INDUCTION TRAINING SEIO Implementation: Tendering, Procurement and Budget Support

Training Objectives Overall the training will provide basic information on EU contracting procedures so that these can be taken into account when preparing implementation plans, sequencing and monitoring of future IPA Actions. Specifically, the training will explain: the PRAG and its relationship to the EU Financial Regulation; contract types and their uses; required documents for each contract type and procurement procedure contract value and its effect on procurement procedures time taken to complete the various procurement procedures and how to incorporate this into the development of realistic implementation plans requirements for budget support

Contracts Contracts are the normal legal basis for the disbursement of IPA finances (there are others e.g. Delegated Agreements, Sector Budget Support) In EU pre-accession funds a distinction is made between procurement contracts and grant contracts. In procurement, the clients requirements are specified in contract documents (e.g. Terms of Reference for consultants). By contrast, in grant schemes the client explains the problems and potential grant contractors make proposals to address these problems. The client chooses the best proposal and awards the grant i.e. The grant awardees design the solutions and not the clients (as in procurement).

PRAG Practical Guide to Contract Procedures for EU External Actions (PRAG) http://ec.europa.eu/europeaid/prag/document.do?locale=en Regulation No. 966 /2012 of the European Parliament and the Council on the Financial Rules applicable to the general budget of the Union Commission Delegated Regulation No. 1268/2012 of 29 October 2012 on the Rules of Application of Regulation No 966/2012 of the European Parliament and Council on the financial rules applicable to the general budget of the Union http://ec.europa.eu/budget/documents/financial_regulation_en.htm

Types of Contract and Associated Documents IPA Action Document SERVICES Terms of Reference Procurement SUPPLIES Technical Specifications WORKS Bills of Quantity Services Studies - identification and preparation of projects, feasibility studies, economic and marketing studies, technical studies, evaluations and audits (Global price) Technical assistance - the service provider has an advisory role, directs or supervises a project, or providing expert services defined in the contract (fee-based) The combination - defined as resources and product Supplies Purchase, lease or rental of assets (equipment). During the delivery of the equipment may be required installation and maintenance products Works Performance, or design and construction that result in the building or work of civil engineers who themselves are sufficient to meet the economic or technical function. Twinning (Twinning: 1-2 MEUR and Twinning light: up to 200.000 EUR) Cooperation tool between a Public Administration in a Partner/ Beneficiary country and the equivalent institution in an EU Member State It consists of sending to Serbia at least one resident adviser (12- 24 months)- RTA- and a number of medium and short-term missions, all to be carried out by public officials of the EU Member State institution Key features is the concept of mandatory results: both the Serbian and the EU partner commit themselves to work towards a commonly agreed result, which should be measurable and precise. Includes at least some elements of approximation to the EU acquis Grants Direct payments of non-commercial nature Grants contract is used for the grant scheme as direct donation for local and regional authorities and civil society organizations Direct Agreements For particular tasks with specific organizations like UNHCR etc. GRANTS Guidelines for Applicants

International call for proposals Local call for proposals Tendering Procedures SERVICES >€300,000 International restricted procedure < €300,000 but > €20,000 1.Framework contracts 2.Competitive negotiated procedure < €20,000 Single tender SUPPLIES > €300,000 International open procedure <€300,000 but > €100,000 Local open procedure <€100,000 but > €20,000 Competitive negotiated procedure WORKS >€5,000,000 1.International open procedure 2.International restricted procedure <€ 5,000,000 but > €300,000 < € 300,000 but > €20,000 Competitive negotiated procedure GRANTS >€2,000,000 International call for proposals Local call for proposals For any amount in cases of urgency Direct grant Local open postupak Ovaj postupak se sprovodi za nabavke koje su 150 000 > 60 000 Eur Koji su koraci u okviru ovog postupka: Najava (contract forecast) nije obavezna Objava nabavke (procurement notice) se objavljuje samo o zemlji. Komisija objavljuje samo referencu te procedure na svom web site-u Podnošenje ponuda (minimum 30 dana od objave nabavke u lokalnim novinama\medijima) Evaluacija prispelih ponuda (oko 30 dana) rocedure (Otvoreni postupak u zemlji) Competitive negotiated procedure (konkurentni postupak) Ovaj postupak se sprovodi za nabavke koje su 60 000 Eur > 10 000 Eur Nema javnog oglašavanja za nabavku Ugovorna strana pozove, po svom izboru, min. 3 dobavljača da dostave ponude za dobavljanje robe Dobavljači imaju rok od 30 dana da daju ponudu Evaluacija prispelih ponuda Single tender (princip jedne ponude) Ovaj postupak se sprovodi za nabavke koje su 10 000 Eur > 0 Eur Kontaktira se jedna firma koja će da da ponudu, Rok za dostavljanje ponude je stvar odluke Ugovarača, preporuka minimum 7 dana Evaluacija prispele ponude (7 dana) For services with a value of less than or equal EUR 2 500 the Contracting Authority may simply pay against invoices without prior acceptance of a tender. Restricted procedure All service contracts worth € 300 000 or more must be awarded by restricted tender procedure following international publication of a contract prior information notice and a contract notice For supplies with a value of less than EUR 2 500, the Contracting Authority may pay on the basis of an invoice without prior acceptance of a tender

