Proposal for a Council Regulation (EC) amending Council Regulation EC No 1628/96 of 25 July 1996 relating to aid for Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the former Yugoslav Republic of Macedonia
Date: 1998-01-21
Institutions: European Commission
Subjects: EU aid, Yugoslavia, award of contract, cooperation policy, economic reconstruction

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 21.01.1998 
COM(1998) 18  final 

98/ 0023 (CNS) 

Proposal for a 

r OT Tisirn. RFGI IL ATION (EC) 

amending Council Regulation EC N° 1628/96 of 25 July 1996 relating to aid for 

Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the 

former Yugoslav Republic of Macedonia 

(presented by the Commission) 

Explanatory  Memorandum 

After  the signing of the Dayton/Paris peace agreements the Commission  undertook, in 
close co-operation  with  other major  donors, a comprehensive  reconstruction  effort  in 
Bosnia Herzegovina. 

For the period  1996-1999 one billion ECU was earmarked for this purpose as part of a 
5,1 billion US $ reconstruction programme. 

In the first half of  1996 the assistance  mainly  consisted  of deliveries of supplies and 
goods  to  meet  the  most  basic  requirements  for  restoring  life  to  normal.  After  that 
period  more  medium  and  long  term  projects  were  undertaken  to  repair  damage  to 
infrastructure,  including housing, water supply, energy production and transport. 

The assistance to Bosnia and Herzegovina is based on two legal instruments: 
The  Phare  regulation  and  Council  regulation  n°  1628/96  amended  by  Council 
regulation  n° 2240/97. 

The latter regulation  has  been in force  for about  1 Vz years and experience  has shown 
that  certain  provisions  or  the  lack  thereof,  are  standing  in  the  way  of  a  flexible, 
effective  and quick delivery of the Community's assistance assistance, thereby adding 
a complication  to an already difficult  and complex political  environment  in which the 
assistance effort  has to be carried through. 

From  various  quarters  criticism  has  been  aired  on  the  slow  pace  of  the  assistance 
effort.  Reasons  for  delays,  some  of  which  are  entirely  beyond  the  control  of  the 
Commission, are  manyfold: 

•  political  controversies  at  the  level  of  the  central  institutions  of  Bosnia  and 
Herzegovina  have  often  led  to  long  delays  in  the  decisions  on  which  projects 
should be carried out on a priority basis. 

• 

• 

the  political  conditionality,  which  is  being  applied  as  part  of  the  Dayton/Paris 
provisions concerning the delivery of reconstruction assistance, has in certain cases 
rightfully  led to the suspension of reconstruction  projects. 

in  order  to  exercise  maximum  control  over  project  expenditure  and  in  order  to 
retain  full  transparency,  most  of the  project  preparation  and  execution  have  been 
implemented through a centralised approach. 

• 

the regulatory  framework  which  is the basis  for  the reconstruction  effort  involves 
long lead times for the preparation, publication and evaluation of tenders. 

In  order  to  overcome  some  of  the  elements  which  are  slowing  down  the  assistance 
effort  and  thereby  the  return  of  refugees,  the  Commission  has  realised  that  the 
following  remedial actions would be required: 

• 

instead  of  involving  all  the  time  the central  government  institutions  in  the  decision 
the 
making  process  concerning 
Commission  would  propose  to  deal  on  a more  direct  basis  with  regional  and  local 
authorities, thereby  increasing  the flexibility  of our assistance  effort. 

the  selection  of  programmes  and  projects, 

This  also  allows 
the  High 
Representative  for  Bosnia  Herzegovina,  to  assist  those  municipalities  that  support 
the  peace process. 

in  close  consultation  with 

the  Community, 

•  experience  over  the  past  1  '/a  years  has  shown  that  for  reasons  of  effectiveness, 
most  of  the  infrastructure  projects  should  be  prepared,  executed  and  monitored 
through  a  Sarajevo  based  presence.  Therefore  it  has  been  decided  to  strengthen  the 
Commission  presence  in  Sarajevo  and  to  decentralise  some  of  the  reconstruction 
assistance  activities.  This new structure  is now  being  put  into place. 

•  as a  final  part of the required  improvement  of the effectiveness  of the  Community's 
the  Commission  now  proposes  a  modification  of  Council 

assistance  effort, 
regulation  1628/96 as amended  by Council  regulation  2240/97. 

The  modification  of  the  existing  regulation  will  not  by  itself  generate  a  quicker  and 
more  effective  delivery  of  our  assistance  to  Bosnia  and  Herzegovina,  but  in 
combination  with  the other  measures taken  it should  enable the Commission  to deal  in 
a  more  expedient  way  in the areas for  which  it is responsible  with  the  special  situation 
in  Bosnia  Herzegovina. 

