1. EN DG Regional Policy EUROPEAN COMMISSION Lesson learnt from tender procedures financed by the Structural Funds Brussels, 13 November 2008 Lesson learnt from tender procedures financed by the Structural Funds Brussels, 13 November 2008 Claude Tournier Directorate-General Regional Policy Directorate J - Audit

2. DG Regional Policy EUROPEAN COMMISSION EN 2 Brussels, 13 November 2008 Outline presentation A.Main findings of DG REGIO audits in relation to Public Procurement Directives B.Financial corrections for non compliance in the field of public procurement C.Conclusions / Tips how to do it better

3. DG Regional Policy EUROPEAN COMMISSION EN 3 A. Main findings of DG REGIO audits in relation to PPD a)General / preparation of tenders b)Publication c)Evaluation committees / tender opening d)Selection phase / Eligibility e)Evaluation of tenders / award f)Cancellation / appeals g)Implementation of contracts / Modifications

4. DG Regional Policy EUROPEAN COMMISSION EN 4 A. Main findings of DG REGIO audits in relation to PPD General / Preparation of tenders a)Directives on public procurement not adequately implemented by the Member State (allowing certain types of establishment to avoid being classified as contracting authorities; confusion between selection and award criteria) b)Restrictive selection criteria in procurement notices and tender dossiers c)Unclear drafting and content of tender dossiers

5. DG Regional Policy EUROPEAN COMMISSION EN 5 A. Main findings of DG REGIO audits in relation to PPD Publication a)Tenders published at regional / national level instead of EU level (discrimination on the ground of nationality) b)Contracts divided up in order to avoid the need to comply with the Directives

6. DG Regional Policy EUROPEAN COMMISSION EN 6 A. Main findings of DG REGIO audits in relation to PPD Evaluation committees / tender opening a)Hierarchical links within members of evaluation committees b)High ranked officials involved in the evaluation process c)Insufficient qualification / experience of members of evaluation committees d)Preparatory meeting after the opening session

7. DG Regional Policy EUROPEAN COMMISSION EN 7 A. Main findings of DG REGIO audits in relation to PPD Selection phase / eligibility a)Exclusion of tenders is not duly justified b)Abnormally low bids are excluded without tenderers being asked for an explanation c)Automatic acceptance of explanations provided by abnormally low bidder d)Requests for clarifications are not transparent

8. DG Regional Policy EUROPEAN COMMISSION EN 8 A. Main findings of DG REGIO audits in relation to PPD Evaluation of tenders / Award - 1 Selection and award criteria are mixed Distinguish between three types of criteria: exclusion, selection and award Selection: in accordance with the criteria of economic and financial standing, of professional and technical knowledge or ability (is the tenderer capable of performing the contract?) Award: in case of award to the most economically advantageous tender, to appreciate the quality of the offer (in relation to subject matter of the contract).

9. DG Regional Policy EUROPEAN COMMISSION EN 9 A. Main findings of DG REGIO audits in relation to PPD Evaluation of tenders / Award - 2 Selection and award criteria are mixed, e.g. award criteria include : the previous experience, works carried out for contracting authority, n° of permanent staff vs temporary staff

10. DG Regional Policy EUROPEAN COMMISSION EN 10 A. Main findings of DG REGIO audits in relation to PPD Evaluation of tenders / Award - 3 a)Contracts awarded by direct agreement (without any competition at all) b)Other unlawful discriminatory criteria are applied, e.g. the requirement to have an office or representative in the country/region c)Average values from bids are used, unfairly penalising low bids d)Joint evaluation of tenders is carried out e)Service contracts: the weight of the final interview in the evaluation process is not proportionate

11. DG Regional Policy EUROPEAN COMMISSION EN 11 A. Main findings of DG REGIO audits in relation to PPD Cancellation / Appeals a)Tender negotiation stage: substantial reduction of scope of works b)Appeals from unsuccessful bidders not properly dealt with

12. DG Regional Policy EUROPEAN COMMISSION EN 12 A. Main findings of DG REGIO audits in relation to PPD Implementation of contracts / Modifications a)Additional works or services directly awarded to the economic operator in place, when  amount exceeds 50% of the amount of original contract,  the circumstances invoked are not unforeseen  even if circumstances are unforeseen, when works/services are economically or technically separable b)Automatic extension of supervision contracts because of delays in the execution of works contracts

13. DG Regional Policy EUROPEAN COMMISSION EN 13 A. Main findings of DG REGIO audits in relation to PPD Implementation of contracts / Modifications a)Additional works not included in the project initially considered or in the original contract I.Tender documents should be the result of careful planning and include all necessary elements for a genuine competition II.« Unforeseen » events should be interpreted in an objective manner as referred to what the authorities should have foreseen and not to what they actually did III.Consider the means available to the contracting authority, the characteristics of the project and the good practices in the field IV.Unforeseen circumstances should not be imputable to the contracting authority

14. DG Regional Policy EUROPEAN COMMISSION EN 14 A. Community law applicable to contracts not covered by PPD Recent ECJ case-law  Assessment of cross-border interest  No presumption, not even complaints received  If no cross-border interest can be proved  national legislation  But always, in case of direct award of contracts without any form of competition, the principle of sound financial management

