ENDG Regional Policy

EUROPEAN COMMISSION

Lesson learnt from tender procedures financed by the

Structural Funds

Brussels, 13 November 2008

Claude TournierDirectorate-General Regional Policy

Directorate J - Audit

DG Regional Policy

EUROPEAN COMMISSION

EN

22Brussels, 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

DG Regional Policy

EUROPEAN COMMISSION

EN

33

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

DG Regional Policy

EUROPEAN COMMISSION

EN

44

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

DG Regional Policy

EUROPEAN COMMISSION

EN

55

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

DG Regional Policy

EUROPEAN COMMISSION

EN

66

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

DG Regional Policy

EUROPEAN COMMISSION

EN

77

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

DG Regional Policy

EUROPEAN COMMISSION

EN

88

A. Main findings of DG REGIO audits in relation to PPD

Evaluation of tenders / Award - 1Selection 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).

DG Regional Policy

EUROPEAN COMMISSION

EN

99

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

DG Regional Policy

EUROPEAN COMMISSION

EN

1010

A. Main findings of DG REGIO audits in relation to PPD

Evaluation of tenders / Award - 3a) 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 oute) Service contracts: the weight of the final interview in

the evaluation process is not proportionate

DG Regional Policy

EUROPEAN COMMISSION

EN

1111

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

DG Regional Policy

EUROPEAN COMMISSION

EN

1212

A. Main findings of DG REGIO audits in relation to PPD

Implementation of contracts / Modificationsa) 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

DG Regional Policy

EUROPEAN COMMISSION

EN

1313

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

DG Regional Policy

EUROPEAN COMMISSION

EN

1414

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

DG Regional Policy

EUROPEAN COMMISSION

EN

1515

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

DG Regional Policy

EUROPEAN COMMISSION

EN

1616

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

DG Regional Policy

EUROPEAN COMMISSION

EN

1717

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

DG Regional Policy

EUROPEAN COMMISSION

EN

1818

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 irregularitiesc) Cancellation of all or part of the public

contribution to OP/priority axis/operationd) Commission intervenes in the second

instancee) Commission determines type of financial

correction: specific / flat rate / extrapolated

DG Regional Policy

EUROPEAN COMMISSION

EN

1919

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

DG Regional Policy

EUROPEAN COMMISSION

EN

2020

Commission guidelines on the application of financial corrections – Examples I

Subject to PPDSubject 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%

DG Regional Policy

EUROPEAN COMMISSION

EN

2121

Commission guidelines on the application of financial corrections – Examples II

Subject to PPDSubject 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

DG Regional Policy

EUROPEAN COMMISSION

EN

2222

Commission guidelines on the application of financial corrections – Examples III

Subject to PPDSubject to PPDi) 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

DG Regional Policy

EUROPEAN COMMISSION

EN

2323

Commission guidelines on the application of financial corrections – Examples IV

Not Subject to PPDNot Subject to PPDBelow 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

DG Regional Policy

EUROPEAN COMMISSION

EN

2424

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

DG Regional Policy

EUROPEAN COMMISSION

EN

2525

C. Conclusions / Tips to do it betterRisk 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

DG Regional Policy

EUROPEAN COMMISSION

EN

Thank you for your attention!