Practical Guide to Contract Procedures - Basic Course

1. EUROPEAID/121737/D/SV/RO - Training in Project Cycle Management, Procurement and Contracting of Pre-Accession Projects and Management of EU Structural Instruments Practical Guide to Contract Procedures - Basic Course Marko Rillo - www.rillo.ee February/March 2006 Bucharest

2. Good Morning! • Agenda • Rules • Objectives and expectations • Teamwork: • You will be divided into 5 teams of 5 persons. • Each of you will be allocated to a team (A, B, C, D, E). Later you can make up a team name. • Working in teams is an important part of all training

3. Marko Rillo - www.rillo.ee • Work 2002- 5MPC owner, trainer and consultant: Estonia (ex. Estonian Telecom, Estonian Postal Services, Ministry of Finance), Latvia, Bulgaria (Ministry of Finance), Croatia (Ministry of Finance, Ministry of European Integration, Ministry of Foreign Affairs) 2001-02 AS Andmevara, managing director, member of board 1997-01 CFCU Estonia director • Studies Currently PhD studies in TUT - strategy process Earlier: M.Sc Economics in TUT, IntBBA in EBS, Lappeenranta University of Technology, University of Helsinki, University of Tartu • Hobbies Swimming, photography, hiking on land and sea, music composition, Lecturing on management and strategic management, research on managerial issues

4. Learning Objectives By the end of the course, you should have understanding of: • The contents of the PRAG and how to use it • The principles of PRAG procurement • The future of PRAG - what will change after the EU accession • Basics of contract award procedures: supplies, services, works, grants • The procedures and process relating to the evaluation Do you have your own expectations, too?

5. Training Approach The training will: • Be participative • Be exercise based • Involve you in team working • Involve you in presenting your understanding to the others

6. Start with The Test! Example questions • Which of the following types of contract are not covered by the PRAG? Services: Works: Employment. • A member of the evaluation committee who has a conflict of interest in relation to one of the companies submitting a bid is permitted to remain on the committee provided he or she does not vote. True / False?

7. Teams - Introductions You will have 5 minutes to introduce yourselves to the other team members (name, institution and position) and to choose one of you to introduce the team members to the rest of the participants.

8. 1.2A Main Principles of PRAG

9. The Project Cycle

10. Formulation Phase of Project Cycle • Detailed project design work. Project fiche reviewed to identify issues needing further analysis or design work • If necessary - design and formulation work contracted and carried out • Feasibility assessed • Risk and sustainability analysed • Terms of Reference prepared • Technical and administrative provisions for implementation prepared

11. Implementation Phase of Project Cycle • Contracting is completed, project activities are carried out and the results are delivered to the beneficiary. • A periodic monitoring activity is carried out to allow project managers to oversee and review project progress.

12. Practical Guide • Adopted in 01.02.2006 - altogether 126 p. + annexes • Can be downloaded: http://europa.eu.int/comm/europeaid/tender/ practical_guide_2006/index_en.htm • Explains the contracting procedures which apply to EC external aid contracts. • Governs the award of service, supply and works contracts financed by the general budget of the European Communities

13. Types of Contracts Services - technical assistance, studies, training or designs • Carried out by consultant(s) Supplies - the purchase, leasing, rental or hire purchase of products, incl their design, manufacture, delivery, assembly or commissioning of goods together with any related tasks e.g. siting, installation, maintenance, repairs, training and after-sales service • Carried out by supplier(s) Works - the execution of works, or both design and execution of works (outcome of building or civil engineering works) • Carried out by contruction company, supervised by engineer(s)

14. PRAG - Table of Contents • Introduction • Basic Rules for Service, Supply and Works Contracts • Service Contracts • Supply Contracts • Works Contracts • Grants • Relations with International Organisations and Other Donors • Legal Texts • Annexes

15. General introduction • For Phare and ISPA EU Commission should be interpreted as being the EU Delegation • For SAPARD, DG AGRI • Days are to be interpreted as calendar days • Language to be used – practical reasons - is English in all cases

16. Centralised vs Decentralised • Centralised (EU Commission is CA) • Decentralised • Ex ante: decisions concerning the procurement and award of contracts are taken by the Contracting Authority (CA) and referred to the approval of the European Commission • Ex post:decisions are taken by the CA without prior reference to the EC (except special rules in PRAG)

