Special Report No 16/2000 on tendering procedures for service contracts under the Phare and Tacis programmes, together with the Commission's replies
Date: 2000-07-13
Institutions: European Court of Auditors
Subjects: EU programme, award of contract, competition law, invitation to tender, services contract

6.12.2000

EN

Official Journal of the European Communities

C 350/1

I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 16/2000

on tendering procedures for service contracts under the Phare and Tacis programmes, together
with the Commission’s replies

(pursuant to Article 248(4), second subparagraph, of the EC Treaty)

(2000/C 350/01)

CONTENTS

Paragraph

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE LEGAL BASE AND THE REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE MAIN STAGES OF THE RESTRICTED INVITATION TO TENDER. . . . . . . . . . . . . . . . . . . .

Calls for expressions of interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The drawing-up of shortlists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Invitations to participate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The evaluation of tenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The evaluation committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Technical evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS ON RESTRICTED INVITATIONS TO TENDER. . . . . . . . . . . . . . . . . . . . . . . . .

Shortlists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Quality of the preselection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reduced competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The information supplied to tenderers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rules for the formation of consortia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mention of the financial evaluation criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Use of outside experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Evaluation of the tenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operation of the evaluation committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Marks awarded to the technical proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial evaluation methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in the methods of financial evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

File management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-3

4-7

8-22

10

11-12

13-15

16-22

16-17

18-19

20-22

23-69

25-36

25-29

30-36

37-39

37

38-39

40-45

46-64

46-49

50-54

55-56

57-59

60-63

64-69

3

3

3

4

4

4

4

4

4

5

5

7

7

7

8

8

8

8

9

9

10

10

10

11

13

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Paragraph

Page

OBSERVATIONS CONCERNING FRAMEWORK CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Competition between tenderers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transparency of procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effectiveness of the procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Responsibilities of the parties involved in the procedures . . . . . . . . . . . . . . . . . . . . . . . . . . .

General conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70-75

76-86

77-78

79-81

82

83-84

85-86

ANNEXES I to V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Commission’s replies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

14

14

14

14

14

15

16

21

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INTRODUCTION

1. The DAS audit work on transactions from the 1998 financial
year revealed weaknesses in the implementation of some of the
procedures for putting contracts out to tender under the Phare
and Tacis programmes. At the same time, on the basis of a Finan-
cial Control Department report on the subject, the spokesperson
for the discharge for financial year 1997 asked the Court of Audi-
tors to examine the procedures for awarding contracts under these
two programmes. Against this background an audit was per-
formed on 120 technical assistance contracts (80 for the Phare
programme and 40 for Tacis), most of which had been concluded
between 1996 and 1998 following restricted invitations to ten-
der (1).

2. The sample concerning the Phare programme covered 31
operations managed by staff at the Commission’s headquarters
and 49 operations effected under decentralised management pro-
cedures (DIS) in four Phare countries (Poland, Latvia, Bulgaria and
Romania). The Tacis sample covered transactions effected by staff
at the Commission’s headquarters, mainly in Russia. Owing to the
nature of the sample, the audit results cannot be used for statisti-
cal projections to the whole of the Phare and Tacis field. On the
other hand, the sample does demonstrate the existence of real
risks in the award of service contracts under the Phare and Tacis
programmes.
It also revealed the number of problems en-
countered (see the table), thus highlighting the weaknesses of the
systems adopted by the Commission at the time.

In June 1999, the Commission introduced a new instruction
3.
manual for service, supply or works contracts concluded in con-
nection with Community cooperation with non-member coun-
tries. The intention of the manual is to establish stricter and more
consistent procedures for all external aid, without any distinction
between programmes. If they are rigorously applied, the instruc-
tions can be expected to rectify various shortcomings that have
been pointed out in this report and must be seen as a valuable aid
in improving the management of aid to non-member countries.

THE LEGAL BASE AND THE REGULATIONS

4. The award of the contracts that were audited is for the most
part governed by Articles 112 to 119 of the Financial Regulation
and by the regulations
relate specifically to Phare
(Article 7) (2) and Tacis (Article 6 of, and Annex III to the

that

(1) Five of the Tacis contracts examined for the DAS were earlier than

1996.

(2) Council Regulation (EEC) No 3906/89 of 18 December 1989
(OJ L 375, 23.12.1989), as last amended by Regulation (EC) No 1268/
1999 of 21 June 1999 (OJ L 161, 26.6.1999).

Regulation) (3). The Financial Regulation (Article 117) stipulates
that the tender selected must be economically the most advanta-
geous, whilst authorising (Article 118(1)) the use of restricted
invitations to tender for awarding contracts for services and for
technical cooperation.

5. The Phare Regulation specifies (Article 7) that, in cases involv-
ing more than EUR 50 000, participation in invitations to tender
and contracts must be open on equal terms to all natural and legal
persons of the Member States and the countries of the Phare
group. The practical rules for awarding these contracts are laid
down in the manual of decentralised management procedures
(DIS).

6. For its part, the Tacis Regulation lays down that:

(a) the widest possible participation in invitations to tender for
supplies, works and services under equal conditions must be
ensured;

(b) the Commission must apply the selection criteria with due
regard to transparency and rigour and at the same time try to
diversify the selection;

(c) on the widest possible basis and using the most modern means
of communication, any party that may be interested in tender-
ing should be encouraged to express their interest.

7. Article 6 of the same Regulation stipulates that, as of the
amount of EUR 200 000, service contracts must, as a rule, be
awarded by restricted invitations to tender.

THE MAIN STAGES OF THE RESTRICTED INVITATION TO
TENDER

8. For both Phare and Tacis, there are four main stages in the
restricted procedures for putting contracts up for tender:

(a) the call for expressions of interest in the proposed project;

(b) the drawing-up of a shortlist of undertakings that are to be

invited to participate;

(c) the invitation to tender and notification of the detailed rules

for submitting tenders;

(d) the evaluation of the tenders submitted and subsequent selec-

tion of the best tender.

