It must be easy to change mode, to
find information about those modes, with integrated ticketing. The Shift2Rail
Joint undertaking must look into these things and take into account the urban
dimension, and UITP will be very attentive that it does.
Yves PERREAL of Thales noted that the main objective of a Shift2Rail Joint undertaking is
to increase rail modal share by improving offer, but also by improving the
demand. There is a need to boost competition with other transport modes. A
Shift2Rail Joint undertaking will help to create a more customer-driven
industry and make rail more attractive to people. This includes integration
with other modes but also other services (shopping, etc.) A focus on the first
and last mile is essential and is one of the aims of the initiative. He
stressed that the rail sector is a sector in which EU political and financial
support can truly help to reduce fragmentation, which is very important.
Miroslav HALTUF of the Oltis Group stressed that the goal of using innovative approaches to make
passenger traffic seamless for all citizens across Europe must absolutely be
extended to freight. Freight should receive strong support in a Shift2Rail
Joint undertaking.
Nicolas ERB of Alstom expressed strong support for a Shift2Rail Joint undertaking. He
asked for industry to be consulted at an early stage of the legislative
proposal and asked whether the decision could be taken before the end of the
current Parliamentary term.
Sian PROUT of DG MOVE responded saying that the Commission's wish is to go fast, but that
we have to be realistic. The last plenary session of the European Parliament
would be in April. There is a lot of support in EP thanks to industry's
efforts, however all players would have to work very fast if a first reading
were to be achieved before the end of the current EP mandate. The Commission
intends to present its proposal in December and the consultation would begin
thereafter. 
Jürgen MEYER of Siemens commented that while a budget for a Shift2Rail Joint undertaking has
been guaranteed, there is no communication on the amount. The industry estimate
has risen from EUR 800 million to EUR 1.15 billion, mainly due to the fact that
the initiative has been opened up to many more stakeholders. Contrary to the
Clean Sky initiative, which focuses only on the equivalent of the rolling
stock, the Shift2Rail Joint undertaking would have a very ambitious and broad
programme, covering infrastructure, traffic management and control systems. He
therefore highlighted the need for an ambitious budget.
Maria PRICEof UIP presented the position of wagon leasers. For them, the key problems
are those of interoperability, safety, maintenance, certification of vehicles,
market-driven approach (also how demand is changing in the supply chain). She
noted that the governance structure proposed by UNIFE remained difficult to
grasp by many UIP members, who are quite new to EU Framework Programmes. She
requested more clarity on the Joint Undertaking's decision-making procedures,
on SME involvement and on Named Beneficiaries. How will governance reflect on
the distribution of funds? Will there be two budgets: One under H2020 and one
under S2R? 
Sian PROUT of DG MOVE responded saying that these questions were not yet answered and
would be defined following the impact assessment and subsequent negotiations on
the legislative proposal. She added that DG MOVE remained available for
bilateral sessions if specific questions required clarification.
Manuel PEREIRA of the University of
Lisbon stressed the fact that the rail sector also
has a lot of positive aspects. High-speed and urban mobility solutions are
essential. Rail is eco-friendly, safe, produces reduced externalities, etc.
Nevertheless, innovation is important to
maintain progress and performance. There is a need to create an ecosystem with
companies, SMEs and excellent research organisations. Scientific robustness is
required even in higher Technology Readiness levels. Therefore, there is a need
to properly involve the scientific and research community.
With regards to interoperability, he
stressed that smaller stakeholders must have a chance to be involved, in the
structure but also in deployment across whole of Europe. Openness mechanisms
must be set up to ensure proper representation. This will be instrumental in
implementing interoperability across Europe.
Sian PROUT of DG MOVE closed the session, reminding those who had not yet done so to
participate in the online consultation and inviting all participants to
continue their valuable work towards better integrating rail R&I efforts.

