1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

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

10. 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

11. 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

12. Thank you for your attention!