PUBLIC MANAGEMENT: PRIORITISATION OF INFRASTRUCTURE FUNDING IN BERLIN

Client and Problem Overview

One of the largest funding schemes of Germany's regional policy is the "Common Task of Improving Regional Economic Structures". It is incorporated within regional policies aiming to support economically weaker regions. The state of Berlin is eligible for participation in the scheme as its per capita income and investment levels are comparatively low. Part of the programme is business-related infrastructure funding which is managed by the Berlin Government Senate of Economics, Labour and Women Issues (SenWAF).

In past years, SenWAF has been able to support all eligible funding requests from existing financial funds. In 2006, however, SenWAF faced a substantial increase of the number of proposals received and also experienced a budget cut. Thus, the task of balancing benefits against costs became a priority to ensure the efficiency of public investments.

Objectives of the Project

The MARA1 team was employed to provide support in developing a transparent model to effectively prioritise funding proposals. The model should assist SenWAF in the objective appraisal of benefits, costs, and risks of proposed projects, and in selecting the portfolio of projects that will be financed.

: The Value-for-Money Triangle

Modelling Approach

The approach used was the socio-technical approach of the London School of Economics, which combines multi-criteria decision analysis (MCDA) with a social component called decision conferencing. The model created in this process prioritises the funding proposals by decreasing order of their benefit-to-cost ratios. The triangles below show the relationship between the cost and the added benefit of each criterion. A representative selection of 39 funding options was selected for this pilot project by the decision makers. These options were categorised into 6 funding areas. The options were evaluated based on the following criteria: financial cost, administrative cost, reputation of the bidder, conflict potential, size of effect, fit to existing infrastructure, and strategy impact.

Results, Impact and Conclusion

The MCDA provided SenWAF with a consistent and structured analysis framework. The participatory element of the socio-technical approach allowed for the effective integration of internal knowledge. In addition, the exchange of ideas in the decision conference helped to create shared understanding between the decision makers and the project employees. Overall, the process provided SenWAF with important strategic insights. A sensitivity analysis of the model revealed a fairly robust structure: even large variations in the criteria weights did not result in significant changes concerning the projects order of priority.

Although this was a pilot project, SenWAF thought the prioritisation that resulted from the MCDA model and the insights the model generated were quite valuable. For this reason it was decided to implement the MCDA approach as an alternative way to evaluate incoming funding requests in the future. To assist SenWAF in doing this, a comprehensible Excel add-on (PublicPrio) was developed. Together with the "Scoring Guidelines" document, which contains all scales and scoring instructions, it can be used to evaluate the remaining and future funding requests in order to optimise SenWAF's funding portfolio.

Most relevant Literature

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Bana e Costa, C.A.; Correa, E.C.; De Corte, J. and Vansnick, J. (2002): Facilitation Bid Evaluation in Public Call for Tenders: A Socio-Technical Approach. Omega, Vol.30 (3), pp. 227-242.
Bana e Costa, C.A.; Fernandes, T.G. and Correia, P.V.D. (2006): Prioritisation of Public Investments in Social Infrastructures Using Multi-Criteria Value Analysis and Decision Conferencing: A Case-study. International Transactions in Operational Research, Vol.13, p. 279.

The SenWaF project in the framework of MARA 2006 was funded by the European Union (European Fund for Regional Development - EFRE).