Annex
VI: Schematic comparison of the key governance elements of the options

This Annex provides details on the
essential elements pertaining to each of the four implementing structure options
presented in Chapter 4.
 Option || Option 1 Collaborative Research || Option 2 Contractual PPP || Option 3 Institutional PPP (Art. 187 TFEU) || Option 4 ERA in lead || 
 Implementing structure || The Commission / Executive Agency || The Commission / Executive Agency || Establishment of a dedicated legal entity composed of both the Union and industry || A new implementing structure is created within the European Railway Agency (Regulatory Agency) || 
 Procedure of establishment || No new body established. Immediately operational   || Via a non-legally binding contractual agreement, following a Commission Decision (average time of process 9 months). || Via a Council Regulation after consultation with the European Parliament, and the European Economic and Social Committee (min 6 to 12 months). Set up time following adoption of the Regulation is on average 1.5-2 years. || Amendment of ERA Regulation, review via ordinary legislative procedure (min. 2 years). || 
 Tasks and objectives || ·         Oversee and manage the implementation of the research programme ·         Help mobilise public and private sector funds   || ·         Associate industry to research programme development ·         Oversee and manage the implementation of the research programme ·         Help mobilise public and private sector funds || ·         Contribute to the EU policy objectives (integration of the Single European Railway Area, competitiveness) ·         Define and launch the research and innovation activities ·         Mobilise public and private sector funds ·         Oversee the implementation of the research programme || 
 Governance || Horizon 2020 rules. || The mechanism for involving the partners (public or private) in planning and implementation is established in the Memorandum of Understanding. The Partnership Board is the main mechanism for dialogue. || A specific governance structure, including the respective decision-making powers by private and public partners, is established in the basic act. Roles of different partners (Commission, market players, Member States) can vary. || A specific governance structure, including the decision-making powers by private and public partners, is established in the amended ERA regulation. Currently, the Board is composed of Member State, Commission and industry representatives but industry has no voting rights. || 
 Strategy and planning || Commission approves global research strategy based on input from technology platform (ERRAC) and ERA, with an advisory role from MS (programme committee). Bi-annual operational planning with annual competitive calls conducted by the Commission, possible input from stakeholders, approved by MS. || Private partners develop the multi-annual roadmap and provide inputs to the work programmes. Bi-annual work programmes with annual competitive calls conducted by the Commission, possible input from stakeholders, approved by MS || Decisions on strategic framework and annual work plans are taken by the dedicated legal entity according to its own governance structure. || Strategic framework provided by the Commission setting the high level priorities. Annual operational planning setting technical framework approved by ERA.    || 
 Approach to programming || Stand-alone projects, each having its own objectives. No predefined budget, commitments at project level. Large scale projects, but so far mostly pre-competitive research. Deployment stage may be included. Calls for tenders allowed, but rarely used. || Individual, but larger-scale, cross-thematic projects steered by a wider logic. Aiming at results nearing market readiness. Deployment stage may be included. || Dedicated structure aimed at sound and focused project selection and coordination. Calls for tenders allowed. Prioritising long term goals and stability. Market driven project coordination. Deployment stage may or may not be included. || Strong project coordination driven exclusively by SERA goals. Priorities focussed on standardisation and deployment. Deployment stage included. || 
 Participation || Horizon 2020 rules. Ad hoc project level participation, based on own initiative. || Standard Horizon 2020 rules. Ad hoc participation of industry, via non legally -binding Memorandum of Understanding || Derogations to Horizon 2020 are possible, but need to be duly justified. Formalisation of the Commission-industry partnership. Commitments of members are established on contractual basis and are legally binding. Beyond funding, industry is expected to commit in other terms e.g. to participate in demonstration activities. Possibility to ensure a balanced participation of all market players in the value chain (supply industry, operators, and infrastructure managers). || Possibility to ensure an adequate balance of representativeness. Industry contributes indirectly via the technology platform (ERRAC) || 
 Financing || Expected €450 M under Horizon 2020 financing Horizon 2020 general rules apply 
 EU contribution to direct costs: up to 70% for demo or 100% for research; 25% for indirect costs. Max timeframe limited to the period of financial framework. || EU contribution to direct costs: up to 70% for demo or 100% for research; 25% for indirect costs. Indicative budget for EU contribution and industry commitment is set out in a Memorandum of Understanding, and will be confirmed via work programmes. Max timeframe limited to the period of financial framework. || Average Commission funding rate of  +/- 50%, with a minimum industry contribution to the budget of 50%, in kind or in cash. Possibility to use different funding instruments/co-financing rates depending on Technology Readiness Level Budget ceiling for EU contribution is set out in the basic act. Basic act specifies the maximum timeframe can go beyond the period of financial framework. || Timeframe can go beyond the period of financial framework. Commitments defined on an annual basis. || 
 Administration costs || The Financial Regulation (Commission Regulation (EC, Euratom) No 2343/2002) applies. || The Financial Regulation applies. Industry covers the costs of their internal governance and their participation in advisory role. || The financial rules are adopted by the Administrative Board. They should respect the broad principles laid down in the Financial Regulation. Public and private partners share management and contribute to operational costs.  || The financial rules are adopted by the Administrative Board after the Commission has been consulted. The Financial Regulation applies unless a deviation is specifically required for the Agency’s operation and the Commission has given its prior consent. || 
 Monitoring and follow up || General Horizon 2020 rules. Project level monitoring, formal obligation, limited to contractual procedures. || Tailor made rules according to basic act. || ERA in charge of follow up according to its internal rules || 
 Intellectual property rights || Foreground (results) owned by participant generating those results. Restrictions foreseen for the transfer or licensing of results to third party established in third country. || Tailor made rules according to basic act. JU may grant wider access rights to knowledge. || Same as for Options 1 and 2 || 