The  Council  Regulation  n'T 628/96  has  been  modified  on  10  November  1997  by 
Council  Regulation  n°224()/97.  This  modification  was based  on  Article  11 of  Council 
Regulation  n° 1628/96,  allowing  for  modification  of  the  Annex  to  the  Regulation  by 
qualified  majority.  The  Commission  has  proposed  the  modification  which  was 
adopted  in  order  to  streamline  tendering  procedures.  The  modification  in  accordance 
with  Article  1  I  is limited  to any  modification  to the Annex  of the  Regulation  only. 

In  order  to  accelerate  project  implementation,  a  set  of  measures  has  been  identified 
which entail  a modification  of Regulation n° 1628/96. 

Indeed: 

it  has  appeared  that  the  ceiling  of  200.000  ECU  for  private  treaty  for  service 
contracts  is  not  sufficient  as  far  as  technical  assistance  contracts  are  concerned. 
Preparatory  work  for  infrastructure  projects,  establishment  of  bills  of  quantities  and 
important 
technical  proposals  based  upon  examination  of  damaged  bridges  or 
buildings  are regularly  more expensive  than  200.000  liCU  and  therefore  a threshold  of 
400.000  KC1.1 is  proposed. 

smaller  reconstruction  projects  with  almost  entirely  local  components  are 
usually  not of interest to international  operators, unless they  are already  established  on 
the  spot.  Thus  procedures  aimed  at the award  of a contract to a 'local  contractor'  seem 

justified,  also  permitting  contracting of  international  companies, already  established  in 
the  region. 

in  the event  that  the prevailing  conditions  impede  such  or  in the  event  that  the 
procedures  have  been  unsuccessful,  it  is proposed  - under  exceptional  circumstances-
to  award  these  contracts  by  private  treaty  to  a  contractor  from  one  of  the  Member 
States.  This  will  allow  the  Commission  to  quickly  find  another  contractor  in  case  the 
initial  procedure  was  not  successful  or  to  attract  interest  of  an  international  company 
in case the  'local  market'  is shared by the local  operators. 

Article  116 of  the  Financial  Regulation  allows  for  the  award  of contracts  after 
restricted  tendering  under  specific  circumstances.  Experience  has  shown  that  the 
major  part  of  the  reconstruction  projects  would  qualify  for  the  application  of  Art  116 
bul  regularly  projects  facilitating  the  return  of  refugees  should  benefit  from  restricted 
tendering  procedures  up  to  10  MECU  in  order  to  shorten  the  delays  to  a  strict 
minimum  in these  important  cases 

the  obligation  to  consult  the  Art. 12  Management  Committee  involves  quite 
important  delays  in  the  implementation  process,  which  result  from  preparatory  work 
on the  side of the  Commission  (including  translation  etc.), fixed  dates  of the  meetings 
and  so  on.  Therefore,  in  order  to  speed  up  the  implementation,  it  is  proposed  to 
increase the threshold  from  2 to 5 MECU. 

the  existence  of  two  Committees  (Phare  and  Reconstruction)  for  Community 
aid  already  makes  the  Community  action  more  difficult  to  implement.  But  the 
procedures  for  handling  the  Management  Committee  are  also  difficult  and  in  view  of 
a  streamlined  approach  the  functioning  of  the  Phare  Committee  is  proposed  for  the 
Reconstruction  Programme. 

Another  important  obstacle  to  quick  implementation  of  aid  consists  in  the 
obligation  specified  to  in  the  Financial  Regulation  to conclude  Financing  Memoranda 
with  the  beneficiary  country,  normally  on  the  level  of  the  Government  of  the 
Recipient  Stale.  It  is  understood  that  the  OHR  is  always  consulted.  Given  the 
circumstances  in  the  region,  the  Commission  will  use  the  possibility  offered  by 
Article  106  paragraph  1  of  the  Financial  Regulation 
to  conclude  Financing 
Memoranda  with  regional  public  bodies  (municipalities  or  other  institutions  of  the 
recipient  organisation)  and  to  contribute  to  programmes  and  co-operation  schemes 
forwarded  by  municipalities  or  regional  bodies,  in  consultation  with  the  Central 
Government. 

It is therefore  proposed  that: 

-  Service  contracts  not  exceeding  400.000  ECU  for  technical  assistance  shall  be 
awarded  by  private  treaty, especially  to prepare, monitor or evaluate  Community  aid. 

