# C_2008081EN.01000101.xml

| 1.4.2008 | EN | Official Journal of the European Union | C 81/1 |
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1.4.2008

EN

Official Journal of the European Union

C 81/1

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SPECIAL REPORT No 1/2008

SPECIAL REPORT N

concerning the procedures for the preliminary examination and evaluation of major investment projects for the 1994-1999 and 2000-2006 programming periods together with the Commission's replies

(presented pursuant to Article 248(4), second subparagraph, EC)

(2008/C 81/01)

CONTENTS

GLOSSARY

| I-VII | SUMMARY |
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I-VII

| 1-8 | INTRODUCTION |
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1-8

| 1-7 | Definitions and approval framework |
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1-7

| 8 | The volume of funds involved |
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8

| 9-13 | THE SCOPE OF THE AUDIT AND OF THIS REPORT |
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9-13

| 14-34 | DOES THE COMMISSION PREPARE COMMUNITY FINANCING OF MAJOR PROJECTS ADEQUATELY? |
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14-34

| 14-16 | Preliminary examination framework and audit criteria |
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14-16

| 17-20 | Project examination: improvements in the methodological framework but procedures to be strengthened |
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17-20

| 21-25 | The cost-benefit analysis: varying quality of applications |
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21-25

| 26-34 | Setting Community financial assistance: criteria inconsistently interpreted and applied |
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26-34

| 35-55 | DO EX POST EVALUATIONS OF MAJOR PROJECTS GENERATE RESULTS THAT ARE HELPFUL FOR SUBSEQUENT DECISION-MAKING? |
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35-55

EX POST

| 35-39 | Evaluation framework and audit criteria |
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35-39

| 40-41 | Several wide-ranging evaluations but very few individual evaluations of major projects |
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40-41

| 42-49 | Factors that impeded the ex post evaluation of major projects |
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42-49

ex post

| 43-46 | Incomplete aid applications |
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43-46

| 47-49 | Inadequate monitoring |
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47-49

| 50-55 | The 2000-2006 period: evaluations at risk of being compromised |
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50-55

| 56-58 | THE NEW REGULATIONS FOR THE 2007-2013 PERIOD |
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56-58

| 59-65 | CONCLUSIONS AND RECOMMENDATIONS |
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59-65

| 59-62 | Conclusions |
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59-62

| 63-65 | Recommendations |
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63-65

Annex I Samples I and II by Member State concerned — List of projects examined

Annex I

Annex II 2000-2006 major projects evaluated — Discount rate and time horizons

Annex II

The Commission's replies

The Commission's replies

GLOSSARY






  Cohesion Fund

| Cohesion Fund | Instrument designed to promote economic and social cohesion by financing large projects in the fields of the environment and transport in Member States with a per capita GNP of less than 90 % of the Community average. The Cohesion Fund was originally implemented in Spain, Greece, Ireland and Portugal. Since 1 January 2004 Ireland has no longer been eligible. The new Member States have profited from Cohesion Fund support since their accession to the Community. |
| --- | --- |
| Cost-benefit analysis | A technique for comparing all the costs and all the benefits of an intervention to determine whether the benefits outweigh the costs, and if so, by what proportion. |
| Deadweight effect | An effect that becomes apparent and would have emerged even if a public intervention had not taken place. |
| Effectiveness | Measures the relationship between the results obtained and the objectives set. |
| Efficiency | Measures the relationship between the resources employed and the results obtained. |
| ERDF (European Regional Development Fund) | Financial instrument designed to promote economic and social cohesion between the countries of the EU by correcting the main regional imbalances and by reconversion of regions whose development is lagging behind. ERDF interventions are mainly implemented through operational programmes encompassing a large number of projects. |
| Impact | Socioeconomic consequences that may be attributed to an intervention. |
| IRR (internal rate of return) | Rate at which an investment becomes profitable.






  — | Financial IRR: a rate of return calculated exclusively from the amounts of financing relating directly to the project. |

Instrument designed to promote economic and social cohesion by financing large projects in the fields of the environment and transport in Member States with a per capita GNP of less than 90 % of the Community average. The Cohesion Fund was originally implemented in Spain, Greece, Ireland and Portugal. Since 1 January 2004 Ireland has no longer been eligible. The new Member States have profited from Cohesion Fund support since their accession to the Community.

Cost-benefit analysis

Cost-benefit analysis

A technique for comparing all the costs and all the benefits of an intervention to determine whether the benefits outweigh the costs, and if so, by what proportion.

Deadweight effect

Deadweight effect

An effect that becomes apparent and would have emerged even if a public intervention had not taken place.

Effectiveness

Effectiveness

Measures the relationship between the results obtained and the objectives set.

Efficiency

Efficiency

Measures the relationship between the resources employed and the results obtained.

ERDF (European Regional Development Fund)

ERDF (European Regional Development Fund)

Financial instrument designed to promote economic and social cohesion between the countries of the EU by correcting the main regional imbalances and by reconversion of regions whose development is lagging behind. ERDF interventions are mainly implemented through operational programmes encompassing a large number of projects.

Impact

Impact

Socioeconomic consequences that may be attributed to an intervention.

IRR (internal rate of return)

IRR (internal rate of return)

Rate at which an investment becomes profitable.

—

Financial IRR: a rate of return calculated exclusively from the amounts of financing relating directly to the project.

| — | Economic IRR: a rate of return calculated taking into account external economic factors. |
| --- | --- |

—

Economic IRR: a rate of return calculated taking into account external economic factors.

NPV (net present value)

NPV (net present value)

Value obtained by indexing at the present time the value of all cash balances which will be generated by a project during its life. This method enables various projects to be compared.

Operational programmes

Operational programmes

A document approved by the Commission, it takes the form of a coherent set of priorities comprising multiannual measures. The priorities may be implemented through recourse to one or more Structural Funds, or, alternatively, to other financial instruments and the EIB.

Programming period

Programming period

The multiannual framework within which Structural Fund expenditure is planned and implemented.

Risk analysis

Risk analysis

Study to determine the probability that the value of the underlying variables originally calculated for a project will actually be confirmed.

Sensitivity analysis

Sensitivity analysis

Study of the stability of the expected result of a project when exposed to changes in the underlying variables.

Structural Funds

Structural Funds

Community funds financing actions with the aim of reducing disparities in development between the regions of the EU. ERDF is the main financial instrument for these actions.

SUMMARY

| I. | The regulations define ‘major’ infrastructure and productive investment projects essentially in terms of the volume of finance involved. In view of the economic significance and potential impact of these projects, they are subject to special preliminary examination procedures prior to approval. For the same reasons, relevant information must be collected so that the effects actually achieved can be assessed in comparison to those which had been expected (see paragraphs 1-8). |
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I.

The regulations define ‘major’ infrastructure and productive investment projects essentially in terms of the volume of finance involved. In view of the economic significance and potential impact of these projects, they are subject to special preliminary examination procedures prior to approval. For the same reasons, relevant information must be collected so that the effects actually achieved can be assessed in comparison to those which had been expected (see paragraphs 1-8).

| II. | The Court's audit centred on ERDF major projects and, by analogy, those under the Cohesion Fund for the 1994-1999 and 2000-2006 programming periods. This report is constructed around two main themes: the process of preparation for approval, by the Commission, of major projects and the process of evaluation after their implementation (see paragraphs 9-13). |
| --- | --- |

II.

The Court's audit centred on ERDF major projects and, by analogy, those under the Cohesion Fund for the 1994-1999 and 2000-2006 programming periods. This report is constructed around two main themes: the process of preparation for approval, by the Commission, of major projects and the process of evaluation after their implementation (see paragraphs 9-13).

| III. | The Court found several weaknesses in the preliminary examination procedure in the two periods in question. Of particular concern were the procedures for project appraisal and for setting the rate of Community co-financing. The quality of the cost-benefit analyses presented by project promoters in support of applications for assistance was extremely variable, and the same was true of the use to which the Commission put those analyses. These findings lead to doubts about the real value added of the special procedure for approving major projects (see paragraphs 14-34). |
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III.

The Court found several weaknesses in the preliminary examination procedure in the two periods in question. Of particular concern were the procedures for project appraisal and for setting the rate of Community co-financing. The quality of the cost-benefit analyses presented by project promoters in support of applications for assistance was extremely variable, and the same was true of the use to which the Commission put those analyses. These findings lead to doubts about the real value added of the special procedure for approving major projects (see paragraphs 14-34).

| IV. | The Court recommends that the Commission should apply more efficient preliminary examination procedures based on the tools it has itself developed, should ensure that the cost-benefit analysis is rigorously applied, particularly in respect of the data provided, and should continue its efforts to take into account those factors which allow the rate of Community participation to be adjusted (see paragraph 63). |
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IV.

The Court recommends that the Commission should apply more efficient preliminary examination procedures based on the tools it has itself developed, should ensure that the cost-benefit analysis is rigorously applied, particularly in respect of the data provided, and should continue its efforts to take into account those factors which allow the rate of Community participation to be adjusted (see paragraph 63).

| V. | As regards the ex post evaluation of major projects from the 1994-1999 period (the only such evaluation that the Commission had been able to carry out at the time of the audit), it proved to be severely handicapped by the lack of pertinent and accurate information on anticipated effects and monitoring. Given these circumstances, the evaluations did not produce any information that was useful from the point of view of decision-making for the following period, with the exception of one case concerning projects cofinanced by the Cohesion Fund. The evaluation of ERDF major projects from the 2000-2006 period, which has yet to be carried out, will be able to rely on stricter rules, especially in the area of monitoring. However, not much has yet been done to apply those rules in practice (see paragraphs 35-55). |
| --- | --- |

V.

As regards the ex post evaluation of major projects from the 1994-1999 period (the only such evaluation that the Commission had been able to carry out at the time of the audit), it proved to be severely handicapped by the lack of pertinent and accurate information on anticipated effects and monitoring. Given these circumstances, the evaluations did not produce any information that was useful from the point of view of decision-making for the following period, with the exception of one case concerning projects cofinanced by the Cohesion Fund. The evaluation of ERDF major projects from the 2000-2006 period, which has yet to be carried out, will be able to rely on stricter rules, especially in the area of monitoring. However, not much has yet been done to apply those rules in practice (see paragraphs 35-55).

ex post

| VI. | The Structural Funds regulations for the 2007-2013 period do not require the Commission to carry out individual ex post evaluations of major projects. However, the Court recommends that, when completed, the major projects should be evaluated individually, in relation to their specific objectives, by the national management authorities and the beneficiaries, for whom the information obtained from this exercise would be useful. To this end, the Commission must ensure that the applications for assistance contain the information required in respect of indicators and the initial situation, and that this information is rigorously monitored. As regards the information provided by the evaluation, which must be forwarded to it, the Commission must analyse its own requirements so as to ensure that it has relevant, reliable data available on the effects produced by the major projects (see paragraph 64). |
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VI.

The Structural Funds regulations for the 2007-2013 period do not require the Commission to carry out individual ex post evaluations of major projects. However, the Court recommends that, when completed, the major projects should be evaluated individually, in relation to their specific objectives, by the national management authorities and the beneficiaries, for whom the information obtained from this exercise would be useful. To this end, the Commission must ensure that the applications for assistance contain the information required in respect of indicators and the initial situation, and that this information is rigorously monitored. As regards the information provided by the evaluation, which must be forwarded to it, the Commission must analyse its own requirements so as to ensure that it has relevant, reliable data available on the effects produced by the major projects (see paragraph 64).

ex post

| VII. | In the longer term, the Court invites the Commission, the European Parliament and the Council to give thought to the purpose of the special arrangements for major projects (see paragraph 65). |
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VII.

In the longer term, the Court invites the Commission, the European Parliament and the Council to give thought to the purpose of the special arrangements for major projects (see paragraph 65).

INTRODUCTION

Definitions and approval framework

| 1. | The concept of ‘major projects’ is defined, in essence, in the Community regulations on the ERDF (1), and depends on the volume of finance involved in the projects. |
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1.

The concept of ‘major projects’ is defined, in essence, in the Community regulations on the ERDF (1), and depends on the volume of finance involved in the projects.

1

| 2. | For the 1994-1999 programming period, ‘major projects’ were ‘those the total cost of which taken into account in determining the amount of Community assistance is, as a general rule, greater than ECU 25 million for infrastructure investments or greater than ECU 15 million for productive investments’ (2). |
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2.

For the 1994-1999 programming period, ‘major projects’ were ‘those the total cost of which taken into account in determining the amount of Community assistance is, as a general rule, greater than ECU 25 million for infrastructure investments or greater than ECU 15 million for productive investments’ (2).

2

| 3. | For the 2000-2006 programming period, the definition of ‘major projects’ covers projects ‘whose total cost taken into account in determining the contribution of the Funds exceeds 50 million euro’ (3). In addition, these projects must comprise an economically indivisible series of works fulfilling a precise technical function and which have clearly identified aims. As in the previous period, these may be investments in infrastructure or productive investments (4). |
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3.

For the 2000-2006 programming period, the definition of ‘major projects’ covers projects ‘whose total cost taken into account in determining the contribution of the Funds exceeds 50 million euro’ (3). In addition, these projects must comprise an economically indivisible series of works fulfilling a precise technical function and which have clearly identified aims. As in the previous period, these may be investments in infrastructure or productive investments (4).

3

4

| 4. | The Cohesion Fund regulations, on the other hand, contain no definition of ‘major projects’ for either one of the periods under consideration (5). However, since, in the cohesion countries, similar transport infrastructure or environment projects may be financed by either the Cohesion Fund or the ERDF, the audit also examined, by analogy, a number of Cohesion Fund projects that were selected on the basis of total cost, applying the same criteria as for the ERDF major projects. |
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4.

The Cohesion Fund regulations, on the other hand, contain no definition of ‘major projects’ for either one of the periods under consideration (5). However, since, in the cohesion countries, similar transport infrastructure or environment projects may be financed by either the Cohesion Fund or the ERDF, the audit also examined, by analogy, a number of Cohesion Fund projects that were selected on the basis of total cost, applying the same criteria as for the ERDF major projects.

5

| 5. | As regards the approval framework, ERDF major projects for the 1994-1999 period could be submitted individually or within the framework of an operational programme. In any case, the Commission was informed about major projects, with further details to be supplied (6), but no formal approval decision was required. |
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5.

As regards the approval framework, ERDF major projects for the 1994-1999 period could be submitted individually or within the framework of an operational programme. In any case, the Commission was informed about major projects, with further details to be supplied (6), but no formal approval decision was required.

6

| 6. | All ERDF major projects for 2000-2006 were financed within a wider programme of assistance (7). However, the regulations required the Commission to approve them individually, unlike other projects, which were approved only at Member State level (8). |
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6.

All ERDF major projects for 2000-2006 were financed within a wider programme of assistance (7). However, the regulations required the Commission to approve them individually, unlike other projects, which were approved only at Member State level (8).

7

8

| 7. | Under the Cohesion Fund, in both periods, only individual projects could be financed, each project forming the subject of a specific decision. |
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7.

Under the Cohesion Fund, in both periods, only individual projects could be financed, each project forming the subject of a specific decision.

Table 1

Definition of ‘major projects’

| FUND | 1994-1999 period | 2000-2006 period |
| --- | --- | --- |
| EDRF ‘major projects’

  (infrastructure and productive investment projects) | Total cost greater than:






  — | ECU 25 million for infrastructures |

FUND

1994-1999 period

2000-2006 period

EDRF ‘major projects’

EDRF ‘major projects’

(infrastructure and productive investment projects)

Total cost greater than:

—

ECU 25 million for infrastructures

| — | ECU 15 million for productive investments |
| --- | --- |

—

ECU 15 million for productive investments

Total cost greater than:

50 million euro for all types of project

In addition:

indivisibility of work from economical and technical points of view and clearly identified objectives

Individual project or project included in larger intervention

Project always part of larger intervention

Cohesion Fund ‘major projects’

Cohesion Fund ‘major projects’

(transport infrastructure and environment projects)

No definition in the regulations

For the purposes of the audit, total cost greater than ECU 25 million

No definition in the regulations

For the purposes of the audit, total cost greater than 50 million euro

Individual project

Individual project

The volume of funds involved

| 8. | Table 2 shows the total cost for the two programming periods of the major projects which received assistance from the EDRF and the Cohesion Fund: |
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8.

Table 2 shows the total cost for the two programming periods of the major projects which received assistance from the EDRF and the Cohesion Fund:

Table 2

Table 2

Total cost of the ‘major projects’ which benefited from Community intervention

| | 1994-1999 period | 2000-2006 period |
| --- | --- | --- |
| ECU 1 000 million | Number of projects | 1 000 million euro | Number of projects |
| ERDF MPs | 36 | 676 | 48 | 279 |
| Cohesion Fund MPs | 12 | 147 | 23 | 154 |
| Total | 48 | 823 | 71 | 437 |

1994-1999 period

2000-2006 period

ECU 1 000 million

Number of projects

1 000 million euro

Number of projects

ERDF MPs

36

676

48

279

Cohesion Fund MPs

12

147

23

154

Total

Total

48

48

823

823

71

71

437

437

THE SCOPE OF THE AUDIT AND OF THIS REPORT

| 9. | Given the impact that single projects of a financial volume exceeding a certain amount may have on regional development, major investment projects are bound by preliminary examination procedures that are more than usually complex. As of the 2000-2006 period, at least, they are also subject to a separate approval decision. For the same reasons, a retrospective appraisal of the actual effects generated by the allocated resources is required in the interest of obtaining guidance for project design and selection in future programming periods. |
| --- | --- |

9.

Given the impact that single projects of a financial volume exceeding a certain amount may have on regional development, major investment projects are bound by preliminary examination procedures that are more than usually complex. As of the 2000-2006 period, at least, they are also subject to a separate approval decision. For the same reasons, a retrospective appraisal of the actual effects generated by the allocated resources is required in the interest of obtaining guidance for project design and selection in future programming periods.

| 10. | The Court therefore sought replies to the following questions:






  — | Is Community financing of major projects adequately prepared by the Commission? |
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10.

The Court therefore sought replies to the following questions:

—

Is Community financing of major projects adequately prepared by the Commission?

| — | Does the ex post evaluation of major projects generate results that are useful for future decision-making? |
| --- | --- |

—

Does the ex post evaluation of major projects generate results that are useful for future decision-making?

ex post

| 11. | The administrative checks and checks carried out in the Member States covered a sample of 20 closed major projects from the 1994-1999 period, and 30 major projects from the 2000-2006 period. In addition, a supplementary sample of 36 major projects from 2000-2006 was taken for administrative checks at the Commission (see Annex I). |
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11.

The administrative checks and checks carried out in the Member States covered a sample of 20 closed major projects from the 1994-1999 period, and 30 major projects from the 2000-2006 period. In addition, a supplementary sample of 36 major projects from 2000-2006 was taken for administrative checks at the Commission (see Annex I).

Annex I

| 12. | With regard to the system that was set up for the preliminary examination of major projects, the audit focused on the Commission's procedures for the two periods, 1994-1999 and 2000-2006. The progressive improvements made are indicated. The recommendations in this part will probably have an impact on implementation in the 2007-2013 period, for which the concept of ‘major projects’ has been retained for all the Structural Funds (9). |
| --- | --- |

12.

With regard to the system that was set up for the preliminary examination of major projects, the audit focused on the Commission's procedures for the two periods, 1994-1999 and 2000-2006. The progressive improvements made are indicated. The recommendations in this part will probably have an impact on implementation in the 2007-2013 period, for which the concept of ‘major projects’ has been retained for all the Structural Funds (9).

9

| 13. | Turning to the subject of ex post evaluation, only those evaluations concerning the projects of the 1994-1999 period could be taken into account, since, at the time of the Court's audit, implementation of the projects of the 2000-2006 period had not yet been completed and the ex post evaluations were still to be done (10). Nevertheless, the report also examines whether improvements can be hoped for in respect of the 2000-2006 period. The observations that were drawn up on conclusion of the audit may have an impact on the evaluations for the 2000-2006 period, which are yet to be carried out, but chiefly on those for the 2007-2013 period which has just begun. |
| --- | --- |

13.