The call for expressions of interest and the drawing-up of short-
lists are vital, as they ensure that the principles of equality of treat-
ment for the purposes of participation in public contracts are
respected (Article 114 of the Financial Regulation). Similarly, the

(3) Council Regulation (EC) No 1279/96 of 25 June 1996, OJ L 165,

4.7.1996.

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selection of the most economically advantageous tender relies on
the criteria for evaluating the tenders (Article 117 of the Financial
Regulation) as notified at the time of the invitation to participate.

(a) the list of undertakings invited to participate;

(b) the instructions to tenderers;

9. Where operations are managed centrally, as is the case for the
Tacis programmes and the Phare multicountry measures and the
measures that were being carried out at the time in the Baltic
States, employees at the Commission’s headquarters are directly
responsible for the procedure. Where operations are conducted
under the decentralised management system, the DIS procedures
are essentially carried out by the authorities in the beneficiary
country, usually with the help of Western technical assistants and
under the supervision of the Commission delegation on the spot.
In all cases, the Commission retains overall responsibility for the
correct use of the budget appropriations.

Calls for expressions of interest

10. This stage, which aims to ensure that the range of competi-
tion is the widest possible, consists in informing any interested
undertaking or organisation of the forthcoming award of a con-
tract. This information is circulated via the Official Journal of the
European Communities or the Internet (since October 1996 for ser-
vice contracts exceeding EUR 200 000).

The drawing-up of shortlists

11. On the basis of the expressions of interest and their registers
of contractors, the Commission staff or the PMUs (1) draw up a
shortlist of undertakings which includes only those considered to
be most able to carry out the planned operation. The factors
borne in mind when drawing up the shortlist are recorded in a
report which is included in the file for the invitation to tender.

12.
In order to ensure that there is adequate competition, the
two programmes have laid down a minimum for the number of
undertakings that are to appear on the shortlist: seven for con-
tracts not exceeding EUR 1 million and 10 for other contracts.
Paragraph 11 of Annex II to the Tacis Regulation also states that
in the case of highly complex projects it may be suggested that
undertakings be grouped in consortia.

(c) the rules applicable to tenders and to the award of service

contracts financed by Phare and Tacis;

(d) the standard contract and its annexes, including the specifica-

tions for the particular contract concerned.

14. The instructions specify the structure, content, conditions
and deadlines for the submission of tenders and the criteria for
the award of the contract. These are the factors on which the
tenderer bases his bid.

15. The selection process always has two stages: a technical
evaluation, followed by a financial evaluation, which account for
70 % and 30 % respectively of the final appraisal.

The evaluation of tenders

The evaluation committee

16. The bids submitted by the tenderers are evaluated by a
special committee. Since October 1996 the evaluation commit-
tees for contracts awarded on the direct authority of the Commis-
sion have comprised a (non-voting) chairman, who is an estab-
lished member of the Commission staff, and five evaluators (two
Commission representatives, one representative of the final
beneficiary, two outside experts or two experts belonging to the
Commission staff). For the decentralised Phare contracts, the local
authorising officer determines the composition of the commit-
tee, which may include an outside expert.

17. When the tenders are opened, the evaluation committee
checks that each tender was indeed received within the prescribed
time limits and that the technical and financial proposals are
separate. It then proceeds with the technical and financial evalu-
ations, checking that the documentation was duly submitted in
accordance with the prescribed rules. At each of these stages the
Committee draws up a report on its work.

Invitations to participate

Technical evaluation

13. The undertakings chosen at the end of the preselection pro-
cess are invited to submit a tender for services. For this purpose,
they receive a complete file containing the following documents:

18. The first part of the actual evaluation is the appraisal of the
technical proposals and this usually consists of two stages:

(1) Programme Management Units.

(a) scrutiny of the written proposals;

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(b) an interview with the main parties involved (head of project,

long-term experts, etc.).

(a) comparison of
expenses;

the total prices, excluding reimbursable

19. The technical tenders are evaluated in the light of various
parameters, which, as a rule, are set out in the instructions to
tenderers. The evaluators take into account the proposed organ-
isation, the tenderer’s experience and the quality of the proposed
staff, plus the use of local experts. The purpose of this latter point
is, in principle, to encourage the transfer of know-how and to
ensure that the results achieved are sustainable in the long term.
Only undertakings which score over 65 % in the technical evalu-
ation then go on to the financial evaluation (see paragraph 15).

(b) comparison of the unit prices (total price less reimbursable
expenses divided by the proposed number of man-days).

22. The mark awarded for the financial proposal is added to the
mark for the technical part in order to obtain the final mark. The
tender that achieves the highest mark overall is then regarded as
economically the most advantageous and, in principle, gains the
contract.

OBSERVATIONS ON RESTRICTED INVITATIONS TO TENDER

Financial evaluation

20. The instructions to tenderers always state that the proposed
fees must be within reasonable market rates and that the total
amount of the tender may not exceed a given budget for each
invitation to tender.

23. The audits revealed difficulties at various stages of the
invitation-to-tender procedure. The most serious problems, how-
ever, concerned the evaluation of the tenders and the manage-
ment of the files. These shortcomings were found in 47 of the 80
Phare files and 21 of the 40 Tacis files examined.

21. For contracts under the Tacis programme, the information
on the financial evaluation does not contain any further details,
whereas for Phare contracts the Commission’s internal instruc-
tions (4 October 1996) require the method used for the financial
evaluation to be specified. For the latter, one of the following two
methods is usually applied:

24. Of the 68 cases in which the problems encountered were
considered to be serious (see the table) there were eight where the
problem had a direct effect on the final award of the contract and
12 where it might have affected the award of the contract. Due to
the absence of supporting documents, it is not possible to give an
opinion in the latter cases.

