COMMUNICATION FROM THE COMMISSION - EXTERNALISATION of the management of Community programmes including presentation of a framework regulation for a new type of executive agency

TABLE OF CONTENTS

1. Introduction

2. Instruments for a manageable externalisation policy

2.1. Scope of externalisation

2.2. The proposed instruments

2.2.1. Executive agencies

2.2.2. Management by a network of national agencies .6

2.2.3. Outsourcing .8

2.2.3.1. Towards more rationalisation

2.2.3.2. A revamped Vademecum guide ......

3. Timetable and implementing arrangements

3.1. Executive agencies: setting up a legal framework

3.2. Future of the TAOs and transitional arrangements

4. Externalising tasks other than the management of programmes

5. Conclusion

ANNEX Guidelines for the Standard Financial Regulation of Executive Agencies

Externalisation of the management of Community programmes including presentation of a framework regulation for a new type of executive agency

1. Introduction

In December 1999 [1] the Commission set out to develop a coherent and manageable externalisation policy in order to correct the aberrations caused by poor control of various technical assistance offices (TAOs).

[1] Guidelines for the Commission's externalisation policy; Communication from Mrs Schreyer and Mr Kinnock, SEC(1999) 2051/7, 14 December 1999.

The Commission has based its approach on its vision of an administration re-focused on its core tasks and activities [2]. The first field to be tackled will be the management of Community programmes.

[2] White Paper on administrative reform: COM(2000) 200 final/2, 5 April 2000.

This will allow the Commission's permanent staff to be assigned to its essential tasks. It will also make it possible to reincorporate many of the TAOs without increasing the claims on Part A of the budget, and to regain effective control of executive and support activities by means of more closely controlled structures endowed with the necessary skilled staff. The net result should be an organisational set-up that makes more efficient overall use of the resources allocated to it.

New externalisation instruments will be needed to implement this policy. The purpose of this Communication is to introduce those instruments, to lay out a general framework for their use and to present a draft framework regulation to govern the most innovative of these instruments, the executive agencies. In so doing the Commission will have met its undertakings to Parliament within the time agreed.

However, adopting the corresponding legal instruments and their implementing rules will take a relatively long time. In the mean time, the Commission has decided to adopt immediate measures to quickly and effectively rectify the situation regarding the tasks entrusted to some of the TAOs. These measures involve authorising the funding of outside staff and the relevant administrative costs from the operating appropriations of the programmes concerned. To that end, a request was put to the Budgetary Authority in the letter of amendment to the preliminary draft budget for 2001 [3].

[3] SEC(2000)1363 final, 4 September 2000.

2. Instruments for a manageable externalisation policy

2.1. Scope of externalisation

Externalisation can take a number of forms, according to the sectors or activities to which it is applied [4]. The first is the management of Community programmes [5], using the instruments described here (Chapters 2 and 3). But externalisation can also be applied to other types of task. The Commission has begun to consider which other tasks might qualify, and its initial thoughts are set out in Chapter 4.

[4] These ideas are developed in the report by the planning and coordination group on externalisation (document CG3(2000), transmitted by Mr Kinnock and Mrs Schreyer to the legislative and budgetary authorities on 18 May 2000).

[5] "Community programme" means any operation or set of operations or other initiative which the relevant legal basis or budgetary authorisation requires to be implemented by the Commission for the benefit of one or more categories of specific beneficiaries, by committing expenditure.

Certain limits and constraints must be observed when tasks are externalised. In particular, externalisation cannot absolve the Commission of the responsibilities conferred on it by the Treaties, by virtue of either implementing powers delegated to it by the Council (Article 202) or its responsibility for implementing the budget (Article 274). Its public-authority tasks, in particular, cannot be devolved to private bodies.

The instruments must be designed in such a way as to preserve the continuity of the chain of responsibility between the Commission and the bodies to which it delegates powers and to give the Commission effective control of the tasks it devolves to outside agencies. The decision to externalise tasks must always be made on grounds of good management, accompanied where appropriate by a simplification and clarification of management procedures, and because it is more cost-effective than direct management.