Turning to the subject of ex post evaluation, only those evaluations concerning the projects of the 1994-1999 period could be taken into account, since, at the time of the Court's audit, implementation of the projects of the 2000-2006 period had not yet been completed and the ex post evaluations were still to be done (10). Nevertheless, the report also examines whether improvements can be hoped for in respect of the 2000-2006 period. The observations that were drawn up on conclusion of the audit may have an impact on the evaluations for the 2000-2006 period, which are yet to be carried out, but chiefly on those for the 2007-2013 period which has just begun.

ex post

ex post

10

DOES THE COMMISSION PREPARE COMMUNITY FINANCING OF MAJOR PROJECTS ADEQUATELY?

Preliminary examination framework and audit criteria

| 14. | It is the responsibility of the Member States to present major projects for Community co-financing, and this is carried out on the basis of their own preliminary examination procedures and rules, taking into account the stated priorities of the relevant ERDF Operational Programmes and of the Cohesion Fund. |
| --- | --- |

14.

It is the responsibility of the Member States to present major projects for Community co-financing, and this is carried out on the basis of their own preliminary examination procedures and rules, taking into account the stated priorities of the relevant ERDF Operational Programmes and of the Cohesion Fund.

| 15. | The Commission is not expected to make a comparative assessment of the different Member States' projects, as the volumes of finance earmarked for each State are fixed in advance during the preparations for each programming period. Nevertheless, the Commission must examine the quality of the projects to be financed, i.e. whether the projects selected have the potential to achieve results with regard to regional development, and whether financial participation by the Community is required to carry them out and would deliver real added value. |
| --- | --- |

15.

The Commission is not expected to make a comparative assessment of the different Member States' projects, as the volumes of finance earmarked for each State are fixed in advance during the preparations for each programming period. Nevertheless, the Commission must examine the quality of the projects to be financed, i.e. whether the projects selected have the potential to achieve results with regard to regional development, and whether financial participation by the Community is required to carry them out and would deliver real added value.

| 16. | The Court scrutinised the Commission's preliminary examination phase, on the basis that the following factors were necessary for this phase to lead to the adoption of worthwhile projects:






  (a) | a common framework for the examination of applications for assistance to ensure that the project has been correctly prepared and contains the information which can form the basis for a decision on whether it merits assistance; |
| --- | --- | --- |

16.

The Court scrutinised the Commission's preliminary examination phase, on the basis that the following factors were necessary for this phase to lead to the adoption of worthwhile projects:

(a)

a common framework for the examination of applications for assistance to ensure that the project has been correctly prepared and contains the information which can form the basis for a decision on whether it merits assistance;

| (b) | a decision process based on well-tried methods, understood and applied in a similar way by the Member States and the Commission; |
| --- | --- |

(b)

a decision process based on well-tried methods, understood and applied in a similar way by the Member States and the Commission;

| (c) | determination of the rate of Community financial assistance on the basis of rules which ensure the public intervention is put to most efficient use. |
| --- | --- |

(c)

determination of the rate of Community financial assistance on the basis of rules which ensure the public intervention is put to most efficient use.

Project examination: improvements in the methodological framework but procedures to be strengthened

| 17. | The Court's audit demonstrated that, with time, the management tools put in place by the Commission have been refined. Although there are differences between the application forms for assistance for ERDF and Cohesion Fund major projects for the 2000-2006 period, they are more comprehensive and suitable than the forms used in the preceding period. Likewise, the Guide to the cost-benefit analysis (11) made available to the Member States by the Commission has been improved both in terms of its presentation of the theoretical framework and its practical application (12). |
| --- | --- |

17.

The Court's audit demonstrated that, with time, the management tools put in place by the Commission have been refined. Although there are differences between the application forms for assistance for ERDF and Cohesion Fund major projects for the 2000-2006 period, they are more comprehensive and suitable than the forms used in the preceding period. Likewise, the Guide to the cost-benefit analysis (11) made available to the Member States by the Commission has been improved both in terms of its presentation of the theoretical framework and its practical application (12).

11

12

| 18. | However, the examination of the applications varied in quality:






  — | as several managing departments are responsible for the preliminary examination (the Commission's geographical units assess the projects as a whole, while the Evaluation Unit examines the cost-benefit analysis), for a long time there was no common approach, for example in the form of a checklist. Apart from the vade mecums and procedural handbooks for Cohesion Fund and ERDF projects in general, it was not until 2003 that appraisal summary tables and checklists for major projects in particular were laid down, |
| --- | --- | --- |

18.

However, the examination of the applications varied in quality:

—

as several managing departments are responsible for the preliminary examination (the Commission's geographical units assess the projects as a whole, while the Evaluation Unit examines the cost-benefit analysis), for a long time there was no common approach, for example in the form of a checklist. Apart from the vade mecums and procedural handbooks for Cohesion Fund and ERDF projects in general, it was not until 2003 that appraisal summary tables and checklists for major projects in particular were laid down,

vade mecums

| — | interdepartmental consultation sometimes leads to conflicting views concerning, above all, the appropriateness and level of assistance. The geographical units responsible do not always heed these unless an explanation is put on file. Sometimes, too, requests for additional information from other services are not followed up (see Box 1), |
| --- | --- |

—

interdepartmental consultation sometimes leads to conflicting views concerning, above all, the appropriateness and level of assistance. The geographical units responsible do not always heed these unless an explanation is put on file. Sometimes, too, requests for additional information from other services are not followed up (see Box 1),

Box 1

| — | there is no clear rule, in the cohesion countries, for assigning major transport and environment projects to the ERDF or the Cohesion Fund, apart from the fact that the Cohesion Fund must prioritise financing for the Trans-European Transport Networks (TEN-T). As the Cohesion Fund applies higher ceilings to project finance, this has led to cases where similar projects are allocated different financial contribution rates. What is more, the assignment of a project to the ERDF or the Cohesion Fund also has different implications for monitoring and ex post evaluation (see Box 2). |
| --- | --- |

—

there is no clear rule, in the cohesion countries, for assigning major transport and environment projects to the ERDF or the Cohesion Fund, apart from the fact that the Cohesion Fund must prioritise financing for the Trans-European Transport Networks (TEN-T). As the Cohesion Fund applies higher ceilings to project finance, this has led to cases where similar projects are allocated different financial contribution rates. What is more, the assignment of a project to the ERDF or the Cohesion Fund also has different implications for monitoring and ex post evaluation (see Box 2).

ex post

Box 2

Box 1With regard to productive projects, one Commission department had pointed out that the investments were likely to prove extremely profitable and therefore did not require assistance. For one transport infrastructure project, another department had proposed that the requested 60 % contribution rate be reduced because the project was located in the wealthiest region of the Member State and the authorities were applying lower rates in regions that were less well-off. A rate cut was also sought in the case of another project where the investment return was extremely good. In the end, the reduction in the requested contribution rates was not made for any of these projects. In the case of the construction of an underground railway, it was converted into an environmental project under the Cohesion Fund when DG TREN refused to view it as transport infrastructure, despite reservations expressed by DG ENV on the grounds that only 1-3 % of the benefits to be derived from the project would be environmental in nature.

Box 1With regard to productive projects, one Commission department had pointed out that the investments were likely to prove extremely profitable and therefore did not require assistance. For one transport infrastructure project, another department had proposed that the requested 60 % contribution rate be reduced because the project was located in the wealthiest region of the Member State and the authorities were applying lower rates in regions that were less well-off. A rate cut was also sought in the case of another project where the investment return was extremely good. In the end, the reduction in the requested contribution rates was not made for any of these projects. In the case of the construction of an underground railway, it was converted into an environmental project under the Cohesion Fund when DG TREN refused to view it as transport infrastructure, despite reservations expressed by DG ENV on the grounds that only 1-3 % of the benefits to be derived from the project would be environmental in nature.

Box 2In Greece, assignment to one or the other fund, following consultation with the Commission, depends on the projects' level of preparation and planning and the availability of resources. This has led to the somewhat illogical situation where one extension project for a major transport project was financed by the Cohesion Fund at the rate of 66,3 % and another by the ERDF under an operational programme at 50 %.

Box 2In Greece, assignment to one or the other fund, following consultation with the Commission, depends on the projects' level of preparation and planning and the availability of resources. This has led to the somewhat illogical situation where one extension project for a major transport project was financed by the Cohesion Fund at the rate of 66,3 % and another by the ERDF under an operational programme at 50 %.

| 19. | There were substantial delays in the examination process. The two-month time limit set for Commission approval (13) following the receipt of application forms is usually exceeded. The average time needed for the ERDF and Cohesion Fund projects that were audited on the spot was 187 days, with the approval period ranging from 46 to 1 001 days. These delays are attributable to the fact that the Commission is obliged to seek further details on the vast majority of major projects, largely owing to the poor quality — or absence — of environmental impact studies, which are compulsory in many cases, and to specific aspects of the financial and economic project analyses (14). Furthermore, the Member States are often very slow in replying. The shortcomings which affected project management for a considerable time may, in part, explain these delays (see paragraph 17). |
| --- | --- |

19.

There were substantial delays in the examination process. The two-month time limit set for Commission approval (13) following the receipt of application forms is usually exceeded. The average time needed for the ERDF and Cohesion Fund projects that were audited on the spot was 187 days, with the approval period ranging from 46 to 1 001 days. These delays are attributable to the fact that the Commission is obliged to seek further details on the vast majority of major projects, largely owing to the poor quality — or absence — of environmental impact studies, which are compulsory in many cases, and to specific aspects of the financial and economic project analyses (14). Furthermore, the Member States are often very slow in replying. The shortcomings which affected project management for a considerable time may, in part, explain these delays (see paragraph 17).

13

14

| 20. | The Commission's examination for the approval of projects proved to be too lenient:






  — | projects were approved before they were entirely ready, as indicated by the fact that budgets were overrun and implementation deadlines were missed. Even where it was informed of this problem, the Commission approved them nonetheless, |
| --- | --- | --- |

20.

The Commission's examination for the approval of projects proved to be too lenient:

—

projects were approved before they were entirely ready, as indicated by the fact that budgets were overrun and implementation deadlines were missed. Even where it was informed of this problem, the Commission approved them nonetheless,

| — | some projects, on the other hand, were almost completed by the date they were submitted. For some productive projects, the projects were close to physical completion by the date on which the application file was sent to the Commission (although this was ahead of the closure of the accounts). In such circumstances the project could no longer be modified and the Commission could only either approve or refuse the application, |
| --- | --- |

—

some projects, on the other hand, were almost completed by the date they were submitted. For some productive projects, the projects were close to physical completion by the date on which the application file was sent to the Commission (although this was ahead of the closure of the accounts). In such circumstances the project could no longer be modified and the Commission could only either approve or refuse the application,

| — | in the case of productive investments, application of the principles relating to justification of public intervention was only rarely verified. Consideration of the criteria relating to compensating for market weaknesses and avoiding the co-financing of deadweight effects did not play a major role in the financing decisions, |
| --- | --- |

—

in the case of productive investments, application of the principles relating to justification of public intervention was only rarely verified. Consideration of the criteria relating to compensating for market weaknesses and avoiding the co-financing of deadweight effects did not play a major role in the financing decisions,

| — | some major projects did not satisfy the criterion whereby major projects are supposed to comprise an economically indivisible series of works fulfilling a precise technical function and with clearly identified aims (see paragraph 3). A number of ERDF projects that were adopted as major projects were in fact made up by combining a number of separate individual projects. This is important in view of the fact that submission of an application for a major project grants the de facto right to benefit from extended application of the ‘n + 2 rule’ while the project is being examined, which may take a considerable amount of time (15). |
| --- | --- |

—

some major projects did not satisfy the criterion whereby major projects are supposed to comprise an economically indivisible series of works fulfilling a precise technical function and with clearly identified aims (see paragraph 3). A number of ERDF projects that were adopted as major projects were in fact made up by combining a number of separate individual projects. This is important in view of the fact that submission of an application for a major project grants the de facto right to benefit from extended application of the ‘n + 2 rule’ while the project is being examined, which may take a considerable amount of time (15).

15

The cost-benefit analysis: varying quality of applications

| 21. | The cost-benefit analysis required by the legislation, in order to substantiate applications for assistance, is the main tool at the Commission's disposal for its decision to grant Community financing or not. Its satisfactory application is essential to evaluate the quality of the projects submitted. Its objective is to compare the resources deployed with the socioeconomic benefits which may be obtained in the medium term from the proposed action (16). The Commission may ask for the analysis submitted in support of the application to be revised or expanded, or may itself carry out an appraisal of the project, seeking the views of independent experts, where necessary, and the assistance of the EIB. |
| --- | --- |

21.

The cost-benefit analysis required by the legislation, in order to substantiate applications for assistance, is the main tool at the Commission's disposal for its decision to grant Community financing or not. Its satisfactory application is essential to evaluate the quality of the projects submitted. Its objective is to compare the resources deployed with the socioeconomic benefits which may be obtained in the medium term from the proposed action (16). The Commission may ask for the analysis submitted in support of the application to be revised or expanded, or may itself carry out an appraisal of the project, seeking the views of independent experts, where necessary, and the assistance of the EIB.

16

| 22. | Despite publication by the Commission of a Guide to the cost-benefit analysis of major projects (see paragraph 17), great disparity was noted in the quality of the financial and economic analyses presented by the promoters. |
| --- | --- |

22.

Despite publication by the Commission of a Guide to the cost-benefit analysis of major projects (see paragraph 17), great disparity was noted in the quality of the financial and economic analyses presented by the promoters.

| 23. | The Commission takes an equivocal attitude to this. In some cases it tolerates numerous weaknesses and approves projects without requiring further details, while in other cases it suspends approval until it has received essential items of financial information. |
| --- | --- |

23.

The Commission takes an equivocal attitude to this. In some cases it tolerates numerous weaknesses and approves projects without requiring further details, while in other cases it suspends approval until it has received essential items of financial information.

| 24. | The Court's audit has brought to light the following shortcomings and inconsistencies which impair the appraisal of the projects:






  — | inadequate information to assess the soundness of the analysis carried out; for a number of projects the financial and economic analyses are nothing more than a statement of the investment amount, costs and revenue, with no breakdown of these figures; for other projects only the results of the analyses are presented, |
| --- | --- | --- |

24.

The Court's audit has brought to light the following shortcomings and inconsistencies which impair the appraisal of the projects:

—

inadequate information to assess the soundness of the analysis carried out; for a number of projects the financial and economic analyses are nothing more than a statement of the investment amount, costs and revenue, with no breakdown of these figures; for other projects only the results of the analyses are presented,

inadequate information to assess the soundness of the analysis carried out

| — | missing components: in some cases the economic analysis and the cost-benefit report are missing; the contents of the risk and sensitivity analyses are often incomplete; rates and time horizons are not specified (see Annex II); direct environmental impacts are simply described or referred to without being assigned a financial value, or only a partial value. In the case of a number of major transport infrastructure projects that form part of wider projects, no overview of the entire project is provided although this is necessary for evaluation of the part presented for cofinancing (see Box 3). In the case of major industrial projects the results and impact indicators are rarely quantified, with the exception of employment (direct and indirect job creation, maintenance of employment), |
| --- | --- |

—

missing components: in some cases the economic analysis and the cost-benefit report are missing; the contents of the risk and sensitivity analyses are often incomplete; rates and time horizons are not specified (see Annex II); direct environmental impacts are simply described or referred to without being assigned a financial value, or only a partial value. In the case of a number of major transport infrastructure projects that form part of wider projects, no overview of the entire project is provided although this is necessary for evaluation of the part presented for cofinancing (see Box 3). In the case of major industrial projects the results and impact indicators are rarely quantified, with the exception of employment (direct and indirect job creation, maintenance of employment),

missing components

Annex II

Box 3

| — | conflicting or erroneous practices: different financial and economic discount rates have been applied in the analyses, even in one and the same Member State, either to the public infrastructure projects or the productive investments (see Annex II). It is not always clear whether rate-of-return calculations are inclusive or exclusive of assistance; depreciation is taken into account when calculating the financial IRR and NPV, which is contrary to the generally acknowledged principles of financial analysis. Lastly, a relatively high proportion of the productive investments examined gave identical financial and economic IRR and NPV data. |
| --- | --- |

—

conflicting or erroneous practices: different financial and economic discount rates have been applied in the analyses, even in one and the same Member State, either to the public infrastructure projects or the productive investments (see Annex II). It is not always clear whether rate-of-return calculations are inclusive or exclusive of assistance; depreciation is taken into account when calculating the financial IRR and NPV, which is contrary to the generally acknowledged principles of financial analysis. Lastly, a relatively high proportion of the productive investments examined gave identical financial and economic IRR and NPV data.

conflicting or erroneous practices

Annex II

Box 3In the case of the construction of a cross-border tunnel, the application, as a major project, was submitted by one of the two Member States involved. An overview of the entire tunnel project would have been useful for an evaluation of the applicant Member State's section. The same applies to the cross-border motorways. For the national motorways and railways a separate economic analysis was made in many cases for each phase, with each phase constituting a major project, but there was no overall economic analysis.

Box 3In the case of the construction of a cross-border tunnel, the application, as a major project, was submitted by one of the two Member States involved. An overview of the entire tunnel project would have been useful for an evaluation of the applicant Member State's section. The same applies to the cross-border motorways. For the national motorways and railways a separate economic analysis was made in many cases for each phase, with each phase constituting a major project, but there was no overall economic analysis.

Generally speaking, the quality of the analyses is weaker in the case of major productive investment projects.

| 25. | The poor quality of the analyses accompanying the aid applications shows that, in the examination phase, the Commission did not always carry out an effective examination of the cost-benefit analyses of the projects. Whether infrastructure investments or productive investments, under these circumstances conclusive rejection of a project was a very rare occurrence, as rare as requests for projects to be revised after examination by the Commission. |
| --- | --- |

25.

The poor quality of the analyses accompanying the aid applications shows that, in the examination phase, the Commission did not always carry out an effective examination of the cost-benefit analyses of the projects. Whether infrastructure investments or productive investments, under these circumstances conclusive rejection of a project was a very rare occurrence, as rare as requests for projects to be revised after examination by the Commission.

Setting Community financial assistance: criteria inconsistently interpreted and applied

| 26. | The purpose of the administrative examination undertaken by the Commission is to ‘confirm or amend the rate of Community assistance’ (17). Introduced to ensure that awards are effective, this instrument ensures that the financed project receives the resources needed for its achievement without the beneficiary acquiring any unjustified advantage. This is particularly important where the beneficiaries are private businesses, as Community funding may distort market conditions. |
| --- | --- |

26.

The purpose of the administrative examination undertaken by the Commission is to ‘confirm or amend the rate of Community assistance’ (17). Introduced to ensure that awards are effective, this instrument ensures that the financed project receives the resources needed for its achievement without the beneficiary acquiring any unjustified advantage. This is particularly important where the beneficiaries are private businesses, as Community funding may distort market conditions.

17

| 27. | Community assistance is subject to certain regulatory ceilings. Lower regulatory ceilings are provided for investments in infrastructure that generate substantial net revenue and for investments in firms (18). In addition, Community rules and State aid ceilings must be complied with. |
| --- | --- |

27.

Community assistance is subject to certain regulatory ceilings. Lower regulatory ceilings are provided for investments in infrastructure that generate substantial net revenue and for investments in firms (18). In addition, Community rules and State aid ceilings must be complied with.

18

| 28. | Within the limits of these ceilings the only precise factor used by the Commission to determine the rate of Community assistance has been the financing gap ratio, which is only applied to revenue-generating infrastructure projects. It consists of calculating that part of the discounted initial investment cost of the project which is not covered by the net present value of operating revenues (including the residual value) (19). This calculation allows the maximum level of public intervention to be fixed. In 2003 the Commission introduced an amended method of calculation for major sanitation and solid waste management projects (20), which takes account of revenue generation while seeking to avoid penalising beneficiaries who rigorously observe the ‘polluter pays’ principle (21). |
| --- | --- |

28.

Within the limits of these ceilings the only precise factor used by the Commission to determine the rate of Community assistance has been the financing gap ratio, which is only applied to revenue-generating infrastructure projects. It consists of calculating that part of the discounted initial investment cost of the project which is not covered by the net present value of operating revenues (including the residual value) (19). This calculation allows the maximum level of public intervention to be fixed. In 2003 the Commission introduced an amended method of calculation for major sanitation and solid waste management projects (20), which takes account of revenue generation while seeking to avoid penalising beneficiaries who rigorously observe the ‘polluter pays’ principle (21).