Problems considered to be serious in the sample of 120 contracts examined

Table

Number of
invitations to
tender
examined

Financial
tenders not
produced

Evaluation
report not
produced

Accepted
despite
confusion of
interests

Debatable
practice
during the
evaluation

Dispersion of
marks
influenced
result

Local experts
not taken
into account

Difference
between
issued criteria
and criteria
used

At least one
serious
problem

Problem
affected
result

Problem could
have affected
result

Number of invitations to tender presenting serious problems

Tacis

Phare (central management)

Call for tenders managed by Brussels

Phare (decentralised manage-
ment)

Call for tenders managed locally

Bulgaria

Latvia

Poland

Romania

40

31

71

15

3

14

17

49

15

19

34

4

2

2

8

1

3

4

Total sample

120

42

4

1

1

3

1

4

5

3

3

1

1

1

3

6

9

4

13

2

2

15

3

6

9

2

2

1

1

6

15

21

22

43

10

2

5

8

25

68

3

2

5

1

1

1

3

8

4

5

9

3

3

12

1

1

1

3

3

C
3
5
0
/
6

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

.

.

6
1
2
2
0
0
0

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Shortlists

Quality of the preselection

25. With the exception of four Phare contracts for which the
documentation could not be produced, all the contracts examined
were duly advertised as required.

26. There was considerable variety in the form and the content
of the preselection reports, depending on the programme and the
manager. Under the decentralised management for Phare, an evalu-
ation chart is used consisting of predetermined criteria which
result in an overall mark. Only those undertakings that have been
awarded a mark higher than a set minimum of 65 % are allowed
to go on to the next stage. The most recent version of the decen-
tralised management procedures came into force in Septem-
ber 1997, since when the preselection has been the responsibility
of a special committee made up of three persons designated by
the local authorising officer.

Irrespective of the number of undertakings invited to tender,
29.
the proportion that goes on to the technical evaluation stage is an
indicator of the interest in the contract and, therefore, of the level
of competition achieved through the shortlist. For 13 Phare con-
tracts and three Tacis contracts (Annex I), only one tenderer
passed the technical selection and was simultaneously awarded
the contract.

Reduced competition

30.
In fact, the setting of minimum levels for the number of
undertakings to be included in shortlists had little effect, because
the formation of consortia and subcontracting between undertak-
ings on the same shortlist were authorised very often, thereby
weakening the competition between tenderers (see box No 1). The
instruction manual mentioned in paragraph 3 now prohibits
groups of this kind.

27.
In the case of the Tacis programme, the shortlist is essentially
drawn up on the basis of an appraisal by the Commission man-
ager, endorsed by the authorising officer.

28. Thirty-four Phare and seven Tacis files did not contain docu-
mentation to show that the shortlist had been drawn up in a way
which ensured that there was effective competition.

31. Thus, in 34 of the 80 Phare invitations to tender and 31 of
the 40 Tacis invitations to tender examined, undertakings on the
shortlist were grouped together. Furthermore, in 38 Phare cases
and 11 Tacis cases, the number of tenders received was less than
half the number of invitations to tender that had been sent, partly
because of grouping (Annex II). Moreover in one Tacis case there
were questionable aspects to the manner in which one tenderer
went about forming a consortium (see box No 1, paragraph 35).

Box No 1

Phare

32. # 105:EUR 1 million. There were 11 undertakings on the shortlist for the award of a contract in the energy sector in Romania.
As a result of grouping, only three tenders were submitted.

33. # 110:EUR 2,3 million. The instructions to tenderers for an institutional development operation in Romania, on the one hand,
stipulated that the undertakings on the shortlist must form consortia and, on the other, expressed the wish that a context of normal
competition could be maintained. The outcome was that there were only two tenders combining six associates out of the 16 that had
been invited to tender.

Tacis

34. # 24: EUR 2 million. Although eight undertakings were initially invited to tender, only two bids were received for a contract in
the transport sector. These two tenders involved five of the undertakings from the preselection.

35. # 27:EUR 2,5 million. For the award of a contract relating to the design of a system of payment by bank card in Russia, one
of the tenderers was approached twice (first directly and then via an intermediary) to participate in a consortium with one of the other
preselected undertakings. The intermediary was confident of being able to win the contract if his proposal was accepted: participation
in the consortium and payment of a commission. The proposal was rejected and the tenderer who had thus been contacted informed
Commission staff of what had happened. Despite the details of this case having been corroborated by two Commission officials, the
contract was awarded to the consortium which included the offending undertaking.

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36. The Tacis evaluation reports clearly state which of the part-
ners in the consortium were originally on the shortlist. The Phare
files, however, do not always provide this information.

The information supplied to tenderers

Rules for the formation of consortia

37. As a general rule the instructions stipulated that consortia
and subcontracting contracts were permitted between undertak-
ings on the shortlist, but it also happened that such associations
were not allowed (four Phare cases, six Tacis cases). Collaboration
is possible under various rules, but as no justification is ever given
for the option chosen, it is difficult to assess the reasons for it.

Mention of the financial evaluation criteria

38. No precise method is specified for Tacis contracts, a fact
which does not comply with the provisions of Article 117 of the
Financial Regulation. Furthermore, it is not in accordance with
best practice, which requires that the award criteria be stated in
the contract specifications or the tender notice whenever the con-
tract is to be awarded to the economically most advantageous
tender (as opposed to an award based on other criteria).

39. For 34 of the 80 Phare files, this information was not given.
Furthermore, for 12 Phare files the Commission’s files did not
contain the instructions to tenderers.

Use of outside experts

(a) the Commission manager proposes an expert whom he knows.
The administrative situation is subsequently regularised by
integrating this expert, after negotiation, into the framework-
contract teams;

(b) the Commission manager submits the desired profile to the
contractor which proposes one of the experts on its lists.

The procedure still lacks transparency and is protected against
possible confusions of interest by a formal system of sworn dec-
larations (see box No 2).

41. As of 2000, the implementation of new framework con-
tracts (at least three per sector of assistance) should make it pos-
sible to improve the situation. The managers should no longer
have to propose candidates and the desired profiles are expected
to be submitted in parallel to three framework contract holders
in the sector concerned.

42.
In order to increase the effectiveness of the systems, the
Commission should set up, for the external aid programmes, a
database containing the main data on the experts. A tool of this
kind would make it possible:

(a) to reduce the risks of confusions of interest from the very out-
set. In two cases, beneficiaries of framework contracts offi-
cially expressed their interest in service contracts in their sec-
tor of activity, even though their contracts prohibit them from
doing so (#35: EUR 0,9 million; #51:EUR 2,8 million);

(b) to improve circulation of experts’ profiles, and their track
records in particular, at the Commission. Such circulation is
essential, in view of the high turnover of personnel at the
Commission and the widespread use of experts. Since Octo-
ber 1996, more than 2 000 experts have been consulted
through Phare framework contracts.