The examples given in this Communication do not therefore prejudge the results of such analysis and any decisions which might be taken in the future.

2.2. The proposed instruments

Externalisation can take several forms.

Executive tasks which are the responsibility of the public authorities, or for which there is no truly competitive market, can be dealt with by

(i) devolution, i.e. delegating executive responsibilities to Community public bodies (executive agencies) conceived as part of an expanded Community administrative architecture;

(ii) decentralising, i.e. delegating executive responsibilities to national public bodies with a public service mission backed by the State, to act as partners in implementing some Community policies.

Some tasks requiring technical expertise and various preparatory or auxiliary administrative tasks, not inherently belonging to the domain of the public authorities nor requiring the exercise of discretionary powers, could be handled by

(iii) outsourcing through contracts let to the private sector.

A separate instrument is proposed for each kind of externalisation:

2.2.1. Executive agencies

Implementing and managing projects is a profession in itself. Achieving excellence in this profession requires specialist staff and precise methods. The idea of executive agencies has been developed to achieve the required level of professionalism. The future executive agencies will be specialised management bodies sufficiently distinct from the Commission to enjoy maximum autonomy and flexibility in day-to-day management but with the Commission retaining enough control to ensure that its strategic objectives are met.

In this way, the Commission will be able to dedicate its resources to framing policy and overall programming rather than managing individual projects.

This approach will also significantly enhance the visibility and clarity of the Community's activities, since each agency will have a specific mission with which to identify, and honed expertise in its specialist field.

Executive agencies will be particularly suited to managing Community programmes:

*requiring a high level of technical and financial expertise throughout the project cycle,

*where there is a clear separation between the programming and implementation stages of projects,

*comprising technical projects which require no political decision-making for their implementation,

*where economies of scale can be achieved by encouraging specialisation or entrusting a range of similar programmes to a single agency,

*where programmes, their objectives and methods are rolled over periodically.

By way of example, the Commission could envisage using executive agencies to implement programmes in the fields of education and training. Similarly, an executive agency could be entrusted with collecting and processing the statistics needed for implementing any Community programmes. In addition, a specific assessment in the field of external aid is planned for 2002 [6]. Once that assessment has been completed, use of executive agencies might be considered to implement some programmes in that field [7].

[6] Commission Decision of 16 May 2000: SEC(2000) 814 to /5; SEC(2000) 823 and /2.

[7] This assessment could also result in a recommendation to further integrate the cooperation cycle for some programmes.

The principles underlying the introduction of executive agencies as a policy instrument are set out in a proposal for a framework regulation presented together with this document.

This framework regulation, to be adopted by the Council under Article 308 of the Treaty, lays down the conditions and institutional arrangements for the creation of executive agencies (e.g. type of link with the Commission and method of delegating tasks, method of funding, composition and powers of the steering committee, director, personnel structure, tasks that may be delegated, principles of financial management [8], etc.).

[8] See model set of financial regulation for an executive agency, attached at Annex.

The regulations governing the programmes concerned should include the possibility of using technical assistance for their implementation. Executive agencies would then be set up, as and when needed, by Commission decision after consulting a committee composed of Member States' representatives which would identify the programmes to be implemented.

2.2.2. Management by a network of national agencies [9]

[9] This management approach involves the Commission entrusting budget execution to external bodies under national law, to public bodies, or to bodies with a public service mission and backed by the State ("national agencies").

This type of management, which is in line with the thinking underlying the preparation of the White Paper on governance due to be issued in summer 2001, is based on a network of national agencies [10] set up in the Member States, and in some cases, in non-member countries, to which the Commission decentralises the implementation of Community programmes.

[10] "National agency" does not necessarily mean an entity created from scratch for the purpose of decentralising a programme. National agency status can be conferred on existing entities with their own mission; it can also be conferred on regional, crossborder and transnational entities provided they can guarantee proper performance.