Annex
VII: Summary of the cost-effectiveness analysis

This Annex provides background information relating
to the cost-effectiveness analysis presented in section 5.2.6 of the main
report. It outlines the core assumptions, alongside the methodology for
calculating administrative costs
In the CR option, the following
assumptions are made:
·        
No establishment costs as the programmes are managed
within existing structures. 
·        
Running costs:
o  
Basic running costs are calculated based on the
current costs of the FP7-Transport budget, while factoring in the efficiency
gains foreseen under H2020.
o  
In the 2007-2013 period, the Commission spent
EUR 285 million to cover administrative running costs out of an overall Commission
contribution of EUR 4.244 billion. Taking into account the estimated leverage
effect of 1.5 of the Commission contribution[111],
the total FP7-Transport budget for the 2007-2013 period (including industry
contribution) is estimated at EUR 6.5 billion. Thus, administrative costs of
EUR 285 million represent 4% of the total FP7-Transport budget (including
industry contribution). 
o  
Simplification measures introduced in H2020 are
likely to lead to efficiency gains within the Commission (single set of
participation rules and funding costs, simplified system of indirect cost
calculation and reimbursement, more flexible budgetary and procurement
procedures, etc.). If we assume this will lead to a 20% cut in administrative
costs, this means administrative costs will represent 3.5% of the total budget.
o  
If we transpose this 3.5% share of running costs
to a rail R&I budget of EUR 690 million (Commission
contribution of EUR 450 million, with a leverage effect of 1.5), administrative
costs can be estimated at around EUR 24.15 million over 7 years, or an
annual equivalent cost of EUR 3.45 million. Running costs will vary from year
to year according to the operational expenditure managed within a given year.
Budgets are likely to be smaller in the first years and surge in the final
years.
o  
The additional management capacity developed by
the Commission to ensure coordination of activities, partnerships and results
with a view to ensure R&I contributes to the completion of the SERA has
been estimated at a total of 2 administrator positions and 1 assistant in
relevant thematic and horizontal units. This estimate has been obtained as
follows: Under FP-7, more than 80 rail-related projects were funded in the
period 2007-2013 with an average project duration of 3 years. It can therefore be
assumed that a similar number of projects will be funded under H2020, or
slightly less (60) if one takes into account pure rail projects. This means
that, at any given time, the Commission will be running around 30 projects
simultaneously. Assuming that a coordination function requires at least half a
man-day per project per week, the coordination function will require 3 Full-time-equivalent
staff (1 full-time equivalent per 10 projects running). at an average cost of
128 kEUR per year[112]
(=384 kEUR/year over 7 years, or a total of EUR 2.688 million). 
o  
Spread over the 7-year duration of H2020, this
brings total annual equivalent running costs to roughly EUR 3.834 million per
year.
·        
Winding down and legacy management costs:
o  
No winding down costs under this option
o  
Legacy management of CR projects would be
required until 2024.[113].
Costs relating to managing the legacy of programmes are estimated to represent 75%
of total annual equivalent running costs in 2021, 50% in 2022, 25% in 2023 and 10% in 2024 – i.e. a total
legacy management budget of EUR 6.134 million – or 876 kEUR per year, spread over
the 7-year H2020 programming period.
·        
Total implementation costs: Based on the above calculations, the total annual equivalent implementation
cost of the baseline option is EUR 4.71 million (based on the 7
year H2020 programming period). 
In the cPPP option, the following
assumptions are made:
·        
No establishment costs as the programmes are managed
within existing structures. 
·        
Running costs:
o  
Running costs are assumed to be similar to the
CR option as projects are managed according to the same rules and procedures,
and the Commission will also have to develop additional management capacity to
ensure the complementarity and necessary coverage of cPPP projects –i.e. an annual equivalent cost of around EUR 3.834 million.
o  
Additional costs related to Commission efforts to
manage relations with stakeholders, can be estimated at a total of 1 administrator
position and ½ assistant position in relevant thematic and horizontal units –
i.e. 1.5 full-time equivalents at an average cost of 128 kEUR per year (=192
kEUR/year). These costs are calculated over the period 2015-2020, given that
the cPPP would likely not be operational before 2015.
o  
The private partners involved cover the costs of their internal coordination.

o  
One-off costs of 200 kEUR (i.e. 28kEUR per year)
for external evaluations should also be factored in (based on the assumption of
one mid-term and one final evaluation at a cost of 100 kEUR each). 
o  
Spread over the 7-year duration of H2020, this
brings total annual equivalent running costs to roughly EUR 4 million per year.
·        
Winding down and legacy management costs:
o  
No winding down costs under this option
o  
Costs relating to managing the legacy of
programmes are estimated in the same way as the CR option, resulting in a total legacy management budget of EUR 6.4 million –
or 920 kEUR per year, if one spreads this over the 7-year H2020 programming
period.
·        
Total implementation costs: Based on the above calculations, the total annual equivalent implementation
cost of the cPPP option is EUR 4.95 million (based on the 7 year
H2020 programming period) – or roughly 200kEUR higher than the baseline on an
annual basis. 
In the iPPP option, the following
assumptions are made:
·        
Establishment costs. 
o  
Establishment costs relate to the set-up time of
the iPPP. For past iPPPs the administrative set up time has been of just over 2
years on average. It is nevertheless assumed that the set-up time for a new
iPPP could be reduced quite significantly thanks to
previous experience. We therefore assume that the administrative set-up time of
the rail iPPP will be of 1.5 years.

