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1. Pillar 3: Regularity and quality of the public procurement process

Contents1. Pillar 3: Regularity and quality of the public procurement process....................................1

1.1 State of play................................................................................................................2

1.2 The way forward.........................................................................................................5

1.2.1 Streamlining the public procurement process.........................................................5

A. Preparatory stages, including needs assessment and feasibility studies.....................5

B. Development of procurement strategy..........................................................................6

C. Estimated value.............................................................................................................6

C. Annual Public Procurement Plan..................................................................................6

D. Selection of procedure..................................................................................................7

E. Drafting tender documentation......................................................................................7

F. Defining deadlines for preparation and submission of tenders.....................................8

G. Clarifications to tender documents................................................................................8

H. Tender evaluation process............................................................................................8

I. Award decisions..............................................................................................................9

J. Notifications / complaints...............................................................................................9

K. Confirmation document.................................................................................................9

L. Contract implementation................................................................................................9

M. Final analysis of implemented contracts.....................................................................10

N. Transparency and confidentiality................................................................................11

O. Horizontal measures...................................................................................................11

1.2.2 Actions to ensure regularity and quality of the process: scope and expected impact.........................................................................................................................11

A. Develop internal control...............................................................................................11

B. Streamline ex-ante external control............................................................................15

C. Improve and extend systems to prevent conflicts of interests: improper influence.....22

D. Streamline ex-post control..........................................................................................27

1.3 Impact and results indicators....................................................................................29

1.4 List of Annexes corresponding to Pillar 3.................................................................36

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Disclaimer: this chapter aims at improving the regularity of the procurement procedures in Romania, reviewing accordingly the national control system. The detailed measures are without prejudice to the functions and independence of the management and control system for EU funds, solely ruled by Regulation 1303/2013

This Pillar contains a main text (Strategy), a table with the specific actions (Action plan) and annexes. The annexes are complementing documents. They must be read in the light of the Strategy and Action plan and cannot amend or contradict the actions as set out in the Strategy and Action plan. Those texts always prevail over the annexes.

State of play

The current pillar of the strategy outlines the measures to be taken aiming at improving the quality and regularity of the public procurement process. It is structured into two separate and complementary sections, targeting (i) the streamlining of the public procurement process on the basis of commonly agreed solutions to practical problems identified during the discussion in the public procurement working group and (ii) the reshaping the dynamics of the control procedures in order to bring more efficiency and accountability to the process.

The first section focuses on the measures designed to improve the public procurement process, responding to the problems generated by the current rules or practice. The measures will be mainly taken as part of the secondary legislation defining the implementing rules of the laws transposing the 2014 Public Procurement Directives and/or as part of the tertiary legislation and guidance to be further elaborated. The problems, solutions and related instruments are detailed in Annex 1 to the present pillar, integral part of the current document.

The process of identification of problems and solutions has been facilitated by incorporating the input obtained during extensive public consultations with relevant organisations such as the Coalition for the Development of Romania, the Public Policies Institute or representatives of the professional organisations. Solutions have been identified in light of best practices and of the orientations provided by the 2014 Directives.

The second section of the present pillar focuses on the methods, institutions and means required to ensure that the public procurement process is regular and of good quality.

Ensuring the regularity and quality of the public procurement process mainly entails the adequate functioning of the following:

Efficient internal control systems,

Reliable ex-ante external control,

Adequate prevention of conflicts of interest,

A solid remedy system (dealt with under pillar 2 above), of 47

Effective ex-post control.

The efficiency of the current public procurement system is impaired by a series of deficiencies highlighted in the following paragraphs.

The existing control systems in the public procurement field are fragmented, partly redundant and focusing almost exclusively on formal aspects pertaining to the regularity of the process, without assessing objective quality considerations (i.e. it is assessed whether the “letter of the law” has been observed, instead of focusing on the effective value for money generated by the procedures, particularly by assessing to what extent effective competition and transparency have been ensured).

Internal control is weak, mainly as a result of the pressure exerted by highly hierarchical system which voids of effectiveness the checks and balances formally in place. Control is usually reduced to the limited role of the preventive financial controllers, rather than defining a more comprehensive control mechanism. As regards public procurement process, internal control is ineffective, mostly formal and fragmented, especially at local level. It seems to be focused exclusively on the legality of the budgetary aspects, without considering any strategic dimension, such as budgetary allocation, prioritization of projects or elements of the tender dossier.

As a consequence, considering the weak internal control environment, the Romanian system is focused on additional compensation levers such as external controls (ex-ante and ex-post).

Currently, the system relies on two types of ex-ante external controls, namely control of the tender documentation and control of the tender evaluation.

The following deficiencies have been identified pertaining to the ex-ante control:

General : Ex-ante control on the tender documentation and ex-ante control for tender evaluation focus on different aspects which are not seen as part of an integrated approach and which are not sufficiently interlinked.

Related to ex-ante control of the tender documentation:

o With the current human resources available (on average 28 people), in 2014, ANRMAP has performed about 47,295 verifications of tender documents (including returns), in respect of roughly 18,500 individual procedures. This represents an average of 7 verifications per person and per day.

o The control screens only the information included in the Data Sheet – mostly qualification and award criteria,

o The control does not spot discriminatory contractual clauses, nor biased or sub-standard technical specifications,

o Due to the detailed justification required for the use of the most economically advantageous tender criterion, contracting authorities are discouraged to use it and prefer to recourse to the lowest price criterion, even when not opportune,

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which is perceived to provide more security when subject to subsequent various controls. This approach might place the CAs in a better position when faced with external scrutiny, however, it considerably hampers the development of strategic procurement policies and leads to important efficiency losses in the use of public funds,

o The controls are not providing any incentives to the contracting authorities to develop their administrative capacities by remedying the issues spotted. Instead, they instill a defensive attitude of CAs and result in a lack of ownership translated in highly inefficient procedures, De facto, the rejection rate of tendering notices is rather stable, confirming the slow progress achieved by contracting authorities in improving the regularity and quality of their tendering documentation

o In case of disagreement between the contracting authority and the control body, there is no possibility to appeal the decision of the control body,

o The timespan period between the first submission by the CAs of the tender notice to the control body and its actual publication is in many cases extremely long; in average, documents are rejected more than once,

o Despite validation by the ex-ante control, certain aspects might still be contested and considered irregular at a later stage (ex-post control, audits), obliging contracting authority supporting the inflicted sanctions / financial corrections.

Related to the ex-ante control of tender evaluation:

o With the current human resources available (about 200 persons), UCVAP !!! has performed about 2,000 verifications of tender evaluations in year 2014, out of a total of 18,500 procedures being published and about 4,000 negotiations without publication of tender notice.

o The control does not focus on critical stages of the procedures,o Limited technical capacity at control body level,o Observations are not always focusing on the important aspects of the awarding

procedure or on the correctness of the evaluation committees decision on the rejected / winner bidders,

o Observations are not mandatory for the contracting authorities and there is no mediation mechanism to issue opinions/interpretations acknowledged by the stakeholders of the system,

o Highly important, the control of conflicts of interest covers limited situations when they might occur and it is limited to EU funds.

As regards the ex-ante control of tender documentation, data from ANRMAP show the following results:

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Year Number of contracting authorities1

Number of procedures controlled

Number of rejections of tender documentation

2012 3,899 27,656 31,937

2013 3,069 19,343 28,886

2014 3,221 18,367 26,957

This shows that, in average, a tender documentation is rejected more than once. It also shows that, although about 15,000 entities are registered in the national public procurement platform as contracting authorities, a significantly less number of these is actually involved in procurement above the threshold for direct purchase . It is to be mentioned that the reduction in the number of contracting authorities and procedures published from 2012 to 2013 corresponds to the increase of the thresholds for direct purchase, effective from the 1st of July 2013. This requires targeted measures to increase the transparency of the procedures below the thresholds of the directives.

As regards the ex-post control, the following deficiencies have been identified:

Several institutions are performing ex-post controls / audits: Court of Accounts, Audit Authority, ANRMAP, managing Authorities. This results in overlaps between institutions (unavoidable for institutions involved in EU funds management and control) as well as differences of interpretations.

Ex-post control might overlap with ex-ante control (i.e. performing a new verification of the same issues), with different conclusions.

There are significant differences between the national and EU funds in terms of ex-post control.

In addition, controls only focus on regularity issues, whereas procurement practices which may impede the intensity of the competition and discourage performant bidders (low quality of tendering documentation, unreasonable or disproportionate requirements or responsibilities, insufficient time left for issuing bids), prejudicial for the quality of the project and the value for money are not addressed through the verification process.