Management by networking is based on the principle of collaboration between a number of entities with complementary missions and functions. It brings project management closer to beneficiaries and encourages stable, long-term interaction and collaboration among the partner agencies themselves and between them and the Commission.

Management by networking, then, meets two types of needs:

*running broad-based programmes

-which the Commission cannot manage using its own staff or an executive agency (for example, mobility measures in educational programmes),

-which it would not be desirable to manage in an excessively centralised fashion, but where the central authorities must still be able to intervene if necessary (for example, by having responsibility for the final selection of projects, which are managed thereafter at decentralised level).

In such cases, the decision to opt for management by networking will mainly depend on the "downward multiplier" or relay effect, bringing project management closer to beneficiaries.

*seeking collaboration with national partners to take account of local peculiarities

This might involve fields in which Community intervention has a powerful territorial impact, such as directly administered regional measures, the environment, transport, energy, or fields where national expertise is essential (e.g. statistics).

The arrangement envisaged for any given programme will be based on the following legal instruments (for which a standard model will be devised based on experience with education and culture programmes):

*a regulatory instrument setting up a programme and providing for management by a network of national agencies on the basis of legal acts to be drawn up at a later date.

*a Commission decision laying down the "Provisions setting out the responsibilities of the Member States and the Commission concerning national agencies in the context of the general guidelines for implementing the programme". The decision would then be notified (under Article 254 of the EC Treaty) to each Member State [11]. These Provisions would specify, in particular:

[11] These provisions may need to be adapted in the case of programmes involving non-member countries.

-the conditions for setting up a national agency,

-the monitoring and management responsibilities of the national agency,

-the responsibilities of the Member State and the Commission with regard to how projects are selected,

-the responsibilities of the Member State and the Commission with regard to auditing the national agency and the projects,

-the financial responsibility of the national agency, particularly regarding the agreements it makes with the final beneficiaries.

*an "operating agreement" concluded between the Commission and each national agency.

This agreement would be annual (or multi-annual, depending on the duration of the programme/scheme) and renewable, and would determine, by means of an annual work programme, the conditions on which the Community would finance the operation of the national agency.

*as many "decentralised measures agreements" as needed, concluded between the Commission and each national agency, under which the Community funds that the agency is to manage for the benefit of the nationals of its Member State will be made available to it.

Lastly, another way in which these national agencies could be used should be examined more closely at a later date. Once certain agencies have acquired a recognised degree of expertise in a field in which the European Union runs programmes, the Commission might wish to entrust to them, under contract or by instruction, with certain management tasks of assistance to all the beneficiaries of a given programme, provided of course that this would not compromise the Community character of the measure. This could be the case as regards the management of certain implementing arrangements of research programmes.

2.2.3. Outsourcing

2.2.3.1. Towards more rationalisation

The Commission will continue to need to outsource technical and/or administrative assistance in order to mobilise resources and expertise which it cannot, by definition, find among its own staff and which it would not be appropriate to entrust on a long-term basis to an agency. This type of externalisation should be used only where prior assessment has demonstrated that it is both appropriate and cost-effective.

Contractors may not exercise either public-authority powers or discretionary powers, but may be entrusted with clearly identified technical and executive tasks.

Recourse to technical and administrative assistance contracts should be based on clear rules and harmonised criteria and results monitored. In particular :

*services to be contracted out should be specified in terms of output (i.e. results), not input (i.e. resources);

*the performance of the contractor should be regularly and formally monitored;

*in order for services to be outsourced, there must be a competitive market available;

*the contracting organisation must maintain a technical capacity to define the required service and monitor the results;

*outsourcing in no way diminishes the responsibility of the contracting organisation;

*such expenditure may be financed from the appropriations of a programme or scheme only if this is approved by both the budget and legislative authorities.

Outsourcing will thus be better controlled and substantially more restricted than before.