  During
      this period, it is assumed that the Commission
      incurs costs related to the coordination and
      supervision of setting up the iPPP. The needs are estimated at 3 administrator
      positions and 1/2 assistant position in relevant thematic and horizontal
      units – thus 3.5 full-time
      equivalents at a cost of 128kEUR each, or a total
      annual cost of of 448 kEUR. Over a 1.5 year period, this corresponds to a total
      set-up budget of 672 kEUR, or, spread over the 7 year H2020 programming
      period, an annual cost of about 96 kEUR per year. 

·        
Running costs:
o  
Running costs of the iPPP are calculated based
on the average administrative running costs of existing iPPPs, while factoring
in the efficiency gains foreseen under H2020 and the new financial regulation.
o  
An analysis of existing iPPPs shows that the
average share of  administrative expenditure in total expenditure was 3.8%,
while the average share of staff expenditure within this administrative
expenditure was 56% (see the table on staff and expenditure for existing iPPPs below).
o  
Simplification measures introduced in H2020 and
the new financial regulation are likely to lead to efficiency gains within iPPPs
(simplified budgetary and procurement procedures, sharing of audit functions
with the Commission, pooling of resources, etc.). If we assume this will lead
to a 20% cut in administrative costs, this means administrative costs will
represent 3% of the total budget of iPPPs.
o  
If we transpose this 3% share of administrative
running costs to a rail R&I budget of EUR 900
million (Commission contribution of EUR 450 million, with a leverage effect of 2),
total administrative costs of the iPPP can be estimated at around EUR 27 million.
However, as the lifespan of the iPPP will only be 5 years (2016-2020 given
setting up time), it can be assumed that some of the rail R&I budget
(roughly EUR 70 million for the period 2014-2015) will be managed under CR
before being taken over to the iPPP. Therefore, administrative costs in the
first 2 years will be similar to CR (3.5% of EUR 70 million, or a total of 2.45
million), while, during its 5 year lifespan, administrative costs of the iPPP
will be 3% of EUR 830 million, or EUR 24.9 million, of which 50% will be paid
by industry. This brings total administrative costs of the option up to EUR
27.35 million, or an annual equivalent cost (spread over the 7 years of H2020)
of EUR 3.907 million.
o  
If one assumes that the efficiencies enabled
under H2020 and the new Financial Regulation are largely reflected in staff
expenditure and that therefore staff expenditure is reduced to an average share
of 45% of total administrative costs, the total administrative
costs of the iPPP (EUR 4.98 million per year) correspond to staffing levels of 20
full-time equivalents (assuming
an average cost per agent of 110 kEUR, rather than
128kEUR in the baseline, given the reduced cost of hiring temporary or
contractual staff in an iPPP compared to Commission officials).
o  
One can also take a bottom-up approach to
staffing levels, based on average operational expenditure per staff member in
current iPPPs. In existing iPPPs, average operational expenditure per staff
member was around EUR 6.5 million in 2012. Applying this ratio, if one assumes
the annual budget of the future rail iPPP will be of roughly EUR 166 million[114], then the iPPP would
require 25 full-time equivalents, at equal productivity levels to current
iPPPs. Assuming 20% efficiencies under H2020 and the new Financial Regulation,
this figure could be reduced to 20 full-time equivalents, which is similar to
results calculated with the means of top-down approach above. 

  On top of the administrative costs of
      the iPPP itself, the Commission incurs costs of roughly 320 kEUR
      per year for the supervision of and participation in the iPPP (equivalent
      to 2.5 full-time equivalents). These costs are incurred over the 5 year lifespan of the
      iPPP. Furthermore, one-off costs of 200 kEUR for external evaluations
      must be factored in (based on the assumption of one mid-term and one
      final evaluation at a cost of 100 kEUR each). Spread over the 7 years lifetime of
      the iPPP, this leads to an annual cost of about 260 kEUR per year.

·        
Winding down and legacy management costs:
o  
Costs relating to managing the legacy of
programmes are estimated in the same way as the CR option, resulting in a total legacy management budget of EUR 6.939 million
– or 991kEUR per year, spread over the 7-year H2020 programming period. Half of
these costs will be funded by industry.

  On top of this, the direct cost of
      winding down is likely to be similar to the setting up costs, i.e. 672
      kEUR, or 96 kEUR if one spreads the cost over 7 years, half of which will
      be funded by industry. These costs will only be relevant if it is decided
      that the iPPP will cease to exist at the end of the 2014-2020 financial
      framework.

Staff and expenditure: Overview of key figures of existing iPPPs

 Total implementation costs: Based on the above calculations, the total annual equivalent implementation
     cost of the iPPP option is EUR 5.457 million (based on the 7
     year H2020 programming period) – or roughly 750 kEUR higher than the
     baseline on an annual basis. However, as industry commits to covering half
     of the running and winding down costs, the estimated implementation cost
     to the European Commission is limited to EUR 3.183 million.
     Operating an iPPP is thus less costly for the Commission compared to CR or
     the cPPP. 