Finally, as pointed out in several other fields of the Romanian administration as well, there is a generalised perception that irregularities are primarily the responsibility of procurement officers, who should then be sanctioned as individuals, rather than identifying, penalizing and then remedying the deficiencies of the system, e.g. by better guidance, improved training and sounder internal control environment. This perception leads to risk-avoidance behaviours whereby implementing best practices is replaced by a focus on strict compliance and applying sound judgement by a mechanistic approach. Some of the consequences are

1 Number of contracting authorities publishing tenders in SEAP and whose tender documentation have been subject to ex-ante control

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(i) the generalised use of the lowest price criterion, even when significant intellectual services are required or in case of complex tenders, (ii) the focus on detailed technical specifications rather than on performance specifications or (iii) focus on the qualification criteria rather than on the assessment of technical proposals. Ultimately, the consequences are detrimental to achieving value for money and to the actual use of public procurement in promoting public policies such as innovation or environmental sustainability.

The revisited approach aims at modifying the initial paradigm, along the following principles:

1. Enhanced responsibility of contracting authorities, through increase of their capacity from the set of actions detailed in pillar 4 and more effective internal controls to detect and prevent deficiencies;

2. Parallel gradual phasing out of the systemic ex-ante control, towards sample verifications, with a view to further increasing their accountability. The phasing out pace will then take into account the evidence enhanced reliability of the contracting authorities.

1.1 The way forward

As described above, the way forward includes two main groups of actions, that are described in two different sections below:

- Those aiming at improving the deficiencies in the public procurement process, and- Those aiming at ensuring an adequate level of control on this process.

1.1.1 Streamlining the public procurement process

The main logical and chronological steps of the public procurement process, from initiation to completion of the contract have been analysed, with a view to identify the current deficiencies and tailored solutions. These have then been grouped under 14 headings reflecting the “life-cycle” of the public procurement process, plus 3 horizontal headings. While details on the deficiencies and solutions are presented in Annex 1 to the present pillar, the following paragraphs outline the most important aspects.

A. Preparatory stages, including needs assessment and feasibility studiesThe definition of needs and prioritisation of investments and purchases require urgent improvement. A number of measures are ongoing and instruments are being developed such as the establishment of a dedicated unit within the Ministry of Public Finances on the prioritisation of projects or the adoption of multi-annual master plans at national and local levels. However, although the issue is acknowledged, it does not pertain as such to the public procurement process and cannot be dealt with in depth as part of the present strategy.

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Under this heading, specific actions will be taken in order to streamline the feasibility study process, ensuring that sufficient time and resources are allocated to the preparation of projects and that risks are properly assessed and allocated. These actions will mainly consist in guidelines to project preparation and template specifications for feasibility studies.

B. Development of procurement strategyThe contracting authorities knowledge of the market is often weak, while procurement plans, including division into lots and contracts, duration of execution, etc, are deficient, impeding the intensity of the market reply

In addition to the possibility offered by the 2014 Directives of organising a consultation of the market prior to launching tenders, guidance will be provided so as to:

- Increase the degree of market knowledge of the contracting authorities,- Develop a procurement strategy, for major projects, ensuring that the various

components (including lots) are correctly planned,- Organise transparent (including at least publication in SEAP) and useful market

consultations.

It is also emphasised that the mutualisation of contracting authorities resources and the use of centralised purchasing bodies will be key-enablers to ensure an increased level of knowledge of the relevant markets.

C. Estimated valueEstimated value is currently seen as an absolute reference, without however being established using sound methods.

The estimated value actually covers two different aspects,that, although linked, are related to different objectives. The first objective is to assess the value of the contract that should be concluded, the second one is to assess the applicable publicity requirements for the tender procedure (in relation with the thresholds defined). Detailed methodologies will be developed in this regard and form part of the web-based guidelines, while the principles defined by the Directives will be integrated in the primary and secondary legislation

It will also be made clear that contract prices cannot be modified in such way that the new, increased, price would cross a publication/ procedure threshold.

The estimation of the likely tender amount will be better substantiated by the publication in SEAP of the final contract prices as well as by an increased responsibility of designers towards such estimate. (standard contracts for designers, developed under the standardised documentation as presented in pillar 4 of the present strategy, will define that part of their remuneration will be based on the accuracy of the estimate in line with existing norms, standards, statistics, market price, etc.

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The rule of automatic rejection of tenders having a value higher than the estimated value will be made more flexible, especially in the case of procedures where the estimated value is more difficult to estimate (competitive dialogue, negotiations) and for concessions.

D. Annual Public Procurement Plan

Rules will be defined in order to provide more transparency regarding the contracting authorities planning, with a focus on the largest projects. Therefore, contracting authorities will be required to publish either extracts of their annual public procurement plan or prior information notices for projects above a certain thresholds.

In addition, contracting authorities will be encouraged to publish relevant information from their annual public procurement plans and modifications to these.

E. Selection of procedureMeasures will be takenand guidance developed so as to encourage the use of restricted procedures and therefore encourage higher competition between qualified tenderers. For instance, the requirement to publish the entire tender documentation from the launch of the restricted procedure will be eliminated since it leads to a much longer duration of restricted procedures as against open tenders. The key issue is that the subject-matter of the procedure and the resulting requirements are sufficiently defined when selection criteria are being established and published so that these criteria remain fully relevant.

Guidance will also be provided to encourage the use, where adequate and relevant, of competitive dialogue and negotiations procedures with publication of a notice, especially in these fields where technical specifications are difficult to define.

Furthermore, detailed guidance will be developed so as to ensure that the use of derogatory procedures, especially as regards contract modifications, is fully justified and regular.

The legislation will define any additional threshold (under the thresholds for publication in the JOUE as defined by the Directives) for the application of specific procedures, implementing the principle of proportionality.

F. Drafting tender documentationThe development of standardised tender documents/templates (see relevant details in pillar 4 of the present strategy) will enable contracting authorities to follow and integrate good practices. Standardised tender documents will actually entail two main aspects: standard templates, for general application, and, for specific fields / types of projects, “pre-filled” tender documents that would only require limited tailoring / adaptation.

.As a minimum standard tender documents will include:

General instructions to tenderers and format of specific instructions to tenderers, General conditions of contract and format of specific conditions of contract, General specifications and format of specific conditions.

The scope of standardisation of tender documents is to ensure a better definition of the

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needs and related requirements, adequate and balanced conditions of contracts, and that meaningful tenders are received

Conditions of contract should be balanced as regards risks being retained by both parties. Contracts should include protection clauses, triggering official controls of the contracts by the responsible authorities – e.g inspections from the labour institutions in the case of abnormally low prices for work. Contracts will also include mechanisms for independent check of quality and performance.

Where standardised documentation is not feasible, guidance will be developed in order to elaborate performance-based specifications, establish testing standards and measure the level of achievement of performance (for works and supplies mainly).

Emphasis will be given to the technical proposal, with formats adapted to the field of contracts, avoiding a simple “copy-paste” from the requirements.

Methods will be developed so as to make consultants more responsible for the quality of tender dossiers they prepare, including by requirements for professional liability insurance.

G. Selection criteria

The past experience has shown that selection criteria were improperly used, with excessively high requirements or requirements inducing a bias in favour of or in detriment of specific operators. The efforts of normalisation of the selection criteria have however not been able to fully remedy the situation, setting compulsory levels that appear as being very low, while leading to a very formalistic approach.

As regards selection criteria, the current legalistic approach will be repealed and replaced by more guidance and better justification. The scope is to establish a strong relationship and proportionality between the selection criteria and the requirements of the project.

Guidance will be provided by sectors / fields, having in view the complexity of projects.

As detailed in pillar 4 of the present strategy, a feasibility study will be performed regarding the introduction of a list of approved economic operators, as a pilot project in the roads and highways procurement area. Results will be analysed and further implementation / extension decided on this basis.

H. Award criteria

As concerns the definition of the award criterion, guidance will be provided by sectors, having in view the complexity of projects and the type of procedures, so as to use, when appropriate, other criteria than the lowest price. Guidance will also be developed in how to properly assess quality factors.

In particular, the legislation will define that the lowest price criterion will not be used for intellectual services (unless such services are of a basic level), but the best price-quality ratio.

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When defining award criteria, contracting authorities will have to ensure that a reasonably limited number of factors are used (so that they remain meaningful), that such factors effectively enable to differentiate the bidders and are actually verifiable (especially in the case of life-cycle costs).

I. Defining deadlines for preparation and submission of tendersUnder the current practice, deadlines for preparation of tenders are almost systematically defined as the shortest. In many cases, due to various changes, clarifications, etc, they are extended in a rather hectic way.

It is expected that the focus on a sounder procurement strategy, as well as the market consultations and related guidance, will invite contracting authorities to define deadlines adapted to the nature and complexity of the procedure.