15. DG Regional Policy EUROPEAN COMMISSION EN 15 B. Financial corrections for non compliance in the field of public procurement Relevant legislation (2007-2013): Reg. 1083/2006 - Art. 98: by the MS - Art. 99: by the Commission Serious deficiency in the M&C Irregular expenditure in a certified expenditure declaration MS has not complied with its obligations under art. 98 - Art. 100: Contradictory Procedure

16. DG Regional Policy EUROPEAN COMMISSION EN 16 B. Financial corrections for non compliance in the field of public procurement Relevant legislation (1994-1999) Art. 24 of Council Regulation N° 4253/88 Relevant legislation (2000-2006) Art. 39(2) and (3) of Council Regulation N° 1260/99 – Art. 4-7 of Commission Regulation 448/2001

17. DG Regional Policy EUROPEAN COMMISSION EN 17 B. Financial corrections for non compliance in the field of public procurement 1.Ref. to Public Procurement Directives or the general principles of the Treaty 2.Art. 1(2) of Reg. 2988/95: definition of irregularity + Reg. 2035/2005 amending 1681/1994, and now further definitions in complement in Art. 27 of Reg. 1828/2006 3.Commission guidelines on the application of financial corrections

18. DG Regional Policy EUROPEAN COMMISSION EN 18 B. Commission guidelines on the application of financial corrections - Principles a)MS responsible in the first instance for investigating irregularities and applying financial corrections b)Individual or systemic irregularities c)Cancellation of all or part of the public contribution to OP/priority axis/operation d)Commission intervenes in the second instance e)Commission determines type of financial correction:specific / flat rate / extrapolated

19. DG Regional Policy EUROPEAN COMMISSION EN 19 B. Commission guidelines on the application of financial corrections Rate of corrections can range –from 2% to 100% of the amount of the contract (or of the addendum) in case of contracts covered by PPD –from 5% to 25% of the amount of the contract (or of the addendum) in case of contracts not covered by PPD

20. DG Regional Policy EUROPEAN COMMISSION EN 20 Commission guidelines on the application of financial corrections – Examples I Subject to PPD a)Contract directly awarded (no competition at all)  100% b)Contract awarded without prior publication in the OJEU (publication at national/regional level)  25% c)Addenda for additional works (services) without unforeseen circumstances  100% of the addenda d)Addenda for “complementary” works (services) with unforeseen circumstances and > 50% of initial contract  100% of the amount exceeding 50%

21. DG Regional Policy EUROPEAN COMMISSION EN 21 Commission guidelines on the application of financial corrections – Examples II Subject to PPD e)Addenda for additional works (services) with unforeseen circumstances and > 50% of initial contract  100% of the amount of additional works f)Procurement notice or tender dossier do not mention all the selection and award criteria which are used  25% of contract g)Contract awarded without respecting the announced criteria  5%, 10% or 25% of contract based on seriousness h)Procurement notice or tender dossier do not contain a sufficiently detailed description of the subject matter  25% of contract

22. DG Regional Policy EUROPEAN COMMISSION EN 22 Commission guidelines on the application of financial corrections – Examples III Subject to PPD i)Negotiations during the award procedure  25% of contract j)Procurement notice or tender dossier with illegal selection and/or award criteria (dissuasive effect)  25% of contract /100% when intention to exclude certain firms k)Reduction of the physical object of the contract without price decrease  100% of reduction (+ 25% if the reduction refers to one of the essential elements of the contract) l)Auxiliary elements of the PPD not respected (e.g. publication of the award notice)  2%, 5% or 10% of contract

23. DG Regional Policy EUROPEAN COMMISSION EN 23 Commission guidelines on the application of financial corrections – Examples IV Not Subject to PPD Below the thresholds ; Service contracts of Annex II B Dir. 2004/18/EC and Annex XVII B of Dir. 2004/17/EC a)Non respect of sufficient degree of advertising  25% of contract b)Addenda for additional works (services, supplies) without unforeseen circumstances  25% of the addenda c)Procurement procedure with illegal selection and/or award criteria (dissuasive effect)  10% of contract d)Violation of the equality of treatment principle between tenderers  10% of contract

24. DG Regional Policy EUROPEAN COMMISSION EN 24 C. Conclusions / Tips to do it better  Focus should be put on preventive actions  reliable procurement system  Reliable procurement system: - Independent and capable procuring entities fully responsible for implementing procurement, but - Existence of public procurement institutions or agencies (autonomous bodies) in charge of protection of rights - Internal audit bodies - External audit bodies - Other stakeholders (commercial associations, NGOs, media) Otherwise  Audits (ex post): contract already signed  if impact on Community budget  Financial corrections

25. DG Regional Policy EUROPEAN COMMISSION EN 25 C. Conclusions / Tips to do it better Risk analysis needed when the control applies to samples :  Services contracts, then supply ones, more risky than works ones (evaluation, monitoring of actual expenditures)  Smaller beneficiaries more at risk (municipal level) : weaker administrative capacity and experience and “local” considerations for choosing the companies  Concessions and long term services contracts : financial challenges and direct negotiations  Monitor the addenda : can change the balance of the initial competition

26. DG Regional Policy EUROPEAN COMMISSION EN Thank you for your attention!