19

20

21

| 29. | In practice, in certain cases examined by the Court, the application of the financing gap ratio principle has either resulted in fixing too high a rate of Community contribution or there is doubt as to the correct application of this principle. |
| --- | --- |

29.

In practice, in certain cases examined by the Court, the application of the financing gap ratio principle has either resulted in fixing too high a rate of Community contribution or there is doubt as to the correct application of this principle.

| 30. | Apart from the financing gap method, no guidelines indicate any other factors to be taken into account for the purpose of adjusting Community assistance rates, which helps to explain certain differences in the views expressed during the interdepartmental consultation process (see paragraph 18). In the absence of previously established criteria, the rate of assistance is adjusted in a random manner and its consistent application cannot be verified. |
| --- | --- |

30.

Apart from the financing gap method, no guidelines indicate any other factors to be taken into account for the purpose of adjusting Community assistance rates, which helps to explain certain differences in the views expressed during the interdepartmental consultation process (see paragraph 18). In the absence of previously established criteria, the rate of assistance is adjusted in a random manner and its consistent application cannot be verified.

| 31. | The Court's audit has shown that as regards public infrastructure investment projects which do not generate revenue, socioeconomic aspects (‘context’ factors such as the degree of industrialisation of a region or its relative prosperity) are not taken into account for the purpose of reducing assistance rates. The same applies to such criteria as complementarity with other Community operations. The Commission also did not question the structure of the financial arrangement submitted by the project initiator. |
| --- | --- |

31.

The Court's audit has shown that as regards public infrastructure investment projects which do not generate revenue, socioeconomic aspects (‘context’ factors such as the degree of industrialisation of a region or its relative prosperity) are not taken into account for the purpose of reducing assistance rates. The same applies to such criteria as complementarity with other Community operations. The Commission also did not question the structure of the financial arrangement submitted by the project initiator.

public infrastructure investment projects which do not generate revenue

| 32. | As regards productive investments, the review of the projects has shown the method of setting assistance rates to be relatively automatic:






  — | in most cases the rate granted is merely the rate applied for, |
| --- | --- | --- |

32.

As regards productive investments, the review of the projects has shown the method of setting assistance rates to be relatively automatic:

productive investments

—

in most cases the rate granted is merely the rate applied for,

| — | financial cost-benefit analysis (which is mainly constructed around the financial IRRs and NPVs and risk and sensitivity analyses) was not taken into account for the adjustment of the assistance rate. Some highly profitable projects with a high financial IRR attracted high co-financing even though Commission departments other than the examining geographical unit had emphasised the deadweight effect of assistance. The audit has indicated that in certain cases deadweight effects actually appeared after the projects were implemented (see Box 4), |
| --- | --- |

—

financial cost-benefit analysis (which is mainly constructed around the financial IRRs and NPVs and risk and sensitivity analyses) was not taken into account for the adjustment of the assistance rate. Some highly profitable projects with a high financial IRR attracted high co-financing even though Commission departments other than the examining geographical unit had emphasised the deadweight effect of assistance. The audit has indicated that in certain cases deadweight effects actually appeared after the projects were implemented (see Box 4),

Box 4

| — | within the limits of the regulatory ceilings and the maximum levels determined by the rules governing State aid, socioeconomic concepts (such as value added, the creation or maintenance of employment, leverage effects) were not generally taken into account in fixing the assistance rate. Nevertheless, good practice was observed in the case of productive investments in Spain, where the competent national departments also drew on non-financial criteria when specifying the rate, and the co-financing rate was calculated by reference to employment, the use of regional natural resources, value added (especially in terms of increased productivity), technological innovation and knock-on potential, |
| --- | --- |

—

within the limits of the regulatory ceilings and the maximum levels determined by the rules governing State aid, socioeconomic concepts (such as value added, the creation or maintenance of employment, leverage effects) were not generally taken into account in fixing the assistance rate. Nevertheless, good practice was observed in the case of productive investments in Spain, where the competent national departments also drew on non-financial criteria when specifying the rate, and the co-financing rate was calculated by reference to employment, the use of regional natural resources, value added (especially in terms of increased productivity), technological innovation and knock-on potential,

| — | the Commission's departments did not consider the use of loans rather than grants. However, loans ought to be considered, particularly for productive investments with high financial IRRs or for businesses with good financial ratios. Generally speaking, aspects such as the financial situation of the business or market conditions are not taken into account in determining the level of assistance. |
| --- | --- |

—

the Commission's departments did not consider the use of loans rather than grants. However, loans ought to be considered, particularly for productive investments with high financial IRRs or for businesses with good financial ratios. Generally speaking, aspects such as the financial situation of the business or market conditions are not taken into account in determining the level of assistance.

Box 4In the case of one company generating substantial profits, the project would have succeeded without Community assistance. The same applies to another industrial production project, for which the business concerned had almost no competitors in the European market. However, in certain cases the effects of locating a project at a particular site might justify subsidies for projects with favourable IRRs. In the case of a major project of another company, which, at the time, had substantial shares of the world market for several projects, the cofinanced investment was at a company site in an Objective 1 region and Community grants played a significant role in the choice of site.

Box 4In the case of one company generating substantial profits, the project would have succeeded without Community assistance. The same applies to another industrial production project, for which the business concerned had almost no competitors in the European market. However, in certain cases the effects of locating a project at a particular site might justify subsidies for projects with favourable IRRs. In the case of a major project of another company, which, at the time, had substantial shares of the world market for several projects, the cofinanced investment was at a company site in an Objective 1 region and Community grants played a significant role in the choice of site.

| 33. | The Commission is aware of these weaknesses. In 2004 it made an attempt at rationalisation by seeking to adjust Community assistance rates by reference to certain criteria. This produced indicative assistance rates weighted by each sector's anticipated rate of return, calculated on the basis of financial IRRs from a sample of 200 infrastructure and productive projects. This is a useful tool, although still very limited. In any case, it came too late for examination of the files. |
| --- | --- |

33.

The Commission is aware of these weaknesses. In 2004 it made an attempt at rationalisation by seeking to adjust Community assistance rates by reference to certain criteria. This produced indicative assistance rates weighted by each sector's anticipated rate of return, calculated on the basis of financial IRRs from a sample of 200 infrastructure and productive projects. This is a useful tool, although still very limited. In any case, it came too late for examination of the files.

| 34. | The new guidelines published in 2006 (22) propose including in the financing gap calculation factors that are not purely financial, such as the existence of a public-private partnership and equity (that is, the relative prosperity of the region). They also deal with the manner of combining subsidies and loans on the basis of the profitability normally expected per sector. Even though ‘context’ factors are still not fully taken into account, these improvements are in line with the approach favoured by this report of seeking a wider and more objective framework for differentiating the amount of aid. They must be applied consistently and transparently to the financing decisions of the new period. |
| --- | --- |

34.

The new guidelines published in 2006 (22) propose including in the financing gap calculation factors that are not purely financial, such as the existence of a public-private partnership and equity (that is, the relative prosperity of the region). They also deal with the manner of combining subsidies and loans on the basis of the profitability normally expected per sector. Even though ‘context’ factors are still not fully taken into account, these improvements are in line with the approach favoured by this report of seeking a wider and more objective framework for differentiating the amount of aid. They must be applied consistently and transparently to the financing decisions of the new period.

22

DO EX POST EVALUATIONS OF MAJOR PROJECTS GENERATE RESULTS THAT ARE HELPFUL FOR SUBSEQUENT DECISION-MAKING?

EX POST

Evaluation framework and audit criteria

| 35. | Generally speaking, the aim of evaluating a project after completion is to account for the use of resources and the effectiveness and efficiency of the operation undertaken. It is of particular interest to political leaders, managing authorities and beneficiaries. It must allow lessons to be drawn about the need for supplementary or corrective measures to be taken in the future. As the results generated by such evaluations concern the effects produced by a project, they will also be used in quantifying the objectives of future projects. |
| --- | --- |

35.

Generally speaking, the aim of evaluating a project after completion is to account for the use of resources and the effectiveness and efficiency of the operation undertaken. It is of particular interest to political leaders, managing authorities and beneficiaries. It must allow lessons to be drawn about the need for supplementary or corrective measures to be taken in the future. As the results generated by such evaluations concern the effects produced by a project, they will also be used in quantifying the objectives of future projects.

| 36. | The Structural Funds regulations stipulate that Community interventions shall be subject to such a type of evaluation. It is characterised as an ‘ex post evaluation’ and must be undertaken by the Commission in collaboration with the Member States (23). As an ERDF major project that is submitted outside an operational programme is regarded as an intervention, it is in principle subject to ex post evaluation. There is no explicit regulatory requirement as regards the individual major projects that make up an intervention (24). |
| --- | --- |

36.

The Structural Funds regulations stipulate that Community interventions shall be subject to such a type of evaluation. It is characterised as an ‘ex post evaluation’ and must be undertaken by the Commission in collaboration with the Member States (23). As an ERDF major project that is submitted outside an operational programme is regarded as an intervention, it is in principle subject to ex post evaluation. There is no explicit regulatory requirement as regards the individual major projects that make up an intervention (24).

ex post

23

ex post

24

| 37. | However, as regards the Cohesion Fund, there is express provision for ex post evaluation of each project (25). |
| --- | --- |

37.

However, as regards the Cohesion Fund, there is express provision for ex post evaluation of each project (25).

ex post

25

| 38. | The basic data used in the ex post evaluations are mainly collected by the Member States through the monitoring system. During the 1994-1999 period, only Cohesion Fund projects were subject to individual monitoring and annual implementation reports. Structural Funds projects were explicitly monitored at a higher level (measures, priorities, operational programmes, Community support frameworks, etc. (26)). |
| --- | --- |

38.

The basic data used in the ex post evaluations are mainly collected by the Member States through the monitoring system. During the 1994-1999 period, only Cohesion Fund projects were subject to individual monitoring and annual implementation reports. Structural Funds projects were explicitly monitored at a higher level (measures, priorities, operational programmes, Community support frameworks, etc. (26)).

ex post

26

| 39. | The Court examined the evaluation phase from the point of view that:






  (a) | the evaluation of major projects must serve to guide the implementation of future projects. The national authorities and the beneficiaries are primarily concerned by these evaluations, which provide information for improving the effectiveness and efficiency of operations on the ground; |
| --- | --- | --- |

39.

The Court examined the evaluation phase from the point of view that:

(a)

the evaluation of major projects must serve to guide the implementation of future projects. The national authorities and the beneficiaries are primarily concerned by these evaluations, which provide information for improving the effectiveness and efficiency of operations on the ground;

| (b) | the tools for monitoring project implementation and for comparing their achievement must be defined from the outset; |
| --- | --- |

(b)

the tools for monitoring project implementation and for comparing their achievement must be defined from the outset;

| (c) | data must be obtained for these tools to be used. |
| --- | --- |

(c)

data must be obtained for these tools to be used.

Several wide-ranging evaluations but very few individual evaluations of major projects

| 40. | The Member States only rarely carry out ex post evaluations of major projects (27). Only one of the twenty projects audited by the Court had been evaluated (see Box 5). Naturally, studies of the sectors to which the major projects belong — such as, for example, the port and automotive sectors — may be conducted by beneficiaries, managing administrations or external bodies (universities or research centres). However, such studies do not target the projects directly and are not in the nature of ex post evaluations. Furthermore, they are not always forwarded to the departments responsible for managing the Community funds.

  Box 5Only one of the projects in the Court's sample had undergone individual ex post evaluation. However, the macroeconomic impact was assessed on the basis of factors which differed from those initially provided for in the ex ante evaluation presented in support of the application. As a result, the impact cannot be compared with the one anticipated. What is more, there was no recalculation of the expected financial return. |
| --- | --- |

40.

The Member States only rarely carry out ex post evaluations of major projects (27). Only one of the twenty projects audited by the Court had been evaluated (see Box 5). Naturally, studies of the sectors to which the major projects belong — such as, for example, the port and automotive sectors — may be conducted by beneficiaries, managing administrations or external bodies (universities or research centres). However, such studies do not target the projects directly and are not in the nature of ex post evaluations. Furthermore, they are not always forwarded to the departments responsible for managing the Community funds.

ex post

27

Box 5

ex post

Box 5Only one of the projects in the Court's sample had undergone individual ex post evaluation. However, the macroeconomic impact was assessed on the basis of factors which differed from those initially provided for in the ex ante evaluation presented in support of the application. As a result, the impact cannot be compared with the one anticipated. What is more, there was no recalculation of the expected financial return.

Box 5Only one of the projects in the Court's sample had undergone individual ex post

ex ante

| 41. | At Commission level, the evaluations that specifically target the major projects of the 1994-1999 period (the only ones to have been evaluated up to now) (see paragraph 13), or concern some aspect of them, have very heterogeneous aims and methods. They were not used by the national managing authorities and beneficiaries, with one exception (see (d)):






  (a) | a thematic evaluation of the impact of the Structural Funds on transport infrastructures, which essentially considered the strategies per country and per method of transport at programme level. This evaluation provides little data with regard to the efficiency, effectiveness and impact of the individual projects; |
| --- | --- | --- |

41.

At Commission level, the evaluations that specifically target the major projects of the 1994-1999 period (the only ones to have been evaluated up to now) (see paragraph 13), or concern some aspect of them, have very heterogeneous aims and methods. They were not used by the national managing authorities and beneficiaries, with one exception (see (d)):

(a)

a thematic evaluation of the impact of the Structural Funds on transport infrastructures, which essentially considered the strategies per country and per method of transport at programme level. This evaluation provides little data with regard to the efficiency, effectiveness and impact of the individual projects;

| (b) | an ex post evaluation of Objective 1 that includes an examination of sixty major ERDF and Cohesion Fund projects. It used a wide-ranging approach that included an assessment of the appropriateness of the strategy, of effectiveness, efficiency and impact, management and implementation systems and Community value added. However, only a small number of major projects were considered from the point of view of certain aspects of effectiveness; |
| --- | --- |

(b)

an ex post evaluation of Objective 1 that includes an examination of sixty major ERDF and Cohesion Fund projects. It used a wide-ranging approach that included an assessment of the appropriateness of the strategy, of effectiveness, efficiency and impact, management and implementation systems and Community value added. However, only a small number of major projects were considered from the point of view of certain aspects of effectiveness;

ex post

| (c) | an evaluation of the macroeconomic impact of individual Cohesion Fund projects — the only evaluation to consider this aspect — by means of specially adapted macroeconomic models. However, the real effects of the projects were not examined, as the only data used was that drawn from the ex-ante cost-benefit analyses (28); |
| --- | --- |

(c)

an evaluation of the macroeconomic impact of individual Cohesion Fund projects — the only evaluation to consider this aspect — by means of specially adapted macroeconomic models. However, the real effects of the projects were not examined, as the only data used was that drawn from the ex-ante cost-benefit analyses (28);

ex-ante

28

| (d) | an ex post evaluation of projects (29) on the basis of a sample of 200 Cohesion Fund projects. The evaluation assessed the adequacy of the strategic planning, project design and project selection procedures, management and implementation systems, effectiveness and efficiency. A sub-group of 60 projects was later given a more in-depth examination from the point of view of socioeconomic impact. Using the Guide to cost-benefit analysis as a benchmark, the internal economic rate of return was recalculated. This study's recommendations were discussed by the Member States concerned and led to improvements in methodology. |
| --- | --- |

(d)

an ex post evaluation of projects (29) on the basis of a sample of 200 Cohesion Fund projects. The evaluation assessed the adequacy of the strategic planning, project design and project selection procedures, management and implementation systems, effectiveness and efficiency. A sub-group of 60 projects was later given a more in-depth examination from the point of view of socioeconomic impact. Using the Guide to cost-benefit analysis as a benchmark, the internal economic rate of return was recalculated. This study's recommendations were discussed by the Member States concerned and led to improvements in methodology.

ex post

29

Factors that impeded the ex post evaluation of major projects

| 42. | The Court has on several occasions (30) highlighted the weaknesses of the evaluation exercises for the 1994-1999 period, which were particularly marked by the absence of data or its unreliability. The Court's reports invited the Commission to consider the possibility of collecting information on the individual projects, without which the methodologies used are too theoretical or inapplicable. The audit of the major projects of that period corroborated these findings. |
| --- | --- |

42.

The Court has on several occasions (30) highlighted the weaknesses of the evaluation exercises for the 1994-1999 period, which were particularly marked by the absence of data or its unreliability. The Court's reports invited the Commission to consider the possibility of collecting information on the individual projects, without which the methodologies used are too theoretical or inapplicable. The audit of the major projects of that period corroborated these findings.

30

Incomplete aid applications

| 43. | The ex post evaluation of major projects was at first hindered by missing information in the aid applications. This was noted both by the studies undertaken of major projects and by the Court's audit. |
| --- | --- |

43.

The ex post evaluation of major projects was at first hindered by missing information in the aid applications. This was noted both by the studies undertaken of major projects and by the Court's audit.

ex post

| 44. | One of the evaluations carried out highlighted, in particular, that:






  (a) | the objectives of the projects were not always quantified; |
| --- | --- | --- |

44.

One of the evaluations carried out highlighted, in particular, that:

(a)

the objectives of the projects were not always quantified;

| (b) | at the level of cost-benefit analysis, benefits which were difficult to evaluate — in particular environmental benefits — were not quantified or were taken into account in the calculation of the ex ante economic internal rate of return without adequate concrete information and justification having been obtained. In numerous cases the anticipated results were not quantified; |
| --- | --- |

(b)

at the level of cost-benefit analysis, benefits which were difficult to evaluate — in particular environmental benefits — were not quantified or were taken into account in the calculation of the ex ante economic internal rate of return without adequate concrete information and justification having been obtained. In numerous cases the anticipated results were not quantified;

ex ante

| (c) | the distinction was not always drawn between permanent jobs and temporary jobs; the methodological hypotheses for ex ante estimates of impact on employment were not explained or different methodologies were applied. |
| --- | --- |

(c)

the distinction was not always drawn between permanent jobs and temporary jobs; the methodological hypotheses for ex ante estimates of impact on employment were not explained or different methodologies were applied.

ex ante

| 45. | In addition to the inadequacy of the cost-benefit analysis that has already been highlighted (see paragraphs 21-25), the audit carried out by the Court confirmed the shortcomings found in the earlier reports, in particular:






  (a) | the absence, weakness or inadequacy of the indicators; |
| --- | --- | --- |

45.

In addition to the inadequacy of the cost-benefit analysis that has already been highlighted (see paragraphs 21-25), the audit carried out by the Court confirmed the shortcomings found in the earlier reports, in particular:

(a)

the absence, weakness or inadequacy of the indicators;

| (b) | the absence of any reliable information concerning the initial situation, that is, the situation existing before the project was implemented. |
| --- | --- |

(b)

the absence of any reliable information concerning the initial situation, that is, the situation existing before the project was implemented.

| 46. | As these factors are necessary in order to evaluate the operations, the deficiencies discovered impede ex post evaluations. |
| --- | --- |

46.

As these factors are necessary in order to evaluate the operations, the deficiencies discovered impede ex post evaluations.

ex post

Inadequate monitoring

| 47. | Even in those cases where a monitoring system was introduced at project level, the studies undertaken and the audit carried out by the Court have shown that the monitoring process did not ensure that adequate data was collected for the purposes of evaluation. |
| --- | --- |

47.

Even in those cases where a monitoring system was introduced at project level, the studies undertaken and the audit carried out by the Court have shown that the monitoring process did not ensure that adequate data was collected for the purposes of evaluation.

| 48. | One of the evaluations carried out found that:






  (a) | the collection of statistics relating to the use of transport infrastructures did not focus on the economic implications of this use, such as reductions in the cost of travel; |
| --- | --- | --- |

48.