In the ERA option, the following
assumptions are made:
·        
Establishment costs. 
o  
Although the programmes would be managed within
the existing structure, the Agency would have to be significantly remodelled to
accommodate the needs of implementing and coordinating a research programme. The
regulatory procedure in itself would take 2 years, while the administrative
set-up-time, allowing for new staff to be hired and specific decision-making
procedures to be established, is estimated at roughly 1 year. During this time,
programmes will be run under CR. The human resources required during this
period are similar to setting up an iPPP (i.e. 3.5 full-time equivalents) but
given that some of these resources (2.5 full-time equivalents) are internal to
the Agency, their cost will be lower. Indeed, the average cost per ERA full-time
equivalent staff member is 100 kEUR[115],
i.e. 22% cheaper than in the baseline option (128kEUR). The establishment cost is therefore estimated at 350 kEUR.
·        
Running costs are similar to CR option although
slightly lower as the average cost of staff at ERA is lower than at the
Commission :
o  
Taking into account the 3-year set-up time,
running costs in the first 3 years will be similar to CR.
o  
For the remaining 4 years, the cost structure is
similar to CR (calculated at 3.5% of operational expenditure) but cheaper, due
to the 22% lower average cost of ERA staff. The average share of staff
expenditure in administrative costs in DG RTD was 67% in 2011 according to
internal estimates[116].
Other administrative costs are assumed to remain stable. This means total
running costs in the ERA option amount to EUR 21.24 million, or an annual
equivalent cost of EUR 3.034 million.
o  
No additional costs are required on the
Commission side given that it already participates in the ERA structure and
that the baseline assumption of increased management capacity is already
included in the running costs.
o  
Assuming that each staff member can manage an
average operational expenditure of EUR 6.5 million (see iPPP scenario), it is
estimated that the Agency would need to acquire 15 additional full-time
equivalents to manage the H2020 rail R&I annual budget (annual budget of
roughly EUR 98 million, given a total budget of EUR 690 million[117]), or slightly less
given efficiencies under H2020 and the new Financial Regulation.
·        
Winding down and legacy management costs:
o  
Costs relating to managing the legacy of
programmes are similar to the CR option (although slightly cheaper, given the
lower staff costs), leading to a total legacy management budget of EUR 4.855
million – or 695 kEUR per year over the 7-year H2020 programming period.
o  
On top of this, the direct cost of winding down
is likely to be similar to the setting up costs, i.e. 350 kEUR. These costs
will only be relevant if it is decided that the iPPP will cease to exist at the
end of the 2014-2020 financial framework.
·        
Total implementation costs: Based on the above calculations, the total annual equivalent
implementation cost of the ERA option is EUR 3.83 million (based
on the 7 year H2020 programming period) – or roughly 900 kEUR lower than the
baseline on an annual basis. 
The following table summarises the total
costs and the equivalent annual implementation cost relating to each option, based on the 7 year lifecycle of
Horizon 2020. 
Calculations of implementation costs of the options under assessment
(in kEUR)

Annex
VIII: Technology Readiness Levels (TRL)

