Procurement rules

Joint Technical Secretariat

Beneficiary Seminar

Seminar for Beneficiaries20-21 February 2012

Narva, Estonia

What is procurement?

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Procurement is the timely acquisition of goods, works, and services, which respects the following condition in accordance with the Article 1 and 2 of Annex IV to the Grant Contract:

- the objectives of organisation are concerned;

- fairness, integrity and transparency through competition;

- economy and effectiveness;

- best value for money;

- avoid any conflicts of interest.

ATTENTION!

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Project Beneficiaries and partners form Estonia and Latvia, as well as Russian Federation public entities, should follow their NATIONAL PROCUREMENT PROCEDURES and additionally follow the rules of nationality and origin set out in Article 2 of Annex IV to the Grant Contract.

Russian Beneficiaries and partners that are not public entities must respect Article 1 to 7 of Annex IV to the Grant Contract. It is recommended to use PRAG (chapters 2 to 5 and templates) as a model of “best international practice” (Article 3 of Annex IV).

Good procurement principles 1

Strict rules should be followed in each procurement procedure in order to acquire best price-quality ratio.

- No discrimination – against product, services, suppliers, contractors or service providers on grounds of nationality, as long as the rules of origin and nationality are respected.

- Fair competition – all tenderers must be given the same information and the same opportunities to come up with winning bids.

- Clear specification – tenderers cannot complete effectively unless they know precisely the requirements of the purchaser.

Good procurement principles 2

- Effective publicity (announcement) – particularly important for publicly funded procurement where, typically the purchasers are not experts in the field. This is where use of the internet is increasingly important. For publications in the national or regional press the EU guidelines on visibility should be followed.

- Adequate timescales – bidders are given sufficient time to respond to advertisements expressing an interest in the purchaser’s requirement, to respond to invitations to participate in the bidding and to prepare and submit their offers.

(PRAG: 60 days for Supplies and 90 days for Works in international tenders, 30 for Supplies and 60 for Works in local tenders)

Good procurement principles 3

- Use of relevant objective criteria – it is crucial that the criteria used for the elimination of unsuitable candidates, the selection of participants in contract award procedures and the award of contracts on the basis of the offer(s) economically most advantageous to the purchaser are both objective and relevant to the requirement.

- Adequate records - it is essential to be able to justify decisions later on if there are any challenges or doubts about the decisions that were made.

General rules of procurement

Every procurement procedure should follow two selection criteria:

- the eligibility check of the tenderer or candidate to take part in the procure needs to be carried out in order to identify possible grounds for exclusion in advance;

- criteria for assessing its financial, economic, technical and professional capacity.

Basic steps in procurement

- Development of Procurement Plan;

- Development of technical specification or Terms of Reference (if nessesary);

- The Call Forwarding / Publication/ Request for offers;

- Receiving tenders from potential suppliers/ service providers/ contractors;

- Making the decision on the offers;

- Notification of the decision to the responsible bodies and possible contractors;

- Document issued by the responsible authority/authorities confirming that procurement documentation is in compliance with the requirements set in the national legislation (if applicable);

- Contract procedure with the winner of the procurement.

Types of contracts

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Service contracts:

- Studies: identification and preparation of projects, feasibility studies, economic and market studies, technical studies, evaluations and audits

- Technical assistance: advisory role, to manage or supervise a project, or to provide the experts specified in the contract

Supply contracts:

- Purchase, leasing, rental or hire (with or without option to buy) of equipment

- A contract for the supply of equipment and, incidentally, for installation

Works contract:

- The execution, or both the execution and design, of works

- Outcome of building or civil engineering works

Mixed contracts

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Mixed (hybrid) contracts (PRAG Article 2.4.9):

- Contract between the Beneficiary or partner and a service provider, supplier or construction firm covering two or more of the following: works, supplies and services.

- Beneficiary or partner determines the procurement procedure to be used depending on which of the components (works, supplies or services) prevails. This assessment must be made on the basis of:

- the value, and

- the strategic importance of each component relative to the contract as a whole.