One of the evaluations carried out found that:

(a)

the collection of statistics relating to the use of transport infrastructures did not focus on the economic implications of this use, such as reductions in the cost of travel;

| (b) | analyses of unit costs did not result in a comparison of the projects on the basis of benchmarks; |
| --- | --- |

(b)

analyses of unit costs did not result in a comparison of the projects on the basis of benchmarks;

| (c) | information on the revenue generated and on the application of the polluter pays principle were inadequate in a number of cases; |
| --- | --- |

(c)

information on the revenue generated and on the application of the polluter pays principle were inadequate in a number of cases;

| (d) | the ex post recalculation of the economic internal rate of return was hampered by a lack of information concerning actual results. It often had to be based on hypotheses and, in the absence of any contradictory information, on the data contained in the ex ante evaluation; |
| --- | --- |

(d)

the ex post recalculation of the economic internal rate of return was hampered by a lack of information concerning actual results. It often had to be based on hypotheses and, in the absence of any contradictory information, on the data contained in the ex ante evaluation;

ex post

ex ante

| (e) | information concerning the creation of direct employment and permanent employment was sometimes not available or of poor quality. |
| --- | --- |

(e)

information concerning the creation of direct employment and permanent employment was sometimes not available or of poor quality.

| 49. | The Court's audit of major projects for the 1994-1999 period also showed weaknesses in monitoring:






  (a) | as regards investments in infrastructures, with the exception of one project, monitoring focused only on effects that were, technically, easy to trace, i.e. creation of direct employment, goods and passenger traffic, number of connections, areas sold, number of beds per 1 000 inhabitants. Other direct effects that are more difficult to monitor (petrol consumption, comfort, environmental effects, quality of healthcare) were not subject to any follow-up. The same applied a fortiori to indirect and more long-term effects (such as productivity, the creation of businesses and employment, prices, etc.). Furthermore, those aspects used by the beneficiary to calculate the estimated economic return (for example, for road infrastructure: time savings, reduction of the cost of transport, reduction of accidents, effects on the flow of traffic generated and on additional traffic, etc.) were generally not considered to be indicators that needed monitoring; |
| --- | --- | --- |

49.

The Court's audit of major projects for the 1994-1999 period also showed weaknesses in monitoring:

(a)

as regards investments in infrastructures, with the exception of one project, monitoring focused only on effects that were, technically, easy to trace, i.e. creation of direct employment, goods and passenger traffic, number of connections, areas sold, number of beds per 1 000 inhabitants. Other direct effects that are more difficult to monitor (petrol consumption, comfort, environmental effects, quality of healthcare) were not subject to any follow-up. The same applied a fortiori to indirect and more long-term effects (such as productivity, the creation of businesses and employment, prices, etc.). Furthermore, those aspects used by the beneficiary to calculate the estimated economic return (for example, for road infrastructure: time savings, reduction of the cost of transport, reduction of accidents, effects on the flow of traffic generated and on additional traffic, etc.) were generally not considered to be indicators that needed monitoring;

| (b) | as regards productive investments, monitoring was limited to the physical and financial aspects of the investments and, generally, to the direct creation of employment, since the final reports drawn up in connection with the final payment had to comply with the contractual requirements concerning payment. Generally speaking, the managing body does nothave information about such factors as the creation of enterprises and indirect employment, productivity increases or the environment. |
| --- | --- |

(b)

as regards productive investments, monitoring was limited to the physical and financial aspects of the investments and, generally, to the direct creation of employment, since the final reports drawn up in connection with the final payment had to comply with the contractual requirements concerning payment. Generally speaking, the managing body does nothave information about such factors as the creation of enterprises and indirect employment, productivity increases or the environment.

The 2000-2006 period: evaluations at risk of being compromised

| 50. | For the 2000-2006 period, the ERDF legislation stipulates that, in future, for the major projects, the annual implementation reports on interventions must contain a separate chapter on progress made and financing. In addition, financial and progress indicators must be designed to provide separate information for the major projects (31). |
| --- | --- |

50.

For the 2000-2006 period, the ERDF legislation stipulates that, in future, for the major projects, the annual implementation reports on interventions must contain a separate chapter on progress made and financing. In addition, financial and progress indicators must be designed to provide separate information for the major projects (31).

31

| 51. | Nevertheless, although the annual implementation reports contain a chapter on major projects, these chapters are often restricted to a simple description of the projects and do not present the physical progress made, or separate results and impact indicators. |
| --- | --- |

51.

Nevertheless, although the annual implementation reports contain a chapter on major projects, these chapters are often restricted to a simple description of the projects and do not present the physical progress made, or separate results and impact indicators.

| 52. | In the same way, the priorities and measures concerning major projects do not always include the indicators allocated to them, or the indicators at priority and measure level are not consistent with those for the major projects. |
| --- | --- |

52.

In the same way, the priorities and measures concerning major projects do not always include the indicators allocated to them, or the indicators at priority and measure level are not consistent with those for the major projects.

| 53. | At the level of the projects examined on-the-spot, while a number of major projects have an adequate list of implementation, results and impact indicators, other projects either do not refer to any indicator at all, or have only been allocated physical and financial implementation indicators. |
| --- | --- |

53.

At the level of the projects examined on-the-spot, while a number of major projects have an adequate list of implementation, results and impact indicators, other projects either do not refer to any indicator at all, or have only been allocated physical and financial implementation indicators.

| 54. | Sometimes no clear link exists between the overall objectives, the individual objectives and the designated indicators. A number of objectives have not been allocated indicators at all. Likewise, indicators put in place for projects which are similar but cofinanced by the ERDF or the Cohesion Fund respectively are not identical. |
| --- | --- |

54.

Sometimes no clear link exists between the overall objectives, the individual objectives and the designated indicators. A number of objectives have not been allocated indicators at all. Likewise, indicators put in place for projects which are similar but cofinanced by the ERDF or the Cohesion Fund respectively are not identical.

| 55. | Future ex post evaluations will be affected for the same reasons as in the preceding period, i.e. the weaknesses found concerning monitoring and indicators. The contribution of major projects to the more global objectives of regional development will therefore remain very difficult to define. |
| --- | --- |

55.

Future ex post evaluations will be affected for the same reasons as in the preceding period, i.e. the weaknesses found concerning monitoring and indicators. The contribution of major projects to the more global objectives of regional development will therefore remain very difficult to define.

ex post

THE NEW REGULATIONS FOR THE 2007-2013 PERIOD

| 56. | The new framework regulation for the 2007-2013 period (32), which applies both to the ERDF and the Cohesion Fund, introduces certain improvements as regards major projects:






  (a) | the concept is redefined (33), with ERDF projects and Cohesion Fund projects being treated equally; |
| --- | --- | --- |

56.

The new framework regulation for the 2007-2013 period (32), which applies both to the ERDF and the Cohesion Fund, introduces certain improvements as regards major projects:

32

(a)

the concept is redefined (33), with ERDF projects and Cohesion Fund projects being treated equally;

33

| (b) | the information to be submitted by the Member States is clearly defined. In particular, there must be explicit justification for a public contribution to the funding; |
| --- | --- |

(b)

the information to be submitted by the Member States is clearly defined. In particular, there must be explicit justification for a public contribution to the funding;

| (c) | there is a clearer definition of revenue-generating projects and how they are to be treated; |
| --- | --- |

(c)

there is a clearer definition of revenue-generating projects and how they are to be treated;

| (d) | the annual report and the final report on implementation must provide a clear view of the physical progress and financing of major projects. |
| --- | --- |

(d)

the annual report and the final report on implementation must provide a clear view of the physical progress and financing of major projects.

| 57. | In addition, in 2006 the Commission published guidelines on the preparation of major projects in the new period, which made a certain number of improvements (see paragraph 34). |
| --- | --- |

57.

In addition, in 2006 the Commission published guidelines on the preparation of major projects in the new period, which made a certain number of improvements (see paragraph 34).

| 58. | Finally, the rules provide for ex post evaluations to be carried out by the Commission at programme level only. There is therefore no provision for either EDRF or Cohesion Fund projects to be evaluated individually. |
| --- | --- |

58.

Finally, the rules provide for ex post evaluations to be carried out by the Commission at programme level only. There is therefore no provision for either EDRF or Cohesion Fund projects to be evaluated individually.

ex post

CONCLUSIONS AND RECOMMENDATIONS

Conclusions

| 59. | There are a number of shortcomings in the preliminary examination procedures for major projects:






  (a) | the project examinations varied in quality. Not until 2003 was a common approach provided for the managing departments (see paragraphs 17-20); |
| --- | --- | --- |

59.

There are a number of shortcomings in the preliminary examination procedures for major projects:

(a)

the project examinations varied in quality. Not until 2003 was a common approach provided for the managing departments (see paragraphs 17-20);

| (b) | many weaknesses were tolerated by the Commission. Great disparities exist in the quality of the financial and socioeconomic analyses presented in support of the projects. In particular, the quality of the analyses presented in support of productive investments projects is poor. As a result, major projects are adopted although the data provided do not permit an adequate assessment (see paragraphs 21-25); |
| --- | --- |

(b)

many weaknesses were tolerated by the Commission. Great disparities exist in the quality of the financial and socioeconomic analyses presented in support of the projects. In particular, the quality of the analyses presented in support of productive investments projects is poor. As a result, major projects are adopted although the data provided do not permit an adequate assessment (see paragraphs 21-25);

| (c) | in spite of the improvements made by the Commission, the factors used to adjust the rate of Community intervention are not yet sufficiently precise. For productive investments the possibility of granting a loan instead of a subsidy was not examined (see paragraphs 26-34). |
| --- | --- |

(c)

in spite of the improvements made by the Commission, the factors used to adjust the rate of Community intervention are not yet sufficiently precise. For productive investments the possibility of granting a loan instead of a subsidy was not examined (see paragraphs 26-34).

| 60. | Taking these factors into consideration, the Court entertains doubts concerning the real added value of the approval process for major projects as implemented by the Commission. The exercise is cumbersome and does not exclude projects of inferior quality or adjust the rate of intervention in a satisfactory manner. Neither does it guarantee adequate preparation for the subsequent evaluation. The weaknesses noted in the preliminary examination procedure had repercussions on the ex post evaluation process. |
| --- | --- |

60.

Taking these factors into consideration, the Court entertains doubts concerning the real added value of the approval process for major projects as implemented by the Commission. The exercise is cumbersome and does not exclude projects of inferior quality or adjust the rate of intervention in a satisfactory manner. Neither does it guarantee adequate preparation for the subsequent evaluation. The weaknesses noted in the preliminary examination procedure had repercussions on the ex post evaluation process.

ex post

| 61. | Weaknesses were also discovered in the ex post evaluations:






  (a) | hardly any individual ex post evaluations are carried out on the initiative of the Member States. At Commission level there is no global approach to the ex post evaluation of major projects. Those evaluations carried out had very heterogeneous aims and methods (see paragraphs 40-41); |
| --- | --- | --- |

61.

Weaknesses were also discovered in the ex post evaluations:

ex post

(a)

hardly any individual ex post evaluations are carried out on the initiative of the Member States. At Commission level there is no global approach to the ex post evaluation of major projects. Those evaluations carried out had very heterogeneous aims and methods (see paragraphs 40-41);

ex post

ex post

| (b) | the ex post evaluation of major projects for the 1994-1999 period was hindered by substantial shortcomings in the aid applications, in particular concerning anticipated effects, indicators, and the initial situation. These deficiencies prevented an evaluation of the real effects of the interventions and the drawing of lessons from them for subsequent decision-making (see paragraphs 43-46); |
| --- | --- |

(b)

the ex post evaluation of major projects for the 1994-1999 period was hindered by substantial shortcomings in the aid applications, in particular concerning anticipated effects, indicators, and the initial situation. These deficiencies prevented an evaluation of the real effects of the interventions and the drawing of lessons from them for subsequent decision-making (see paragraphs 43-46);

ex post

| (c) | the manner in which the monitoring was carried out in this period hampered the ex post evaluations, as numerous aspects were neglected (see paragraphs 47-49). |
| --- | --- |

(c)

the manner in which the monitoring was carried out in this period hampered the ex post evaluations, as numerous aspects were neglected (see paragraphs 47-49).

ex post

| 62. | The Commission adopted a number of measures in 2003 in the light of the weaknesses found at the end of the ex post evaluation of the 1994-1999 period. However, no substantial progress was made with the adoption and monitoring procedures for the major projects of the 2000-2006 period and the ex post evaluation exercise for this period, which is still to be carried out, is at risk of being compromised (see paragraphs 50-55). |
| --- | --- |

62.

The Commission adopted a number of measures in 2003 in the light of the weaknesses found at the end of the ex post evaluation of the 1994-1999 period. However, no substantial progress was made with the adoption and monitoring procedures for the major projects of the 2000-2006 period and the ex post evaluation exercise for this period, which is still to be carried out, is at risk of being compromised (see paragraphs 50-55).

ex post

ex post

Recommendations

| 63. | As regards the 2007-2013 period, the Community regulations provide that, as in the preceding periods, the Commission should approve the granting of Community assistance for each major project. To avoid financing decisions being reduced to an administrative exercise with no influence on the quality of the projects adopted, the Commission should:






  (a) | apply more efficient preliminary examination procedures based on the tools that it has itself developed; |
| --- | --- | --- |

63.

As regards the 2007-2013 period, the Community regulations provide that, as in the preceding periods, the Commission should approve the granting of Community assistance for each major project. To avoid financing decisions being reduced to an administrative exercise with no influence on the quality of the projects adopted, the Commission should:

(a)

apply more efficient preliminary examination procedures based on the tools that it has itself developed;

| (b) | ensure that the cost-benefit analysis is applied rigorously, particularly as regards information that can be used to check the reliability of the hypotheses used; |
| --- | --- |

(b)

ensure that the cost-benefit analysis is applied rigorously, particularly as regards information that can be used to check the reliability of the hypotheses used;

| (c) | continue its efforts to take into account the socioeconomic factors that allow the rate of Community participation, which at present is based mainly on financial aspects, to be adjusted. Consideration of such factors should be based on explicit and less random rules applied in a consistent manner. |
| --- | --- |

(c)

continue its efforts to take into account the socioeconomic factors that allow the rate of Community participation, which at present is based mainly on financial aspects, to be adjusted. Consideration of such factors should be based on explicit and less random rules applied in a consistent manner.

| 64. | The Structural Funds regulations for the 2007-2013 period do not provide for the ex post evaluation of major projects by the Commission. However, the Court considers that the evaluation of major projects after completion is essential for the national administrations and the beneficiaries, who need to verify the real efficiency and effectiveness of the expenditure in order to improve management and for whom the evaluation should provide real assistance with regard to programming. As a result:






  (a) | it is important for major projects to be evaluated individually, against their own objectives, by the national administrations and beneficiaries; |
| --- | --- | --- |

64.

The Structural Funds regulations for the 2007-2013 period do not provide for the ex post evaluation of major projects by the Commission. However, the Court considers that the evaluation of major projects after completion is essential for the national administrations and the beneficiaries, who need to verify the real efficiency and effectiveness of the expenditure in order to improve management and for whom the evaluation should provide real assistance with regard to programming. As a result:

ex post

(a)

it is important for major projects to be evaluated individually, against their own objectives, by the national administrations and beneficiaries;

| (b) | as regards the information provided by the evaluation, which must be communicated to it, the Commission must analyse its requirements in respect of the information needed to undertake the evaluation and, in particular, must review the information needed to assess the impact of the major projects on regional development objectives, to which the projects are supposed to make a very substantial contribution. The Court considers that this evaluation could be based on data generated at major project level. To this end, and to ensure the evaluation is feasible, the requirements regarding the information to be collected and the reports to be drawn up should be rationalised; |
| --- | --- |

(b)

as regards the information provided by the evaluation, which must be communicated to it, the Commission must analyse its requirements in respect of the information needed to undertake the evaluation and, in particular, must review the information needed to assess the impact of the major projects on regional development objectives, to which the projects are supposed to make a very substantial contribution. The Court considers that this evaluation could be based on data generated at major project level. To this end, and to ensure the evaluation is feasible, the requirements regarding the information to be collected and the reports to be drawn up should be rationalised;

| (c) | in order to guarantee the quality of subsequent evaluations, the Commission must ensure, when examining the files, that there are no lacunae in the applications submitted as regards indicators and the initial situation; |
| --- | --- |

(c)

in order to guarantee the quality of subsequent evaluations, the Commission must ensure, when examining the files, that there are no lacunae in the applications submitted as regards indicators and the initial situation;

lacunae

| (d) | for the same purpose, subsequent to the Commission's examination, monitoring must focus on the objectives and on the implementation and results indicators set out in the applications for assistance. |
| --- | --- |

(d)

for the same purpose, subsequent to the Commission's examination, monitoring must focus on the objectives and on the implementation and results indicators set out in the applications for assistance.

| 65. | In the longer term, the Court invites the Commission, the European Parliament and the Council to give thought to the purpose of the special arrangements for authorising major projects. |
| --- | --- |

65.

In the longer term, the Court invites the Commission, the European Parliament and the Council to give thought to the purpose of the special arrangements for authorising major projects.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 14 February 2008.

For the Court of Auditors

Vítor Manuel DA SILVA CALDEIRA

President

---

(1)  The concept already existed in Council Regulation (EEC) No 4253/88 of 19 December 1988 (OJ L 374, 31.12.1988, p. 1). It also applies in the rules for the new period (2007-2013) (Articles 39-41 of Council Regulation (EC) No 1083/2006 of 11 July 2006 (OJ L 210, 31.7.2006, p. 25)).

1

(2)  Article 16(2) of Council Regulation (EEC) No 4253/88 as amended by Regulation (EEC) No 2082/93 of 20 July 1993 (OJ L 193, 31.7.1993, p. 20).

2

(3)  Article 25 of Council Regulation (EC) No 1260/1999 (OJ L 161, 26.6.1999, p. 1).

3

(4)  Article 26 of Regulation (EC) No 1260/1999.

4

(5)  The Cohesion Fund exists to finance larger projects in the fields of transport and environment. Article 10(3) of Council Regulation (EC) No 1164/94 of 16 May 1994 (OJ L 130, 25.5.1994, p. 1) specified, for the 1994-1999 programming period, that ‘the total cost of projects or groups of projects may in principle not be less than ECU 10 million’. For the following programming period, Council Regulation (EC) No 1264/1999 of 21 June 1999 (OJ L 161, 26.6.1999, p. 57) replaces ‘ECU’ with ‘euro’.

5

(6)  Article 5 of Regulation (EEC) No 4254/88 as amended by Council Regulation (EEC) No 2083/93 of 20 July 1993 (OJ L 193, 31.7.1993, p. 34).

6

(7)  Mainly Operational Programmes, Single Programming Documents and Community Initiative Programmes.

7

(8)  Article 26(3) of Regulation (EC) No 1260/1999.

8

(9)  See in particular Articles 39-41 of Regulation (EC) No 1083/2006.

9

(10)  Eight projects adopted between 2000 and 2002 were nevertheless examined in the context of an ex post evaluation carried out on behalf of the Commission (see paragraph 41).

10

ex post

(11)  See the Guide to cost-benefit analysis of ERDF major projects in the context of Community regional policy, which was finalised in 1994. A revised Guide published in 1997 also covered Cohesion Fund major projects. For the following period, the former guidance instrument was replaced in 2002 by the Guide to cost-benefit analysis of investment projects under the Structural Funds (ERDF), Cohesion Fund and ISPA. These documents are available on the Commission's website at: http://ec.europa.eu/regional_policy/sources/docoffic

11

http://ec.europa.eu/regional_policy/sources/docoffic

(12)  In particular, the Guide published in 2002 specifies the financial and economic rates of return that should be used and the ‘time horizons’ that should be applied in each investment field in order to assess the return on projects. However, it fails to provide any details or forecasting techniques concerning impacts on the environment or job creation.

12

(13)  Article 26(3) of Regulation (EC) No 1260/1999; the time limit is three months if the EIB has to be consulted.

13

(14)  In this connection, see also paragraphs 22-24.

14

(15)  This rule provides for the automatic decommitment of commitments that have not been settled within two years of the date on which the corresponding appropriations were entered in the Community budget. It constitutes an incentive to rapid implementation of the projects.

15

(16)  Article 26(1) of Regulation (EEC) No 4253/88, as modified by Regulation (EEC) No 2082/93 for ERDF projects from the 1994-1999 period, Articles 25 and 26 of Regulation (EC) No 1260/1999 for ERDF projects from 2000-2006. Article 10 of Regulation (EC) No 1164/94 and Regulation (EC) No 1264/1999 for Cohesion Fund projects from 1994-1999 and 2000-2006 respectively.