40. Outside experts are involved, on the one hand, in drawing
up the contract specifications and, on the other, in evaluating the
tenders. They are recruited on framework contracts which cover
most of the sectors of assistance (13 for Phare and six for Tacis)
(see paragraph 70). There are two possibilities:

43. Confusions of interest were detected in seven Phare and two
Tacis cases. The bids presented under these circumstances were in
fact rejected on three occasions in the case of Phare and once for
Tacis, but not in the other cases (see box No 2).

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Box No 2

Phare

44. # 101:EUR 1,5 million. The person who drew up the contract specifications for a pilot project for the regional land register in
Bulgaria was proposed as the long-term expert in the bid submitted by one of the tenderers. This undertaking, which thus had a crucial
advantage, succeeded in winning the contract. This confusion of interests was not mentioned in the evaluation committee’s minutes,
but was mentioned in a follow-up report that was submitted subsequently. Not only was the contract signed with the offending
undertaking but the expert also remained on the technical assistance team.

Tacis

45. # 80:EUR 2,9 million. In the case of one Tacis contract relating to the environment sector, a person consulted by the Com-
mission when the specifications for the project were being drawn up also appeared as the coordinator in one of the tenders submitted
for the same project. The confusion of interests did not result in the exclusion of either the expert or the undertaking concerned; indeed,
the undertaking won the contract, having been awarded a very high mark for the technical part.

Evaluation of the tenders

Operation of the evaluation committees

46. Even though the members of the Committee are required to
attend the evaluation meetings, five Phare files and one Tacis file
showed that the evaluators had not attended all the meetings. In

one case, the evaluator who was absent was simply treated as an
observer and his evaluation was not taken into account. Some of
the solutions accepted by the Committee in the case of Phare were
debatable: in particular, the replacement of evaluators during the
procedure, the awarding of marks for stages of the evaluation in
which the evaluators in question had not participated and the
signing by those absent of attendance sheets for meetings which
they did not attend (see box No 3).

Box No 3

Phare

47. # 104: EUR 0,9 million. In one case relating to the tourism sector in Poland, the marks given by the evaluator who attended
some of the evaluation phases were simply repeated for the phases where he was absent. Furthermore, these absences did not prevent
the evaluator from signing the attendance lists for meetings which he did not attend.

48. # 29:EUR 1,8 million. For one contract in the marketing of agricultural products sector, the independent expert submitted a
report to the Commission, calling in question the reliability, competence and independence of the other members of the Committee
during the evaluation of the tenders. His conclusion was that the evaluation had not been taken seriously.

49. # 109:EUR 1,4 million. For one training project, one of the external evaluators stated in his report that other Committee
members were frequently absent, to the extent that at one interview he was on his own. Nevertheless, a mark was given by every evalu-
ator for every interview.

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Marks awarded to the technical proposals

50.
In view of its weight (70 %), the technical evaluation is deci-
sive and any significant difference between the tenderers as regards
the points awarded is a serious handicap in the later stages. It
must, therefore, be considered very carefully: in all the files exam-
ined, there were only three contracts that were awarded to an
undertaking which did not occupy the top position at the end of
the technical evaluation.

In the case of 16 Phare and 12 Tacis files, the marks awarded
51.
by the local assessors differed greatly from those given by the
other members of the Committee and were the cause of signifi-
cant differences between the undertakings evaluated. In two Phare
cases and one Tacis one, the divergences led the Commission to
cancel the tender evaluation. In other cases, the results were
accepted and the procedure continued. The reasons for these dif-
ferences in attitude should be explained carefully when the deci-
sion is tipped in the direction of a particular tenderer precisely
because of differences of this type (three Phare and three Tacis
cases).

Box No 4

Phare

52. # PL05: EUR 0,4 million. The marks awarded by one member of the evaluation committee swung the award of a contract in
Poland (technical assistance for privatisation) in favour of one of the tenderers.

Tacis

53. # 94: EUR 3,9 million. As a result of overmarking by the only Russian expert, one Tacis contract concerning the development
of human resources was awarded to the undertaking that came second at the end of the technical evaluation. The difference between
the marks awarded to the top two undertakings by the expert was four times greater than the difference between the four other asses-
sors’ evaluations of the same tenderers. If this expert’s marks had not been taken into account, the contract would have been awarded
to another undertaking.

54. There is no rule to distinguish cases where the procedure
must be terminated from those where it may be continued. Under
such circumstances it would be preferable if the marks at the
extreme ends of the scale were excluded when the average is being
calculated (e.g. if they deviate from the average by more than a
predetermined amount), or, if appropriate, that the evaluation be
taken over by another committee.

drawing attention to their importance, the Commission’s depart-
ments did not follow the rules provided in Article 117 of the
Financial Regulation (see paragraph 4). Finally, contrary to what
is laid down in the instructions to tenderers, a selection has very
often already been made on the basis of the written proposals.
Only undertakings which obtain more than 65 % from the tech-
nical review of their files are invited for interview. However, in
reality, many tenderers have had their technical mark raised after
the interviews. Given that this preliminary filter is never men-
tioned, the information sent to tenderers is incomplete.

Interviews

55. The interviews are part of the technical evaluation and the
points awarded count towards the final technical mark. In the
case of Phare, the written tender usually accounts for 80 % of the
technical evaluation and the interviews for 20 %. On occasion,
however, the interviews either accounted for more than 20 % (12
Phare files), or the evaluation committee did not arrange an inter-
view (18 Phare cases). In 16 Phare cases and all the Tacis ones, the
proportion applicable to the interview was not specified and
adjustment was a matter for overall discretionary appraisal.

Financial evaluation methods

57.
It was found from examining the files that 11 different meth-
ods had been used in evaluating the financial proposals for Phare
and six for Tacis (Annex IV). These methods can be divided into
two groups: in the first, the comparisons are based on the overall
amounts, whereas in the second it is the average unit costs that
are compared. Some of the methods applied in the second group
produce effects which go against the policies set out elsewhere by
the Commission.

