DG RTD - Directorate J 17 July 2003 NEGOTIATIONS in the 6 FP What’s New 1 Contract structure & evolution 2 Financial provisions 3 Recommendations

DG RTD - Directorate J 17 July 2003 Contract Structure  Core contract(standard with specifics of project)  Annex I (technical tasks - the “project”)  Annex II General Conditions (applicable to every instrument)  Annex IIIInstrument specific provisions (specific to instrument)

DG RTD - Directorate J 17 July 2003 Contractors l New General Rule: Participant = contractor Every legal entity contributing to a project must have a contractual link with the Community l Exceptional cases: subject to very restrictive rules –Third parties identified in Annex I –Subcontractors l The Coordinator is a contractor with additional obligations but no additional rights.

DG RTD - Directorate J 17 July 2003 Signature and entry into force 4Contractual link of all contractors with the Commission 4 New Contract enters into force upon signature of coordinator and Commission 4All the contractors are identified in the core contract [Art. 1.2] 4Coordinator must ensure other contractors sign within delays 4Distribution of advance - Several options available: minimum number of participants/all participants 4Evolution of consortium possible: é where one or more does not sign the Form A [article 2] é in case of enlargement (new contractors) [article 3]

DG RTD - Directorate J 17 July 2003 Consortium Agreement (a) Mandatory in most cases, recommended always To be signed before the signature of the contract 1. Management - Decision-making process distribution of funds paid to the consortium (via the coordinator) evolution of the work program and organisation of work evolution of the consortium’s composition (modification) 2. IPR issues IPR issues should be agreed before signature of the contract (mandatory for specific Pre-Existing Know How exclusion)

DG RTD - Directorate J 17 July 2003 Consortium Agreement (b) 3. Global Risk Management: collective responsibility  - technical implementation of the action = collective responsibility of the contractors  - consortium to deal with breach of contract / non- performance and imposition of financial collective responsibility and any financial security necessary for same

DG RTD - Directorate J 17 July 2003 Financial Provisions 1. Third parties 2. Receipts 3. Subcontractors 4. Cost categories 5. Joint Liability 6. Audit certificate 7. Sanctions

DG RTD - Directorate J 17 July 2003 Third parties identified in Annex I  In most of the cases they do not participate, they simply make their resources available to a contractor, this is not a case of participation but only a question of eligibility of the cost of these resources  General rule: only contractor’s costs will be reimboursed  In exceptional cases: “participation” of members of entities when their members do some of the work on the project third parties based on a previous agreement. the third parties, the agreement and the tasks must be identified in Annex I

DG RTD - Directorate J 17 July 2003 Financing: receipts (a) Principle: EU contract can not provide profits Three kinds of receipts must be taken into consideration in order to avoid any possibility of profit: Financial transfers or their equivalent to the contractor from third parties ; Contributions in kind from third parties; Income generated by the project. In the first two cases (financial transfers or contributions in kind), these endowments are considered as receipts of the project if the third party has provided them specifically to be used in the project. If, on the other hand, these endowments are at the discretion of the contractor they are not to be considered as receipts, but they can be considered costs of the project if the conditions for “third party” contributions are met.

DG RTD - Directorate J 17 July 2003 Financing: receipts (b) In the first two cases, where contributions from third parties are used for the project by the contractor, the latter is required to inform the third party of this use and in accordance with the national legislation or practice in force. In the case of income generated by the project itself: General rule: any income generated by the project itself, including the sale of assets bought for the project, are considered as income to the project (receipts) Derogation: income generated by the use of the knowledge resulting from the project is not considered as a receipt

DG RTD - Directorate J 17 July 2003 Subcontracting  Contractors shall ensure that the work to be performed can be carried out by them.  Exception: where it is necessary to subcontract certain elements of the work, this should be clearly identified in Annex I.  Subcontracts:  Should be selected on the basis of a call for tender  subcontractors can not be pre-determined (unless framework contract running)  contractor assumes responsibility for the tasks and obligations passed to the contractor  Minor services may be subcontracted during the life of the project, but always respecting the above rules.