In addition, guidance will be provided on defining the borderline between clarification and modification of the tender documents that will also establish good practices in terms of extension of deadlines and cancellation vs. relaunching rather than multiple extensions – modifications.

J. Clarifications to tender documentsIn the current practice, there are often a very large number of requests for clarifications, triggered by the lack of clarity of tender documents. It is expected that market consultation and the use of standardised documentations, as well as the recourse to more professional organisations (consortia of contracting authorities, centralised purchasing bodies) will improve the quality of tender documents. In addition, guidance will be provided on the proper way of answering to requests for clarifications and the difference between clarification and alteration. Requirements will be defined to publish consolidated versions of the tender documents (over a certain degree of changes / clarifications), so as to ensure that the tender documents are readable and clear.

K. Tender evaluation processThe tender evaluation process will be re-engineered the following way:

financial offers should not be opened during the opening session but prices should be communicated after the technical evaluation is finalised, in a public session for bidders whose technical proposals were accepted,

European Single Procurement Document (ESPD) in place, in parallel with the acceptance of post-qualification concept,

evaluation committee should consist of individuals with expertise in the area of contract scope, not necessarily only employees of the contracting authority,

familiarization of the evaluation committee with the content of the tender documents and thus with the contract objective,

awareness about the role, tasks and responsibilities of evaluation committee members shall be ensured,

clear and free of interpretation criteria for all stages of the evaluation at the moment

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of launching the procedure is secured, mechanisms for unitary application of the criteria to all tenderers are disseminated,

The implementation of these measures will take the form of secondary legislation and guidance published as part of the web-based guidelines.

Guidance will also be provided as regards the preparation of the evaluation report, with clear and simple templates enabling to understand the reasons for the award decision. Furthermore, guidelines will be developed as regards the treatment and evaluation of alternative proposals

The current legal requirement setting maximum period for tender evaluation will be repealed together with the adoption of the new laws on public procurement, as it has proven ineffective.

L. Award decisionsWhen communicating the decision to an award procedure, the contracting authority should provide sufficient information to all tenderers to enable them to properly assess the reasons their offer was rejected. It is expected that better information of the non-successful tenderers will also, in the medium term, reduce the reasons for complaints. Guidance will be developed in this regard, while the secondary legislation will define the basic obligation for communication.

M. Notifications / complaintsPrior notification of the contracting authority will become mandatory; a complaint will be submitted only if the contracting authority does not remedy the situation in due time. The scope is to make contracting authorities more responsible and to ensure that they have a real possibility of taking remedial measures.

Mechanisms will be developed so as to ensure:

unitary practices within the panels of the National Council for Solving Complaints (CNSC),

specialisation of the judges / courts at the level of the Court of Appeals, harmonisation of the interpretations between the CNSC, Court of Appeals as well as

with the other institutions involved in the public procurement system.

N. Confirmation documentThe confirmation document (“document constatator”) will be published in SEAP, for more transparency. In addition, the final contract price will also be published in SEAP.

O. Contract implementationA set of actions (including related legislation) will be developed / adopted so as to streamline information on utilities location and needs for protection / relocation. This will imply

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requirements for utility owners / managers to fully map their networks (within a period of time of about 2 years) and answer for the authorisations they issue.

All technical obligations entailed in the authorisations and conditioning these latter (environmental mitigation measures for instance) shall be duly reflected in the tendering documents and, at the latest, remaining formal obligations shall be cleared out before signing the contracts.

For authorisations unavoidably issued after the contract signature, notably – although not exclusively – for design and build contracts (such as construction permits, or complementary environmental permit), the consequences in terms of possible delays and costs should be duly anticipated in the contractual provisions.

The independence of supervising engineers (and of consultants involved in project management) will be ensured, through declarations and checks and the selection requirement increased and aligned to those applicable for the main works. In addition, recourse to external and independent laboratories will be developed for the most critical taking over tests, further guaranteeing the performance of the delivered works.

The role of feasibility studies, related indicators and “general estimate” during the implementation of the project will also be streamlined including modification of the Government Decision 28/2008 so as to move from detailed technical indicators and budget lines to a limited set of budgetary, economic and performance indicators aiming at verifying the financial feasibility and economic desirability of the project.

In addition, for design and build projects, feasibility studies will no longer be referred to, and even annexed, to tendering documentation, include compulsory solutions, leaving flexibility for the contractors to design the projects with regard to the performance objectives defined in the studies and in the tendering documentation.

Contracts shall also define clear procedure for contracting authorities review of proposals related to main subcontractors, under the responsibility of the contractor, including checking the capacity and capability of subcontractor, so that treatment prior and after to contract signature is substantially the same.

Full guidance will also be prepared on the treatment of contract modifications, in line with the provisions of the 2014 Directives.

P. Final analysis of implemented contractsGuidance will be prepared so as to ensure analysis of the performance of the procurement function at the level of the contracting authority at the end of the budget year, by reference to APPP or procurement strategy information, by reference to deadlines undertaken by contracting authority, in final to have an auto-evaluation and lessons learned.

This will also include evaluation of the objectives and level of performance actually reached.

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The publication in SEAP of the final contract price (including all possible costs overruns, modifications, etc) will be made compulsory.

Q. Transparency and confidentialityIncreased transparency is an objective per se and most information and documents related to tender procedures are public by nature.

In this regard, the treatment of confidential information submitted by bidders will be clarified. Bidders might indicate that some parts of their tenders are confidential, but should support the burden of proof in this respect.

Furthermore, during the period of evaluation, the composition of the evaluation committee should remain confidential.

R. Horizontal measuresA number of horizontal measures will have a positive influence on the overall public procurement process. These include:

Centralized procurement bodies, Consortia of contracting authorities, Access to external expertise (CPBs, PP technical experts open data base), Curricula development and training for procurement officers.

Measures related to internal and external controls and to the prevention of conflicts of interest, as detailed below, will also improve the regularity and quality of the process.

1.1.2 Actions to ensure regularity and quality of the process: scope and expected impact

The overall objective under this second section is to ensure that the public procurement process is regular and of good quality. This implies that the control environment is such that, beyond the strict observance of the applicable laws and rules, good practices are applied so that, by enhanced transparency and increased competition, best value for money is obtained.

To this aim, the following actions have been identified:

A. Develop internal controlB. Streamline ex-ante external controlC. Improve and extend systems to prevent conflicts of interestsD. Streamline ex-post control

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A. Develop internal control

Contracting authorities should progressively shift from compliance-driven to an effectiveness approach, in which internal control systems are above all set-up to ensure that the goal of the procurement process is achieved: obtaining the best value for money.

A strong internal control system at the level of each contracting authority would significantly reduce at an early stage the risk of irregularities and errors and ensure that contracting authorities achieve their objective of obtaining the best value for money. Furthermore, efficient internal control would also reduce the need for external control.

It should be emphasised that, as a general rule, the internal control is a system aiming at ensuring the head of the contracting authority that adequate checks and balance exist, allowing sound decision-making. In this regard, when disagreements appear, the system allows for a mediation mechanism. Ultimately, the head of the contracting authority has the last say.

a. Scope of the internal control systemThe long-term goal is to set-up internal controls systems at the level of all contracting authorities in Romania. A functioning system of controls should become mandatory, its scope should be proportionate to the capacities and the intensity of procured activities of the contracting authorities.

The internal control systems should cover all phases of the public procurement process from the preparation of tenders up to the performance of the contract, while actual requirements should be differentiated function to the size of the contracting authority, so as to avoid developing a high burden on smaller contracting authorities.

In this regard, data collected from SEAP for the period January 2013-March 2015 show that, out of more than 15,000 contracting authorities recorded by the system, only 4,366 have been launching tender procedures over that period (above the direct agreement threshold). Furthermore, the data show the following distribution of contracting authorities against the cumulated share of estimated values of the procedures launched:

Share of total estimated value of tender procedures launched – 01/2013-03/2015

Number of contracting authorities

40% 21

50% 44

75% 190

90% 660

100% 4,366

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Based on their activity, it is therefore reasonable to assume that there are about 40 large contracting authorities, 600 medium contracting authorities and 3,700 small contracting authorities. The requirements for internal control should therefore integrate the principle of proportionality.

Therefore, for the smaller contracting authorities, the internal control will focus on:

Regularity check, through guidelines similar to those used by external control; Verify that guidance on good practices has been applied.

