Agriculture and Rural Development

Public Procurement issues in EAFRD implementation

By

Wolfgang KAHLENBORN

European Commission DG Agriculture and Rural DevelopmentJ.4 – Audit of rural development expenditure and IPARD

December 2012

Background

The Common Agricultural Policy

• Pillar 1 – EAGF (budget: 44 billion EUR in 2012)

• Pillar 2 – EAFRD (13 billion EUR)

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EAFRD – Rural Development (1)

• Axis 1 – Improving the competitiveness of the agricultural and forestry sector

• Axis 2 - Improving the environment and the countryside

• Axis 3 – The quality of life in rural areas and diversification of the rural economy

• Axis 4 – Leader

• Axis 5 – Technical assistance

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The European Agricultural Fund for Rural Development (EAFRD)

EAFRD – Rural Development (2)

• Most projects are relatively small (not falling under the EU directives on public procurement)

• High number of beneficiaries

• Most beneficiaries are from the private sector

• Exceptional: private beneficiaries have to follow public procurement rules(according to national law)

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EAFRD – Rural Development (3)

Main measures with public beneficiaries:

• Measure 125 – Infrastructure related to the development and adaptation of agriculture and forestry

• Measure 321 – Basic services for the economy and the rural population

• Measure 322 – Village renewal and development

• Measure 323 – Conservation and upgrading of the rural heritage

• Axis 5 – Technical assistance

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Legislation

EAFRD legal provisions and public procurement:

• A project financed by the EAFRD has to comply with

EU law;

The Rural development program;

National law (incl. provisions on public procurement).

• The Paying Agency shall carry out an exhaustive check of the public procurement procedure(Article 24(2)(c) of Regulation 65/2011)

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Commission Audit Findings

• The Paying Agency does not feel responsible for the detailed verification of the public procurement procedure(“no complaints means all is fine”)

• The Paying Agency checks the procedure but examines only the winning bid.

• Weaknesses in the design of the award criteria.

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Commission auditors noted during their missions in the EU27 the following weaknesses:

Case study (1)

• A bridge over a small river (measure 321; village renewal)

• The beneficiary: a village in a new Member State

• High aid intensity (100%)

• The beneficiary (village) is the contracting authority

• Tendered on the basis “the economically best offer”

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The investment project visited by the Commission auditors:

Case study (2)

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Outcome of the tender:

Price Quality Warranty Duration Total

EUR 30% 30% 10% 30% 100%

Offer 1 320.000 27 6 8 30 70

Offer 2 500.000 17 21 2 13 53

Offer 3 324.000 18 14 6 16 54

Offer 4 290.000 30 15 3 18 66

Offer 5 550.000 16 29

10 20 74

Case study (3)

Commission findings:

• The weight of the price was low andissues of interest of the village had a quite high importance

• The winning bid offered an (excessive) warranty period of 100 years.

A long warranty period means to have less costs of reparation in the future.

Maintenance costs as well as replacement investments are not eligible for an EAFRD funding.

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Case study (4)

Conclusions:

• The award criteria shall adequately take into consideration the interests of the contracting authority as well as those of the EU.

• The contracting authority as well as the Member State shall ensure that the award criteria and their weight lead to the “best offer”.

• The award criteria shall not lead to ineligible expenditure (as an excessive warranty period).

• The Managing authority should give help and/or fix in advance specific conditions for the procurement. This also facilitates the checks later on.

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Thank you for your attention!

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