56. There is nothing in the Phare files to explain the choice of
options. Moreover, by omitting to specify in the instructions to
tenderers whether interviews would take place and by not

58. This is the case where, in order to calculate the average cost
of the experts, the total cost of experts, both local and European,

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Official Journal of the European Communities

C 350/11

is divided only by the services rendered by the European Union
experts (man-days). This method gives the advantage to tenders
which favour hiring European experts, to the detriment of those
which employ local experts. Such a step is in conflict with the
intentions expressed in the instructions issued to tenderers, and
in the Commission’s internal instructions (4 October 1996), which
seek to promote the use of local experts, with the aim of ensur-
ing that the results achieved have long-term sustainability (see
paragraph 19).

59.
In the sample examined, six Phare and nine Tacis contracts
were affected by the non-inclusion of experts from CEEC coun-
tries. In only one case (#62: EUR 4,8 Million) did a Commission
official ask for the basic calculation to be amended so as to place
all tenderers on an equal footing.

Changes in the methods of financial evaluation

60. While the evaluation criteria were indeed sent to tenderers
in the case of the Phare programme, the evaluation committee
nevertheless applied different criteria sometimes. Thus, the evalu-
ations of 12 of the 80 Phare contracts examined were carried out
under questionable conditions. This practice may mislead tender-
ers, who construct their tenders according to the criteria issued
to them. In two of the 12 contracts involved, the contract would
have been awarded to another tenderer if the criteria had been
adhered to. The absence of financial tenders in two other files
made it impossible to say whether the contracts would have been
awarded to the same tenderers if the method proposed initially
had been applied (see box No 5).

C 350/12

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Official Journal of the European Communities

6.12.2000

Box No 5

Phare

61. # 33: EUR 11,7 million. The instructions issued to tenderers specified that the financial proposals would be evaluated on the
basis of the average unit cost of the experts. This meant the total cost, less reimbursable expenses, divided by the experts’ services
calculated in terms of man-days. These instructions also specified (Section C.2.1) that an incorrect allocation between direct costs and
reimbursable expenses could lead to the rejection of the tender and that any expenditure relating to support for the project must be
entered under direct costs. None of these provisions was applied.

The financial evaluations were thus made on the basis of overall costs excluding reimbursable expenses, without considering the number
of experts, and therefore, prices being equal, conferring an advantage on the tenders that used fewer experts. Furthermore, the tender
selected included, among the reimbursable expenses, various support measures, in particular EUR 288 000 for local offices, which
should have been included under the direct costs. The proposal in question should have been rejected as soon as the tenders were opened,
on the grounds of incorrect cost allocation. Lastly, examination of the financial proposals shows that the composition of the reimburs-
able expenses varied from tender to tender and no corrections were made before the financial evaluation in order to ensure that the
data being compared was of the same type. It thus emerges that, if the evaluation criteria issued to the tenderers had been applied, the
undertaking chosen would not have been selected since it would have been placed lowest in the rankings.

Calculation data

— Evaluation which did not respect the advertised criteria:

Fees +
direct costs

1 747 865
1 908 080
2 088 570

(a)
(b)
(c)

— Evaluation respecting the advertised criteria:

Fees +
direct costs

1 747 865
1 908 080
2 085 570

/

/
/
/

M/D
EU + local experts

3 595
5 876,5
4 935,5

= 486,19
= 324,7
= 422,57

(a)
(b)
(c)

Final ranking

(1)
(2)
(3)

Final ranking

(3)
(1)
(2)

62. # 56: EUR 4 million. The instructions issued to the tenderers for a technical assistance contract in Latvia informed them that
the financial proposals would be evaluated on the basis of the average unit cost of the experts. It was therefore in the tenderers’ interest
to keep this average cost as low as possible, in particular by making greater use of local experts whose fees were, as a rule, lower. In
reality, the result of the evaluation was distorted by the way in which the calculation data were handled. The total cost for experts,
both European and local, was only divided by the time required by the European experts to perform their services. The tender chosen
was the one which favoured the use of (costly) European experts, to the detriment of those which used a larger number of (cheaper)
local experts. Had the data for the calculation not been revised, the contract would have been awarded to a different undertaking.

Calculation data

— Evaluation which did not respect the advertised criteria:

Fees +
direct costs

3 338 870
3 184 420

/

/
/

M/D
EU + local experts

Final ranking

2 486
3 333

= 1 343
= 955

(2)
(1)

(a)
(b)

— Evaluation respected the advertised criteria:

Fees +
direct costs

3 338 870
3 184 420

/

/
/

M/D
EU + local experts

Final ranking

10 780
6 235

= 310
= 511

(1)
(2)

(a)
(b)

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Official Journal of the European Communities

C 350/13

63. Similarly, in three Tacis cases, the information was not sent
to the tenderers, but contradictions were found between the cri-
teria initially agreed by the evaluation committee and the way in
which they were actually applied. However, the changes did not
affect the results of the evaluation.

File management

64. Even though the Tacis files are more complete and their
quality is better than that of the Phare files, the management of
files by the Commission staff reveals three types of shortcoming:

(a) documents dispersed;

(b) documentation incomplete or mislaid;

(c) difficulty, or even impossibility, of identifying the manager
responsible for the project (because certain non-permanent
managers left the Commission).

65.
In the case of 27 Phare and 15 Tacis files, it is not possible
to assess whether the procedures for awarding contracts were
entirely regular, because the tenders that were eliminated, or the
evaluation reports, are missing. In addition, the information nec-
essary for a proper understanding of the course that the proced-
ures took is not always available. Some important items of cor-
respondence were not placed in the files and reports drawn up by
the expert evaluators were not always placed on file systematic-
ally, even in the case of headquarters management.

66. The management of the Tacis programme files was entrusted
to a technical assistance office (TAO), whereas that of the Phare
programme was carried out by the local contracting authorities
and the Commission. After having been managed centrally, the
Phare files were transferred to the delegations as from the second
half of 1998 for the national programmes and to the SCR for the
multinational programmes.