Whereas, for larger contracting authorities, more quality / performance controls, through dedicated internal departments, will be carried out

The manner in which internal control systems should be set-up by contracting authorities will be described in the web-based guideline as part of a "manual/guideline". Moreover, a team should be set-up to support implementation of internal controls on the ground.

b. Critical standards which should be followed by all contracting authorities (including smaller ones)

The Secretariat General of the Government (SGG) is the central authority responsible for issuing and implementing the Governmental policy on internal control systems. The SGG will set up internal control standards for effective management of the public procurement process (including process description, flow of information and responsibilities matrix) to provide generic guidance and set out the requirements for the internal control activities of all contracting authorities.

Internal controls will include at least the following phases: preparation of tenders, drafting the tender documents, carrying out the tender procedure, performance of the contract.

In terms of process, the system will include the following main principles: Segregation of duties, at least between operational functions and financial/payment

functions, procurement officers and technical & economic departments. The requirements for segregation of duties will also depend on the size of the contracting authorities.

The "4 eyes principle", implying that tasks are clearly divided into two steps: initiation one the one hand, and verification on the other hand, performed by different individuals.

Substantiation of the internal visas such as those provided by the economic and legal departments, using check lists and other instruments.

The internal control system will also include a policy document on conflicts of interest.

A specific set of actions for public entities will consist in reinforcing the role of the preventive

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financial controller. By law, the head of each public entity appoints a preventive financial controller, in charge of verifying legality and regularity in relationship with financial and legal operations. The actions considered are the following:

Introducing specific checks prior to the launch of any procurement procedure, Developing detailed check lists and guidance so as to enable the preventive financial

controller to verify the regularity of the process, Reinforce the integrity rules for preventive financial controllers, ensuring that they are

free of conflicts of interest, Reinforce the independence of preventive financial controllers in the exercise of their

functions, by generalising the requirement for a prior agreement of the Ministry of Public Finances in case of suspension, change or dismissal of the financial controller.

Ensure that preventive financial controllers receive adequate training in the field of public procurement.

Institutions competent for controlling and auditing the efficiency and performance of public entities will pay attention, in the context of the supervision system detailed in pillar 5, on the effectiveness of the internal control mechanisms, as potential major source for shortcomings.

c. Standards for larger contracting authorities

Two of the largest contracting authorities, namely the National Company for Roads and motorways (CNADNR) and the National Administration “Romanian Waters” (ANAR) will be subject to a pilot project carried out by an external company and aiming at:

assessing effectiveness of the current internal ex-ante control functions; improving the internal control functions at the level of each pilot institution, having in view

their particularities; ensuring that internal control targets regularity as well as quality; receiving support to implement the new internal control systems; implementing the ISO Anti-bribery Management System Standard, once available.

Once efficient internal control systems are implemented within CNADNR and ANAR, these will be rolled out to all larger contracting authorities in Romania, taking into account the experience gained within the pilot project. Lessons will also be learnt that could apply to smaller contracting authorities.

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B. Streamline ex-ante external control

a. Main directionsThe main directions of improvement of the ex-ante external control can be summarised as follows:

ex-ante controls (of tender documents and of tender evaluation) will be carried out by the same institution, the National Agency for Public Procurement (ANAP), ensuring consistency of interpretations,

ex-ante controls will entail both regularity and quality aspects, technical expertise will be made available to the ex-ante control body, both by full time

employees and hiring of experts, for aspects mainly pertaining to regularity, the results of ex-ante controls will be

compulsory to the contracting authority, although challengeable , for aspects mainly pertaining to quality, the results of ex-ante controls will first be subject

to a mediation procedure with the contracting authority, following which they will become compulsory to the contracting authority, although challengeable .

the systematic ex-ante control of tender documentation will gradually disappear, so as to be replaced by control on a sample basis, in line with the progressive support to and accountability of contracting authorities.

the basis for sampling will include procedures being launched (above the direct agreement threshold, with or without publication of a tender notice), important contract modifications and re-evaluations of tenders further to decisions by Review Body or Courts. As regards contract modifications, those that are substantial as per the definition of the Directives require the performance of a new tender procedure and will therefore, by definition, be included in the sample. In addition, non-substantial modifications will be included in the sample when their value is above a certain threshold (5% of the initial contract value or when a change of contractor is being considered.

The following paragraphs provide details on the mode of implementation.

b. Phasing out of systematic ex-ante control of tender documents

The development of internal control, the improvements of the public procurement process (procurement strategy, market consultation, publication of final contract prices, evaluation of results, etc), the mandatory notification of contracting authorities prior to lodging complaints as well as the establishment of proper monitoring and supervision shall increase the accountability of the contracting authorities. In addition, the development of adequate guidance, help-desk, professionalization of procurement officers, development of centralised purchasing bodies and of consortia of contracting authorities are meant to reinforce the administrative capacity of the CAs.

Therefore, the progressive shift from systematic ex-ante control of tender documents to of 47

sample based verifications will be linked with a parallel gradual increase of accountability and capacity of the contracting authorities. The implementation of the measures of operational support and guidance provided to contracting authorities, as presented under pillars 2 and 4 of the present strategy will also contribute to the process. More specifically, the systematic ex-ante control of tender documentation will be maintained as a transition phase until the publication of the web-based guidelines and standardised documents (July 2016).

The move from systematic control to sample based control will also enable the ex-ante control body to redirect resources towards a more in-depth quality control and will then be phased in accordance with the parallel reinforcement of the capacity and expertise of the ex-ante control body

The pace of the phasing out will take into account the measured performance and reliability of contracting authorities, against the indicators used when preforming the monitoring and supervision functions described under pillar 5 of the present strategy.

The methodology for gradually phasing out the systemic control will be detailed, regarding the envisaged pace and the integration of the above considerations, in agreement with Commission services. This methodology shall also indicate the sample of awarding procedures that might be subject of the ex-ante controls (on basis of annual assessments of the existing resources and of the efficiency of ex-ante control for tender documentations and for evaluations.)

c. SamplingThe sample based control will integrate two main elements, namely risk analysis and random basis. The risk analysis will mainly include two sets of factors: factors related to the size and complexity of the specific tender procedure and factors related to the capacity of the contracting authority (based on previous history). This enables to define four main categories of risks, as follows:

1. High value / complex tender with low capacity of contracting authority,2. Low value / simple tender with low capacity of contracting authority,3. High value / complex tender with reasonable capacity of contracting authority,4. Low value / simple tender with reasonable capacity of contracting authority.

For each of the main risk categories, a yearly target rate of verification will be defined. This target rate will obviously take into account the institutional resources available. It will define the probability for a tender of being subject to ex-ante control, probability that will be different for each risk category.

When a tender procedure is being initiated by a contracting authority, it will be classified into one of the above risk categories. A random procedure will then determine whether the specific procedure is subject to ex-ante control or not.

Therefore, the sampling method will be widely based on random basis, to make sure there is

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a real open probability for any contracting authority to be subject to control and that such control cannot be anticipated by the contracting authorities.

The risk and subsequent control policies will be updatable and consider the adequate risk factors (type of contracts, sectors, type of procured activities, capacity and reliability of contracting authority), building on the experience.

d. Contract modifications

Contracting authorities will be required to notify the ex-ante control body prior to approving important contract modifications. Such notifications will therefore enter into the basis for sampling. The verification will occur prior to the approval of the contract modification (and of any subsequent payment), so that it clearly pertains to control.

As regards contract modifications, those that are substantial as per the definition of the Directives require the performance of a new tender procedure and will therefore, by definition, enter within the basis for sample. In addition, non-substantial modifications will enter within the basis for sample when their value is above a certain threshold (5% of the initial contract value or when a change of contractor is being considered).

e. Regularity and qualityThe notions and regularity and quality require some clarification.

Verification of the regularity is mostly based on the observance of the legal framework, focusing on issues such as the type of procedure, publication requirements, duration, non-discriminatory selection and award criteria, etc.

In practice, regularity will entail:

1. Verification of the tendering notices and relevant related documents, allowing for meaningful checks. In particular, the proposed selection and award criteria will be justified against the description of the project, including, whenever necessary, through consideration of the relevant chapters of the technical requirements (that justify requirements for some specific expertise or the methodology for assessing some award criteria).

2. Screening of key elements, based on sectoral checklists of the technical requirements, to track possible tailored requirements on supplied items or technologies.

3. Transparency in the clarifications brought to potential bidders.4. Transparency in the requests for clarification addressed to bidders.5. Transparency of the selection and award decisions.6. Regularity of the contract modifications.

Points 1 to 3 pertain to the verification of tender notices and related documents (all published

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in SEAP), points 4 and 5 pertain to verification of the tender evaluation process while point 6 pertains to verification of contract implementation.

Until now, point 1 verifications were carried out by ANRMAP on a systematic basis, while points 3 to 6 were verified by UCVAP based on sampling. Point 2 verifications were not performed. As already mentioned, verifications were carried out in a formalistic and too standardised manner, so that the related methodologies require significant improvement.