16

(17)  See Article 26(3) of Regulation (EC) No 1260/1999.

17

(18)  See Article 13 of Regulation (EEC) No 2052/88 as amended by Council Regulation (EEC) No 2081/93 of 20 July 1993 (OJ L 193, 31.7.1993, p. 5) and Article 29 of Regulation (EC) No 1260/1999 for the ERDF; Article 17 of Regulation (EEC) No 4253/88 as modified by Regulation (EEC) No 2082/93 and Article 7 of Regulation (EC) No 1264/1999 for the Cohesion Fund respectively.

18

(19)  The ‘financing gap’ ratio formula is as follows: r = (C-R)/C, where C represents the total cost of the discounted initial investment and R the net present value of operating revenues.

19

(20)  ‘Simplification, transparency and coherence in the evaluation of major public infrastructure projects: application of four elementary rules’, DG Regional Policy, Note of 14.4.2003 formally addressed to the competent authorities of the Member States and accession countries. A note on the new rules for the application of the ‘financing gap’ formulae had already been sent to the Committee for the Development and Reconversion of Regions in July 2002.

20

(21)  For both types of projects the principle that the polluter pays requires setting a higher charging level to cover the operating and investment costs, which reduces the financing gap and consequently the amount of Community assistance. The modifications applied in relation to the traditional formula correct this ‘distortion’ by providing that the formula should not take account of the total net value of operating revenues but only the part calculated as a proportion of the investment assistance granted by the Commission. The formula is slightly different for the Cohesion Fund and for the ERDF.

21

(22)  See Working Document No 4 ‘The new programming period 2007-2013. Guidance on the Methodology for carrying out cost-benefit analysis’, August 2006.

22

(23)  Article 6(2) of Regulation (EEC) No 2052/88 as amended by Regulation (EEC) No 2081/93 and Article 43 of Regulation (EC) No 1260/1999.

23

(24)  Nevertheless, a separate ex post evaluation is possible. Article 27(4) of the 2002 Financial Regulation provides for the evaluation of all programmes and activities which entail significant spending. Meanwhile, Article 21 of the rules implementing the Financial Regulation requires an interim and/or ex post evaluation of any programme or activity that exceeds five million euro. Without prejudice to these provisions, the Commission has asserted its right to chose the level of exclusiveness at which an evaluation is to be carried out, taking into account a certain number of criteria including, in particular, financial size and expected impact (see the recent Communication to the Commission from Mrs Grybauskaitė, Responding to strategic needs: Reinforcing the use of evaluation, SEC(2007) 213 of 14 February 2007, paragraph 2.1).

24

ex post

ex post

Responding to strategic needs: Reinforcing the use of evaluation

(25)  Article 13 of Regulations (EC) No 1164/94 and (EC) No 1264/1999.

25

(26)  Article 25 of Regulation (EEC) No 2082/93.

26

(27)  By way of example, in Ireland Forfás performs ex post evaluations of a sample of productive investments every year. In Portugal, the Departamento de Prospectiva e Planeamento (DPP) used econometric models to carry out the macroeconomic ex post evaluation of certain infrastructure investments.

27

ex post

ex post

(28)  The models were applied especially to investments in nine major transport infrastructures in environmental projects in Spain. The application of these models was reviewed in Special Report No 15/2000.

28

(29)  The projects were from the 1994-1999 programming period, with the exception of eight projects adopted by the Commission between 2000 and 2002.

29

(30)  See in particular Special Reports No 15/2000 on the Cohesion Fund, No 12/2001 concerning certain structural measures to improve the employment situation, No 7/2003 on the implementation of assistance programming for the period 2000 to 2006 and No 10/2006 on ex post evaluations of Objectives 1 and 3 programmes for the 1994-1999 period.

30

ex post

(31)  Article 36(3) of Regulation (EC) No 1260/1999.

31

(32)  Regulation (EC) No 1083/2006. These aspects are referred to in Articles 39-41, Article 37, Article 55 and Article 67(2)(g).

32

(33)  New thresholds now apply: 25 million euro for environmental projects and 50 million euro for other projects.

33

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ANNEX I

SAMPLES I AND II BY MEMBER STATE CONCERNED — LIST OF PROJECTS EXAMINED

| Checks on files and in the Member States (50 projects) | Additional checks on files at the Commission (36 projects) |
| --- | --- |
| Germany







  — | Buna Sow — project 25153584 |

Checks on files and in the Member States (50 projects)

Additional checks on files at the Commission (36 projects)

Germany

—

Buna Sow — project 25153584

| — | Logistik-Center Rheinhausen ‘Logport’ Infrastruktur |
| --- | --- |

—

Logistik-Center Rheinhausen ‘Logport’ Infrastruktur

| — | Ausbau der Schienenstrecke (ABS) Berlin-Frankfurt/Oder |
| --- | --- |

—

Ausbau der Schienenstrecke (ABS) Berlin-Frankfurt/Oder

| — | Otto GmbH&Co KG |
| --- | --- |

—

Otto GmbH&Co KG

| — | Phönix West |
| --- | --- |

—

Phönix West

Germany

/

Greece

| — | Athens Metro (OP Urban development 1994-1999) |
| --- | --- |

—

Athens Metro (OP Urban development 1994-1999)

| — | General hospital of Chania — project 18861 (OP Crete 1994-1999) |
| --- | --- |

—

General hospital of Chania — project 18861 (OP Crete 1994-1999)

| — | Extension of Athens Metro from Panagoulis to the old airport at Elliniko (CF) |
| --- | --- |

—

Extension of Athens Metro from Panagoulis to the old airport at Elliniko (CF)

| — | Water supply of Irakleion and Agios Nikolaos from the Aposelemi dam (2nd. phase) (CF) |
| --- | --- |

—

Water supply of Irakleion and Agios Nikolaos from the Aposelemi dam (2nd. phase) (CF)

| — | Renewal and extension of the bus and trolley fleet of Athens public transport companies ETHEL-ILPAP (OP SAAS 2000-2006) |
| --- | --- |

—

Renewal and extension of the bus and trolley fleet of Athens public transport companies ETHEL-ILPAP (OP SAAS 2000-2006)

| — | Extensions of Athens Metro and transfer stations (OP OALAA) |
| --- | --- |

—

Extensions of Athens Metro and transfer stations (OP OALAA)

Greece

| — | Développement du tram d'Athènes — C(2003)/122 |
| --- | --- |

—

Développement du tram d'Athènes — C(2003)/122

| — | Sections d'Egnatia Odos-Ioannina-Metsovo — C(2004)/4367 |
| --- | --- |

—

Sections d'Egnatia Odos-Ioannina-Metsovo — C(2004)/4367

Spain

| — | Túnel de Somport — 941165005 |
| --- | --- |

—

Túnel de Somport — 941165005

| — | Autopista Madrid-Valencia — 961165008 |
| --- | --- |

—

Autopista Madrid-Valencia — 961165008

| — | Linea Valencia-Tarragona-Acond 200-220 km/h entre ppkk 30 y 50-10.6 |
| --- | --- |

—

Linea Valencia-Tarragona-Acond 200-220 km/h entre ppkk 30 y 50-10.6

| — | CN-VI. Autovia Madrid-A Coruna. Tramo: Villartelin — Nadela — 1.1.1 |
| --- | --- |

—

CN-VI. Autovia Madrid-A Coruna. Tramo: Villartelin — Nadela — 1.1.1

| — | Fabricacion de Automoviles Renault Espana S.A. (Construction of an environmentally friendly car engine) — VA/198/P07 |
| --- | --- |

—

Fabricacion de Automoviles Renault Espana S.A. (Construction of an environmentally friendly car engine) — VA/198/P07

| — | Ceramicas Belcaire, S.A. (Reconstruction of a manufacturing plant) — CS/265/P12 |
| --- | --- |

—

Ceramicas Belcaire, S.A. (Reconstruction of a manufacturing plant) — CS/265/P12

| — | Ampliación del Puerto de Alicante — C(2003) 4394 (2003 ES 16 CPT 018) |
| --- | --- |

—

Ampliación del Puerto de Alicante — C(2003) 4394 (2003 ES 16 CPT 018)

| — | Actuaciones Línea alta velocidad Madrid-Barcelona-frontera francesa: Tramo Madrid-Lleida C(2000) 2939 (2000 ES 16 CPT 002) |
| --- | --- |

—

Actuaciones Línea alta velocidad Madrid-Barcelona-frontera francesa: Tramo Madrid-Lleida C(2000) 2939 (2000 ES 16 CPT 002)

| — | Arteria aductora del Campo de Pozos de Guadarrama y estación de tratamiento-2002 C(2004) 3565 (2002 ES 16 CPT 035) |
| --- | --- |

—

Arteria aductora del Campo de Pozos de Guadarrama y estación de tratamiento-2002 C(2004) 3565 (2002 ES 16 CPT 035)

| — | Saneamiento y depuración de diversas zonas de Cantabria — C(2000) 4307 (2000 ES 16 CPT 001) |
| --- | --- |

—

Saneamiento y depuración de diversas zonas de Cantabria — C(2000) 4307 (2000 ES 16 CPT 001)

| — | Ampliación Puerto de Ferrol (puerto exterior) — C(2004) 1862 (2002 ES 161 PR 001) |
| --- | --- |

—

Ampliación Puerto de Ferrol (puerto exterior) — C(2004) 1862 (2002 ES 161 PR 001)

| — | Ampliación del Puerto de Sagunto — C(2003) 4232 (2002 ES 161 PR010) |
| --- | --- |

—

Ampliación del Puerto de Sagunto — C(2003) 4232 (2002 ES 161 PR010)

| — | Glapilk, AIE — C(2003) 118 (2002 ES 161 PR 016) |
| --- | --- |

—

Glapilk, AIE — C(2003) 118 (2002 ES 161 PR 016)

| — | Petroquimica Espanola SA — C(2004) 145 (2003 ES 161 PR026) |
| --- | --- |

—

Petroquimica Espanola SA — C(2004) 145 (2003 ES 161 PR026)

| — | Tableros Tradema SA — C(2003) 5090 (2003 ES 161 PR 020) |
| --- | --- |

—

Tableros Tradema SA — C(2003) 5090 (2003 ES 161 PR 020)

| — | Construcciones aeronáuticas — Cádiz (2004 ES 161 PR 010) |
| --- | --- |

—

Construcciones aeronáuticas — Cádiz (2004 ES 161 PR 010)

Spain

| — | Dupont Ibérica SL — C(2003) 1342 |
| --- | --- |

—

Dupont Ibérica SL — C(2003) 1342

| — | Fibras del Noroeste SA — C(2003) 180 |
| --- | --- |

—

Fibras del Noroeste SA — C(2003) 180

| — | Bioetanol Galicia SA — C(2003) 181 |
| --- | --- |

—

Bioetanol Galicia SA — C(2003) 181

| — | BP Oil Refinería de Castellón — C(2003) 3974 |
| --- | --- |

—

BP Oil Refinería de Castellón — C(2003) 3974

| — | Biocarburantes de Castilla y León — C(2004) 658 |
| --- | --- |

—

Biocarburantes de Castilla y León — C(2004) 658

| — | Intercontinental Química SA — C(2004) 2306 |
| --- | --- |

—

Intercontinental Química SA — C(2004) 2306

| — | Airbus España SL, Fabricación automatizada Toledo — C(2003) 4736 |
| --- | --- |

—

Airbus España SL, Fabricación automatizada Toledo — C(2003) 4736

| — | Airbus España SL, centro excelencia montajes Cádiz — C(2003) 4738 |
| --- | --- |

—

Airbus España SL, centro excelencia montajes Cádiz — C(2003) 4738

| — | Construcciones Aeronáuticas Sevilla — C(2004) 2441 |
| --- | --- |

—

Construcciones Aeronáuticas Sevilla — C(2004) 2441

| — | Ford España — C(2003) 4229 et C(2004) 2303 |
| --- | --- |

—

Ford España — C(2003) 4229 et C(2004) 2303

| — | Renault España — C(2004) 2304, C(2004) 3444 et C(2004) 3702 |
| --- | --- |

—

Renault España — C(2004) 2304, C(2004) 3444 et C(2004) 3702

| — | Autovia de la Plata — C(2004) 275, C(2004) 0141, C(2004) 245 et C(2004) 2440 |
| --- | --- |

—

Autovia de la Plata — C(2004) 275, C(2004) 0141, C(2004) 245 et C(2004) 2440

| — | Autovia del Mediterraneo — C(2003) 1336 et C(2003) 3809 |
| --- | --- |

—

Autovia del Mediterraneo — C(2003) 1336 et C(2003) 3809

| — | Autovia del Cantabrico — C(2003) 209, C(2003) 211 et C(2003) 2594 |
| --- | --- |

—

Autovia del Cantabrico — C(2003) 209, C(2003) 211 et C(2003) 2594

France

| — | RN 20 — Déviation de Foix |
| --- | --- |

—

RN 20 — Déviation de Foix

| — | RCEA — Route Centre Europe Atlantique — C(2003) 2265 |
| --- | --- |

—

RCEA — Route Centre Europe Atlantique — C(2003) 2265

| — | Sevelnord — C(2003) 53 |
| --- | --- |

—

Sevelnord — C(2003) 53

| — | Pilkington — C(2002) 3478 |
| --- | --- |

—

Pilkington — C(2002) 3478

France

| — | Tunnel du Lioran — C(2002) 4154 |
| --- | --- |

—

Tunnel du Lioran — C(2002) 4154

| — | Tramway de Clermont-Ferrand — C(2004) 4349 |
| --- | --- |

—

Tramway de Clermont-Ferrand — C(2004) 4349

| — | Grand Halle d'Auvergne — C(2002) 1765 |
| --- | --- |

—

Grand Halle d'Auvergne — C(2002) 1765

| — | Electrification des lignes vosgiennes — 2ème tranche — C(2003) 3131 |
| --- | --- |

—

Electrification des lignes vosgiennes — 2ème tranche — C(2003) 3131

Ireland

| — | Gateway 2000 Ireland Ltd Dublin |
| --- | --- |

—

Gateway 2000 Ireland Ltd Dublin

| — | N11 Rathnew/Ashford by-pass |
| --- | --- |

—

N11 Rathnew/Ashford by-pass

| — | M1 Cloghran/Lissenhall (stage 2) |
| --- | --- |

—

M1 Cloghran/Lissenhall (stage 2)

Ireland

| — | Luas Line A (Light rail), C(2001)/4330 |
| --- | --- |

—

Luas Line A (Light rail), C(2001)/4330

| — | N22 Ballincollig By-pass, C(2002)/4617 |
| --- | --- |

—

N22 Ballincollig By-pass, C(2002)/4617

Italy

| — | ESSO Italiana SpA |
| --- | --- |

—

ESSO Italiana SpA

| — | SGS-Thomson microelectronics |
| --- | --- |

—

SGS-Thomson microelectronics

| — | Produzione di pompe ad altissima pressione per motori diesel — C(2004) 5697 |
| --- | --- |

—

Produzione di pompe ad altissima pressione per motori diesel — C(2004) 5697

| — | RFI SpA — Potenziamento infrastrutturale e tecnologico della Caserta-Foggia — C(2005) 1268 |
| --- | --- |

—

RFI SpA — Potenziamento infrastrutturale e tecnologico della Caserta-Foggia — C(2005) 1268

Italy

| — | Metropolitana di Napoli — Dante/Garibaldi — C(2005) 5235 |
| --- | --- |

—

Metropolitana di Napoli — Dante/Garibaldi — C(2005) 5235

| — | Metropolitana di Napoli — Vantivelli/Dante — C(2005) 5241 |
| --- | --- |

—

Metropolitana di Napoli — Vantivelli/Dante — C(2005) 5241

| — | Autostrada Siracusa-Gela — C(2005) 5233 |
| --- | --- |

—

Autostrada Siracusa-Gela — C(2005) 5233

| — | FRIEL — C(2005) 2839 |
| --- | --- |

—

FRIEL — C(2005) 2839

| — | IVECO — C(2005) 1481 |
| --- | --- |

—

IVECO — C(2005) 1481

Portugal

| — | Autoeuropa |
| --- | --- |

—

Autoeuropa

| — | Auto-estrada A12 |
| --- | --- |

—

Auto-estrada A12

| — | Sistema multimunicipal de saneamento do Tejo-Trancão — C(2003) 2951 |
| --- | --- |

—

Sistema multimunicipal de saneamento do Tejo-Trancão — C(2003) 2951

| — | Porto do Caniçal — C(2003) 4458 |
| --- | --- |

—

Porto do Caniçal — C(2003) 4458

| — | Linha do Algarve II et V — C(2000) 3486 et C(2001) 3590 |
| --- | --- |

—

Linha do Algarve II et V — C(2000) 3486 et C(2001) 3590

| — | Linha do Douro (troço Cête — Caíde) — C(2001) 2124 |
| --- | --- |

—

Linha do Douro (troço Cête — Caíde) — C(2001) 2124

| — | Infineon technologies — C(2004) 3220 |
| --- | --- |

—

Infineon technologies — C(2004) 3220

| — | Mabor Continental — C(2004) 661 |
| --- | --- |

—

Mabor Continental — C(2004) 661

Portugal

| — | IC 10 — Ponte sobre o Tejo em Santarém — C(2001) 2727 |
| --- | --- |

—

IC 10 — Ponte sobre o Tejo em Santarém — C(2001) 2727

| — | Armazenamento subterrâneo do Canriço — C(2001) 2011 |
| --- | --- |

—

Armazenamento subterrâneo do Canriço — C(2001) 2011

| — | EPCOS — C(2003) 183 |
| --- | --- |

—

EPCOS — C(2003) 183

| — | CIMPOR — C(2003) 5099 |
| --- | --- |

—

CIMPOR — C(2003) 5099

| — | MST — Metropolitano do Sul do Tejo — C(2003) 3078 |
| --- | --- |

—

MST — Metropolitano do Sul do Tejo — C(2003) 3078

| — | Aeroporto Sá Carneiro (2003 PT 161 PR 004) |
| --- | --- |

—

Aeroporto Sá Carneiro (2003 PT 161 PR 004)

United Kingdom

| — | Phoenix natural gas network |
| --- | --- |

—

Phoenix natural gas network

| — | Liverpool Airport |
| --- | --- |

—

Liverpool Airport

| — | Merseyside Special Investment Fund (MSIF) — C(2001)2059 et C(2003)5386 |
| --- | --- |

—

Merseyside Special Investment Fund (MSIF) — C(2001)2059 et C(2003)5386

| — | Yorkshire and Humber Partnership Investment Fund (Y&H PIF) — C(2003)206 et C(2003)5386 |
| --- | --- |

—

Yorkshire and Humber Partnership Investment Fund (Y&H PIF) — C(2003)206 et C(2003)5386