67. The conditions under which these transfers were carried out
were not satisfactory. Firstly, the majority of the files sent to the
delegations proved to be incomplete. These files were then trans-
ferred, but in no real order and with no accurate notification of
their contents. At the time of the audit visits, in June 1999, the
delegations had not yet received guidelines on filing (how to keep
and structure files).

68. As regards Tacis, it is rather unwise to entrust a private
operator with information as sensitive as that connected with the
awarding of public contracts for which undertakings in the same
group as the operator in question may tender.

69. This situation is the result of administrative weaknesses
which have been highlighted many times in the Court’s reports:
very high rate of turnover among managers, combined with a
lack of clear rules on the keeping of files and their structure and
storage. These management defects mean that it is not possible to
guarantee continuity of service in the managing departments
(institutional memory). In the case of the contract documenta-
tion, for which the Commission may be held responsible, greater
administrative discipline is called for.

OBSERVATIONS CONCERNING FRAMEWORK CONTRACTS

70.
In order to speed up the implementation of the Phare and
Tacis programmes and reduce the number of invitation-to-tender
procedures (Annex V), the Commission concluded framework
contracts in various sectors (13 for Phare and six for Tacis). The
framework contracts were awarded following open invitations to
tender. The files for the Phare contracts examined were mislaid by
Commission staff.

71. The Commission insists that framework contracts be used
for any service contract involving an amount of less than
EUR 300 000 and for a duration of less than 18 months. This
form of contract is used, in particular, for recruiting experts to
draw up the contract specifications and evaluate the tenders (see
paragraph 40).

In the case of Phare, the contracts were signed in September
72.
and October 1996. At the time, their duration was supposed to
be limited to two years, with no extension possible. Subsequently,
all these contracts were extended three times, taking their overall
duration to almost three and a half years. The total value of the
contracts in question was EUR 106 million (Annex V).

In the case of Tacis, six framework contracts were signed in
73.
May 1998. Of the 45 tenders received for the six sectors con-
cerned, 26 were rejected because they did not involve the mini-
mum number of experts required (70).

74. The condition concerning the minimum number of experts,
which seriously reduced competition, appears debatable. In fact,
the Commission managers themselves often propose experts, who
are then entered on the contractor’s list ex post facto (see para-
graph 40). In the particular case of the human resources sector
nine of the 10 bids received were excluded for that very reason,
thereby eliminating any real competition. For four out of the six
sectors only one undertaking reached the financial evaluation
stage, and won the contract at the same time.

75. Lastly, the new principles governing the use of technical

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Official Journal of the European Communities

6.12.2000

assistance offices (TAOs) (1), which were adopted in June 1999,
specify that contracts concerning TAOs must first be submitted
for the opinion of the Advisory Committee on Procurements and
Contracts (ACPC). As with the TAOs, the new framework con-
tracts too should, in future, be submitted to the ACPC.

CONCLUSIONS AND RECOMMENDATIONS

76. The audit revealed various problems in the awarding of ser-
vice contracts. The most important of them concern the evalua-
tion of the tenders and the existence of supporting documents.
These findings concern more than half the Phare and Tacis files
that were examined (see the table).

Competition between tenderers

77. Although the use of the restricted invitation-to-tender pro-
cedure does not necessarily entail any restriction of competition,
some decisions nevertheless effectively limit competition, for
example, the formation of consortia and the use of authorised
subcontracting among enterprises included on the same short-
list (see paragraphs 25 to 36).

78. Partnerships between undertakings on the same shortlist are
no longer permitted, in order to avoid agreements whose main
effect is to weaken competition. However, it might be possible for
partnerships with other undertakings to be approved, especially
where they have expressed an interest in the project but have not
been included on the shortlist.

dures that differ from those notified to the tenderers (see para-
graphs 57 to 63).

If the Commission wishes to meet the standards of transpar-
81.
ency it has set itself for the awarding of contracts, it should in
future:

(a) draw the tenderers’ attention to the importance attached to
the interviews and notify them of the methods adopted for
the technical and financial evaluations;

(b) ensure that the evaluation committees do not deviate from
the evaluation criteria and rules issued to the tenderers, and
that they always take care to justify all their decisions and ini-
tiatives;

(c) establish a standard filing system in which all the information
concerning an invitation to tender (tenders received, detailed
reports by the evaluating experts, correspondence, documents
relating to the negotiations) is collected in one case file;

(d) send clear, standard filing instructions to all its delegations

and check that they are actually applied;

(e)

in the interests of transparency, record, accurately and com-
prehensively, the follow-up given to complaints and irregu-
larities.

Effectiveness of the procedures

82. The continuity of public service and adequate knowledge of
procedures are not effectively provided, neither by means of per-
sonnel (substantial staff turnover) or files (often incomplete), nor
by means of regulations (lacking clarity) (see paragraphs 4 to 7,
64 to 69).

Transparency of procedures

Responsibilities of the parties involved in the procedures

79. The instructions sent to tenderers do not always specify or
explain the criteria and procedures governing the award of the
contract (Phare), or they omit them (Tacis). The omissions con-
cern, firstly, interviews, which may be arranged (or not), and
whose importance varies from one contract to another (see para-
graphs 55 and 56). They give particular cause for concern when
they concern the criteria used for the financial evaluation (see
paragraphs 38 and 39). Most of the files do not include the finan-
cial bids that were eliminated, which makes verification of the
procedure difficult (see paragraphs 64 to 69).

In such a context, the procedures for awarding contracts are
80.
open to question when the evaluations take place under proce-

(1) Communication from Mr Liikanen to the Commission, SEC(1999) 981,

23.6.1999.

83. Absences on the part of evaluators and marks that vary
excessively may indicate a lack of rigour and independence on the
part of the evaluators concerned (see paragraphs 40 to 45, 50 to
54).

84.
It is suggested that the organisational framework be improved
for all those involved and that any risk of a confusion of roles be
eliminated at the outset. This requires, in particular, the creation
of a database containing details of all the outside experts and their
performance in relation to their successive contracts. The effects
of any anomalies that are noted in the marks awarded could be
mitigated by eliminating some of the extreme notes when the
average is calculated. Moreover, the working of the evaluation
committees might be improved if an agent of the Commission
were present in the evaluation committees convened on the initia-
the decentralised contracting authorities (see para-
tive of
graph 16).