Additionally, verification of the quality requires tracking requirements or procurement strategies which would impede the intensity and the quality of competition, such as disproportionate requirements, inadequate division into lots, lack of usefully designed lots, unreasonable execution delays or contractual conditions, excessive recourse to design and build procedures, etc. These aspects will be addressed in corresponding guidelines and, where applicable, standardised documentation.

In the long run, this type of verifications shall be systematically applied jointly with the regularity check to all procedures subject to the sample, although more complex projects are likely to raise more concerns. Deviations from the recommended practices in guidelines / standardised documents would be the main factor triggering in-depth verifications.

It needs to be clarified that quality issues are less clear cut than regularity issues and might include aspects that could be perceived as partly subjective (for instance the adequate level of detail of field investigations in a design-build tender or the adequate period of time for preparation of tenders in a complex project). However, an accumulation of quality deficiencies in a specific tender procedure would lead to a situation where competition could be seriously hampered.

As a matter of exemplification, in the case where a motorway construction project would be tendered with a very poor level of field investigations being provided to tenderers, with design and geotechnical risks being transferred to the contractor, while the time available for the preparation of tenders would not allow tenderers to perform the missing investigations so as to effectively assess the risks and substantiate their tender price, then it is likely that a significant number of potential tenderers would be deterred to get involved into the process and the principles of competition and value for money would be widely affected.

Furthermore, a specific issue pertaining to regularity is that of detecting biased technical specifications. This risk is mainly related to a number of sectors such as IT or procedures involving a significant part of equipment. It is acknowledged that identification of such rigged specifications might be fairly difficult to be performed since it requires an in-depth knowledge of the market in the related field. Therefore, the main element of control in this regard remains the market itself, through the complaint mechanism. In addition, as regards the screening of technical specifications against possible bias as part of the ex-ante control, a pragmatic approach has been retained, as follows:

introduce as part of the sectorial check-lists some key elements to be checked (no brand names, in exceptional cases brand name with the mention “or equivalent”, focus on

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functional and performance specifications whenever possible, etc), develop specific check lists in order to identify possible biased specifications for two pilot

sectors (medical equipment and development of IT systems), for a fully-fledged control to be performed as part of the ex-ante control. This will also require the necessary involvement of experts in the related fields.

evaluate, after one year of functioning, this pilot phase, against the following main criteria: effectiveness (whether the desired results have been obtained, that can be measured by a decrease in the number of complaints lodged by market operators in relation with biased requirements for tenders in the two pilot sectors), efficiency (whether the generalised costs of the pilot system, in terms of delays to the process and human resources mobilised, are proportionated with the benefits), time impact. Further to this evaluation, ANAP will take the decision on whether to extend or not this type of verifications.

f. Types of controlTaking into account the resources available to the ex-ante control body, as well as the previous experience of both ANRMAP and UCVAP, the following aspects are underlined:

- The current average of 7 tender notices being checked per person and per day does not allow any in-depth analysis. There is also an urgent need to streamline the verifications, to make it less formalistic, more meaningful and add a screening of key technical specifications.

- Verification of both regularity and quality of a tender notice and related documents would require in average about 5 man-days, that is about 20 times more resources than the current verifications. This would increase significantly when it comes to the detailed verification against possible bias in technical requirements.

- UCVAP currently verifies about 8% of the total sample basis (tender procedures and negotiations without publication of a notice), that is about 2,000 verifications per year.

- A re-engineering of the related controls is necessary, by requiring the observers to attend only the key phases/steps of the evaluation and the control of tendering documentations to be focused on quality aspects. This will enable to would increase the efficiency of the use of human resources involved in the control activities and therefore the overall number of procedures controlled, with a target number comprised between 4,000 and 5,000 per year.

- Therefore, the following conclusions can be drawn:- There is a need to allocate additional resources both for verifications of tender notices

and related documents and for verification of tender evaluation and contract modifications,

- Since it will be difficult to multiply the resources of the ex-ante control body by a factor of 20, during the phasing period out of the systematic ex-ante control of tender notices and related documents, quality checks will be gradually integrated in respect of a limited number of procedures. In parallel, improved regularity checks will be

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continued for all procedures until July 2016. After July 2016, the number of regularity checks will gradually decrease but will remain significant. More emphasis will be put on the quality checks.

-- In the long run the objective would be that the sampled procedures will be subject to

the full scope of verifications, on regularity and quality, covering the whole ex-anet cycle (tendering notice, technical documentation based on check lists, clarifications to tenderers and selection and award decisions)

g. Check listsControls will be adjusted to the specificity of the sectors by using checklists (IT, infrastructure projects, medical equipment, R&D, energy, etc). The check lists will identify issues mainly pertaining to regularity and those related to quality.

h. Technical expertiseThe ex-ante control body will secure the appropriate technical expertise, using both internal and external resources. Considering that assessing the legality of the selection criteria or the regularity of the evaluation of a technical proposal requires a solid understanding of the technical specifications, ensuring the appropriate technical expertise is essential. In this regard, even when focusing on regularity issues only, the ex-ante control will not review exclusively the tender notice and instructions to tenderers; on the contrary, it will consider the entire tender documentation, including contract and specifications / terms of reference. The review will be guided by check-lists that will enable the controller to spot key tailored or discriminatory requirements in the technical documentation, mostly related to supplied components or technology.. It needs to be emphasised that the above measures will gain more efficiency when linked with those described in pillar 4 of the current strategy, including development of standardised tender documentation, with better structured templates, more detailed presentation of the project including objectives and scope, etc.

In order to implement the measures of streamlining of the ex-ante control, the ex-ante control body within ANAP will require increased human resources, particularly as regards technical expertise. ANAP will therefore secure technical expertise through two complementary ways, namely by hiring about 50-60 technical specialists for the most frequent needs and by setting up framework agreements with the double aim of securing highly specialised resources for specific technical fields but also of ensuring additional technical resources when required.

Based on the analysis of existing procedures, it is envisaged that the 50 to 60 technical specialists to be hired by ANAP would include about 25-30 specialists in various construction fields (roads, rail and public transport, civil engineering, water and wastes), about 15 specialists in IT and 10 to 15 specialists in other sectors including health, finance, disposing of operational experience in managing procured contracts etc. The level of remuneration of

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ANAP is meant to be sufficiently attractive, as part of the Romanian public sector, to enable to hire and retain technical specialists in these fields.

Where the level of expertise required will be significantly deeper, the framework agreements will enable mobilisation of adequate experts (with the corresponding level of remuneration) within a reasonable time period (i.e. without triggering additional delays against the overall period necessary for ex-ante control).

i. Results of ex-ante control

For issues identified as pertaining to regularity, the results of the ex-ante control will be directly compulsory to the contracting authority. Depending on the phase in which the irregularity is identified, the tender notice will not be published or the procedure will be suspended until the irregularity is remedied. In certain cases, it is also possible that the only effective remedial measure consist in cancellation of the procedure.

For issues identified as pertaining to quality, for which, as mentioned above, the assessment is less “black and white” and leaves some room for interpretation. As an example, the time for preparation of a complex tender (when bidders are required to prepare a concept design or equivalent) should not be limited to the period defined by the law as being the minimum one. Whereas guidance will provide elements in order to assess the reasonable time for preparation of tenders, the exact period adequate for each individual case remains a matter of interpretation.

Therefore the results of the ex-ante control in this regard will subject to a mediation procedure with the contracting authority. The outcome of the mediation will then become compulsory to the contracting authority.

In accordance with the general legal framework, the decisions of the ex-ante control body will be considered as administrative acts, therefore challengeable by the contracting authority in front of the relevant courts. The decisions will however remain in force unless and until otherwise decided by the court.

j. Time impact

The impact of the ex-ante control system on the time-lapse for individual procedures is outlined in the following table:

Phases of ex-ante control Maximum time period (in working days)

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Sampling 1 working day (from notification by contracting authority, with relevant documents)

Tender documentation

Regularity and quality ex-ante control

10 working days delay for publication of tender notice

Not later than 10 days prior to the deadline for submission of tenders (from sampling decision to issuance of initial control results)

5 working days for mediation procedure, if required by the contracting authority (from issuance of initial control results to final control results)

Ex-ante control of tender evaluation

Control is performed during the period of tender evaluation, directly by ANAP observers attending key decisional meetings of the evaluation committee, with verification of the main steps of the evaluation (technical, financial, qualification). Exceptionally, Up to 3 working days per step may be needed, additional to the evaluation process itself, in case internal clarification / arbitration would be needed.

Ex-ante control of important contract modifications

5 working days (additional to the time required by the contracting authority to assess and agree the related contract modification).