DG RTD - Directorate J 17 July 2003 Financing: costs New principles:  1 - cost categories are replaced by conformity to contractors’ own accounting rules and legal environment  2 - focus resources on the reality and the necessity of the cost, rather than on formality (cost categories) Therefore, costs must be :  actual, economic and necessary for the project  incurred during the duration of the project (exception: costs of the final reports)  recorded in the accounts (or in the accounts of third parties, which must be informed) 3. New: list of Inelegible costs: they exclude indirect taxes, duties, interests, costs reimbursed in respect of another Community project, and not give rise to profit

DG RTD - Directorate J 17 July 2003 Financing: cost reporting models (a) FC: actual direct and indirect costs (not available for Coordination Actions and Specific Support Actions, where the indirect costs are 20% of the direct ones) New FCF (variant of FC): actual direct costs + flat rate for indirect costs (20% of total actual direct costs, except costs of subcontracts - all instruments) Only SMEs, non profit & International organisations AC: actual additional direct costs + flat rate for indirect costs (20% of total actual additional direct costs, except costs of subcontracts - all instruments)

DG RTD - Directorate J 17 July 2003 Financing: cost reporting models (b)  SMEs, non- commercial or non-profit organisations established either under public or private law, international organisations: FC/FCF  Physical persons: AC mandatory (it is not possible to charge for labour costs)  Private companies (other than above): FC  AC: IMPORTANT: only for those non- commercial or non-profit organisations established either under public or private law or international organisations that do not have an accounting system that allows the share of their direct and indirect costs relating to the project to be distinguished. This will have to be certified by the auditor.  The fact of having used AC in FP V does not automatically grant AC in FP6 General Rule: a legal entity applies the same cost model in ALL contracts established under FP6 except may move from AC to FCF/FC or from FCF to FC (“one way ticket”)

DG RTD - Directorate J 17 July 2003 Liability (1) New: Collective responsibility of the contractors l Mechanism by which a contractor may be held liable, technically and/or financially, fully or partially, for the action of another contractor l Why? Reinforce the protection of the financial interests of the Community Consequence of FP6 principle of “autonomy of the consortium”: if the money is granted to the consortium, which decides on its allocation, then the consortium as a whole is to be held liable

DG RTD - Directorate J 17 July 2003 Liability (2) Implementation: applied as a last resort Breach of contract Depending on the nature of the breach, the consortium will be invited to find the appropriate solution (technical responsibility) If no solution is found, the defaulting contractor is excluded and the consortium is requested to continue the project (technical responsibility with financial consequences) If the consortium refuses to perform:  1 - the contract is terminated  2 - the consortium is requested to reimburse money owed by the defaulting contractor (collective financial responsibility)

DG RTD - Directorate J 17 July 2003 Liability(3) Implementation: limitations Limited in proportion to the participant’s share of costs in the project, up to the total payment they are entitled to receive IOs, public bodies or entities guaranteed by MS/AS solely responsible for their own debts Control of financial viability: still to be done by the Commission but only systematically applied to coordinators. Other partners depending on the structure of the Consortium.

DG RTD - Directorate J 17 July 2003 Financing: audit certificates 3 each contractor shall provide an audit certificate prepared and certified by an external auditor (for public bodies - competent public officer) 3 to transform an advance into a final payment 3 Based on the reporting periodicity of the contract 3for IP/NoE : every 12 months 3other instruments: periods to be negotiated - at least one at the end 3where requesting a Community financial contribution exceeding € for a specific reporting period, even though an audit certificate is not required for this specific period

DG RTD - Directorate J 17 July RECOMENDATIONS l Collect signatures as soon as possible l Avoid reaching the deadlines; leave time to sort out last moment problems l Remember that there is a waiting list of projects after the offcial deadline. l Read documents and ask questions: almost anything can be solved during negotiations and before signing the contract; afterwards however….