Public Procurement issues in EAFRD implementation By Wolfgang KAHLENBORN European Commission DG Agriculture and Rural Development J.4 – Audit of rural development expenditure and IPARD December 2012

The Common Agricultural Policy Background The Common Agricultural Policy Pillar 1 – EAGF (budget: 44 billion EUR in 2012) Pillar 2 – EAFRD (13 billion EUR) 2

EAFRD – Rural Development (1) The European Agricultural Fund for Rural Development (EAFRD) Axis 1 – Improving the competitiveness of the agricultural and forestry sector Axis 2 - Improving the environment and the countryside Axis 3 – The quality of life in rural areas and diversification of the rural economy Axis 4 – Leader Axis 5 – Technical assistance

EAFRD – Rural Development (2) Most projects are relatively small (not falling under the EU directives on public procurement) High number of beneficiaries Most beneficiaries are from the private sector Exceptional: private beneficiaries have to follow public procurement rules (according to national law) 4

EAFRD – Rural Development (3) Main measures with public beneficiaries: Measure 125 – Infrastructure related to the development and adaptation of agriculture and forestry Measure 321 – Basic services for the economy and the rural population Measure 322 – Village renewal and development Measure 323 – Conservation and upgrading of the rural heritage Axis 5 – Technical assistance 5

Legislation EAFRD legal provisions and public procurement: A project financed by the EAFRD has to comply with EU law; The Rural development program; National law (incl. provisions on public procurement). The Paying Agency shall carry out an exhaustive check of the public procurement procedure (Article 24(2)(c) of Regulation 65/2011) 6

Commission Audit Findings Commission auditors noted during their missions in the EU27 the following weaknesses: The Paying Agency does not feel responsible for the detailed verification of the public procurement procedure (“no complaints means all is fine”) The Paying Agency checks the procedure but examines only the winning bid. Weaknesses in the design of the award criteria. 7

Case study (1) The investment project visited by the Commission auditors: A bridge over a small river (measure 321; village renewal) The beneficiary: a village in a new Member State High aid intensity (100%) The beneficiary (village) is the contracting authority Tendered on the basis “the economically best offer” 8

Case study (2) Outcome of the tender: Price Quality Duration Total EUR Warranty Duration Total EUR 30% 10% 100% Offer 1 320.000 27 6 8 30 70 Offer 2 500.000 17 21 2 13 53 Offer 3 324.000 18 14 16 54 Offer 4 290.000 15 3 66 Offer 5 550.000 29 10 20 74 9

Case study (3) Commission findings: The weight of the price was low and issues of interest of the village had a quite high importance The winning bid offered an (excessive) warranty period of 100 years. A long warranty period means to have less costs of reparation in the future. Maintenance costs as well as replacement investments are not eligible for an EAFRD funding. 10

Case study (4) Conclusions: The award criteria shall adequately take into consideration the interests of the contracting authority as well as those of the EU. The contracting authority as well as the Member State shall ensure that the award criteria and their weight lead to the “best offer”. The award criteria shall not lead to ineligible expenditure (as an excessive warranty period). The Managing authority should give help and/or fix in advance specific conditions for the procurement. This also facilitates the checks later on. 11

Thank you for your attention!