Procurement Procedure Contracting Times Contract Type Procurement Procedure Average Time Taken SERVICE International Restricted Tender (9)-12 months Framework (3)-5 months SUPPLIES International Open Tender 9 months Local Open Tender 6 months WORKS 12+ months 9-12 months GRANTS International Call for Proposals + months Local Call for Proposals (6)-9 months

Service Contracts: International Restricted Tender Procedures Prepare ToR Negotiations with EC Publication of Procurement Notice Establish Sort List and prepare tender dossier Tender preparation /submission Tender evaluation, prepare Evaluation Report and contract dossier Contract Signature Months 1 2 3 4 5 6 7 8 9 10 11 12

Service Tender Dossier A. Instructions to the tenderers Letter of invitation to tender Instructions to tenderers B. Contract Contract, Special Conditions Terms of Reference Organisation and Methodologies Key Experts General Budget breakdown Conditions for service contracts   C. Other information Shortlist notice Administrative compliance grid Evaluation grid D. Tender submission form

Supply Tender Dossier A. Instructions to the tenderers Letter of invitation to tender Instructions to tenderers b. Contract Contract Special conditions Annexes General conditions for supply contracts Technical specifications Budget breakdown Model for performance guarantee Model for advance guarantee   C. Other information Glossary of terms Administrative compliance grid Evaluation grid D. Tender submission form

Works Contracts Works contracts cover construction, there are many national ‘standard’ forms of contract. Despite this, the EC have standardised on the use of an international contract format developed by the Federation Internationale des Ingenieurs-Conseils (FIDIC). It should be noted that IFIs (WB, EBRD) have their own standard documents which must be used by recipients. The most commonly used forms of contract available under FIDIC are: Conditions of Contract for Works of Civil Engineering Construction (The ‘Red Book’) Conditions of Contract for Design –Build and Turnkey (The ‘Orange Book’) Conditions of Contract for Electrical and Mechanical Works (The ‘Yellow Book’) Short Form of Contract (The ‘Short Form’).

Works Tender Dossier Most works contract dossiers contain the following documents: The Tender (Contractor’s offer) The General Conditions of Contract (FIDIC Part I) The Conditions of Particular Application (FIDIC Part II Clauses) The Technical Specifications The Design Documents (Drawings) The priced Bill of Quantities /Schedule of Rates Any other document forming part of the contract e.g. letters of clarification

Bills of Quantity (BoQ) An itemised list showing the number/ quantity of items required to complete the works, the units of measure, the rate per unit of quantity and the consequent total cost for that item. The BoQ may contain a number of bills classified by structure, trade, or standard method of measurement. In turn each bill will be broken down into separate items covering all elements of the works. The total number of items can be many hundreds. During construction the quantity of each item is re-measured and using the Contractors quoted unit rates, the value of the actual works completed by the Contractor is measured

Role of the ‘Engineer’ One of the main aims of Contractors, whilst making every effort to complete the works according to the contract, is to maximise profits wherever possible. This means the Contractor will interpret contract provisions to maximise advantage e.g. providing the cheapest materials to meet the minimum requirements in the specifications or by requesting frequent time extensions. Under FIDIC conditions an independent ‘Engineer’ must be appointed to supervise the works and to ensure that they are carried out according to the contract. The Engineer issues ‘Take Over’ and ‘Default Liability’ Certificates when the works are completed

Responsibilities of the Employer Ensure that the works are legally acceptable Appoint the Engineer Define the scope of the Engineer’s responsibilities Ensure that the site is freely available Provide for the Contractor's needs Pay the Contractor Consult with the Engineer on contractual obligations e.g. delays (time & cost to Contractor); rejection (cost to Employer); default of the Contractor (cost to Employer) before determining the amount due.