United Kingdom

| — | Frenchgate Interchange, Doncaster |
| --- | --- |

—

Frenchgate Interchange, Doncaster

| — | Combined universities in Cornwall (CUC) |
| --- | --- |

—

Combined universities in Cornwall (CUC)

| — | Edinburgh Biomedical Research Institute |
| --- | --- |

—

Edinburgh Biomedical Research Institute

---

ANNEX II

2000-2006 MAJOR PROJECTS EVALUATED — DISCOUNT RATE AND TIME HORIZONS

| Project | Sector | Financial discount rate | Economic discount rate | Time horizons |
| --- | --- | --- | --- | --- |
| Germany |
| Ausbau der Schienenstrecke (ABS) Berlin-Frankfurt/Oder | Infrastructure | 7,5 | 3 | 6 + 30 |
| Phoenix west | Infr. | 6 et 5 | — | 15 |
| Otto GmbH | | 5 | 5 | 14 |
| Greece |
| Extension Metro Athens (CF) | Infr. | 6 | 6 | 30 |
| Extension Metro Athens (OP AA) | Infr. | 6 | 6 | 30 |
| Aposelemi dam (CF) | Infr. | 5 | 3 | 45 |
| Bus and trolley Renewal (OP SAAS) | Infr. | 6 | 5 | 12 |
| Extensions Metro Athens (OP OALAA) | Infr. | Unspecified | 6 | Unspecified |
| Sections d'Egnatia Odos-Ioannina-Metsovo | Infr. | 6 | 6 | 25 |
| France |
| RCEA | Infr. | — | 8 | 25 |
| Sevelnord | Productif | — | — | — |
| Pilkington | Prod. | — | — | — |
| Tunnel de Lioran | Infr. | — | 8 | 20 |
| Grande Halle d'Auvergne | Infr. | 4 and 5,2 | — | 31 |
| Tramway de Clermont-Ferrand | Infr. | 6 | 6 | 35 |
| Electrification lignes vosgiennes | Infr. | 6 | 6 | 31 |
| Déviation Sainte-Marie | Infr. | — | 8 | 23 |
| Electrification Ligne Tours-Saincaize | Infr. | 6 | 8 | 30 |
| ATMEL II | Prod. | 5,5 | — | 5 |
| ATMEL III | Prod. | 5,5 | — | 5 |
| Philips France Semi-Conducteurs | Pord. | 6 | 6 | 5 |
| Spain |
| Ampliación del Puerto de Alicante | Infr. | 6 | 6 | 30 |
| Actuaciones de Línea de alta velocidad Madrid-Barcelona-frontera francesa: Tramo Madrid-Lleida | Infr. | 6 | 6 | 20 |
| Arteria aductora del Campo de Pozos de Guadarrama y estación de tratamiento — 2002 | Infr.-Env. | 5 | 5 | 25 |
| Saneamiento y depuración de diversas zonas de Cantabria | Infr.-Env. | 5 | 5 | 25 |
| Ampliación Puerto de Ferrol (puerto exterior) | Infr. | 6 | 6 | 20 |
| Ampliación del Puerto de Sagunto | Infr. | 6 | 6 | 20 |
| Glapilk, AIE | Prod. | 5 | — | 25 |
| Tableros Tradema SA | Prod. | 10 | — | 10 |
| EADS Petroquimica Española-Andalucia | Prod. | 5 | — | 5 |
| EADS Construcciones aeronáuticas — Cádiz | Prod. | 8 | — | 10 |
| Dupont Ibérica SL — C(2003) 1342 | Prod. | 3,5 | — | Unspecified |
| Fibras del Noroeste SA — C(2003) 180 | Prod. | 6 | — | Unspecified |
| Bioetanol Galicia SA — C(2003) 181 | Prod. | Unspecified | — | 5 |
| BP Oil Refinería de Castellón — C(2003) 3974 | Prod. | Unspecified | — | 10 |
| Biocarburantes de Castilla y León — C(2004) 658 | Prod. | Unspecified | — | 5 |
| Intercontinental Química SA — C(2004) 2306 | Prod. | Unspecified | — | Unspecified |
| Airbus España SL, Fabricación automatizada Toledo — C(2003) 4736 | Prod. | Unspecified | — | Unspecified |
| Airbus España SL, centro excelencia montajes Cádiz — C(2003) 4738 | Prod. | Unspecified | — | Unspecified |
| Construcciones Aeronáuticas Sevilla — C(2004) 2441 | Prod. | Unspecified | — | Unspecified |
| Ford España — C(2003) 4229 | Prod. | 4,5 | — | 11 |
| Ford España — C(2004) 2303 | Prod. | 4,5 | — | 10 |
| Renault España — C(2004) 2304 | Prod. | Unspecified | — | 7 |
| Renault España — C(2004) 3444 | Prod. | Unspecified | — | 10 |
| Renault España — C(2004) 3702 | Prod. | — | — | 5 |
| Autovia de la Plata — C(2004) 275 | Infr. | — | 5 | 30 |
| Autovia de la Plata — C(2004) 0141 | Infr. | — | 5 | 30 |
| Autovia de la Plata — C(2004) 245 | Infr. | — | 5 | 30 |
| Autovia de la Plata — C(2004) 2440 | Infr. | — | 5 | 30 |
| Autovia del Mediterraneo — C(2003) 1336 | Infr. | — | 5 | 30 |
| Autovia del Mediterraneo — C(2003) 3809 | Infr. | — | 5 | 30 |
| Autovia del Mediterraneo — C(2003) 209 | Infr. | — | 5 | 30 |
| Autovia del Cantabrico — C(2003) 211 | Infr. | — | 5 | 30 |
| Autovia del Cantabrico — C(2003) 2594 | Infr. | — | 5 | 30 |
| Ireland |
| N11 Rathnew/Ashford By-Pass | | | 5 | 30 |
| M1 Cloghran — Lissenhall Stage 2 | | | 5 | 30 |
| N22 Ballincollig By-Pass | | | 5 | 20 |
| Luas Line A | | | 5 | 30 |
| Italy |
| Produzione di pompe ad altissima pressione Bosch — C(2004) 5697 | Prod. | 6 | 5 | 10 |
| RFI SpA — Ligne Caserta-Foggia — C(2005) 1268 | Infr. | 6 | 5 | 30 |
| Metropolitana di Napoli — Dante/Garibaldi — C(2005) 5235 | Infr. | 6 | 6 | 30 |
| Metropolitana di Napoli — Vanitelli/Dante — C(2005) 5241 | Infr. | 6 | 6 | 30 |
| Autostrada Siracusa-Gela — C(2005) 5233 | Infr. | 5 | 5 | 35 |
| FRIEL — C(2005) 2839 | Infr.-Energy | 5 | 5 | 16 |
| IVECO — C(2005) 1481 | Prod. | 6 | 6 | 4 + 7 |
| Portugal |
| Sistema multimunicipal de saneamento do Tejo-Trancão — C(2003) 2951 | Infr.-Env. | 6 | 6 | 30 |
| Porto do Caniçal — C(2003) 4458 | Infr. | 6 | 6 | 25 |
| Modernização da linha do Algarve II-C(2000) 3486 | Infr. | 5 | 5 | 25 |
| Linha do Algarve V (troço Ermidas-Faro) — C(2001) 3590 | Infr. | 5 | 5 | 25 |
| Linha do Douro (troço Cête-Caíde) — C(2001) 2124 | Infr. | 5 | | 35 |
| Infineon technologies — C(2004) 3220 | Prod. | 3 | — | 10 |
| Mabor Continental — C(2004) 661 | Prod. | 3 | — | 10 |
| IC 10 — Ponte sobre o Tejo em Santarém — C(2001) 2727 | Infr. | — | 10 | 23 |
| Armazenamento subterrâneo do Caniço — C(2001) 2011 | Infr.-Energy | 8,4 | — | 30 |
| EPCOS — C(2003) 183 | Prod. | 10 | — | 10 |
| CIMPOR — C(2003) 5099 | Prod. | 8 | — | 6 |
| MST — Metropolitano do Sul do Tejo — C(2003) 3078 | Infr. | 7 | 7 | 27 |
| Aeroporto Sá Carneiro | Infr. | 6,62 | 12 | 25/27 |
| United Kingdom |
| Merseyside Special Investment Fund (MSIF) | Prod. | Unspecified | Unspecified | 9/10 |
| Yorkshire and Humber Partnership Investment (Y&H PIF) | Prod. | Unspecified | 5 | 10 |
| Frenchgate Interchange, Doncaster | | 6 | 6 | 25 |
| Combined universities in Cornwall (CUC) | | 5 | 5 | 25 |
| Edinburgh Biomedical Research Institute | | 3,5 | 3,5 | 25 |

Project

Sector

Financial discount rate

Economic discount rate

Time horizons

Germany

Ausbau der Schienenstrecke (ABS) Berlin-Frankfurt/Oder

Infrastructure

7,5

3

6 + 30

Phoenix west

Infr.

6 et 5

—

15

Otto GmbH

5

5

14

Greece

Extension Metro Athens (CF)

Infr.

6

6

30

Extension Metro Athens (OP AA)

Infr.

6

6

30

Aposelemi dam (CF)

Infr.

5

3

45

Bus and trolley Renewal (OP SAAS)

Infr.

6

5

12

Extensions Metro Athens (OP OALAA)

Infr.

Unspecified

6

Unspecified

Sections d'Egnatia Odos-Ioannina-Metsovo

Infr.

6

6

25

France

RCEA

Infr.

—

8

25

Sevelnord

Productif

—

—

—

Pilkington

Prod.

—

—

—

Tunnel de Lioran

Infr.

—

8

20

Grande Halle d'Auvergne

Infr.

4 and 5,2

—

31

Tramway de Clermont-Ferrand

Infr.

6

6

35

Electrification lignes vosgiennes

Infr.

6

6

31

Déviation Sainte-Marie

Infr.

—

8

23

Electrification Ligne Tours-Saincaize

Infr.

6

8

30

ATMEL II

Prod.

5,5

—

5

ATMEL III

Prod.

5,5

—

5

Philips France Semi-Conducteurs

Pord.

6

6

5

Spain

Ampliación del Puerto de Alicante

Infr.

6

6

30

Actuaciones de Línea de alta velocidad Madrid-Barcelona-frontera francesa: Tramo Madrid-Lleida

Infr.

6

6

20

Arteria aductora del Campo de Pozos de Guadarrama y estación de tratamiento — 2002

Infr.-Env.

5

5

25

Saneamiento y depuración de diversas zonas de Cantabria

Infr.-Env.

5

5

25

Ampliación Puerto de Ferrol (puerto exterior)

Infr.

6

6

20

Ampliación del Puerto de Sagunto

Infr.

6

6

20

Glapilk, AIE

Prod.

5

—

25

Tableros Tradema SA

Prod.

10

—

10

EADS Petroquimica Española-Andalucia

Prod.

5

—

5

EADS Construcciones aeronáuticas — Cádiz

Prod.

8

—

10

Dupont Ibérica SL — C(2003) 1342

Prod.

3,5

—

Unspecified

Fibras del Noroeste SA — C(2003) 180

Prod.

6

—

Unspecified

Bioetanol Galicia SA — C(2003) 181

Prod.

Unspecified

—

5

BP Oil Refinería de Castellón — C(2003) 3974

Prod.

Unspecified

—

10

Biocarburantes de Castilla y León — C(2004) 658

Prod.

Unspecified

—

5

Intercontinental Química SA — C(2004) 2306

Prod.

Unspecified

—

Unspecified

Airbus España SL, Fabricación automatizada Toledo — C(2003) 4736

Prod.

Unspecified

—

Unspecified

Airbus España SL, centro excelencia montajes Cádiz — C(2003) 4738

Prod.

Unspecified

—

Unspecified

Construcciones Aeronáuticas Sevilla — C(2004) 2441

Prod.

Unspecified

—

Unspecified

Ford España — C(2003) 4229

Prod.

4,5

—

11

Ford España — C(2004) 2303

Prod.

4,5

—

10

Renault España — C(2004) 2304

Prod.

Unspecified

—

7

Renault España — C(2004) 3444

Prod.

Unspecified

—

10

Renault España — C(2004) 3702

Prod.

—

—

5

Autovia de la Plata — C(2004) 275

Infr.

—

5

30

Autovia de la Plata — C(2004) 0141

Infr.

—

5

30

Autovia de la Plata — C(2004) 245

Infr.

—

5

30

Autovia de la Plata — C(2004) 2440

Infr.

—

5

30

Autovia del Mediterraneo — C(2003) 1336

Infr.

—

5

30

Autovia del Mediterraneo — C(2003) 3809

Infr.

—

5

30

Autovia del Mediterraneo — C(2003) 209

Infr.

—

5

30

Autovia del Cantabrico — C(2003) 211

Infr.

—

5

30

Autovia del Cantabrico — C(2003) 2594

Infr.

—

5

30

Ireland

N11 Rathnew/Ashford By-Pass

5

30

M1 Cloghran — Lissenhall Stage 2

5

30

N22 Ballincollig By-Pass

5

20

Luas Line A

5

30

Italy

Produzione di pompe ad altissima pressione Bosch — C(2004) 5697

Prod.

6

5

10

RFI SpA — Ligne Caserta-Foggia — C(2005) 1268

Infr.

6

5

30

Metropolitana di Napoli — Dante/Garibaldi — C(2005) 5235

Infr.

6

6

30

Metropolitana di Napoli — Vanitelli/Dante — C(2005) 5241

Infr.

6

6

30

Autostrada Siracusa-Gela — C(2005) 5233

Infr.

5

5

35

FRIEL — C(2005) 2839

Infr.-Energy

5

5

16

IVECO — C(2005) 1481

Prod.

6

6

4 + 7

Portugal

Sistema multimunicipal de saneamento do Tejo-Trancão — C(2003) 2951

Infr.-Env.

6

6

30

Porto do Caniçal — C(2003) 4458

Infr.

6

6

25

Modernização da linha do Algarve II-C(2000) 3486

Infr.

5

5

25

Linha do Algarve V (troço Ermidas-Faro) — C(2001) 3590

Infr.

5

5

25

Linha do Douro (troço Cête-Caíde) — C(2001) 2124

Infr.

5

35

Infineon technologies — C(2004) 3220

Prod.

3

—

10

Mabor Continental — C(2004) 661

Prod.

3

—

10

IC 10 — Ponte sobre o Tejo em Santarém — C(2001) 2727

Infr.

—

10

23

Armazenamento subterrâneo do Caniço — C(2001) 2011

Infr.-Energy

8,4

—

30

EPCOS — C(2003) 183

Prod.

10

—

10

CIMPOR — C(2003) 5099

Prod.

8

—

6

MST — Metropolitano do Sul do Tejo — C(2003) 3078

Infr.

7

7

27

Aeroporto Sá Carneiro

Infr.

6,62

12

25/27

United Kingdom

Merseyside Special Investment Fund (MSIF)

Prod.

Unspecified

Unspecified

9/10

Yorkshire and Humber Partnership Investment (Y&H PIF)

Prod.

Unspecified

5

10

Frenchgate Interchange, Doncaster

6

6

25

Combined universities in Cornwall (CUC)

5

5

25

Edinburgh Biomedical Research Institute

3,5

3,5

25

---

THE COMMISSION REPLIES

SUMMARY

| I. | Given the very significant amounts of funds involved in Major Projects, the Commission believes it is important to subject them to a more rigorous application process and a closer examination. This helps to ensure maximum impact on regional development and efficient use of Community resources. |
| --- | --- |

I.

Given the very significant amounts of funds involved in Major Projects, the Commission believes it is important to subject them to a more rigorous application process and a closer examination. This helps to ensure maximum impact on regional development and efficient use of Community resources.

| III. | The Commission agrees that Major Project applications from Member States have been of mixed quality. To improve the quality of dossiers, it has sought clarifications and additional information from the project promoters during the appraisal.
  The Commission has taken steps to improve both the preparation of project applications by Member States and its own appraisal. These will have their full impact in the 2007-2013 programming period. |
| --- | --- |

III.

The Commission agrees that Major Project applications from Member States have been of mixed quality. To improve the quality of dossiers, it has sought clarifications and additional information from the project promoters during the appraisal.

The Commission has taken steps to improve both the preparation of project applications by Member States and its own appraisal. These will have their full impact in the 2007-2013 programming period.

| IV. | The Commission agrees with the Court's recommendations and intends to ensure that the improved regulatory provisions are properly implemented.
  For the 2007-2013 programming period the Commission has published a working document on cost-benefit analysis (CBA), which should improve the quality of CBAs and provide a common framework for project appraisal. Also, the document sets out the calculation method for determining the level of the EU grant based on the provisions of Regulation 1083/2006. |
| --- | --- |

IV.

The Commission agrees with the Court's recommendations and intends to ensure that the improved regulatory provisions are properly implemented.

For the 2007-2013 programming period the Commission has published a working document on cost-benefit analysis (CBA), which should improve the quality of CBAs and provide a common framework for project appraisal. Also, the document sets out the calculation method for determining the level of the EU grant based on the provisions of Regulation 1083/2006.

| V. | The Commission will use Major Project information to address specific evaluation questions, such as unit costs in infrastructure projects, in the context of its wider European Regional Development Fund (ERDF) 2000-2006 ex post evaluation. |
| --- | --- |

V.

The Commission will use Major Project information to address specific evaluation questions, such as unit costs in infrastructure projects, in the context of its wider European Regional Development Fund (ERDF) 2000-2006 ex post evaluation.

| VI. | The Commission agrees that Member States could benefit from ex post evaluations of Major Projects and has therefore always encouraged the practice.
  The new application forms specifically ask for a description of the starting position, together with relevant indicators of outputs and of the contribution to programmes objectives. The new tool for electronic exchange of information will facilitate the collection of structured data on projects which are required by the Commission implementing Regulation.
  Annual implementation reports will have to include information on the progress and financing of Major Projects. |
| --- | --- |

VI.

The Commission agrees that Member States could benefit from ex post evaluations of Major Projects and has therefore always encouraged the practice.

The new application forms specifically ask for a description of the starting position, together with relevant indicators of outputs and of the contribution to programmes objectives. The new tool for electronic exchange of information will facilitate the collection of structured data on projects which are required by the Commission implementing Regulation.

Annual implementation reports will have to include information on the progress and financing of Major Projects.

| VII. | Any review of the requirements for Major Projects should take account of the impact of the improvements in procedures for the 2007-2013 period. |
| --- | --- |

VII.

Any review of the requirements for Major Projects should take account of the impact of the improvements in procedures for the 2007-2013 period.

DOES THE COMMISSION PREPARE COMMUNITY FINANCING OF MAJOR PROJECTS ADEQUATELY?

| 15. | The Commission examines the project applications as thoroughly as possible, with reference to the factors and criteria listed in Article 26(2) of Regulation (EC) No 1260/1999, and carries out the necessary internal consultations, and if necessary enlists the help of the European Investment Bank (EIB), in order to make a full appraisal. |
| --- | --- |

15.

The Commission examines the project applications as thoroughly as possible, with reference to the factors and criteria listed in Article 26(2) of Regulation (EC) No 1260/1999, and carries out the necessary internal consultations, and if necessary enlists the help of the European Investment Bank (EIB), in order to make a full appraisal.

| 16. | The Commission agrees with the Court's statement of principles as to the standards to be aimed for in examining Major Projects. However it is important to bear in mind the constraints of the regulatory environment:






  (a) | the Commission has to rely on the information supplied by Member States; |
| --- | --- | --- |

16.

The Commission agrees with the Court's statement of principles as to the standards to be aimed for in examining Major Projects. However it is important to bear in mind the constraints of the regulatory environment:

(a)

the Commission has to rely on the information supplied by Member States;

| (b) and (c) | different rules applied for ERDF and the Cohesion Fund which were interpreted differently by the Member States. The Commission had no clear legal criteria it could use to require Member States to accept a given financial contribution. |
| --- | --- |

(b) and (c)

different rules applied for ERDF and the Cohesion Fund which were interpreted differently by the Member States. The Commission had no clear legal criteria it could use to require Member States to accept a given financial contribution.

| 17. | In addition, a Guide to the Cohesion Fund 2000-2006 was sent to the Member States in 2000. It contained annexes on the ‘polluter pays’ principle and the financing of revenue-generating projects.
  The 2002 CBA guide is currently being updated to reflect the new regulatory framework and include the latest methodological developments. The new version will be issued in the second quarter of 2008. It will strengthen the sections dealing with the inclusion of environmental impacts and employment effects in CBA results. |
| --- | --- |

17.

In addition, a Guide to the Cohesion Fund 2000-2006 was sent to the Member States in 2000. It contained annexes on the ‘polluter pays’ principle and the financing of revenue-generating projects.