-  Works  and  supply  contracts  not  exceeding  3  MECU  may  be  awarded  by 
procedures 
the  particular 
characteristics  of  the  local  market  do  not  allow  recourse  to  this  procedure  or  where 

to  one  of  the  beneficiary  countries.  Where 

limited 

li 

this  procedure  does  not  lead  to  the  award  of  a  contract,  works  and  supply  contracts 
not  exceeding  3  MECU  shall  in  exceptional  cases  be  awarded  by  private  treaty  to 
natural  or  legal  persons  from  the  member-states  or,  exceptionally,  states  benefiting 
from  the  Phare  programme. 

-  With  respect  to  projects  facilitating  the  return  of  refugees,  works  and  supply 
contracts  exceeding  3  MECU  and  not exceeding  10 MECU  shall  be awarded  by  open 
tendering  procedure  or following  restricted  invitations to tender. 

-  The  threshold  for  consultation  of  the  Management  Committee  (the  Article  12 
Committee)  should  be  increased  from  2  MECU  to  5  MECU,  in  order  to  increase 
efficiency.  Where  the  measure  does  not  exceed  5  MECU  the  Article  12  Committee 
would  be  informed, 

-  The  Commission  should  be  able  to  decide  to  contribute  to  programmes  and  co 
operation  schemes  forwarded  by  municipalities  or  regional  bodies,  in  consultation 
with the Central  Government,  in order to increase flexibility  . 

-  Paragraph  3  of  Article  12  of  Regulation  1628/96,  regarding  the  procedure  to  be 
followed  after  the  Article  12 Committee  has  delivered  its opinion  should  be  amended 
so  that  the  procedure  is  the  same  as  that  applicable  under  the  Phare  Regulation,  in 
order to streamline  the procedures. 

As  regards  information  of the other  institutions  (Council  and  Parliament), by  virtue  of 
Article  13,  the  Commission 
is  already  under  a  quarterly  reporting  obligation. 
However,  an  increase  in  flexibility  necessitates  greater  transparency  and  the  provision 
of  better  and  more  detailed  information  on  the  implementation  of  Community  aid  in 
(he  region.  In  order  to  ensure  this  (he  Commission  shall  increase  the  monitoring  and 
auditing  of  projects  and  programmes  and  shall  contract  specific  external  expertise  for 
this  purpose. 

This measure  will  have no direct impact  on small and medium  size enterprises. 

The  Council  is  requested: 

- 

to adopt the proposed  regulation 

Council  Regulation  N° XX 

amending  Council  Regulation  EC N°  1628/96 of 25 July  1996  relating to aid  for 

Bosnia  and  Herzegovina, Croatia, the Federal  Republic  of Yugoslavia  and  the 

former Yugoslav  Republic  of  Macedonia 

THE  COUNCIL  OF THE  EUROPEAN  UNION 

I laving  regard  to the Treaty  establishing  the  European  Community, and  in  particular 

Article  235  thereof. 

Having  regard  to the proposal  from  the  Commission 

Having  regard  to the opinion of the European  Parliament 

WHEREAS  Council  Regulation  n° 1628/96  as  amended  by  Council  Regulation 

n°2240/97  deals  with  economic  development,  the  restoration  of civil  society  and  co 

operation  between  the  Republics  of  former  Yugoslavia  as  well  as  with  repair  work 

and  the  renovation  of  infrastructure  whilst  pressing  ahead  with  political  and  economic 

reforms 

WHEREAS,  given  the  exceptional  circumstances  in  the  countries  covered  by  this 

Regulation,  the  Commission  has  been  invited  to propose  very  substantial  measures  to 

simplify  procedures  and  to  accelerate  implementation  of  projects  under  Regulation 

n° 1628/96  in  order  to  deliver  more  efficiently 

the  assistance  of  the  European 

Community  to this  region 

WHEREAS  Art  11  of  Regulation  n° 1628/96  provides  for  the  implementation  of 

expenditure  in  accordance  with  the  Financial  Regulation  applicable  to  the  general 

budget  of  the  European  Communities 

1  O J,  L  2 0 4,  1 4 . 8 . 1 9 9 6, 
2  O J,  L  3 0 7,  1 2 . 1 1 . 1 9 9 7, 

p .l 

p .l 

G 

WHEREAS  Art  9  of  the  Regulation  n° 1628/96  provides  that  service  contracts  not 

exceeding  200.000  ECU  can  be awarded  by  private  treaty, and  it  is considered  that  the 

circumstances  in  the  region  justify  specific  provisions  for  the  award  of  technical 

assistance  contracts  not  exceeding  400.000  ECU  by  private  treaty,  especially  for 

technical  support  and  monitoring  of  projects 

WHEREAS,  according  to  Article  116 of  the  Financial  Regulation,  works  and  supply 

contracts  may  be  awarded  by  geographically  or  otherwise  restricted 

tendering 

procedures  in certain  exceptional  situations  and  subject  to certain  conditions;  whereas 

in  light  of  the  exceptionally  difficult  situation  prevailing  in  the  countries  covered  by 

this  Regulation,  the  conditions  triggering  recourse  to  restricted  tendering  procedures 

are  full! I led; 