Ex-ante control of bias in technical specifications (pilot sectors)

30 working days delay for publication of tender notice

Not later than 10 days prior to the deadline for submission of tenders (from sampling decision to issuance of initial control results)

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k. Operational aspects

The time periods mentioned in the above table do not take into account the periods necessary for the contracting authorities to implement the resulting corrections / remedial measures. The experience of the ex-ante control of tender documentation performed since 2011 has shown that the overall time period between the first submission of tender documents and their actual publication was sometimes extremely long, while the number of rejections was very high (in average, more than one rejection by procedure being published).

In order to avoid such problems in the future, the following will be undertaken:

As a matter of principle, the results of the ex-ante control will be complete in relation with those aspects that have been checked: all points to be verified will be analysed and the related check lists will be completely filled so that all irregularities and problems are raised. This implies that no additional comments will be issued by the ex-ante control at later phases with regards to those aspects.

When detecting an irregularity, the ex-ante control will also guide the contracting authority to the relevant instructions, guidelines, standardized specifications, as the case may be. The ex-ante control will not provide guidance or assistance as such but will ensure that the contracting authority is made aware of the means made available in order ofr it to take the corrective / remedial actions.

Given the sensitive aspects of ex-ante control as part of the conduct of procurement procedures, the National Agency for Public Procurement will also implement an adequate human resources policy aiming at ensuring rotation of controllers.

In order to ensure a consistent approach across the various phases of ex-ante control, the ex-ante control body will:

Establish a structure in charge of providing methodological guidance to controllers,

Ensure that, for each given procedure, operational cooperation is being established between those controllers mainly in charge of verifying tender notices and related documentation and those mainly in charge with the verification of the evaluation.

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C. Improve and extend systems to prevent conflicts of interests: improper influence

a. Conflicts of interest and role of the contracting authority

The 2014 Directives provide for a new, more comprehensive definition of conflict of interest in the field of public procurement. The definition refers to any situation in which persons involved in or able to influence the procedure by which a purchaser awards a contract, have a direct or indirect financial, economic or other personal interest that could jeopardise their impartiality and independence in that procedure. On this basis, Romania shall take steps to prevent, identify and address conflicts of interest, the contracting authority having the leading role in this respect. A procedure potentially touched by conflict of interest will be at risk of cancellation.

A conflict of interest refers to a situation where the impartiality and objectivity of a decision of a contracting authority is or might be perceived as being compromised by a personal interest held or entrusted to a given individual. Relevant personal interest may be of financial or non-financial nature and it may concern a personal or family relationship or professional affiliations (including additional employment) or "outside" appointments or former employments or appointments) and other relevant outside activities.

In order to maintain public trust and confidence in the contracting authority activities, to protect its staff from unjustified suspicion and, in wider terms, to maintain trust and confidence in the public procurement system, it is important not only the actual independence and impartiality, but also the perception on these two elements. Therefore, even the appearance of conflict of interest is by itself to be prevented and avoided, even if it turns out to be unsubstantiated.

Furthermore, the contracting authorities are obliged to treat economic operators equally and non-discriminatorily and to act in a transparent way. The contracting authorities should be driven by their active role in the application of these principles, including in their activities to spot any conflicts of interests and take appropriate preventive and remedy measures.

As part of the internal control system to be established, all contracting authorities shall elaborate and adopt a distinct policy document regarding the conflicts of interest, as required by future legal provisions..

This document shall cover the following:

the whole procurement process and the management of the subsequent contracts, meet the requirements of the national procurement regulations and the EU Public

Procurement directives, include a specific chapter dedicated to declarations of absence of conflict of interests, include reference to gifts and other hospitality actions, which can also be deemed to be

inducements. This can occur during, before or after any procurement process and during the management of any subsequent contract or procurement,

ensure that the body maintains records of any conflicts which have arisen, evidence how

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they were dealt with and the follow-up actions undertaken. The policy of maintaining records will allow future conflicts to have a reference point,

include reference to the internal sanctions resulting from undeclared conflicts of interests. Sanctions must be appropriate and a act as a deterrent to breach the rules,

include an Annex providing some common examples of such conflicts, address the situations when staff leaves a public sector organisation, in particular a post

in Government or Local Government (so-called "revolving door" situations). Staff should abide the obligation not to reveal confidential information accessible during the job and should not benefit from any subsequent conflicts of interests which may occur after leaving the job.

This document will be elaborated by contracting authorities on the basis of guidance / template elaborated jointly by ANI, ANAP, SGG (as competent for issuing rules on internal control) and the national agency for public administration. This guidance will provide some common illustrative examples of conflicts of interests and the corresponding template will be annexed to the legal / regulatory act requiring contracting authorities to elaborate the above document and to implement the corresponding mitigation measures.

b. Repeal automatic exclusion of operators ruleThe current provisions of the Government Emergency Ordinance 34 / 2006 providing for the automatic exclusion of economic operators that could be in a situation of conflict of interest involving managers of the contracting authority shall be repealed. Such remedy measures cannot be systematically taken against the operators. The provisions of ordinance 34/2006 will be modified by:

- replacing the notion of “one share” by defining the type and intensity of critical decisional influence;

- replacing the reference to “4th degree” relative by the intensity of releation effectively verifiable by the detection system detailed below;

- the exclusion of bidders, as remediation measures, will be the ultimate solution and will be taken only after ensuring that contracting authorities have taken all measures to eliminate the situation leading to a possible conflict of interest and after giving the bidders the possibility to clarify the data/information

d. Identification and detection of conflict of interests

The first basic measure to be taken by contracting authorities in order to identify and detect conflicts of interest would be to oblige any person involved in a procurement procedure to fill in a declaration of absence of conflict of interests. This should apply to:

the head of the contracting authority and anyone to whom he/she delegates his/her

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duties, members of the management board or similar decision-making positions, staff contributing to preparing/drafting the tender documents, members of the evaluation committee, internal experts performing any task connected with preparing the tender documents

and/or evaluating the bids.

In the case of the head of contracting authority, key decision-makers as well as procurement officers, the declaration would take the form of an annual statement of interests (including past employment or similar).

In the case of persons involved on a case by case basis, such declaration made once but considering situations afferent to each stage of the procurement procedure (preparation, evaluation, monitoring and closure)..

Filing a declaration of absence of conflict of interests should be considered at each stage of the procurement procedure (preparation, evaluation, monitoring and closure).

The occurrence of a conflict of interests is not necessarily illegal in itself. It is, however, irregular to take part in a procedure while being aware of a conflict of interests. It is therefore necessary to disclose any potential conflict of interests before taking any part in the procurement procedure and to take appropriate preventive measures. This also allows the contracting authority to take adequate prevention measures.

The second measure to be taken by the contracting authority consists in performing two types of checks, as part of internal control::

prevention: to detect apparent/potential/actual conflicts of interests sanction/remedy: to detect conflicts of interests, to sanction the person concerned and to

remedy any wrong caused by the conflict of interests.

Checking mechanisms will focus on the declaration of absence of conflict of interests, which should be examined in the light of additional information:

external information (i.e. information about a potential conflict of interests provided by outside persons who have no connection with the situation that generated the conflict of interests, potentially including whistle-blowers and media),

checks performed on certain situations showing a high risk of conflict of interests, based on internal risk analysis or red flags,

checks performed by the Prevent system.

In order to assist detecting conflicts of interest, an instrument has been developed by the National Integrity Agency (ANI). This instrument, (PREVENT) system, will allow the detection of certain potential conflicts of interest, focusing on kinship and shareholding relations between staff members of the contracting authority (decision makers and members of the evaluation committee) and decision makers of the tenderers. It will be applied for all procedures, regardless of the sources of funding. If a potential conflict is detected, an

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integrity warning will be issued by ANI to the contracting authority which will be obliged to take the adequate measures prior to the conclusion of the procedure. One essential element of the PREVENT system will be to ensure that the contracting authorities will be obliged to effectively fill in the data required by the integrity form. This could be achieved by making the filling of the form an obligatory phase in the public procurement cycle and by obliging the CAs to fill in the date directly in SEAP. Furthermore, failure by the contracting authority to fill in the required information in the Prevent system will lead to the automatic suspension of the procedure.

The National Agency for Public Procurement and particularly the ex-ante control body will be informed on the outcome of the checks performed by ANI. The contracting authority will be obliged to report to ANAP on the measures effectively taken following an integrity warning.