SPD: Implementation Planning SECTOR TITLE 2014 2015 2016 2017 2018 2019 2020 Q3 Q4 Q1 Q2 ACTION 1 P   C C/I I Activity 1.1 P  Activity 1.2 ….. ACTION 2  P  C Activity 2.1 Activity 2.2 P = programming (period when the IPA action programme is expected to be adopted C = procurement and grant award procedure I = implementation period

Contracting & Disbursement Deadlines Deadline for concluding the Financing Agreement The final date for the signature of the Financing Agreement is X+1 (where X=year in which budgetary commitment was made). Conclusion of FA=year N Contracting deadline The end date for the signature of contracts (including grant contracts) is 3 years from the date of conclusion of the Financing Agreement i.e. N+3 Deadline for the execution of contracts The end date by which contracts (including grant contracts) must be finished is 3 years from the contract signature. The contracting deadline for the FA=N+3+3 Disbursement deadline The end date for making payments to contractors is 1 year after the deadline for executing contracts i.e. N+3+3+1 Final date for the implementation of the Financing Agreement The end date for closure of the Financing Agreement is 8 years. After this date no financial transactions can be made legally under the Financial Agreement concerned

Programme Intervention Logic Operations Activities Results Collective rural projects Reinforcement of rural producers Specific Objectives Improved productivity Overall Objective Land consolidation Increased revenues Modernisation and adaptation Development of existing activities Improved farming tools Jobs created & safeguarded Stopping rural exodus Attraction of outside companies New activities (tourism) Industrial buildings for new companies Better living conditions Improved value of natural areas Better image of rural areas Restoration of the environment / rural landscape

INDUCTION TRAINING SEIO Budget Support

What is Budget Support (BS)? BS is a method of delivering financial assistance which normally has 4 steps: (Sector) Policy Dialogue Financial Transfers (in ‘tranches’) to National Treasury Account Performance Assessment Capacity Development BS is delivered by means of ‘Sector Reform Contracts’.

Political and Economic Focus of IPA-BS Compliance with the political criteria should be the primary focus of IPA2 BS. In particular, assistance should support preparations for acquis chapters 23 and 24 (The ‘Rule of Law’) For the economic criteria, the main focus of IPA2 BS should be on supporting the establishment of a functioning market economy (Copenhagen Criteria: i.e. ‘The ability to withstand the pressures of the internal market’)

Assessment of Eligibility Assessment takes place at 2 stages in the programme cycle. During programme preparation: assessment of relevance (are key constraints /weaknesses addressed?) and credibility (realism, institutional capacity, track record, political commitment) During programme implementation: assessment of progress made in policy implementation (benchmarked against reform commitments)

Risk Management Framework Risk management is an internal assessment of risk levels based on the analysis of replies to questionnaires in 5 categories, namely: Political Macroeconomic Developmental Public Financial Management Corruption /Fraud There are 4 risk levels: Low Moderate Substantial High Beneficiaries are expected to define their risk response by means of ‘Mitigation Measures’ (these are monitored)

Whether to Provide BS? The EC decision on providing BS is based on 3 assessments: Assessment of political commitment to a reform agenda (in line with EU accession) Assessment of eligibility Assessment of risks and mitigation measures

Variable Tranches: Performance Reserves ‘A Performance Monitoring System and related disbursement criteria is at the heart of any budget support operation’ (EC) BS disbursements are of 2 sorts: Base (or fixed) tranches: these are linked to eligibility criteria Variable tranches: these are intended to create an incentive for improved performance and are based on performance indicators. The EC limit (cap) the use of variable tranches to avoid unpredictability /volatility of disbursements. Typically, Sector Reform Contracts cover commitments for 3 years with an upper limit of 40% variable tranches

Variable Tranche (Performance) Indicators The following principles should be applied: Targets and indicators should be Coherent with sector problem analysis and programme objectives Whilst combined indicators may be used, the emphasis should be on Results Number of indicators should be limited to a maximum of 8 per Tranche (to avoid loss of policy focus) Indicators, targets and assessment methodology should be defined during programme preparation