CERN-ITER Workshop CERN Procurement Anders Unnervik 16 Jan 2017

Legal framework CERN, an Intergovernmental Organization, was established in July 1953, by the “Convention for the establishment of a European Organization for Nuclear Research”. As an Intergovernmental Organization, CERN is not a legal entity under national law but governed by public international law. CERN benefits from immunity from national jurisdiction and execution. Thus, legal disputes between CERN and its suppliers and contractors are not submitted to national courts but solved via international arbitration. CERN is thus entitled to establish its own internal rules necessary for its proper functioning, such as the rules under which it purchases equipment and services. 2

Standard or Non-Standard? What do we buy ? Standard or Non-Standard? Off-the-shelf or products which can be produced with existing manufacturing techniques and/or technologies => functional specification Non-standard products where industry has neither the required know-how nor the immediate interest to develop and design the products for its existing markets => built to print Prototypes and/or pre-series needed?

Basis of Award – Supply contracts Supply contracts shall be awarded on FCA price, «Lowest compliant bid » basis…. ….and….

Lowest cost ……? Takes into account: Initial investment Operating costs: Energy consumption Spares Maintenance Training, etc. Disposal costs

Basis of Award – Service contracts Service contracts are awarded on a «Best Value for Money» basis to the bidder submitting the most economically advantageous bid

Best Value For Money The following criteria and weights will be applied by CERN to evaluate the bids for Service contracts: Criterion Weight Price (inc. all relevant costs) XX Quality Experience of the key personnel Stability of the personnel External references Technical know-how Technical training Quality of the bid Tests Etc. TOTAL 100

Some contractual conditions Performance (bank) guarantee; Two years warranty; Except in case of gross negligence or wilful misconduct, no liability for any indirect or consequential loss or damage; Penalties for late delivery, and often for some contract breaches; Changes of sub-contractors to be approved by CERN; Step-in rights in case of problems with sub-contractors; New IPR vested in CERN; Arbitration.

Some contractual cases, LHC Civil engineering FIDIC Red book (modified, e.g. dispute resolution board); CERN-Engineer-Contractor; Unforeseeable ground conditions; Late building permit->changed contract Dipole cold masses and components CERN design (build-to-print); CERN supplied all major components and tooling -> CERN supplier and client; Initially: one sector, target price with incentive fees and on open-book principles; Instead, firm and fixed prices for 30 cold masses each, thereafter new tender for the rest; Insolvency.

Some contractual cases, LHC Cryogenic distribution line Functional specification; Stage 1: Design, pre-series 110 m test cell (ceiling price for series), three contractors; Stage 2: New fixed-firm prices for series; Issues; change of sub-contractor, insolvency, corrosion, bad components; CERN decided to take over resp. for a faulty sector, pay extra for acceleration of components.

Some contractual cases, LHC Assembly of LHC cryomagnets on the CERN site (see WS-3, presentations); Assembly of LHC interconnections on the CERN site (see WS-3, presentations).

Lessons learned, LHC Different contracts require different tendering and contracting strategies; Technical risk to be borne by the owner of the technology, i.e. the party who knows most about the risks concerned; Flexibility and innovation in the procurement process. If a strategy does not work as planned ->change it; There is no “one-size-fits-all” specification: from “build-to-print” to functional specifications; Plan for variations; Price break-downs.

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