The Perils of ERDF Jim Reed, Director of Procurement – The University of Nottingham Deputy Chair HEPA COUP 2015

Agenda Objectives The saga of ERDF Learning Points How to get through funding agency audits relatively smoothly Benefits vs pain?

Agenda What went wrong at UoN The arguments we had Learning Points

The Problem We used ERDF funding to build or refurbish big buildings We acted relatively commercially but did not comply with the ERDF requirements at the time. The ERDF regulations started as guidelines, changed during the contract and became rules, changing several times during contract lifetimes We used a 3rd party building consultancy to manage the work but didn’t show them the rules/requirements/guidelines or check they were complying with them Particularly we didn’t advertise the admittedly below threshold building work (selection of QS, PM or at times construction company) The Subcontractor working for us made basic mistakes in wording, semantics or process and we didn’t check their work

The Problem DCLG auditors audited every project several times (Article 13, Article 16, enhanced Article 13, National Audit, EU Audit) They consistently re-audit the same areas (eg our PC Contract 5 times) and re-do it in depth. They take every item literally and have no pragmatism, flexibility or view of materiality They are audited on a sample basis by EU auditors I believe they are bonused on recovery UK Government are twitchy as they have been fined! The audit work is outsourced ERDF do not formally control changing requirements And do not seem to understand commercial contracting

Accelerating Low Carbon Economy Building

Accelerating Low Carbon Economy Building

Chemistry Building

The arguments they used You did not advertise even though it was under threshold you should have done. You did not comply with our requirements/rules/guidelines When we changed them – you should have been watching the web site! You did not consider cross border interest (or there is no evidence of it) You used discriminating criteria in a PQQ (3 jobs in the Midlands) You did not get 3 quotes for EVERYTHING You used frameworks (CCS and SUPC) when they were not set up to source for EU funding (the boxes weren’t ticked at the tender stage) You cannot prove that any of the frameworks were “legal”

The arguments we used There was no requirement to advertise in the requirements called up in the contract You changed the requirements without communication and without change control i.e. the contract did not refer to them – so they were not legal requirements The requirements you quote against are labelled “final draft xxx comments” i.e. how can they be official Do YOU follow the get 3 quotes rule yourselves – for example for stationery? We did consider cross border interest in using suppliers who had bid previously, been successful and were on a preferred supplier list The rules you impose are simply not economic

Where we got to The original non compliances were dropped The middle ones were dropped 2 building non compliances were snookered by Mansfield District Council poor representation setting a legal precedent on considering cross border interest Our supplier did use a discriminatory PQQ selection criterion We were fined on 2 counts

Learning Points/Advice Read the rules and make sure everyone does too - In particular make sure all departments and any subcontractors/suppliers are aware Monitor web site for changes in the rules Follow EU Regulationss above threshold – to the letter At Involve Procurement in the project at the beginning, Make sure they have input to or written the procurement section – and looked at the rest. Ideally procurement should be at any audit opening meeting The Procurement Department must manage procurements above the European Union Threshold The Procurement Department must manage the purchasing process and delegate where appropriate Make sure your Purchasing policy harmonises with funding requirements Issue/publish guidance documents Do not assume anything- if you have ANY doubt ask the question

Technical Learning Points If possible use catalogues for commodities e.g. SciQuest/Science Warehouse/Amazon If you are using frameworks make sure they are usable – be prepared to argue Make sure you advertise above the minimum limit If you are using sole suppliers get it signed off before you activate Do not assume anything- if you have ANY doubt ask the question ESIF Government Funding Regulations https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/445584/ESIF_Procurement_Law_Compliance_Guidance_Note_v1_150715.pdf

Thank You Good luck!! And Goodbye