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Official Journal of the European Communities

C 350/15

General conclusion

85. While open invitations to tender are the surest way of guar-
anteeing a broad range of tenders for contracts, making their
application more widespread would increase both the cost of
operations (personnel, experts, costs) and the time required. Fur-
thermore, it is the discipline with which the preselection, infor-
mation and, above all, evaluation procedures are carried out that
should receive particular attention, rather than the form of the
invitation to tender.

86. There can be no justification for the existence of so many
differences between Phare and Tacis as regards the procedures fol-

lowed in awarding service contracts. In this respect, harmonising
the procedures for awarding service contracts within the Com-
mission would be a highly effective means of introducing the dis-
cipline which has, until now, been lacking. On the same point,
creating the SCR and standardising the procedures for contracts
concluded within the framework of cooperation for the benefit of
third countries is only a first step: the desired harmonisation
should be carried out at the level of the Financial Regulation
applicable to the Community budget. The problems that were
found only serve to emphasise the urgency of this harmonisation
and the need to draw up simpler and lasting rules. Furthermore
turnover among the staff allocated to tasks which are essentially
civil service duties should be reduced.

The report was adopted by the Court of Auditors in Luxembourg at the meeting of 12 and 13 July 2000.

For the Court of Auditors

Jan O. KARLSSON

President

C 350/16

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Official Journal of the European Communities

6.12.2000

ANNEX I

Phare contracts for which only one undertaking passed the technical selection stage

No

1

2

3

4

5

6

7

8

9

10

11

12

13

Amount

880 090

2 697 200

609 500

1 039 830

915 638

3 999 854

1 600 000

890 000

744 725

892 942

896 520

478 850

79 330

# Undertakings invited

# Tenders

(in EUR)

6

10

12

8

8

12

10

7

7

7

11

11

8

3

3

3

2

7

6

5

3

2

4

4

2

4

Tacis contracts for which only one undertaking passed the technical selection stage

No

1

2

3

Amount

# Undertakings invited

# Tenders

(in EUR)

1 299 950

3 995 377

2 347 049

7

9

8

5

6

6

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Official Journal of the European Communities

C 350/17

ANNEX II

Changes in the average number of tenders at different stages of the procedure

Average number

Expressions of interest

Undertakings on the shortlist

Tenders received

Tenders reaching financial evaluation

Phare

27,2

9,5

4,7

2,4

Tacis

27,6

8,4

5,2

2,7

C 350/18

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Official Journal of the European Communities

6.12.2000

ANNEX III

Infringements of the rule limiting the size of Tacis contracts (1996, 1997 and 1998)

Contractor No

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

1996

12,0

7,3

2,1

2,9

3,3

4,0

0,0

2,0

1,8

0,0

1,2

2,1

0,0

0,0

2,4

7,8

1997

11,4

3,7

7,3

3,6

6,8

5,5

0,0

5,0

6,0

7,4

1,8

1,9

2,7

8,0

4,1

0,0

Total
1996 + 1997

23,4

11,0

9,3

6,5

10,2

9,5

0,0

7,0

7,8

7,4

3,0

4,0

2,7

8,0

6,4

7,8

1998

0,0

10,4

6,2

4,6

0,0

0,0

9,0

1,5

0,7

1,0

5,4

4,3

5,5

0,0

1,5

0,0

(in million EUR)

Overall amount

23,4

21,4

15,6

11,2

10,2

9,5

9,0

8,5

8,5

8,4

8,4

8,2

8,2

8,0

7,9

7,8

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Official Journal of the European Communities

C 350/19

ANNEX IV

Phare financial evaluation methods

Phare

Number of cases

Number of cases where
the method used differed
from the method issued

0
1
2
3
4

5
6
7
8
9
10
11
12
13

Information missing
Total price / time worked by EU experts
(Total price – local experts’ fees) / time worked by EU experts
Total price
(Total price – local experts’ fees – cost of equipment)/time worked
by EU experts
(Total price – cost of equipment) / time worked by EU experts
Total price – reimbursable expenses
(Total price – reimbursable expenses) / time worked by EU experts
(Total price – reimbursable expenses) / time worked by experts
Fees / time worked by experts
(Fees + allowances) / time worked by experts
Total price + commission
Evaluation in stages
Total price – cost of equipment – cost of local assistance – travel
expenses

14 Method 8 + commission

Total

7
0
0
6

2
0
39
6
10
1
1
3
1

1
1
78

0
0
0
0

0
0
8
1
2
0
0
0
1

0
0
12

+ 2 cases where only one bid reached the technical evaluation and the cases in question did not undergo financial evaluation.

Tacis financial evaluation methods

Tacis

Number of cases

0
1
2
3
4

5
6
7
8
9
10
11
12
13

Information missing
Total price / time worked by EU experts
(Total price – local experts’ fees) / time worked by EU experts
Total price
(Total price – local experts’ fees – cost of equipment) / time worked
by EU experts
(Total price – cost of equipment) / time worked by EU experts
Total price – reimbursable expenses
(Total price – reimbursable expenses) / time worked by EU experts
(Total price – reimbursable expenses) / time worked by experts
Fees / time worked by experts
(Fees + allowances) / time worked by experts
Total price + commission
Evaluation in stages
Total price – cost of equipment – cost of local assistance – travel
expenses

14 Method 8 + commission

Total

+ one direct treaty and one evaluation by the ACPC.

