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

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

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

4. 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

5. 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

6. Accelerating Low Carbon Economy Building

7. Accelerating Low Carbon Economy Building

9. Chemistry Building

10. 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”

11. 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

12. 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

13. 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

14. 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

15. Thank You
Good luck!!
And Goodbye