This annex explains the
different Technology Readiness Levels that can be attained by research projects
and their link with the R&I process.
 Technology Readiness Level || Description 
 1 || Basic principles observed and reported   || Lowest level of technology readiness. Scientific research begins with, to be translated into applied research and development. Example might include paper studies of a technology's basic properties. 
 2 || Technology concept and/or application formulated   || Invention begins. Once basic principles are observed, practical applications can be invented. The application is speculative and there is no proof or detailed analysis to support the assumption. Examples are still limited to paper studies. 
 3 || Analytical and experimental critical function and/or characteristic   || Active research and development is initiated. This includes analytical studies and laboratory studies to physically validate analytical predictions of separate elements of the technology. Examples include components that are not yet integrated or representative. 
 4 || Component and/or breadboard validation in laboratory environment   || Basic technological components are integrated to establish that the pieces will work together. This is relatively "low fidelity" compared to the eventual system. Examples include integration of 'ad hoc' hardware in a laboratory. 
 5 || Component and/or breadboard validation in relevant environment || Fidelity of breadboard technology increases significantly. The basic technological components are integrated with reasonably realistic supporting elements so that the technology can be tested in a simulated environment. Examples include 'high fidelity' laboratory integration of components. 
 6 || System/subsystem model or prototype demonstration in a relevant environment || Representative model or prototype system, which is well beyond the breadboard tested for TRL 5, is tested in a relevant environment. Represents a major step up in a technology's demonstrated readiness. Examples include testing a prototype in a high fidelity laboratory environment or in simulated operational environment.   
 7 || System prototype demonstration in an operational environment   || Prototype near or at planned operational system. Represents a major step up from TRL 6, requiring the demonstration of an actual system prototype in an operational environment, such as in a vehicle or on a track. 
 8 || Actual system completed and qualified through test and demonstration   || Technology has been proven to work in its final form and under expected conditions. In almost all cases, this TRL represents the end of true system development. Examples include developmental test and evaluation of the system in its intended system to determine if it meets design specifications. 
 9 || Actual system proven through successful mission operations || Actual application of the technology in its final form and under mission conditions, such as those encountered in operational test and evaluation. In almost all cases, this is the end of the last "bug fixing" aspects of true system development. Examples include using the system under operational railway conditions. 
The following table presents graphically
the TRLs and their link with the R&I process as well as the coverage of
each TRL by type of project inside the EU framework programme.
[1]       White
Paper on a Roadmap to a Single European Transport Area – Towards a competitive
and resource efficient transport system, COM/2011/0144 final
[2]       The
Fourth Railway Package – Completing the single European railway area to foster
European competitiveness and growth, COM (2013) 25 final
[3]       COM
(2011) 665 final
[4]
      Regulation of the European Parliament and of the
Council establishing Horizon 2020-The Framework Programme for Research and
Innovation (2014-2020), SEC(2011) 1427-Volume 1 and SEC(2011) 1428-Volume
1
[5]
      These figures are to be confirmed after
interinstitutional negotiations.
[6]       Decision
No 1982/2006/EC of the European Parliament and of the Council of 18 December
2006 concerning the Seventh Framework Programme of the European Community for
research, technological development and demonstration activities (2007-2013)
[7]       COM(2008) 800
[8]       COM(2013)
494 final
[9]       Commission
Staff Working Paper SEC(2011) 1427 final on an Impact Assessment accompanying
the Communication 'Horizon 2020 - The Framework Programme for Research and
Innovation'
[10]     UNIFE: Shift²Rail – A Flagship Joint Technology Initiative in
Horizon 2020, July 2012
[11]     Proposal for a Regulation of the European Parliament and of the
Council (COM(2011)809 final) establishing Horizon 2020 - The Framework Programme
for Research and Innovation (2014-2020) and Proposal for a Council Decision
(COM(2011)811 final) establishing the Specific Programme Implementing Horizon
2020 - The Framework Programme for Research and Innovation (2014-2020),
30.11.2011
[12]     COM(2011)
572
[13]     DG RTD Expert Group (2010) Interim Evaluation of the Seventh
Framework Programme
[14]     The meetings took place on 22 May, on 4 September and on 13
September 2013. A written consultation was also organised between 26 July and 2
August 2013.
[15]     SWD(2013) 10 – Part 1
[16]     Eurostat, Modal split of inland freight transport, 2000 and
2010 (% of total inland tkm)
[17]     SWD(2013) 10 –
Part 3
[18] SWD(2013) 10 – Part 3 and SWD (2012) 246
final/2
[19]     SWD(2013) 10 –
Part 3
[20]     SWD(2013) 10 accompanying
the Fourth Railway package proposals – Part 1
[21]     EC, Sector Overview and Competitiveness Survey of the Railway
Supply Industry, May 2012
[22]     EC, Sector Overview and Competitiveness Survey of the Railway
Supply Industry, May 2012
[23]     EC, Sector Overview and Competitiveness Survey of the Railway
Supply Industry, May 2012, p. 100
[24]     EC, DG Research and Innovation (JRC): The 2012 EU Industrial
R&D Investment Scoreboard, 2013
[25]     COM/2011/0144 final, p. 10
[26]     SITPRO Plus: Study of the Impacts of the Transport RTD Projects
in FP5 and FP6, November 2010
[27]     Exploitation is defined as "documented use" through
reference or acknowledgement in documents. 
[28]     Sixth FP7 Monitoring Report – 2012, 7 August 2013
[29]     Foreground means the tangible and intangible results, including
information and knowledge, whether or not it can be protected, which is
generated under the project. Such results include rights related to copyright,
design rights, patent rights, plant variety rights, and similar forms of
protection.
[30]http://errac.uic.org/IMG/pdf/errac_ewg_wp06_evaluation_of_market_uptake_lessons_learnt_from_past_projects_results.pdf