The 2002 CBA guide is currently being updated to reflect the new regulatory framework and include the latest methodological developments. The new version will be issued in the second quarter of 2008. It will strengthen the sections dealing with the inclusion of environmental impacts and employment effects in CBA results.

| 18. | First indent — Most 2000-2006 projects were in fact submitted after the detailed guidance was provided in 2003.
  Second indent — The results of the inter-service consultation are shown in a fiche accompanying the proposed decision so that the Commission is aware of any dissenting views before it takes the decision. The Directorate General for Regional Policy endeavours to procure any further documentation requested by the other services to clarify uncertain points.
  Third indent — There are no ground rules in the regulations about the criteria governing the allocation of projects to the one or the other fund. The range of projects to which the Funds can be applied is determined by their regulations, namely Article 2 of Regulation 1783/1999 for ERDF and Article 3 of Regulation 1164/94 for the Cohesion Fund. The Cohesion Fund has a much narrower scope, being limited to TEN-T and environmental projects.
  Box 1 — In productive investment projects considerations of regional development may outweigh arguments against funding based on the financial profitability of projects. State aid is allowed in order to compensate for the disadvantages of location.
  With regard to the metro project, it was considered that the lack of an immediate link with the TEN-T should not disqualify the project from funding by the Cohesion Fund. The Environment Directorate-General's concern was that the acceptance of this project should not be to the detriment of classic environmental projects financed by the Cohesion Fund, which proved not to be the case. The quantification of the environmental effects of an individual project is very difficult, in view of the number of factors influencing air pollution and energy use in a major conurbation.
  Box 2 — For a project eligible for financing from either fund, maturity is a valid consideration as the completion deadlines for Cohesion Fund projects are somewhat more flexible than those under ERDF programmes. The co-financing rate for the Cohesion Fund project of 66 % was justified, given the higher permitted co-financing rates for the Cohesion Fund and the restriction of ERDF co-financing of projects generating substantial revenue located in Member States covered by the Cohesion Fund to 50 % (Article 29(4)(a) of Regulation 1260/1999). |
| --- | --- |

18.

First indent — Most 2000-2006 projects were in fact submitted after the detailed guidance was provided in 2003.

Second indent — The results of the inter-service consultation are shown in a fiche accompanying the proposed decision so that the Commission is aware of any dissenting views before it takes the decision. The Directorate General for Regional Policy endeavours to procure any further documentation requested by the other services to clarify uncertain points.

Third indent — There are no ground rules in the regulations about the criteria governing the allocation of projects to the one or the other fund. The range of projects to which the Funds can be applied is determined by their regulations, namely Article 2 of Regulation 1783/1999 for ERDF and Article 3 of Regulation 1164/94 for the Cohesion Fund. The Cohesion Fund has a much narrower scope, being limited to TEN-T and environmental projects.

Box 1 — In productive investment projects considerations of regional development may outweigh arguments against funding based on the financial profitability of projects. State aid is allowed in order to compensate for the disadvantages of location.

With regard to the metro project, it was considered that the lack of an immediate link with the TEN-T should not disqualify the project from funding by the Cohesion Fund. The Environment Directorate-General's concern was that the acceptance of this project should not be to the detriment of classic environmental projects financed by the Cohesion Fund, which proved not to be the case. The quantification of the environmental effects of an individual project is very difficult, in view of the number of factors influencing air pollution and energy use in a major conurbation.

Box 2 — For a project eligible for financing from either fund, maturity is a valid consideration as the completion deadlines for Cohesion Fund projects are somewhat more flexible than those under ERDF programmes. The co-financing rate for the Cohesion Fund project of 66 % was justified, given the higher permitted co-financing rates for the Cohesion Fund and the restriction of ERDF co-financing of projects generating substantial revenue located in Member States covered by the Cohesion Fund to 50 % (Article 29(4)(a) of Regulation 1260/1999).

| 19. | The limited period for processing applications begins to run from the receipt of complete information. Therefore, the processing periods referred to by the Court do not necessarily represent a breach of the deadline. As the Court itself notes, the reason for the delays has mainly been the need to request clarifications or missing information from the managing authorities. |
| --- | --- |

19.

The limited period for processing applications begins to run from the receipt of complete information. Therefore, the processing periods referred to by the Court do not necessarily represent a breach of the deadline. As the Court itself notes, the reason for the delays has mainly been the need to request clarifications or missing information from the managing authorities.

| 20. | First indent — The Commission encourages Member States to present funding applications for projects that are sufficiently mature. To avoid the presentation of funding applications for immature projects, the Commission in 2002 decided that Cohesion Fund project decisions would only be able to be amended once in the project's lifetime. The JASPERS facility now set up for the 2007-2013 period (see reply to point 57) is also intended to assist Member States to improve project preparation. Cost overruns can occur even for well prepared, mature projects, especially as a result of inflation of raw material costs, and especially as implementation is spread over several years. Delays are sometimes due to administrative or legal procedures in the Member State, which are also independent of the state of maturity of the project when presented.
  Second indent — The regulations allow Member States to present funding applications for projects which are virtually complete. For productive investment projects the EU grant is often awarded to ‘top-up’ the national aid within the allowable state aid limit; the decision by the national authorities is taken well before the project is completed. In any case, irrespective of the time of submission, the information required with applications imposes a beneficial discipline on Member States in the justification of projects and increases transparency.
  Third indent — Productive investment projects are subject to the rules on state aid schemes which include criteria for assessing eligibility for aid and the compatibility of the aid package proposed with the state aid rules. The standard application form moreover requires information on how the ERDF contribution accelerates or is essential for the implementation of the project. The Court is also referred to the reply to point 32.
  Fourth indent — Cases of groups of projects being accepted as an ERDF Major Project are rare and justified by special circumstances. The advantage of Major Project status under the ‘n + 2’ rule is counterbalanced by the more stringent information requirements. This reduces the risk of spurious Major Project applications. In the Commission's experience, there is a greater risk of Member States failing to notify projects that meet the criteria for Major Projects, and this risk was behind the definition in the regulations as an ‘economically indivisible series of works.’ |
| --- | --- |

20.

First indent — The Commission encourages Member States to present funding applications for projects that are sufficiently mature. To avoid the presentation of funding applications for immature projects, the Commission in 2002 decided that Cohesion Fund project decisions would only be able to be amended once in the project's lifetime. The JASPERS facility now set up for the 2007-2013 period (see reply to point 57) is also intended to assist Member States to improve project preparation. Cost overruns can occur even for well prepared, mature projects, especially as a result of inflation of raw material costs, and especially as implementation is spread over several years. Delays are sometimes due to administrative or legal procedures in the Member State, which are also independent of the state of maturity of the project when presented.

Second indent — The regulations allow Member States to present funding applications for projects which are virtually complete. For productive investment projects the EU grant is often awarded to ‘top-up’ the national aid within the allowable state aid limit; the decision by the national authorities is taken well before the project is completed. In any case, irrespective of the time of submission, the information required with applications imposes a beneficial discipline on Member States in the justification of projects and increases transparency.

Third indent — Productive investment projects are subject to the rules on state aid schemes which include criteria for assessing eligibility for aid and the compatibility of the aid package proposed with the state aid rules. The standard application form moreover requires information on how the ERDF contribution accelerates or is essential for the implementation of the project. The Court is also referred to the reply to point 32.

Fourth indent — Cases of groups of projects being accepted as an ERDF Major Project are rare and justified by special circumstances. The advantage of Major Project status under the ‘n + 2’ rule is counterbalanced by the more stringent information requirements. This reduces the risk of spurious Major Project applications. In the Commission's experience, there is a greater risk of Member States failing to notify projects that meet the criteria for Major Projects, and this risk was behind the definition in the regulations as an ‘economically indivisible series of works.’

| 22. | The Commission agrees that the CBAs submitted were of mixed quality. Use of the CBA guide was not compulsory, but the Directorate-General for Regional Policy has encouraged national authorities to follow it and has contributed to training actions. Above all, however, the Commission has sought to promote internal consistency of CBA methodological approaches across projects at single Member State level because CBA is used to assign financial resources to projects and therefore needs to be applied consistently.
  In order to improve the quality and the comparability of CBAs for the 2007-2013 programming period, the Directorate-General for Regional Policy has produced a working document providing guidance for carrying out CBA (working document No 4 — see reply to point 24). |
| --- | --- |

22.

The Commission agrees that the CBAs submitted were of mixed quality. Use of the CBA guide was not compulsory, but the Directorate-General for Regional Policy has encouraged national authorities to follow it and has contributed to training actions. Above all, however, the Commission has sought to promote internal consistency of CBA methodological approaches across projects at single Member State level because CBA is used to assign financial resources to projects and therefore needs to be applied consistently.

In order to improve the quality and the comparability of CBAs for the 2007-2013 programming period, the Directorate-General for Regional Policy has produced a working document providing guidance for carrying out CBA (working document No 4 — see reply to point 24).

| 23. | The degree of detail required in the analysis advanced in justification of funding proposals is also a matter of judgment, especially where the analysis submitted is based on national criteria for infrastructure investments or on a state aid examination. |
| --- | --- |

23.

The degree of detail required in the analysis advanced in justification of funding proposals is also a matter of judgment, especially where the analysis submitted is based on national criteria for infrastructure investments or on a state aid examination.

| 24. | First paragraph — It is true that Major Project applications sometimes suffered from the weaknesses listed by the Court and that the Commission has in some cases been unable to obtain all the additional information necessary to fill gaps before approving projects.
  For the 2007-2013 period working document No 4 containing guidance for carrying out CBA provides a set of working rules and indicative values for key parameters for CBA (e.g., discount rates, reference periods). In the document the Commission recommends that the Member States develop their own CBA guidelines to take into account their specific institutional and economic conditions. JASPERS (see reply to point 57) is currently assisting Member States to develop national guidelines.
  First indent — As from 2007, following the inclusion in the Commission implementing regulation of a structured list of data required for Major Project applications (Annex XX of Regulation 1828/2006), it will not be possible to omit key information like the rates of return or the reference period, so that projects lacking basic elements of CBA will not in principle be considered as admissible.
  Second indent — For the 2007-2013 programme period the Commission recommends use of standard reference time horizons by sector (working document No 4). The quantification of environmental impacts is not straightforward; however, the CBA guide makes it clear that this should be done and recommends use of any of the various techniques that have been developed.
  Third indent — The discount rates recommended by the Commission are intended as benchmarks from which national rates can diverge, but the Commission recommends internal consistency across similar projects in a Member State or region. The application forms for the 2007-2013 period distinguish clearly between financial profitability with and without the EU grant. Concerning the inclusion of depreciation, both the CBA guide and working document No 4 make it clear that this is an accounting item and not a cash-flow and therefore it must be excluded from the discounted cash-flow analysis.
  Second paragraph — The Commission agrees on the relative weakness of the CBAs for productive investments compared to infrastructure projects. To improve the guidance to the Member States on CBA for productive investments, the Commission intends to add a case study on a productive investment in the update of the CBA guide. The differences between the financial analysis and the economic analysis for industrial projects will be highlighted.
  Box 3 — The Commission agrees that as far as possible information on the impact of linked projects on their respective localities should be taken into account when preparing a Major Project application. It should be noted that network effects are typically dealt with in the traffic and demand analysis and are therefore already indirectly included in the CBAs. |
| --- | --- |

24.

First paragraph — It is true that Major Project applications sometimes suffered from the weaknesses listed by the Court and that the Commission has in some cases been unable to obtain all the additional information necessary to fill gaps before approving projects.

For the 2007-2013 period working document No 4 containing guidance for carrying out CBA provides a set of working rules and indicative values for key parameters for CBA (e.g., discount rates, reference periods). In the document the Commission recommends that the Member States develop their own CBA guidelines to take into account their specific institutional and economic conditions. JASPERS (see reply to point 57) is currently assisting Member States to develop national guidelines.

First indent — As from 2007, following the inclusion in the Commission implementing regulation of a structured list of data required for Major Project applications (Annex XX of Regulation 1828/2006), it will not be possible to omit key information like the rates of return or the reference period, so that projects lacking basic elements of CBA will not in principle be considered as admissible.

Second indent — For the 2007-2013 programme period the Commission recommends use of standard reference time horizons by sector (working document No 4). The quantification of environmental impacts is not straightforward; however, the CBA guide makes it clear that this should be done and recommends use of any of the various techniques that have been developed.

Third indent — The discount rates recommended by the Commission are intended as benchmarks from which national rates can diverge, but the Commission recommends internal consistency across similar projects in a Member State or region. The application forms for the 2007-2013 period distinguish clearly between financial profitability with and without the EU grant. Concerning the inclusion of depreciation, both the CBA guide and working document No 4 make it clear that this is an accounting item and not a cash-flow and therefore it must be excluded from the discounted cash-flow analysis.

Second paragraph — The Commission agrees on the relative weakness of the CBAs for productive investments compared to infrastructure projects. To improve the guidance to the Member States on CBA for productive investments, the Commission intends to add a case study on a productive investment in the update of the CBA guide. The differences between the financial analysis and the economic analysis for industrial projects will be highlighted.

Box 3 — The Commission agrees that as far as possible information on the impact of linked projects on their respective localities should be taken into account when preparing a Major Project application. It should be noted that network effects are typically dealt with in the traffic and demand analysis and are therefore already indirectly included in the CBAs.

| 25. | The Commission has generally carried out a thorough appraisal. The relatively lengthy period for adoption of project applications is typically due to the ‘requests for additional information that the Commission has to make for a large majority of Major Projects’ (see point 19).
  While the Commission very seldom rejects projects, in some cases Member States withdraw projects following observations from the Commission. |
| --- | --- |

25.

The Commission has generally carried out a thorough appraisal. The relatively lengthy period for adoption of project applications is typically due to the ‘requests for additional information that the Commission has to make for a large majority of Major Projects’ (see point 19).

While the Commission very seldom rejects projects, in some cases Member States withdraw projects following observations from the Commission.

| 27. | The purpose of the state aid examination is to ensure that State aid is allowed only up to the level necessary to compensate for the disadvantages of a particular location or reward the performance of certain activities in the public interest (such as research, training or environmental protection). |
| --- | --- |

27.

The purpose of the state aid examination is to ensure that State aid is allowed only up to the level necessary to compensate for the disadvantages of a particular location or reward the performance of certain activities in the public interest (such as research, training or environmental protection).

| 29. | In the cases referred to by the Court the cost-benefit or financial analyses were, often after considerable internal discussion, considered to justify the co-financing rates proposed.
  The Evaluation Unit has developed CBA software which can be used by desk officers to check the correctness of the analyses carried out by the Member States, including the financing-gap calculation done to determine the EU grant. The software has been available since the end of 2004 and was recently updated to incorporate the new co-financing rules for 2007-2013. |
| --- | --- |

29.

In the cases referred to by the Court the cost-benefit or financial analyses were, often after considerable internal discussion, considered to justify the co-financing rates proposed.

The Evaluation Unit has developed CBA software which can be used by desk officers to check the correctness of the analyses carried out by the Member States, including the financing-gap calculation done to determine the EU grant. The software has been available since the end of 2004 and was recently updated to incorporate the new co-financing rules for 2007-2013.

| 30. | The 2000-2006 regulations afforded considerable flexibility in setting co-financing rates. In the Cohesion Fund the flexibility allowed by the Regulation was even greater than for ERDF. The Commission's guidance (for example, the ‘appraisal summary tables’ referred to in point 18) strives for maximum consistency in the methods applied, especially internally within a given Member State, but cannot impose completely standard practices.
  For the 2007-2013 programme period, clearer rules for modulating contributions from the Funds are provided by Article 55 of Regulation 1083/2006. The calculation method for modulating the EU grant has been explained in working document No 4 (see reply to point 24). The application forms have also been adapted to ensure provision of relevant information. |
| --- | --- |

30.

The 2000-2006 regulations afforded considerable flexibility in setting co-financing rates. In the Cohesion Fund the flexibility allowed by the Regulation was even greater than for ERDF. The Commission's guidance (for example, the ‘appraisal summary tables’ referred to in point 18) strives for maximum consistency in the methods applied, especially internally within a given Member State, but cannot impose completely standard practices.

For the 2007-2013 programme period, clearer rules for modulating contributions from the Funds are provided by Article 55 of Regulation 1083/2006. The calculation method for modulating the EU grant has been explained in working document No 4 (see reply to point 24). The application forms have also been adapted to ensure provision of relevant information.

| 31. | Socio-economic conditions such as the relative prosperity of the region where the investment is made can play an indirect role in the determination of the grant through the demand analysis of the CBA.
  The economic analysis mainly plays a role in the decision on whether or not to fund an infrastructure project. However, once a project is selected based on its socio-economic impact, the grant is generally determined on the basis of the financial analysis. The Commission believes that this is a correct approach. Giving less money to economically very desirable projects could endanger them.
  The Commission considers that it cannot decide on the structure of the overall financing package proposed by the Member State but only on the level of the Community grant. |
| --- | --- |

31.

Socio-economic conditions such as the relative prosperity of the region where the investment is made can play an indirect role in the determination of the grant through the demand analysis of the CBA.

The economic analysis mainly plays a role in the decision on whether or not to fund an infrastructure project. However, once a project is selected based on its socio-economic impact, the grant is generally determined on the basis of the financial analysis. The Commission believes that this is a correct approach. Giving less money to economically very desirable projects could endanger them.

The Commission considers that it cannot decide on the structure of the overall financing package proposed by the Member State but only on the level of the Community grant.

| 32. | Where a productive investment has been the subject of an ad-hoc state aid approval or is in line with an approved state aid scheme, it is normal to rely on this assessment in considering an EU contribution requested within the agreed public aid package (see also replies to points 20 and 27).
  As regards taking into account socio-economic factors to modulate the level of grant, see reply to point 31.
  The Commission agrees that procedures for the comparative appraisal of aid applications for productive investment projects at national level are desirable in order to consider wider economic issues and avoid over-financing.
  Box 4 — The financial status of a company contemplating an investment at a particular location is not a determining factor in the decision on the award of aid but the expected financial profitability of the (incremental) investment at the location. Deadweight is a typical risk in state aid schemes, since a large proportion of Major Projects may be assumed to have positive financial net present values and financial rates of return higher than the financial discount rate and sometimes the very objective of the aid is to attract to a less developed area an investment that would have been carried out anyway in other areas. |
| --- | --- |

32.

Where a productive investment has been the subject of an ad-hoc state aid approval or is in line with an approved state aid scheme, it is normal to rely on this assessment in considering an EU contribution requested within the agreed public aid package (see also replies to points 20 and 27).

As regards taking into account socio-economic factors to modulate the level of grant, see reply to point 31.

The Commission agrees that procedures for the comparative appraisal of aid applications for productive investment projects at national level are desirable in order to consider wider economic issues and avoid over-financing.

Box 4 — The financial status of a company contemplating an investment at a particular location is not a determining factor in the decision on the award of aid but the expected financial profitability of the (incremental) investment at the location. Deadweight is a typical risk in state aid schemes, since a large proportion of Major Projects may be assumed to have positive financial net present values and financial rates of return higher than the financial discount rate and sometimes the very objective of the aid is to attract to a less developed area an investment that would have been carried out anyway in other areas.

| 33. | In addition to the guidance referred to by the Court, the Commission had earlier provided the guidance referred to at points 17 and 18 in 1999-2001, a guidance note on the determination of the rate of assistance for revenue-generating investments in the Structural Funds in 2002, and in 2003 had recommended Member States to apply common principles for discount rates and other parameters in financial analyses (see point 28). |
| --- | --- |

33.

In addition to the guidance referred to by the Court, the Commission had earlier provided the guidance referred to at points 17 and 18 in 1999-2001, a guidance note on the determination of the rate of assistance for revenue-generating investments in the Structural Funds in 2002, and in 2003 had recommended Member States to apply common principles for discount rates and other parameters in financial analyses (see point 28).

| 34. | For public-private partnership projects working document No 4 suggests that the use of a higher discount rate may be appropriate to reflect the higher opportunity cost of capital to the private investor. Regarding considerations of relative prosperity, the working document recommends that tariff affordability is explicitly taken into account when determining project revenues, which are an input into the financing-gap formula. |
| --- | --- |

34.

For public-private partnership projects working document No 4 suggests that the use of a higher discount rate may be appropriate to reflect the higher opportunity cost of capital to the private investor. Regarding considerations of relative prosperity, the working document recommends that tariff affordability is explicitly taken into account when determining project revenues, which are an input into the financing-gap formula.

DO EX POST EVALUATIONS OF MAJOR PROJECTS GENERATE RESULTS THAT ARE HELPFUL FOR SUBSEQUENT DECISION-MAKING?

| 36. | The ERDF ex post evaluation was carried out for the 1994-1999 period for the whole ‘Objective’ and therefore encompassed interventions at different levels, though mainly aggregate programme level. Concerning 2000-2006 ex post evaluations, see reply to point 55. |
| --- | --- |

36.