WHEREAS  most  of the  infrastructure  projects  by their very nature have a strong  local 

component  justifying,  for  reasons  of  speed  and  efficiency,  award  procedures  limited 

to one of the beneficiary  countries 

WHEREAS  the  particular  characteristics  of  the  local  market  may  not  allow  recourse 

to this  procedure  or  if this procedure does  not  lead to the award  of a contract,  a private 

treaty  with  international  contractors could  be justified 

WHEREAS  projects  facilitating  the  return  of  refugees  should  benefit  from  restricted 

tendering  procedures  in order  to shorten  the delays to a strict  minimum, 

WHEREAS  Art  10  of  Regulation  n° 1628/96  provides  that  financing  decisions 

exceeding  2 million ECU need approval of the Committee provided  for  in Art  12. 

WHEREAS  this  amount  has  to  be  increased  to  5  MECU  in  order  to  increase 

expediency 

WHEREAS  Art  12  paragraph  3  of  Regulation  n°1628/96  provides  specific  rules  for 

the decision  making  process with the  Committee 

? 

WI 1ERE AS the procedures applying to this Committee should be amended in order to 

streamline  procedures 

WHEREAS  in  order  to  increase  the  flexibility  of  Community  assistance,  the 

Commission 

should  also  be  enabled 

to  contribute 

to  programmes  and 

co-operation  schemes forwarded  by municipalities or regional bodies, in consultation 

with the Central  Government 

HAS ADOPTED THIS  REGULATION 

Article 1 

Regulation  n° 1628/96, is amended as follows: 

a) The following  paragraphs shall be added to Article 9: 

When service contracts take the form  of technical assistance they may be awarded by 

private  treaty  for  operations  not  exceeding  400.000  ECU,  especially  to  prepare, 

monitor or evaluate Community aid. 

Works  MK\  supply  contracts  not  exceeding  3  million  ECU  may  be  awarded  by 

procedures  limited to one of the beneficiary  countries covered  by this regulation. 

Where  the  particular  characteristics  of the  local  market  do  not  allow  recourse  to  this 

procedure or where this procedure does not lead to the award of a contract, works and 

supply contracts not exceeding 3 million ECU may be - in exceptional circumstances -

awarded  by  private  treaty  to  natural  or  legal  persons  from  the  Member  States  or 

exceptionally  from  the  States  benefiting  from  the  Phare  programme  under  the 

conditions specified  in this article. 

With respect to projects  facilitating  the return of refugees  works and supply  contracts 

exceeding  3  million  ECU  and  not  exceeding  10  million  ECU  shall  be  awarded  by 

open  tendering  procedure  or  following  restricted  invitations  to lender.  The  procedures 

and  thresholds established  by Article  10 paragraph  1 and 2 are applicable. 

b) Article  10 (1) is replaced  by the  following: 

Financing  decisions  exceeding  5 million  ECU  shall  be adopted  in accordance  with  the 

procedure  provided  for  in  Article  12  (2).  The  Committee  provided  for  in  Article  12 

shall  be  informed  of operations  involving  financing  of less than  5 million  ECU. 

c) The  following  paragraph  shall  be added  to Article  10 as paragraph  3: 

The  Commission  may  decide  to  contribute  to  programmes  and  co-operation  schemes 

as  referred  to  in  Article  4  forwarded  by  municipalities  or  regional  bodies,  in 

consultation  with  the  Central  Government.  The  procedures  and  thresholds  established 

by  Article  10 paragraph  1  and  2 are  applicable. 

d)  Paragraph  3 of  Article  12 is replaced  by  the following  paragraph: 

The  Commission  shall  adopt  decisions  which  shall  apply  immediately.  However,  if 

these  decisions  are  not  in accordance  with  the opinion  of  the committee,  they  shall  be 

communicated  by  the  Commission  to  the  Council  forthwith.  In  that  event  the 

Commission  shall  defer  application  of the  measures which  it has  decided  for  a  period 

of six weeks. 

The  Council,  acting  by  a qualified  majority,  may  take  a different  decision  within the 

time limit referred to in th« first subparagraph. 

Article 2 

This  Regulation  shall  enter  into  force  on  the  day  following  its  publication  in  the 

Official  Journal  of the  European  Communities 

f 

It shall  apply  until  31  December  1999 

This Regulation  shall  be binding in its entirety and directly  applicable  in all  Member 
States 

Ao 

ISSN 0254-1475 

COM(98) 18  final 

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