17. Role of the Contracting Authority • Responsible for launching tender procedures: • Submission of Contract Forecasts & Procurement Notices • Approval of ToR and TS • Chairingthe Shortlist Panel • Drafting the Tender Dossier (TD) • Dispatch of Invitation to Tender and TD • Receiving tender bids • Chairing tender evaluation sessions • Preparation of Tender Evaluation Reports • Preparation &signatureof contracts • Publishing the award of contract on the Internet

18. Eligibility criteria and other essentials • Nationality • Rule of origin / Grounds for exclusion • Ethic clauses • Fair competition • Transparency and impartiality • Best value for money • Use of standard documents • Record keeping • No retroactive award

19. Eligibility Nationality • open on equal terms to all natural and legal persons of the EU Member States & the countries covered by the Regulation under which the contract is financed • applies to both companies and individual experts Origin • all supplies and equipment purchased must originate in the EU or in an eligible country as defined above in the nationality rule Exceptions to the rules • Decided on a case by case basis by the EC • Experts: with regard to nationals of other countries the EC may approve if (a) the input is relatively small and/or (b) unique expertise is being required • Supplies: justification required before EC approval given (justification on the basis of price will not be accepted)

20. What is Origin? • Country where the product has been obtained or was produced • Evidence • Signed Declaration with tender bid • Certificate of Origin, to submitted when: • bringing supplies into the Beneficiary Country • Provisional Acceptance takes place • the first invoice is presented

21. Exclusion • Natural or legal persons will be excluded from participating in tenders ifthey: • are in financial difficulties • have been convicted or are guilty of grave professional misconduct • have not fulfilled their obligations relating to social security contributions or taxes • are guilty of serious misrepresentation in supplying the information required • are in serious breach of contract for failure to comply with obligations in connection with another contract • are in one of the situations allowing for exclusion referred to in the Ethics Clauses

22. Penalties • In cases of fraud, corruption or participation in a criminal organisation or money laundering the candidate or tenderer will be excluded from awards; • Contractors excluded from awards for up to 2 years for false declarations; • Contractors failing to meet contractual obligations can receive financial penalties; • In the case of substantial errors or irregularities a contract can be suspended

23. Award Principles • Fair Competition- To avoid any conflict of interest, any firm or expert taking part in the preparation of a project must be excluded from taking part in tenders based on this preparatory work • Transparency, proportionality, equal treatment and Non-discrimination • No retroactivity - • Contracts take effect from the date of signature of the last signatory, • All contracts must show the true date of signature and • No disbursements can be effected and no goods and services can be provided before this date • Standard contracts and document formats must be used

24. Visibility • Contractors for services, supply or works must take the necessary measures to ensure the VISIBILITY of the EU financing or co-financing • EU guidelines gives rules – to be found at: http://europa.eu.int/comm/europeaid/visibility/index_en.htm

25. Keeping Records • Written records of the entire tendering and contracting procedure must be kept confidential and retained by the Contracting Authority • The records must be kept for 7 years • The records must include the originals of all tenders submitted with corresponding tender dossier and related correspondence

26. Transparency • Publication of annual Contract Forecast (template) – update every three months • Must be published 30 days before the corresponding procurement notice (sent to ECD 15 days before intended publication) • Publication of Procurement Notice – PN • Extended submission period (50-90 days) • Publication of Evaluation criteria and draft contract in the Tender dossier • Publication of award of contract notices • Precise information to unsuccessful tenderers

27. 1.3B Contract Award Procedures

28. Which award procedure to apply? • Types of procedures: • Open procedure • Restricted procedure • Simplified procedure • Framework contract • Negotiated procedure • Selection and award criteria - borderline cases • Tender procedure with „suspension clause”

29. Procurement thresholds

30. Procurement Tresholds - Grants

31. Principles of Tresholds • The procurement thresholds must be respected and projects must not be split artificially to circumvent these thresholds - no 'sausageing' allowed. • Technical assistance and related activities must be grouped where appropriate in large tenders and contracts.