2.2.3.2. A revamped Vademecum guide

Minimum rules on the characteristics and monitoring of outsourcing contracts will be compiled in a revamped, simple and practical guide to be ready at the beginning of 2001. These rules will cover all technical and administrative assistance outsourced for the purposes of implementing Community programmes and schemes.

This exercise will involve, in particular, defining the specific types of tasks which can be outsourced, and the procedures for regular evaluation by the Commission of the output of contractors. New standard contracts will also be produced.

These different activities are also connected to other measures currently being prepared, which include harmonising the Commission's standard contracts and setting up a central database of all contracts and contractors. The central theme is the same: all these measures are part of the process of rationalising the Commission's contracting policy.

3. Timetable and implementing arrangements

3.1. Executive agencies: setting up a legal framework

Introducing a new type of executive agency will require a fairly long legislative process. Since the exceptional circumstances surrounding the creation of the European Reconstruction Agency (for Kosovo) will not prevail, and since unanimity is required in the Council (under Article 308 of the Treaty), actually setting up the first agency could take around a year and a half.

In addition, creating a new type of contractual employee will require an amendment to the Staff Regulations, which the Commission intends to propose even before the general review scheduled between now and the end of 2001. Similarly, the procedures for seconding officials to these agencies will be reviewed. These changes are admittedly not absolutely essential to the creation of an executive agency statute, but they would make it possible to recruit staff on conditions more appropriate to their tasks.

3.2. Future of the TAOs and transitional arrangements

After systematically analysing the situation, the Commission has launched a plan to reintegrate most of the existing TAOs.

The proposed timetable is unquestionably ambitious, but it meets the requirements of the Budgetary Authority and the Commission's commitments. Accordingly, a considerable number of TAOs will have been dismantled by the end of 2002. Their activities will be either directly taken over by the Commission or externalised in some other way. Specific detailed proposals were made in this connection in September 2000 in a letter of amendment to the preliminary draft budget for 2001 without waiting for the new externalisation instruments to be created.

Transitional arrangements are therefore needed to accompany the reintegration plan in an ordered fashion while ensuring the continuity of management of the Community programmes concerned. These transitional measures involve authorising the funding of outside staff who will take over the tasks of the TAOs from the appropriations of the programmes concerned.

4. externalising tasks other than the management of programmes

In its Communication on matching the Commission's activities with its human resources (SEC 2000/200), the Commission identified a number of tasks other than the management of Community programmes which might lend themselves to externalisation.

These were:

A. tasks relating to the internal workings of the Commission, including the gathering and analysis of information;

B. specialised management activities of an inter-institutional nature (recruitment, and possibly accounting);

C. technical control and monitoring activities, aiming at assisting the Commission in its action of ensuring compliance with Community rules and regulations.

With regard to activities in the third category, the Community is becoming increasingly exposed to new regulatory developments in highly technical fields requiring both a high degree of specialisation, which the Commission does not always have available, and the ability to adapt quickly to technological developments.

Externalisation to an agency whose mission includes contributing its technical competence to the correct application of the rules should therefore make it possible to make optimal use of the best scientific skills available in Europe and facilitate the Union's decision-making and reaction speed.

The statute of such an agency should leave intact the prerogatives of those Community institutions endowed with legislative power (which is why such agencies will not be concerned in the legislative field). The Commission's primacy in its role of guardian of the Treaties, in budget management and its right of initiative must also be preserved (which is why the work programmes of these agencies must be approved by the Commission before they can be adopted), as well as the executive powers entrusted to the Commission by the legislator in the regulations it adopts.

Thinking along these lines will continue, particularly through a series of feasibility studies and cost-benefit analyses, with a view to the discussions which the Commission would like to start with the White Paper on the future of European-level governance currently in preparation.

5. Conclusion

The Commission proposes that the Legislative Authority approve the draft framework regulation on the creation of executive agencies for Community programmes annexed to this Communication, as part of the externalisation strategy described above.

