WRITTEN QUESTION E-1959/99

by Gerhard Hager (NI) to the Commission

(5 November 1999)

Subject: Phare

In its Special Report No 3797 the Court of Auditors pointed out irregularities in the context of the PHARE programme. I should therefore like clarification of the extent to which the Commission has taken account of the criticisms levelled by the Court of Auditors, in particular:

What has been done in the second stage of the Phare project to prevent contracts being broken down into several parts by SMEs so that the approval threshold is not exceeded, thereby precluding the Commission from fully exercising its supervisory function?

The Court of Auditors criticised the proliferation of SMEs, which prevented synergy effects from emerging. What has the Commission done to prevent this problem, and when were concrete steps taken?

Does the Commission have any information on the value of contracts concluded by direct agreement and without a tender procedure?

Does the Commission have information on how often and to what extent the costs of the original projects were exceeded and what costs were incurred for the EU as a result?

What was the level of costs for SMEs in the 1990-1996 Phare programme?

To what extent were the Phare appropriations available for the 1990-1996 programming period used up?

Has the Commission now found out who was meant by the phrase the Russians who are responsible for the design of programmes and who thus received aid in the sum of ECU 1 million for SME projects?

Answer given by Mr Patten on behalf of the Commission

(8 December 1999)

The Commission has issued instructions discouraging artificial splitting of contracts into smaller lots. In addition, the Commission delegations approve ex ante every contract with the exception of minor supply contracts, which are subject to ex post control. The control resources at the Commission delegations have been strengthened through deconcentration by transferring posts from the headquarters. Contracts above 5 million are approved by the Commission in Brussels. These rules on procurement and approval procedures are spelled out in the Decentralised implementation system (DIS) manual, which is available on Internet http:/europa.eu.int//comm/dgla/phare/implementation/dis/contents.htm.

Following the special report of the Court of auditors on the decentralized system for the implementation of the Phare programme, the Commission adopted a strategy of phasing out Phare management units (PMUs) on a progressive basis. This process started in 1997 and will be completed by the partner states on the basis of a specific memorandum of understanding between the Commission and the candidate countries. The PMUs are phased out either by closing them as their programmes come to an end or by transferring their projects to public authorities in the candidate countries. For the national programmes approved in 1998 there are 39 such bodies for all 10 candidate countries, compared with the total of 138 at the end of 1995 identified in the Court of auditors' special report, covering the six countries in which the decentralised system had been introduced.

The proportion of programme expenditure awarded by direct agreement in 1996 was 5,2 %. This has fallen in 1997 and 1998 to 2,2 %. These are contracts awarded to commercial bodies for which there is a market for services. The proportion of programme expenditure awarded by agreement with public sector bodies or international organisations in 1996 was 35,5 %. This proportion remained unchanged in 1998. These are agreements with organisations such as the European Bank for reconstruction and development (EBRD), the World Bank, the Council of Europe, or the European training foundation. At the national level, agreements have been concluded with national public administrations to assist the candidate countries in the field of justice and home affairs. Agreements have also been concluded with public organisations, non-governmental organisations or ministries in the candidate countries. There are clearly cases where there is no market for services, and therefore no basis for launching a tendering procedure.

The costs of projects are set within fixed budgets which are specified in each contract. If for unforeseeable reasons there is a need to increase the budget of a project, the relevant addendum is made according to fixed rules and always before any extra costs are incurred. Costs incurred in excess of the approved budget are not covered by the Phare programme.

No global figures for management costs were identified in the special report of the Court of auditors. As pointed out by the Commission in its reply to the Court of auditors, it would be arbitrary to estimate the administrative costs of PMUs given that they, in addition to management support, provide technical assistance. The Commission is now in the process of decreasing the financing of operating costs of PMUs as part of the strategy of phasing out PMUs mentioned above. According to this strategy, the candidate countries are normally expected to cover all operating costs of the implementing bodies following a transitional period of three years.

During the period 1990-1996, the use of Phare appropriations can be summarised as net commitments made 6 589 million; net contracts made 5 961 million; and payments made 5 333 million.

The Commission is not aware of the phrase in the special report No 3/97 to which the Honourable Member refers.