This above verification process is performed automatically from SEAP, being initiated when the bidders are known (opening of bids). The entire verification flow, until information of contracting authorities and ANAP, does not exceed 8 working days. In the verification process, contracting authorities will acknowledge that, while the results of the Prevent system are based on hard data, the information obtained from whistleblowers and media cannot be judged as evidence per se. However, ANAP, under external control, or the contracting authorities, as part of internal control, should actively check whether the information and if it may impact on the procedure. All data sources at their disposal to check the accuracy of information should be used.

d. ConsequencesWhen a potential conflict of interest is detected, the contracting authority should take all measures to prevent it. Prevention measures are to be differentiated and assessed in light of the role and position of the individual affected by a potential conflict.

Therefore, if the relevant individual is member of the evaluation committee, one of the procurement officers involved in the project or in a similar position, the respective person can be replaced in the procedure, with an individual not affected by the potential conflict of interest who will take over the role and responsibilities of the person potentially in conflict of interest in the relevant procedure.

When the individual potentially in conflict is part of the management / decision – makers of the contracting authority, the solutions to be implemented are more difficult to implement and require a proper assessment of the available solutions. In principle, the person potentially affected by a conflict of interests should excluded from the respective procedure. This implies that the individual would receive no tasks linked to the procedure, would be discharged from any responsibilities related to the procedure and ideally would voluntarily refrain from any direct or indirect involvement.

Whereas this solution might prove efficient when the responsibilities of the individual would

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not be directly linked to the scope of the procedure (e.g., the head of road maintenance for a motorway construction tender), it becomes inadequate when the individual is directly and necessarily involved in the procedure (e.g. head of the contracting authority or head of the procurement department). In these cases, the only remaining solution is to exclude the economic operator from participating to the procedure, since its participation would unavoidably lead to a situation of conflict of interest. The main difference against the current provisions of OUG 34/2006 consists in the fact that exclusion of the economic operator would be the ultimate recourse and by no means an automatic solution.

For all the cases mentioned above, the contracting authority is responsible to take all necessary measures, including adequate publicity, in order to ensure the transparency of the procedure and remove the potential risk of conflicts of interest or the mere perception on the existence of a potential conflict of interests.

It should be also emphasised that the development of centralised purchasing bodies and consortia of contracting authorities, as described in pillar 4 of the current strategy, might reduce direct involvement of staff of the contracting authority in the related procedures, therefore containing the risks of conflicts of interests.

When a conflict of interests that has not been declared by the relevant individual is being detected, the contracting authority might consider the following measures, in addition to the above:

take disciplinary or administrative action/sanctions against the official concerned, or against the bidder

correlate its findings with other data and use them to perform risk analysis, ensure publicity in order to ensure that decisions are transparent, to prevent and deter

any potential similar occurrences.

If the conflict of interests is of criminal nature, the authority should, in addition to the measures set out above, act in line with the relevant legislation and refer the case to the competent authorities.

In order to carry out the required remediation measures, contracting authorities will rely on dedicated guidance issued by ANAP, detailing the desired approach with regard to the possible situations encountered and in particular regarding elected and public officials disposing of critical indirect decisional capacities. This guidance will be supported by illustrative examples.

The new system to be implemented foresees tht after receiving the notification for integrity warning, the contracting authority must carry on all the verifications necessary to clarify the situation of potential conflict of interest and after that will submit its documented opinion regarding the accuracy of the data/information mentioned in ANIs notification back to ANI.

ANI will assess the information (based on documented evidence) and either will maintain its position or will take into consideration the new data/information provided.

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In case ANI maintains its position, the contracting authority must take all necessary measures in order to eliminate the situations that lead to a conflict of interest.

ANAP will check if the corrective measures taken by the contracting authorities are in accordance with those mentioned in section 3 of the Integrity Statement Form and will also monitor that all these measures are in accordance with the provisions of public procurement legislation regarding the conflict of interest.

The signature of a contract without remedying the possible situation of conflict of interest as presented in the Integrity Warning will trigger automatically the procedure of evaluation of the conflict of interest, as foreseen in Law no. 176/2010 on integrity.

e. Improper influence

Although the use of the Prevent system will be compulsory for all public procurement procedures, Prevent will not be able detect all potential conflicts of interests. Therefore, the absence of an integrity warning will not exonerate the contracting authority from its responsibility and active obligation to identify conflicts of interests nor relieve the control bodies from verifications on the matter.

In particular, since Prevent will mainly focus on kinship and shareholding (or similar) relations, it is unlikely to detect conflicts of other nature, such as improper influence. The situation is fairly similar in the case of checks and verifications carried out by the contracting authority or by ex-ante control bodies.

As regards the prevention of improper influence, it should be mentioned that the actions taken by the contracting authorities might have a relatively limited effect, while the most significant impact is expected from the investigation carried out by the judiciary. Preventive actions under the responsibility of the contracting authorities entail:

implementation of ISO Anti-bribery Management System Standard, when available (as explained above, this type of action would mainly be required for the larger contracting authorities),

setting-up a set of “red flags” as part of the internal control system.

A particular situation linked to improper influence to be prevented by the contracting authorities is when economic operators adopt a collusive attitude, detrimental to public funds and interests. Special attention should be given to cases when an economic operator is in a position to approve / reject / monitor, directly or indirectly, the performance of works or services or the provision of goods by another economic operator. The most frequent cases are those of supervising engineers / works contractors, assistance to project management / operator in charge of a project component, etc.

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In such cases, the contracting authority should put in place a number of mechanisms aiming at:

- ensuring that the two economic operators are fully independent from each another; in case the first operator is already hired at the time of launching of the tender for the other operator, that second operator will have to demonstrate independence from the first one. If the tenders for the two operators are launched at the same time, the contracting authority should define a clear rule so as to ensure independence (for instance, in case the preferred tenderer for works is linked with the preferred tenderer for supervision, the tender for supervision would be awarded to the second ranked tenderer).

- ensuring that the operator that is in a position to control the performance of another one …? acts impartially and independently. For instance, in the case of works supervision, the contracting authority should define a number of key tests (for instance, prior to taking over) that would be performed by a third party (such as an independent laboratory).

As regards improper influence, detection will mainly rely on:

complaints submitted by economic operators or third parties, Whistler blowing from relevant parties, including officials from the concerned contracting

authorities. Dedicated function will be entailed in ANAP website, guaranteeing the anonymity of the complainers / whistle blowers

additional outside information – media investigations.

In case a situation of improper influence is suspected, ANAP shall take the required measures, alerting, the contracting authority and notifying the official investigation bodies and cooperate with them.

It will in this regard establish working mechanisms with the investigation bodies, including exchange of information, etc.

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D. Streamline ex-post control and audit

In order to remedy the existing overlapping of various institutions, the ex-post controls currently carried out by ANRMAP will be replaced by the audit performed by the Court of Accounts (the Audit Authority in the case of EU funded projects). The Audit Authority is a body within to the Court of Accounts, for audit of EU funds, The roles and responsibilities of the two entities are clearly defined and do not overlap.

It is mentioned that audit is already performed by the Court of Accounts, in accordance with the base functions of the Court as defined by the law and relevant regulations. This audit takes place after the period of execution of the budget and is not an operational control (so that the notion of “ex-post control” is not adequate). In the new context, in order to establish an efficient public procurement audit, the system will entail the following:

provision of adequate human resources, training and tools to the Court of Accounts; harmonisation of the procedures and methods used by the Court of Accounts and the

Audit Authority in the performance of control pertaining to public procurement will be a priority, so as to ensure full consistency of the approaches and interpretations;

the Court of Accounts methodology used to establish the relevant risk areas, and therefore contributing to the elaboration of the audit plan, will take into account, among others, the risk factors indicated by governmental institutions, such as the National Agency for Public Procurement (ANAP, performing ex-ante control as well monitoring and supervision of public procurement), the National Integrity Agency and the Competition Council;

in line with the existing responsibilities of the Court of Accounts2, the control is fully-fledged, from necessity to payment. It also integrates an assessment of the actual functioning of the internal control system.

a system of dissuasive sanctions will be established, by law, differentiated by type of irregularity.

The system of sanctions will primarily target the deficient contracting authorities as such ranging from recommendations to fines,. Sanctions applied to contracting authorities shall not trigger sanctioning of public procurement officers, unless penal infractions are at stake.

Individual procurement officers will remain responsible in accordance with the provisions of the Penal Code in case of fraud or with the provisions of the Civil Code / Civil Servants law / Labour Code (as relevant) in case of repetitive errors.

The new system of sanctions/administrative measures with sanctioning character shall be defined by the national legislation transposing the PP Directives. The legislation subsequent to this Strategy will contain special provisions:

- to identify the exact cases that generate real (not presumed) prejudices that imply subsequent financial recovery

2 Regulation approved by the Court of Accounts Plenum Decision no. 155/2014 published in the Official Gazette no. 547 on 24/07/2014.