ANNEX Guidelines for the Standard Financial Regulation of Executive Agencies

Guidelines for the Standard Financial Regulation of Executive Agencies

The standard financial regulation for executive agencies is to be based on the Financial Regulation applicable to the general budget of the European Communities (Article 142 of the present Financial Regulation). It should therefore be modelled on the latter, departing from it only where the operational requirements of each agency make it necessary.

The main components and structure of this standard financial regulation for executive agencies are set out below, together with the departures from the Union's Financial Regulation.

Title I: General principles // * The financial regulation of each agency governs solely the budget of that agency, which is an operating budget only.

*The principles of the Financial Regulation [12] are to be included, mutatis-mutandis, in the financial regulation of each agency.

[12] A single annual budget, properly balanced, using the standard unit of account, universal, specific, based on sound financial management and transparency.

*The financial regulation of each agency is to be adopted by the Commission.

Title II: Establishment and structure of the budget // * The administrative budget will be adopted by the Steering Committee of each agency, on a proposal from the Director.

*Prior agreement of the Commission will not be required. However, since the Commission is subsidising this budget, as a percentage of the operational appropriations to be managed by the agency, the Steering Committee will adopt the amount of subsidy fixed.

*Each agency is to have a schedule of posts, in order to show at least the Commission staff seconded to it as temporary staff. The schedule may be general enough as not to hamper management flexibility. Executive staff under contract [13] will not appear in this schedule.

[13] The status of this staff (if different from that of contract status at the Commission) will have to be carefully defined in order to avoid claims before the Court of Justice at a later date for automatic establishment as a permanent officials.

*In the context of the reworking of the Financial Regulation as currently formulated, the schedules of all the agencies are to be submitted to the budgetary authority.

*Since the operational appropriations which an agency manages will continue to be entered in the general budget of the European Union, the Financial Regulation also applies legally to them.

*However, an agency will be able to manage operational appropriations entrusted to it by external entities (governments, international organisations).

Title III: Implementation of the budget // * Each agency is to have an authorising officer and an accountant for the purposes of executing its budget (which is therefore only an administrative budget). The authorising officer is to be the Director. The accountant is to be appointed by the Steering Committee.

*The Director of an agency will have wide autonomy in the use of the administrative budget.

*The Commission will delegate budget execution tasks to each agency in respect of operational appropriations entered in the budget of the European Union. The Director is to be the delegated authorising officer of the agency for executing these appropriations. In carrying out these tasks, the Director is to be bound by the Financial Regulation applicable to the general budget.

*The Commission's internal auditor will perform the same tasks with regard to an executive agency as to the Commission's departments. Agencies will also have their own audit capability.

*The resources of an agency will consist of the subsidy from the Commission, and possibly also of its own resources and contributions from third parties.

*Expenditure has to comply with the same principles as in the Financial Regulation. However, with regard to transfers, the Director will enjoy complete freedom subject to informing the Steering Committee, which may raise objections within a short timescale [e.g. one or two weeks].

*There will be revenue accruing.

Title IV: Award of contracts // * For contracts (paid for from its own administrative budget), each agency will apply the same rules as in the Financial Regulation.

*Agencies will be able to use the framework contracts of the Commission.

Title V: Subsidies // * It is not foreseen that an executive agency will grant subsidies from its own administrative budget .

Title VI: Book-keeping, presentation of accounts // * Double-entry book-keeping is to be applied, according to rules and methods compatible with those of the Commission, in order to facilitate reporting.

Title VII: External monitoring and discharge // * The accountant is to draw up the accounts of the administrative budget for approval by the Director and the Steering Committee. They are to be submitted to the European Parliament, which will give a discharge to the agency. The agency will then give final discharge to the accountant.

*Additionally, as part of the discharge given to the Commission by the budgetary authority, the latter will reach a conclusion about the subsidy granted by the Commission towards the administrative budget of each agency. To this end, the accounts of an agency may be annexed to the financial statements transmitted by the accountant of the Commission.

*Operational appropriations are legally subject to the rules on statements of accounts and discharges in the Financial Regulation.

*The Court of Auditors is to have the same supervisory powers as over the Commission.