32. Negotiated procedure (with prior approval of ECD) • Urgency – other than FM about to expiry • Particular characteristics - services from NPOs, contract following design competition • Additional deliveries by original supplier • Tender procedure has been unsuccessful, no qualitatively or financially worthwile tender has been received. After cancellation, CA negotiate directly – Negotiation Report attached to contract dossier for approval

33. 1.3 Overview of PRAG Document Layout Practical Exercise

34. Answer the following questionsMake your ref. to PRAG section! • What is the number of evaluation committee members in Works tenders • How long does it take to tender international service tender • What are the contents of works tender dossier • How does a company know that a competition is being published • What is the objective of evaluation process

35. 1.4 Introduction to Tender Documents

36. Service Tender Documents • Type of contract • Tender evaluation criteria and weightings • If interviews are possible and when • If variants are allowed • If subcontracting, what proportion (limited in any cases) • Currency: Euro • Budget available indicated • Sworn statements – template (to be specified) • Shortlist • Draft contract and annexes • There should not be any overlap between the shortlist evaluation grid and the service tender evaluation grid

37. Service Tender Submission • Minimum tendering period is 50 days – could be shorter (prior authorisation by ECD) • Deadline should be close of business and preferable Friday • Tender validity is 90 days, can be extended by 40 • Two envelope system • Additional information request/clarification question on tender dossier should be submitted by 21 days before deadline and should be answered by 11 days before deadline

38. Supply Tender Documents • Type of contract • Tender evaluation criteria (Y/N) – if differs from TS (must include all details: after-sales service, spare parts, consumables, training etc.) • Whether variants are allowed • If subcontracting, what proportion • Currency: Euro • Sworn statements – template (to be specified) • Tender guarrantee (1-2% of total budget) • Draft contract and annexes

39. Supply Tender Submission • Minimum tendering period is 60 days – could be shorter (prior authorisation by ECD) • Deadline should be close of business and preferable Friday • Tender validity is 90 days, can be extended by 40 • One envelope system • Technical offer must satisfy TS in all respects • Financial offer template should be used, if not offer should be rejected • Clarification meeting or site visit (at least 21 days before deadline) • Additional information request/clarification question on tender dossier should be submitted by 21 days before deadline and should be answer by 11 days before deadline

40. 1.5 Preparation of Contract Forecasts

41. Contract Forecasting • Publication of annual Contract Forecast (template) – update every three months • Must be published 30 days before the corresponding procurement notice (sent to ECD 15 days before intended publication) • Publication of Procurement Notice – PN - (sent to ECD 15 days before intended publication) • PN could also be published locally, text must be identical to the one indicated on Internet/OJ • Local publication should be at the same time with OJ/Internet • Tender dossier together with PN is sent to ECD for approval

42. Service Contract Forecast Contents • Publication reference • Procedure • Programme • Financing • Contracting Authority • Nature of contract • Contract description • Indicative maximum budget • Intended timing of publication • Additional information • Legal basis

43. Publication reference Procedure Programme Financing Contracting Authority Nature of contract Contract description Numbers and titles of lots Maximum budget Scope for additional services Eligibility Candidature Number of applications Shortlist alliances prohibited Grounds for exclusion Sub-contracting Number of candidates to be short-listed Provisional date of invitation to tender Provisional commencement date of the contract Initial period of execution and possible extension of the contract Selection criteria Award criteria Deadline for receipt of applications Application format and details to be provided How applications may be submitted Additional information Date of publication of contract forecast Legal basis Service Procurement Notice Contents

44. 1.6 Introduction to Evaluation

45. Non-voting secretary Non-voting chairman At least 3 voting members Non-voting observer (optional) The composition of Evaluation Committee

46. Role of the Chairman • Co-ordinating evaluation in accordance with Practical Guide • Ensuring impartiality and transparency • Signing the EVREP • Signing all the letters or explanations on behalf of the EVC • Helping in gaining the consensus among committee members

47. Role of the Secretary • Circulating and collecting the Declarations • Ensuring that all the documents are completed and available to the EVC • Keeping the minutes of all evaluation meetings • Exchanging letters w/ tenderers • Registering attendance to meetings and compiling the EVREP

48. Role of the Members • Making decisions about the evaluation • Choosing the best offers according to guidelines • Members carry collective responsibility for decisions taken

49. Role of the Observer • Checking the compliance with tendering rules and regulations • Reporting on irregularities encountered

50. 2.2 Evaluation of Proposals