1. The Negotiation Process:
(Not legally binding)
The Negotiation Process:
Validation of participants Financial capacity of participants Third parties/subcontracting
FP7 Grant Agreement Negotiations
A Directorate F initiative for coordinators from
FP7-HEALTH-2010-single-stage call and NCPs
Brussels, 16th April 2010
Konstantinos Prilidis Administration and Finance Unit Health Directorate, DG Research
05/04/2017

2. Grant Agreement Negotiation covers Principles of the research GA:
(Not legally binding)
Grant Agreement
Negotiation covers
Validation of the participants (registration of organisation and Participant Identification Code PIC)
Composition of the consortium
Verification of the financial capacity of participants
Check of the budget
Generation of Grant Agreement GA
Principles of the research GA:
Transparency and equal treatment
Non Profit
Co financing
Ex post controls
05/04/2017

3. (Not legally binding)
Validation
At an early stage identify the validated / non validated participants
Appoint LEAR and send necessary documents to the Unique Registration Facility Central Validation Team URF-CVT
Refer to Cordis:
Documents to be sent: VAT extract, extract of registration, law, statutes of a company (to identify its character profit – non profit, research – non research, specific documents for SMEs)
Check the participant’s status and its role in the consortium => additional financial documents to submit for participant(s) subject to the verification of its (their) financial capacity
05/04/2017 3

4. Validation Determines:
(Not legally binding)
Validation
Status of the participant: natural person, legal person, Non profit, Research Organisation, Public Body, International organisation (of european Interest), Secondary and higher education establishment, Enterprise, SME
Determines:
Indirect Cost Model (ICM)
Maximum EC reimbursement rate
05/04/2017

5. Validation Problematic cases:
(Not legally binding)
Validation
Problematic cases:
SME: because of the additional documents (SME checklist and SME check)
Natural person: because of the different type of documents (copy of the passport / ID card)
Attention: Certificate on the average personnel costs !
05/04/2017

6. Composition of the consortium
(Not legally binding)
Composition of the consortium
Principle of FP7: beneficiary shall have the necessary resources to implement the action BUT…in exceptional cases
Subcontracting
Third parties
Identify them at an early stage because additional documents & info to be submitted
Must be described in the DoW/TA
Each third party situation is submitted to conditions. If the situation does not respond to the conditions => third party needs to access the GA as beneficiary
05/04/2017

7. Third Parties Third party= Legal entity that does not sign the GA
(Not legally binding)
Third Parties
Third party= Legal entity that does not sign the GA
Three situations of third parties
Third parties making resources available to the beneficiary (for free or against reimbursement)
Third parties carrying out part of the work
Subcontractors
05/04/2017

8. (Not legally binding)
Subcontracting
Subcontractor = Third party that performs some work for a beneficiary; the payment made by the beneficiary to the subcontractor is recorded in the accounts of the beneficiary and claimed to the Commission.
Conditions:
Subcontractor is not interested in the research
Does not have any rights on the results
Payment includes a profit margin
Subcontractor works without supervision of the beneficiary
Subcontractor is not hierarchically subordinated to the beneficiary
Only part of the project may be subcontracted, subcontract does not concern research work itself but tasks needed in order to carry out the research
Transparent bidding procedures
In DoW/TA unless minor tasks: photocopying, catering,…
No subcontracting between beneficiaries of a grant
05/04/2017

9. (Not legally binding)
Subcontracting
“Any subcontract, the costs of which are to be claimed as an eligible cost, must be awarded to the bid offering best value for money (best price-quality ratio), under conditions of transparency and equal treatment.“ Article II.7.2 of GA
The procedure to be applied for the award of subcontracts must ensure conditions of transparency and equal treatment and depends on the status of the beneficiary:
• Public entities must follow the procurement principles established by their national
authorities. For subcontracts exceeding certain amounts, the directive on public
procurement of services applies and the publication of a call for tenders is mandatory.
However, they should in any case comply with the terms of the GA.
• Private legal entities should follow the rules that they usually apply for the selection of
procurement contracts, respecting in any case the terms of the GA. The publication of a
call for tenders is normally not necessary for private legal entities, but they must at least
require submission of several quotes (usually a minimum of three), unless it has an
established framework contract for the provision of those services. There should be a
proportional relationship between the size in work and cost of the tasks to be subcontracted on the one hand and the degree of publicity and formality of the selection process on the other.
At the request of the Commission and especially in the event of an audit, beneficiaries must be able to demonstrate that they have respected the conditions of transparency and equal treatment
05/04/2017

10. Third Parties Questions helping in the identification of the situation
(Not legally binding)
Third Parties
Questions helping in the identification of the situation
Who carries out the work?
Criteria: hierarchy, supervision, leadership, authority, ownership, research work
Who claims the costs?
The beneficiary or the third party?
Where are the costs recorded?
In the beneficiary’s accounts or in the third party’s accounts?
05/04/2017

11. (Not legally binding)
Third Parties
Third party carrying part of the work => special clause 10
Third party claims own costs directly with the Commission and costs are recorded in third party’s accounts
The third party must be linked to the beneficiary: established formal relationship between the third party and the beneficiary defined as follows:
This relationship is broad and not limited to the GA
It goes beyond the GA and predates the GA
This formal relationship has an external recognition: either legal structure or formal: association, common lab, common infrastructure, common ownership.
Ad hoc collaborations to carry out project: no clause 10
05/04/2017