[31]     SEC(2011) 1427 final, p. 11
[32]     In this context, the ecosystem is considered as the entirety of
institutional, regulatory, operational and technical conditions in which the
rail sector operates in a given country
[33]     Transport research market uptake (Market-up; Project ID:
265841): D2.1 – Characterisation of the context of RTD initiatives in the Rail
Sector, December 2011
[34]     See joint UNIFE & UIC study under FP6: Green Info Package
for the railway sector)
[35]     From a JRC report on R&D efforts of the EU automotive and
rail industry and the public sector (2010). The graphs show that overall
R&D investments are much larger in the road sector although R&D
intensity is not so much lower in the rail sector. Nevertheless, the report
highlights data availability issues in the rail sector which hamper the
comparison among sectors. Despite data problems, the report highlights
stagnating R&D investments in the rail sector.
[36]     European Commission, Joint Research Centre: Report of the STTP
Stakeholder Workshop on Rail Transport, 18 February 2001
[37]     Scale of TRL ranging from 1 to 9: TRL1 expresses the technology
readiness of basic principles and observed (exploratory and applied research)
up to TRL9 a successful operational experience which is fully tested, validated
and demonstrated in its operational environment. Next step would be industrial
deployment. See Annex VIII for further explanations.
[38]     Based on an analysis of the 47 rail-only projects funded under
FP7-Transport, excluding multi-modal projects. For a detailed overview of these
projects, see Annex III.
[39]     The classification of rail actors derives from the European
Commission study by DG Enterprise and Industry: Sector Overview and
Competitiveness Survey of the Railway Supply Industry, May 2012
[40] See annex III for further details on R&I activities under FP7.
[41] Austria, Belgium,
Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,
Hungary, Ireland, Italy, Latvia, Lithuania, Netherlands, Poland, Portugal,
Romania, Slovakia, Spain, Sweden and the UK
[42]     EURNEX: European rail Research Network of Excellence
[43]     COM(2011) 808/809/810/811/812
[44]     Horizon 2020 - The Framework Programme
for Research and Innovation
[45]     See Annex 2 of the Horizon 2020 impact assessment (SEC(2011)1427)
[46]     See Annex 3 of the Horizon 2020 impact assessment (SEC(2011)1427)
[47]     For a detailed assessment of the need for EU intervention in
R&I activities, see the Commission Staff Working Paper SEC(2011) 1427 final
on an Impact Assessment accompanying the Communication from the Commission
'Horizon 2020 - The Framework Programme for Research and Innovation', in
particular p. 13 and Annex 2.
[48]     Communication from the Commission to the European Parliament,
the Council, the European Economic and Social Committee and the Committee of
the Regions, Europe 2020 Flagship Initiative Innovation Union, COM(2010) 546.  
[49]     Proposals for a "Shift2Rail" initiative presented by
UNIFE in July 2012 estimate the necessary budget for rail R&I activities
during the period 2014-2020 at a minimum of EUR 800 million to EUR 1 billion in
order to preserve the long-term competitiveness of the EU rail sector.
[50]     http://www.errac.org/spip.php?article13
[51] Including intermodal projects and cross-cutting issues, under the
following themes: Transport, SME, People, Security, ICT, NMP.
[52]     European Commission: Interim Assessment of the Research PPPs in
the European Economic Recovery Plan, 2011, p. 41 
[53]     European Commission: Evaluation of Regulation 881/2004, Final
Report, April 2011
[54]     Interim Assessment of the Research PPPs in the European
Economic Recovery Plan, 2011, pp. 27 and 45
[55]     SEC(2011) 1427, p.8.
[56]     Partnering in Research and Innovation, COM(2011) 572 final.
[57]     Interim Assessment of the Research PPPs in the European
Economic Recovery Plan, 2011, p. 27
[58]     Interim Assessment of the Research PPPs in the European
Economic Recovery Plan, 2011
[59]     Interim Assessment of the Research PPPs in the European
Economic Recovery Plan, 2011, p. 29
[60] Commission Staff Working document: Impact assessment accompanying
the proposal for a Council Regulation on the Clean Sky 2 Joint Undertaking
[61]     JTI Sherpas’ Group: Final Report: Designing together the ‘ideal
house’ for public-private partnerships in European research
[62]     SEC(2011) 1427, p.22
[63][63]   Interim Assessment of the Research PPPs in the European Economic
Recovery Plan, 2011, p. 45, 46
[64]     European Commission: Sixth FP7 Monitoring Report (2012),
07/08/2013, p. 6.
[65]     European Commission: Sixth FP7 Monitoring Report (2012),
07/08/2013, p. 9.
[66]     European Commission: Sixth FP7
Monitoring Report (2012), 07/08/2013, p. 41
[67]     Interim Assessment of the Research PPPs
in the European Economic Recovery Plan, 2011, p. 13
[68]     Interim Assessment of the Research PPPs in the European
Economic Recovery Plan, 2011, p. 26
[69]     Interim Assessment of the Research PPPs in the European
Economic Recovery Plan, 2011, p. 27
[70] European Commission, DG RTD: Cost-benefit analysis of the Joint
Undertaking (JU) as choice of administrative structure to implement a JTI: Part
of the Impact Assessment on the Public Private Partnerships set up on the basis
of Article 187 TFEU planned under Horizon 2020, 16/11/2012
[71]     Regulation (EU, Euratom) No 966/2012 and Commission delegated
Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application of
Regulation (EU, Euratom) No 966/2012
[72]     Report from the Commission to the Parliament and the Council:
Annual Progress Report on the activities of the Joint Technology Initiatives
Joint Undertakings (JTI JUs) in 2011, COM (2012) 758 final, 14 December 2012.
[73]     Report from the Commission to the Parliament and the Council:
Annual Progress Report on the activities of the Joint Technology Initiatives
Joint Undertakings (JTI JUs) in 2010, SWD (2012) 105 final, 27 April 2012
[74]     Innovative Medicines Initiative: Annual Activity Report 2012,
28 May 2013, p.23
[75]     DG RTD: Cost-benefit analysis of the Joint Undertaking (JU) as
choice of administrative structure to implement a JTI 
[76]     European court of Auditors: Has the Commission ensured
efficient implementation of the 7th Framework Programme for
research, Special Report No2, 2013
[77]     Regulation (EU, Euratom) No 966/2012 and Commission delegated
Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application of
Regulation (EU, Euratom) No 966/2012
[78]     http://ec.europa.eu/commission_2010-2014/sefcovic/documents/120719_agencies_joint_statement_en.pdf