The ERDF ex post evaluation was carried out for the 1994-1999 period for the whole ‘Objective’ and therefore encompassed interventions at different levels, though mainly aggregate programme level. Concerning 2000-2006 ex post evaluations, see reply to point 55.

| 38. | Information from the monitoring system does not form the only basis for the ex post evaluation. Such data needs to be supplemented with, for example, analysis of network effects, longer term demand and impacts after the investment phases, etc. |
| --- | --- |

38.

Information from the monitoring system does not form the only basis for the ex post evaluation. Such data needs to be supplemented with, for example, analysis of network effects, longer term demand and impacts after the investment phases, etc.

| 39. | The Commission agrees with the Court on the importance of evaluation as an input into future decisions on financing and implementation and on the need for tools to determine and collect the data required to carry out evaluations. It has made considerable efforts to improve the arrangements for evaluation and to foster an evaluation ‘culture’ among the actors responsible for structural actions expenditure. |
| --- | --- |

39.

The Commission agrees with the Court on the importance of evaluation as an input into future decisions on financing and implementation and on the need for tools to determine and collect the data required to carry out evaluations. It has made considerable efforts to improve the arrangements for evaluation and to foster an evaluation ‘culture’ among the actors responsible for structural actions expenditure.

| 40. | Other exceptions have been the ex post evaluation of CBAs of environmental projects in Ireland in 2002/2003 and a recently published ex post evaluation of 1993-1999 and 2000-2006 Cohesion Fund projects in Portugal. For the 1994-1999 period the regulations did not explicitly assign responsibility for ex post evaluation (as is the case for the 2000-2006 and 2007-2013 periods). Eventually it was the Commission (not the Member States) which assumed the responsibility for ex post evaluation. There was no regulatory requirement for carrying out ex post evaluations at project level, although this is encouraged.
  The performance of Major infrastructure Projects is often reported on for the purpose of further development, as in the case of the Athens Metro project with its ‘Metro Development Study’ and 20-year business plan. These studies contain much information about previous stages of the project similar to that in an ex post evaluation. |
| --- | --- |

40.

Other exceptions have been the ex post evaluation of CBAs of environmental projects in Ireland in 2002/2003 and a recently published ex post evaluation of 1993-1999 and 2000-2006 Cohesion Fund projects in Portugal. For the 1994-1999 period the regulations did not explicitly assign responsibility for ex post evaluation (as is the case for the 2000-2006 and 2007-2013 periods). Eventually it was the Commission (not the Member States) which assumed the responsibility for ex post evaluation. There was no regulatory requirement for carrying out ex post evaluations at project level, although this is encouraged.

The performance of Major infrastructure Projects is often reported on for the purpose of further development, as in the case of the Athens Metro project with its ‘Metro Development Study’ and 20-year business plan. These studies contain much information about previous stages of the project similar to that in an ex post evaluation.

| 41. | The evaluation referred to by the Court in paragraph 41(d) provided useful information for future decision-making and the debate on the findings led to improvements in the new regulatory framework for the 2007-2013 programming period. |
| --- | --- |

41.

The evaluation referred to by the Court in paragraph 41(d) provided useful information for future decision-making and the debate on the findings led to improvements in the new regulatory framework for the 2007-2013 programming period.

| 42. | The Commission has fully accepted the weaknesses due to lack of data in relation to the 1994-1999 period and has taken steps to improve the gathering of data in the 2000-2006 period and still more so in that for 2007-2013. |
| --- | --- |

42.

The Commission has fully accepted the weaknesses due to lack of data in relation to the 1994-1999 period and has taken steps to improve the gathering of data in the 2000-2006 period and still more so in that for 2007-2013.

| 43. | With the new tool for electronic exchange of information, ‘SFC2007’, it will not be possible to submit a Major Project application until all the structured data (Annex XX of Regulation (EC) No 1828/2006) are encoded in the system. |
| --- | --- |

43.

With the new tool for electronic exchange of information, ‘SFC2007’, it will not be possible to submit a Major Project application until all the structured data (Annex XX of Regulation (EC) No 1828/2006) are encoded in the system.

| 44. | The Commission has followed up the findings of the evaluation referred to by the Court, as described in the reply to point 41. See also the various actions taken to improve the data available for evaluation referred in the replies to points 24, 42 and 43.






  (c) | The Commission has recently developed a working document on methods for measuring employment effects. It is encouraging Member States to use this methodology in order to improve the information on job creation. |
| --- | --- | --- |

44.

The Commission has followed up the findings of the evaluation referred to by the Court, as described in the reply to point 41. See also the various actions taken to improve the data available for evaluation referred in the replies to points 24, 42 and 43.

(c)

The Commission has recently developed a working document on methods for measuring employment effects. It is encouraging Member States to use this methodology in order to improve the information on job creation.

| 45. | (b) | It is true that in many funding applications the starting position is not explicitly or comprehensively described. Nevertheless, as CBA is carried out on an incremental basis, i.e. based on the difference between a scenario with the project and the scenario without the project, the latter is of course modelled on the existing situation. The new application forms are more specific on this point. They also ask for the relevant indicators on output and on the contribution to the programmes objectives. |
| --- | --- | --- |

45.

(b)

It is true that in many funding applications the starting position is not explicitly or comprehensively described. Nevertheless, as CBA is carried out on an incremental basis, i.e. based on the difference between a scenario with the project and the scenario without the project, the latter is of course modelled on the existing situation. The new application forms are more specific on this point. They also ask for the relevant indicators on output and on the contribution to the programmes objectives.

| 46. | See reply to point 42. |
| --- | --- |

46.

See reply to point 42.

| 48. | (b) | The Commission intends to explore the issue of unit costs in more depth starting with the ERDF 2000-2006 ex post evaluation. One of the evaluations will assess the efficiency of ERDF funded Major Projects. It will also develop and test a methodology for investigating unit costs which will later be applied in future evaluations, such as the planned ex post evaluations of Cohesion Fund and ISPA projects. The ultimate objective is to create a database of unit costs which include both operations funded under cohesion policy and available international benchmarks. |
| --- | --- | --- |

48.

(b)

The Commission intends to explore the issue of unit costs in more depth starting with the ERDF 2000-2006 ex post evaluation. One of the evaluations will assess the efficiency of ERDF funded Major Projects. It will also develop and test a methodology for investigating unit costs which will later be applied in future evaluations, such as the planned ex post evaluations of Cohesion Fund and ISPA projects. The ultimate objective is to create a database of unit costs which include both operations funded under cohesion policy and available international benchmarks.

| (d) | At the time of the ex post recalculation of the projects' economic rate of return, actual figures were mostly only available for the investment phases (i.e. investment cost amounts and timing) and only in part for the operational phases. This is why the ex post recalculation needed in several cases to use the ex ante figures for measuring the project's net benefits which occur in the operational phase. |
| --- | --- |

(d)

At the time of the ex post recalculation of the projects' economic rate of return, actual figures were mostly only available for the investment phases (i.e. investment cost amounts and timing) and only in part for the operational phases. This is why the ex post recalculation needed in several cases to use the ex ante figures for measuring the project's net benefits which occur in the operational phase.

| (e) | It is worth noting the difficulties in estimating indirect job creation due to infrastructure projects. For this reason the Commission has decided not to ask for this information in infrastructural Major Project application for the 2007-2013 period. |
| --- | --- |

(e)

It is worth noting the difficulties in estimating indirect job creation due to infrastructure projects. For this reason the Commission has decided not to ask for this information in infrastructural Major Project application for the 2007-2013 period.

| 49. | (a) | Indirect impacts forecast by the CBAs of infrastructure projects such as indirect employment or reduction of road congestion following a railway extension cannot be measured through monitoring. Financial and physical outputs can be monitored during the investment phase, but the same is not true for economic impacts which occur in the operational phase and more generally in the longer term. |
| --- | --- | --- |

49.

(a)

Indirect impacts forecast by the CBAs of infrastructure projects such as indirect employment or reduction of road congestion following a railway extension cannot be measured through monitoring. Financial and physical outputs can be monitored during the investment phase, but the same is not true for economic impacts which occur in the operational phase and more generally in the longer term.

| (b) | The Commission believes that the evaluation of broader economic impacts at regional level (business creation, induced job creation, productivity, and environment) can be better assessed at programme rather than project level. |
| --- | --- |

(b)

The Commission believes that the evaluation of broader economic impacts at regional level (business creation, induced job creation, productivity, and environment) can be better assessed at programme rather than project level.

| 51. | It is intended to increase the attention paid to this requirement in the new period. At all events, such data are generally found in the final reports after completion of the projects. |
| --- | --- |

51.

It is intended to increase the attention paid to this requirement in the new period. At all events, such data are generally found in the final reports after completion of the projects.

| 52-53. | Although they should be consistent, indicators selected for monitoring Major Projects should not necessarily be the same as those set at priority level. This is particularly the case for results or impact which can be meaningfully measured at priority level but not at project level. For instance, it would be hard to measure improved accessibility due to a single project and the improvement of accessibility measured at priority axis level would not stem from the mere sum of the individual project impacts because network effects would probably play an important role. |
| --- | --- |

52-53.

Although they should be consistent, indicators selected for monitoring Major Projects should not necessarily be the same as those set at priority level. This is particularly the case for results or impact which can be meaningfully measured at priority level but not at project level. For instance, it would be hard to measure improved accessibility due to a single project and the improvement of accessibility measured at priority axis level would not stem from the mere sum of the individual project impacts because network effects would probably play an important role.

| 54. | While there are certainly weaknesses and inconsistencies in the data being collected for the 2000-2006 period, the Commission considers that the situation has improved compared to the past and that there is a considerable amount of relevant material that is being gathered and could be used for evaluation purposes (see reply to point 55). For the 2007-2013 period, to increase the standardisation and comparability of information, the Commission has defined a set of ‘core indicators’ (Annex I to working document No 2 on monitoring and evaluation indicators). The Commission encourages Member States to use these key output and result indicators at programme, not at project level. |
| --- | --- |

54.

While there are certainly weaknesses and inconsistencies in the data being collected for the 2000-2006 period, the Commission considers that the situation has improved compared to the past and that there is a considerable amount of relevant material that is being gathered and could be used for evaluation purposes (see reply to point 55). For the 2007-2013 period, to increase the standardisation and comparability of information, the Commission has defined a set of ‘core indicators’ (Annex I to working document No 2 on monitoring and evaluation indicators). The Commission encourages Member States to use these key output and result indicators at programme, not at project level.

| 55. | The ERDF 2000-2006 ex post evaluation is being organised in 11 work packages assessing the overall effects of the policy including selected thematic aspects. One of these has been designed specially to collect the available information on indicators across all programming documents. The data gathering work package will facilitate the work of the consultants working on the other work packages which will focus on filling the data gaps and will carry out the actual evaluations. While in the ex post evaluation the Commission will mainly evaluate investments co-financed by the ERDF at aggregate policy level, not at individual project level, one of the work packages will focus on the impact of Major transport Projects, which will be analysed individually. Another work package will aggregate information on the employment effects of Major Projects. Work is also to be done on unit costs in Major infrastructure Projects (see reply to point 48(b)).
  The Commission will carry out an ex post evaluation of 2000-2006 period Cohesion Fund projects in 2009. |
| --- | --- |

55.

The ERDF 2000-2006 ex post evaluation is being organised in 11 work packages assessing the overall effects of the policy including selected thematic aspects. One of these has been designed specially to collect the available information on indicators across all programming documents. The data gathering work package will facilitate the work of the consultants working on the other work packages which will focus on filling the data gaps and will carry out the actual evaluations. While in the ex post evaluation the Commission will mainly evaluate investments co-financed by the ERDF at aggregate policy level, not at individual project level, one of the work packages will focus on the impact of Major transport Projects, which will be analysed individually. Another work package will aggregate information on the employment effects of Major Projects. Work is also to be done on unit costs in Major infrastructure Projects (see reply to point 48(b)).

The Commission will carry out an ex post evaluation of 2000-2006 period Cohesion Fund projects in 2009.

THE NEW REGULATIONS FOR THE 2007-2013 PERIOD

| 57. | The Commission also refers to the improved application forms, whose data will be recorded on the central database ‘SFC 2007’, the updating of internal instructions (via a special section of the aide-mémoire for desk officers), the use of software to check the coherence and consistency of CBA parameters and results, and the introduction of a facility for technical assistance of Member States with project preparation called ‘JASPERS’ (Joint Assistance for Projects in European Regions). See also the replies to points 22, 24, 29, 43 and 44. |
| --- | --- |

57.

The Commission also refers to the improved application forms, whose data will be recorded on the central database ‘SFC 2007’, the updating of internal instructions (via a special section of the aide-mémoire for desk officers), the use of software to check the coherence and consistency of CBA parameters and results, and the introduction of a facility for technical assistance of Member States with project preparation called ‘JASPERS’ (Joint Assistance for Projects in European Regions). See also the replies to points 22, 24, 29, 43 and 44.

| 58. | While the main emphasis will be on ex post evaluation at programme level, the Commission will draw on data from Major Projects as it is doing in the ex post evaluation for the 2000-2006 period (see reply to point 55). It will also continue to encourage Member States to carry out evaluations, inter alia at project and sector level, on a voluntary basis. |
| --- | --- |

58.

While the main emphasis will be on ex post evaluation at programme level, the Commission will draw on data from Major Projects as it is doing in the ex post evaluation for the 2000-2006 period (see reply to point 55). It will also continue to encourage Member States to carry out evaluations, inter alia at project and sector level, on a voluntary basis.

CONCLUSIONS AND RECOMMENDATIONS

| 59. | The constraints of the regulatory environment for 2000-2006 should be borne in mind.






  (a) | The Commission has generally carried out a thorough appraisal. Most 2000-2006 projects were submitted after 2003. |
| --- | --- | --- |

59.

The constraints of the regulatory environment for 2000-2006 should be borne in mind.

(a)

The Commission has generally carried out a thorough appraisal. Most 2000-2006 projects were submitted after 2003.

| (b) | The Commission agrees that funding applications were of mixed quality and were relatively weak for productive investment projects. It generally made efforts to improve the quality of dossiers by requesting clarifications. For the 2007-2013 period, the legal basis and the tools for the Commission's examination of Major Project applications have been improved. |
| --- | --- |

(b)

The Commission agrees that funding applications were of mixed quality and were relatively weak for productive investment projects. It generally made efforts to improve the quality of dossiers by requesting clarifications. For the 2007-2013 period, the legal basis and the tools for the Commission's examination of Major Project applications have been improved.

| (c) | The 2000-2006 regulations afforded considerable flexibility in setting co-financing rates. |
| --- | --- |

(c)

The 2000-2006 regulations afforded considerable flexibility in setting co-financing rates.

| 60. | Given the very significant amounts of funds involved in Major Projects, the Commission believes it is important to subject them to a more rigorous application process and a closer examination. This helps to ensure maximum impact on regional development and efficient use of Community resources.
  The Commission has taken steps to improve both the preparation of project applications by Member States and its own appraisal. These will have their full impact in the 2007-2013 programming period. |
| --- | --- |

60.

Given the very significant amounts of funds involved in Major Projects, the Commission believes it is important to subject them to a more rigorous application process and a closer examination. This helps to ensure maximum impact on regional development and efficient use of Community resources.

The Commission has taken steps to improve both the preparation of project applications by Member States and its own appraisal. These will have their full impact in the 2007-2013 programming period.

| 61. | (a) | Since 2000 there has been no regulatory basis for requiring Member States to carry out ex post evaluations at project level although this is encouraged. Ex post evaluation for projects was only required for the Cohesion Fund and was undertaken by the Commission. |
| --- | --- | --- |

61.

(a)

Since 2000 there has been no regulatory basis for requiring Member States to carry out ex post evaluations at project level although this is encouraged. Ex post evaluation for projects was only required for the Cohesion Fund and was undertaken by the Commission.

| (b) | The Commission recognised the weaknesses of the data provided with applications in the 1994-99 period and has taken steps to improve the gathering of data in the 2000-2006 period and still more so in that for 2007-2013. |
| --- | --- |

(b)

The Commission recognised the weaknesses of the data provided with applications in the 1994-99 period and has taken steps to improve the gathering of data in the 2000-2006 period and still more so in that for 2007-2013.

| (c) | There were deficiencies in monitoring data which handicapped evaluation. Steps have been taken to remedy these deficiencies, especially for 2007-2013. However, the Commission does not consider that indirect impacts can be monitored at project level (see reply to point 49). |
| --- | --- |

(c)

There were deficiencies in monitoring data which handicapped evaluation. Steps have been taken to remedy these deficiencies, especially for 2007-2013. However, the Commission does not consider that indirect impacts can be monitored at project level (see reply to point 49).

| 62. | While there are certainly weaknesses and inconsistencies in the data being collected for the 2000-2006 period, the situation has improved and the limitations of previous evaluations have been taken into account in planning those for the 2000-2006 period. |
| --- | --- |

62.

While there are certainly weaknesses and inconsistencies in the data being collected for the 2000-2006 period, the situation has improved and the limitations of previous evaluations have been taken into account in planning those for the 2000-2006 period.

| 63. | The Commission agrees with the Court's recommendations and intends to ensure that the improved regulatory provisions are properly implemented.






  (a) | As well as stricter requirements in the regulations on the information required with applications and clarification of the rules for determining the EU-grant, internal instructions have been updated and procedures are being computerised. |
| --- | --- | --- |

63.

The Commission agrees with the Court's recommendations and intends to ensure that the improved regulatory provisions are properly implemented.

(a)

As well as stricter requirements in the regulations on the information required with applications and clarification of the rules for determining the EU-grant, internal instructions have been updated and procedures are being computerised.

| (b) | Together with the stricter requirements for applications and the computerisation of processing, a working document on cost-benefit analysis and an updated CBA guide should improve the quality of CBAs and provide a common framework for project appraisal. |
| --- | --- |

(b)

Together with the stricter requirements for applications and the computerisation of processing, a working document on cost-benefit analysis and an updated CBA guide should improve the quality of CBAs and provide a common framework for project appraisal.

| (c) | The regulations for 2007-2013 lay down clearer rules for determining the EU contribution for revenue-generating projects. The working document has provided guidance on the application of the new rules. The Commission believes that the modulation of the grant should be based on the financial analysis which already indirectly takes into account some socio-economic aspects. |
| --- | --- |

(c)

The regulations for 2007-2013 lay down clearer rules for determining the EU contribution for revenue-generating projects. The working document has provided guidance on the application of the new rules. The Commission believes that the modulation of the grant should be based on the financial analysis which already indirectly takes into account some socio-economic aspects.

| 64. | (a) | The Commission agrees that Member States could benefit from ex post evaluations of Major Projects and has therefore always encouraged the practice. It will continue to do so, but believes that broader economic impacts at regional level can in many cases be better assessed at programme level. |
| --- | --- | --- |

64.

(a)

The Commission agrees that Member States could benefit from ex post evaluations of Major Projects and has therefore always encouraged the practice. It will continue to do so, but believes that broader economic impacts at regional level can in many cases be better assessed at programme level.

| (b) | The Commission's recommendations to Member States on monitoring take account of the needs of future evaluations, in which project data will continue to play a major part. The new tool for electronic exchange of information will facilitate the collection of the structured project data required by the Commission implementing regulation.
  Annual implementation reports will have to include information on the progress and financing of Major Projects. |
| --- | --- |

(b)

The Commission's recommendations to Member States on monitoring take account of the needs of future evaluations, in which project data will continue to play a major part. The new tool for electronic exchange of information will facilitate the collection of the structured project data required by the Commission implementing regulation.

Annual implementation reports will have to include information on the progress and financing of Major Projects.

| (c) | The new application forms specifically ask for a description of the starting position, together with relevant indicators of outputs and of the contribution to programmes objectives. |
| --- | --- |

(c)

The new application forms specifically ask for a description of the starting position, together with relevant indicators of outputs and of the contribution to programmes objectives.

| 65. | The Commission believes it is important to subject Major Projects to additional requirements and scrutiny in view of the large amount of resources they employ. Any such review as proposed by the Court should take account of the impact of the improvements in procedures proposed by the Commission for the 2007-2013 period. |
| --- | --- |

65.

The Commission believes it is important to subject Major Projects to additional requirements and scrutiny in view of the large amount of resources they employ. Any such review as proposed by the Court should take account of the impact of the improvements in procedures proposed by the Commission for the 2007-2013 period.

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