12. Third Parties Cases specifically covered by the special clause 10:
(Not legally binding)
Third Parties
Cases specifically covered by the special clause 10:
Joint Research Units
Scientific and economic unity
Last a certain length of time
Recognised by a public authority
EEIG
Council Regulation (EEC) N° 2137/85 of 25 July 1985
At least 2 legal entities from different members states
Affiliates
Under the direct or indirect control of the beneficiary
Parent companies, holdings, affiliates between themselves
Groupings
Associations, federations
If no legal personality will be treated as a JRU if they meet conditions of JRU
Structures, agreements, units without legal personality created specifically for a participation to GA are not groupings
05/04/2017

13. (Not legally binding)
Third Parties
Third parties carrying out part of the work ( identified in special clause 10)
Names, tasks and resources must be described in DoW/TA
Third parties in Clause 10 must be validated and have a PIC
05/04/2017

14. Third Parties Third parties making resources available: Might be
(Not legally binding)
Third Parties
Third parties making resources available:
Do not carry out part of the work
Are just making resources available
Work is lead by the beneficiary;
Work is usually performed in the beneficiary’s premises;
The resources are under the full and direct control, instructions and management of the beneficiary.
Might be
For free
Against reimbursement
But in both situations it must be the actual costs incurred by the beneficiary (no use of flat rates or average)
Resources = buildings, equipment, personnel
05/04/2017

15. (Not legally binding)
Third Parties
For free
Resources are made available for free by the third party
Costs of these resources are charged by the beneficiary in its Form C
The costs of these resources are not registered in the accounts of the beneficiary Costs of the resources are registered in the accounts of the third party
If these resources are made available specifically for the project they must be considered as receipts
05/04/2017

16. Third Parties Against reimbursement Costs incurred by the beneficiary
(Not legally binding)
Third Parties
Against reimbursement
Costs incurred by the beneficiary
Costs are recorded in the accounts of the beneficiary
Costs are claimed by the beneficiary
Conditions
Must be a prior agreement that defines the frame in which the resources are made available and that sets the rates of reimbursement
No profit margin reimbursement of costs
05/04/2017

17. Third Parties Special cases
(Not legally binding)
Third Parties
Special cases
Foundations, spin off companies created in order to manage the administrative tasks of the beneficiary
Prior agreement
Usually agreements lasting over long period
Usually personnel works on the premises of the beneficiary
Special clause 38 : specific case for coordinator (admin + bank account)
Only for secondary and higher education / public bodies
Third party is controlled or affiliated to the coordinator
Third party has got a mandate
Resources (professor/equipment) working for or used by a university but whose salaries costs are paid by the Government
05/04/2017

18. Assessing the capacity of a participant
(Not legally binding)
Assessing the capacity
of a participant
Principle of the Research GA: co financing
Goal:
Making sure that the participant has the operational and financial capacity to complete the action
Protecting the EU financial interests
05/04/2017

19. (Not legally binding)
Financial Capacity
Participant subject to a verification of its financial capacity
“Private” legal entity
Coordinating an action
Requesting an EC contribution > EUR
Whose financial capacity is doubtful
Content of the check
Financial viability check (financial ratios: solvency, liquidity, profitability)
Co financing / financial exposure flag
Qualifications in audit reports
Substantial findings, …
05/04/2017

20. Financial Capacity Documents to be provided by the beneficiary:
(Not legally binding)
Financial Capacity
Documents to be provided by the beneficiary:
Balance sheet
Profit and losses accounts
Statutory audit reports of the last accounts if available
An audit report certifying the accounts MUST be submitted if EC contribution > EUR
Excell sheet currently available on cordis (gives an indication on the financial viability of an organisation)
Will be changed shortly (+/- July): data collection will be centralised at URF-CVT level
05/04/2017

21. (Not legally binding)
Financial Capacity
Audit report certifying the accounts of the last available financial year
can only be delivered by an approved external auditor
May not be delivered by an internal accountant or by the accountant in charge of making the financial statement Form C
The audit must confirm that the financial statements give a true and fair view of the company at that date
05/04/2017

22. Financial Capacity Natural person to provide:
(Not legally binding)
Financial Capacity
Natural person to provide:
Last income tax declaration
Certified declaration of the current patrimony
Exhaustive list of the debts broken down in short and medium/long term debts as certified by its creditors
An audit report if > EUR
05/04/2017

23. (Not legally binding)
Financial Capacity
According to the rules (ftp://ftp.cordis.europa.eu/pub/fp7/docs/rules-verif_en.pdf) the participant :
May / May not participate
May participate but not be coordinator
May participate but subject to closer monitoring, …
Commission will inform the coordinator and the relevant participant(s)
05/04/2017

24. Guide to Financial Issues
(Not legally binding)
Info available on CORDIS (
Rules on verification of existence, legal status, operational and financial capacity
ftp://ftp.cordis.europa.eu/pub/fp7/docs/rules-verif_en.pdf
Guide to Financial Issues
ftp://ftp.cordis.europa.eu/pub/fp7/docs/financialguide_en.pdf
Participant Portal
05/04/2017

25. THANK YOU FOR YOUR KIND ATTENTION QUESTIONS?
(Not legally binding)
THANK YOU FOR
YOUR KIND ATTENTION
QUESTIONS?
05/04/2017