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- the circumstances under which prejudices will be recovered and- rules for estimation of the prejudice.

Considering that the control sample methodology is different from that used in the case of ex-ante control, it is acceptable and possible that in practice the same procedure might be subject to ex-ante and ex-post audits. However, as a general rule, if a phase of a procedure has been subject to ex-ante control with no irregularities being detected, should an irregularity pertaining to that phase be detected by ex-post control / audits, the ex-post control / audit body will inform the ex-ante control body, for remedial measures to be taken as regards the efficiency of the ex-ante control. In case of disagreement, the coordination mechanism defined under the pillar 2 of the present strategy will be used.

In the specific case of EU funded projects, ex-post controls / audits will be performed by the Audit Authority whithin the Court of Accounts. The role of the Audit Authority is not only to control contracting authorities but also to audit the functioning of the system for management and control of EU funds and check the reliability of this system (including ANAP). In case the Audit Authority or the managing authorities or certifying authority detect irregularities that were not detected by the ex-ante control although they should have been identified, financial corrections will still be applied on the EU contribution, Romania may decide how those corrections are ultimately borne.

A specific case also requires some explanations, namely when an alleged irregularity is identified either through whistleblowing or media or by a public authority, requiring a specific verification. Such cases do not entail complaints submitted by bidders or interested parties as part of the Remedy process, ex-ante control, Court of Accounts audits nor the verifications performed as part of the system of management and control of EU funds. These cases will be referred to the supervision body of ANAP that will perform the necessary verifications of the situation. In case possible fraud is detected, ANAP will refer the results of the verification to the competent authority. In the other cases, ANAP will inform the Court of Accounts. Sanctions will be applied by the Court of Accounts, further to its audits

1.2 Impact and results indicators

The monitoring mechanism described under the chapter “Risks, governance and performance monitoring” is directly applicable for the monitoring of indicators and expected results described under this headline.

With regard to the procurement process regularity and quality verifications pillar, the following indicators of impact are identified:

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Summary of proposed actions, lead and contributing institutions, completion timescales and planned impacts

Identified issue/trigger for the action

Proposed Action Lead Contributors KPI Deadline Source of Information

Planned Impacts

A: Develop internal control

Define specific requirements to be followed by all contracting authorities

Set up the specific requirements concerning effective management of the public procurement process in application of internal control standards

SGG SGG, ANAP, RCA, key stakeholders

Specific instructions issued by SGG with the support of ANAP

Guidance published on web-based guidelines

December 2015

July 2016

Official Gazette

ANAP web site

Introduction of the principles of segregation of duties, “4 eyes principle” and substantiation of visas in the main phases of the public procurement process

Support implementation of internal controls

Guidance on implementing internal control for public procurement, tackling internal actions for preventing conflict of interests

SGG ANAP, RCA, key stakeholders

Team being set up

Guidance, checklists developed

Procedures developed

December 2015

June 2016

December 2015

SGG

SGG internal procedures

Effective guidance is provided for contracting authorities set up and implementation of internal control systems

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Planned Impacts

Streamline the role of preventive financial controllers related to public procurement

Revise MPF Order 923/2014 on preventive financial control

MPF Key stakeholders

Publication of revised Order

March 2016 Official Gazette

Reinforce integrity rules for preventive financial controllers

Reinforce independence for preventive financial controllers

Introduce check prior to launch of procedure (based of substantiated prior visa granted by the economical, technical and legal department)

Ensure adequate training of preventive

Develop and implement training programmes and

MPF ANAP Training programme developed

March 2016 MPF documents

Preventive financial controllers of 47



Planned Impacts

financial controllers in the field of public procurement

guidance adequately fulfil their role in checking legality and regularity of the public procurement process

Controllers trained

2016-2018 MPF reports

Guidance published

March 2016 Web base guidelines

Implement pilot project for large contracting authorities

Develop and implement pilot project for CN ADNR SA and ANAR

CNADNR

ANAR

MPF, ANAP, SGG, RCC

Consultant hired January 2016 SEAP Functional internal control system enabling to ensure regularity and quality of the public procurement process for two pilot contracting authorities

Improved internal control systems adopted

July 2016 Consultant

Internal control systems functioning

September 2016 Consultant / ANAP

Lessons learnt October 2016 ANAP

ISO 37001 (anti-Bribery) implemented

2017 CN ADNR, ANAR

Define specific requirements on

Replicate lessons learnt with CN

ANAP, MPF

, Specific requirements on

December 2016 ANAP, SGG Functional internal control system of 47



Planned Impacts

implementing internal control systems by larger contracting authorities

ADNR and ANAR to all larger contracting authorities

SGG All stakeholders

implementing internal control systems by larger contracting authorities developed

enabling to ensure regularity and quality of the public procurement process for large contracting authorities

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Planned Impacts

B: Streamline ex-ante external control

Reform ex-ante control system

Develop of a methodology for gradually moving from systematic controls to sample based

Drafting of specific checklists

Establish the structure, develop procedures and define responsibilities in view of ex-ante control performance

Adoption of the legal basis

ANAP Key stakeholders

Sampling methodology developed

Checklists developed

Procedures, structure and responsibilities for ex-ante control performance developed

Legal basis adopted

November 2016

January 2016

ANAP

Official Gazette

Ex-ante control system functional, targeting both regularity and quality

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Planned Impacts

empowering ex-ante control body to enforce corrective measures

Hire technical experts as employees of ANAP

Contract framework technical assistance for ex-ante control

New ex-ante system functional

ANAP Key stakeholders

Team of technical experts established

August 2015 – July 2016

ANAP

January 2016

July 2016

ANAP

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Planned Impacts

C: Improve and extend systems to prevent conflicts of interests

Ensure compliance with EU law on conflicts of interest

Repeal rule of automatic exclusion of the economic operators by Governmental Ordinance on "cleaning the past" - Modiy provisions of article 69 of GEO 34/2006 on conflict of interests (automatic exclusion of bidders, “single share” situations and 4th degree relatives)

ANAP Government, key stakeholders

Art. 691 of GEO 34/2006 modified

August 2015 Official Gazette

Avoiding conflicts of interest primarily lies with contracting authorities. Exclusion of economic operator only if no other solution is possible

Improve and extend systems to prevent conflict of interest to all procurement

Make Prevent system operational and compulsory

ANI ANAP, key stakeholders

Prevent system operational

August 2015 (submitted to the Government)

November 2015 (approved by the Parliament)

ANI

Official Gazette

Operational systems to identify and prevent conflicts of interest

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Planned Impacts

procedures Compulsory use of Prevent for all procurement procedures

May 2016 ANAP

Ensure better prevention of conflict of interest

Provide guidance to contracting authorities on how to identify, detect and prevent conflicts of interest at Contracting Authority level, with a view to limit the impact on the market (defining the concept of sensitive key functions; the approach to be followed in respect of holders of such functions involved of in procurement activities; associated

SGG ANI, ANAP, key stakeholders

Guidance developed and made available to contracting authorities

Sensitive key functions identified

Risk management mechanisms identified

June 2016 Web-based guidelines

Improve practices of identification and prevention

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Planned Impacts

risks; risk management). The guidance will be correlated with the instructions on internal control system.

Set up legal requirement for issuing document detailed in section C a) and imposing contracting authorities to remedy situations of possible conflict of interests

D: Streamline control of the Court of Accounts

Reinforce the Enhance the Court of Reinforced January 2016 Court of Increase efficiency

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Planned Impacts

role of the Court of Accounts in public procurement

capacity of the Court of Accounts to tackle public procurement

Accounts capacity Accounts of the audit in public procurement

Ensure adequate human resources, training and tools

Court of Accounts

Adequate staff employed / allocated

January 2016 Court of Accounts

Training programme designed

June 2016 Court of Accounts

Procedures and tools updated


Training programme implementation

December 2016 Court of Accounts

Establish a system of dissuasive sanctions, targeting contracting authorities included in the national

ANAP Court of Accounts, Audit Authority, key

Sanctions system adopted

January 2016 Official Gazette

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Planned Impacts

legislation transposing EU Directives

stakeholders

Take into account Audit Authority experience on control of public procurement

Establish a coordination mechanism between the Court of Accounts and the Audit Authority

Court of Accounts

Audit Authority, ANAP, key stakeholders

Cooperation mechanism developed and functional


Ensure full consistency between approaches and interpretations

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1.3 List of Annexes corresponding to Pillar 3

Annex 1 Long list of problems, solutions and instruments in the public procurement process (corresponding to annex 3 in RO version)

(The following annexes are working documents and are not designed for public disclosure)Annex 2 Blueprint on internal control mechanisms in the field of public procurementAnnex 3 Presentation of the Prevent system

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