[79]     SEC(2011) 1427 final – Annex document, p. 32
[80]     European Rail Traffic Management System and Communications
Based Train Control (Urban Rail)
[81]     UNIFE commanded World Rail Market Study 2012, Roland Berger
[82]     UNIFE: Shift²Rail – A Flagship Joint Technology Initiative in
Horizon 2020, July 2012
[83]     UNIFE – SEURECO ERASME: Internal note
on the evaluation of SHIFT2RAIL project with NEMESIS
model, September 2013
[84]     Regulation 2013/0014 (COD) on the European Union Agency for
Railways and repealing Regulation (EC) No 881/2004
[85]     http://ec.europa.eu/commission_2010-2014/sefcovic/documents/120719_agencies_joint_statement_en.pdf

[86]     The relative weighting of each option is obtained by
calculating the ponderate sum of responses (from 1 to 5 where 1 is not relevant
at all and 5 is very relevant)
[87]     http://intranet-rtd.rtd.cec.eu.int/int_com/docs/CBA_JU.pdf
[88]     http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/127599.pdf
[89]     COM (2012) 299 final.
[90]     COM(2012) 259 final
[91]     The intention is to add this (identical) background Annex to
each of the 3 rail package IAs.
[92]     http://ec.europa.eu/public_opinion/flash/fl_326_en.pdf
[93]     http://ec.europa.eu/consumers/consumer_research/cms_en.htm
[94]     http://ec.europa.eu/transport/rail/studies/doc/2010_09_09_study_on_regulatory_options_on_furt
her_market_opening_in_rail_passenger_transport.pdf
[95]     27 out of the 40 largest intra-EU air routes in the EU were
within the reach of competing long-distance (high-speed) railway services and
yet attracted some 50 million passengers a year - i.e. as much as the 4th
largest EU airport, Madrid-Barajas.
[96]     Directive 2004/51/EC, amending Council Directive 91/440/EEC.
[97]     Council Directive 91/440/EEC, as amended inter alia by
Directive 2007/58/EC.
[98]     Some Member States, such as United Kingdom, Germany, Sweden or
Italy, have unilaterally opened their domestic markets.
[99]     Regulation (EC) No 1370/2007 of the European Parliament and of
the Council of 23 October 2007 on public passenger transport services by
rail and by road and repealing Council Regulations (EEC) Nos 1191/69
and 1107/70
[100]    Directive 2008/57/EC of the European Parliament and of the
Council of 17 June 2008 on the interoperability of the rail system within the
Community (Recast)
[101]    Directive 2004/49/EC of the European
Parliament and of the Council of 29 April 2004on safety on the Community's
railways (Railway Safety Directive).
[102]    Regulation (EC) No 1335/2008 of the European Parliament and of
the Council of 16 December 2008 amending Regulation (EC) No 881/2004
establishing a European Railway Agency (Agency Regulation)
[103]    Proposal for a Regulation of the
European Parliament and of the Council establishing the Connecting Europe Facility, COM(2011) 665
final – 2011/0302 (COD)
[104]    Proposal for a
Regulation of the European Parliament and of the Council on union guidelines
for the development of the
Trans-European Transport network, COM/2011/0650 final/2 - 2011/0294 (COD).
[105]    As the result of the changes induced by the Technical
Specifications for Interoperability (TSIs) decision.
[106]    See the Impact Assessments accompanying the 2001 White Paper,
the 4th railway package, as well as JRC Staff Working Documents accompanying
the Communication on STTP
[107]    European Train Controlling System (a basic component of ERTMS).
[108]    The relative weighting of each option is obtained by calculating
the ponderate sum of responses (strongly disagree = -2; disagree = -1; neutral
and no opinion = 0; agree = 1; strongly agree = 2)
[109]    The relative weighting of each option is obtained by calculating
the ponderate sum of responses (from 1 to 5 where 1 is not relevant at all and
5 is very relevant)
[110]    The relative weighting of each option is obtained by calculating
the ponderate sum of responses (from 1 to 5 where 1 is not relevant at all and
5 is very relevant)
[111]    Based on the fact that the average share of EU funding for
FP7-Transport projects in general and for the 47 rail projects under
FP7-Transport in particular was 65% and 66% respectively – i.e. a leverage
effect of 1.5
[112]    The average cost per full-time
equivalent has been calculated in DG Research's
"Cost-benefit analysis of the Joint Undertaking (JU) as choice of
administrative structure to implement a JTI: Part of the Impact Assessment on
the Public Private Partnerships set up on the basis of Article 187 TFEU planned
under Horizon 2020", 16/11/2012
[113]    Projects under FP7 are expected to run
until 2017 – see Research Executive Agency (REA):
Externalisation in FP7 and Horizon 2020
[114]    Total rail R&I budget of EUR 830 million spread over 5 years
– assuming EUR 70 million is managed through CR in years 2014 and 2015.
[115]    European Commission: Evaluation of Regulation 881/2004, Final
Report, April 2011
[116]    Cost-benefit analysis of the Joint Undertaking (JU) as choice of
administrative structure to implement a JTI: Part of the Impact Assessment on
the Public Private Partnerships set up on the basis of Article 187 TFEU planned
under Horizon 2020, 16/11/2012
[117]    Assuming a similar leverage effect of the Commission
contribution as in the baseline option – i.e. 1.5