Thresholds for procedures- overview

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SERVICES

≥ € 200,000Internation

al restricted

tender procedure

< € 200,000 but > € 10,000

Competitive negotiated procedure

≤ € 10,000Single tender

SUPPLIES

≥ € 150,000Internation

al open tender

procedure

< € 150,000 but

≥ € 60,000Local open

tender procedure

< € 60,000 but > € 10,000

Competitive negotiated procedure

WORKS

≥ € 5,000,000 Internation

alopen

tender procedure

< € 5,000,000

but ≥ € 300,000Local open

tenderprocedure

< € 300,000 but>

€ 10,000Competitive negotiated procedure

Rules of Nationality and Origin

ALL Beneficiaries and partners have to follow rules of nationality and origin include in Article 2 of Annex IV of the Grant Contract „Procurement by grant Beneficiaries in the context of European Union external actions”, even though they can follow national procurement rules as provided for under Article 8.2 of Annex IV. Project partners from Russia should follow the rules set in the Article 4.8 of the Agreement between the Government of Russian Federation and the European Community on financing and implementing the Cross Border Cooperation programme "Estonia - Latvia - Russia".

Nationality and Origin Rules eligible countries

.Annex IV: award of procurement contracts is open to all natural and legal persons of EU Member States and :

- ENPI countries: Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, Palestinian Authority of the West Bank and Gaza Strip, Russian Federation, Syria, Tunisia, Ukraine

- IPA countries (pre-accession): Croatia, The former Yugoslav Republic of Macedonia, Turkey, Albania, Bosnia, Montenegro, Serbia, including Kosovo

- EEA Member States: Iceland, Liechtenstein, Norway

- International Organisations

Rules of Nationality

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- Tenderers must state, in the tender, the country of which they are nationals by presenting the usual proof of nationality under their national legislation.

- This rule does not apply to experts proposed by service providers taking part in tender procedures or service contracts financed by the grant.

- All countries mentioned in previous slide are acceptable, REGARDLESS OF THE PROGRAMME ELIGIBLE AREA!

Rules of Nationality

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ENPI Regulation 1638/2006 art. 21.6: ALL supplies and materials purchased under contracts financed shall originate in a EU Member State or ENPI, IPA, EEA country (previous slide)

- Includes the materials to be used for the construction

- Does not apply to Contractor’s equipment to be used during the construction

- Contractors must present proof of origin no later than when the first invoice is presented, for equipment and vehicles of a unit cost on purchase of more than € 5 000.

- The certificate of origin must be made out by the competent authorities of the country of origin of the supplies (Chamber of commerce…) and must comply with the rules laid down by the relevant EC legislation (see next slide).

Rules of Origin

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The term ‘origin’ is the ‘economic’ nationality of goods in international trade and is defined in the relevant EC legislation on rules of origin for customs purposes (Customs Code, Council Regulation 2913/1992):

- Goods originating in a country shall be those wholly obtained or produced in that country (Article 23)

- Goods whose production involved more than one country shall be deemed to originate in the country where they underwent their last, substantial, economically justified processing or working in an undertaking equipped for that purpose and resulting in the manufacture of a new product or representing an important stage of manufacture (Article 24)

Rules of origin, customs

Exceptions may be justified by:

- Unavailability of products and services in the markets of the countries concerned

- For reasons of extreme urgency

- If the eligibility rule were to make the realisation of a project, a programme or an action impossible or exceedingly difficult

- NOT applicable just because a product of ineligible origin is cheaper than the EU or local product!

- By derogation only (request to JTS/JMA)

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Nationality and origin, exceptions

- Follow national procurement procedures rules (consult with the national office of Procurement)

- If national rules not for you, follow PRAG, as a model of “best international practise” (Article 3 of Annex IV)

- Follow the rules of nationality and origin

- The contract must be awarded to the most economically advantageous tender in accordance with the principles of transparency, fair competition for potential contactors, and taking

care of avoiding any conflict of interest.

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Important

Programmas nākotne..

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Thanks for attention!