0
8
2
24

2
1
2
0
0
0
0
0
0

0
0
38

C 350/20

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Official Journal of the European Communities

6.12.2000

ANNEX V

List of framework contracts

Phare

(in EUR)

Sector

Value of contract as at 30.6.1999

Export and investment

Agriculture

Health

Energy

Public administration

Social development

Environment

Transport

Banking and finance

Telecommunications and post

Privatisation and restructuring

Information technology

Regional development

5 181 888

7 533 795

1 175 578

6 315 818

19 045 019

7 543 984

18 235 197

15 290 569

5 138 651

2 537 760

3 225 216

5 071 384

9 865 931

Tacis

Infrastructure (transport and telecommunications)

Enterprise restructuring and development

Human resources development

Environment

Energy including nuclear safety

Food production, processing and distribution

Total Phare

106 160 790

0

1 996 420

794 026

10 601 395

87 600

87 600

Total Tacis

13 567 041

No

1

2

3

4

5

6

7

8

9

10

11

12

13

1

2

3

4

5

6

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Official Journal of the European Communities

C 350/21

THE COMMISSION’S REPLIES

INTRODUCTION

1. The Court’s report looks at an important area of the Commu-
nity’s external aid management. The difficulties arising from the
expansion of the two programmes, Phare and Tacis, over the
period 1990 to 1997 and the plethora of procedures applicable
to Commission programmes in different geographical regions led
at the end of 1998 to substantial changes in both the structure of
the Commission departments concerned and basic procedures,
especially with a view to the reforms announced in May 2000.

The objectives of the reform are results-oriented. The aim is to
improve the quality of operations through better programming
and to reduce the time taken to implement projects. Many evalu-
ations have confirmed that the main obstacles to a speedy and
successful implementation of these programmes are a lack of
human resources and overly complex procedures. The reform will
try to find realistic solutions to these problems.

Tacis manual of operations). Some of the procedures used for a
time have been abandoned and the Commission has approved
standard service contracts and contract-award procedures that
incorporate a great many changes and improvements.

OBSERVATIONS ON RESTRICTED INVITATIONS TO TENDER

23. The Court claims to have found shortcomings in 47 of the
80 Phare files and 21 of the 40 Tacis files that were examined. The
Commission notes that in 21 of the Phare cases and 15 of the
Tacis cases, the shortcomings concern only the file-keeping.

24. Without casting doubt on the substance of the Court’s argu-
ments, the Commission does not share its conclusions regarding
three of the eight cases mentioned.

The Commission attaches great importance to compliance with
contract-award procedures, and many measures have been taken
under the Phare and Tacis programmes, especially since 1997, to
bring about more rigorous and more transparent competition.

Shortlists

Quality of the preselection

The Phare programme, most of whose recipients are candidate
countries for accession, is essentially decentralised and devolved,
while the Tacis programme, the recipients of which are States of
the former USSR, is completely centralised as the recipients are
not preparing for accession. Under Phare, the national authori-
ties generally assume responsibility for the procedures, issue and
conduct invitations to tender and sign contracts, while in the case
of Tacis contracts, it is the Commission departments which carry
out all the procedures.

28. With regard to Phare, the shortlist at that time was taken
directly from an internal database, the central consultant register
(CCR). All the firms interested in taking part in invitations to ten-
der could get themselves entered in this database by providing
proof of their experience in a given field. When issuing an invita-
tion to tender the contracting authorities used this list to select
the tenderers. This is why no detailed supporting arguments con-
cerning the composition of the shortlists were included in the
files.

The Phare programme is much influenced by the national char-
acteristics of the applicant countries; the level of maturity and the
administrative culture varies greatly from one country to another.
Under these conditions, the controls on procedures cannot be
completely standardised and faultless in every case, whatever the
efforts made by the Commission to train the various contracting
authorities concerned and to publish guides and manuals (in par-
ticular the decentralised implementation system manual — DIS),
designed to ensure consistent and clear procedures.

For Tacis the Commission has made a considerable effort to
develop clear and exhaustive management tools, (for example the

Under the Tacis programme the drawing-up of shortlists was sub-
ject to controls at several levels, in particular by the head of the
geographical unit concerned, the head of the horizontal unit
responsible for the control, the director and, if necessary, the
deputy Director-General, depending on the value of the tender.
Each shortlist was normally accompanied by detailed informa-
tion, including the complete list of the expressions of interest
received from operators for the project concerned, the grounds
for the proposed selection, the list and the value of the contracts
obtained previously by the operators selected, and the projects for
which these operators had been registered on the shortlist. The
process of controlling the shortlists was accompanied by guaran-
tees as to transparency. While it is true that certain documents
sometimes do not appear in the 1994 to 1998 files, owing to suc-
cessive removals as well as structural changes, files have been sys-
tematically kept from the end of 1998.

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29. The first step in the selection procedure is to check that the
firms have the economic and financial capacity required, plus
broad experience and suitable references. The initial step does not
involve any a priori regarding the number and quality of tenders
to be submitted. The quality depends on the effort the firm puts
into its tender, the attention it pays to what the project is meant
to do on the basis of the tender specifications and other technical
factors.

broad European base, to improve technical capacity and the trans-
fer of tenderers’ know-how, and to cope with the specific features
of the environment in the recipient countries and the scale of
local problems. This complementarity was seen as an important
advantage and arose from a considered policy agreed with the
Council. This provision was moreover legal and part of the Tacis
Regulation. As implementation of the programmes advanced, and
in the light of the evolving situation in our partner countries, this
policy was scaled down, then abandoned.

The fact that only a small proportion of firms pass the technical
evaluation stage shows that there is a detailed and rigorous exami-
nation of the qualitative aspects of the tender by the evaluation
committee. Indeed, the ultimate purpose of an invitation to ten-
der is to select one bid among those submitted.

Reduced competition

30. The setting up of consortia between tenderers is a practice
which was encouraged explicitly under the Phare and Tacis pro-
grammes in order to encourage the submission of tenders with a

31. The tables annexed to the Court’s report show that competi-
tion in invitations to tender was broad-based and real (on average
for Phare, 27,2 expressions of interest, 9,5 firms on the shortlist,
4,7 bids received and 2,4 bids making it through to the financial
evaluation stage and, for Tacis, 27,6 expressions of interest, 8,4
firms on the shortlist, 5,2 bids received and 2,7 bids making it
through to the financial evaluation stage).

Box 1

Phare

It is quite usual in an invitation to tender for services, whatever the programme or region in question (in this
32.
case, the Romanian contracting authority), for the number of tenders received to be more or less the same (around
25 %). Moreover, three of the tenders involved nine firms.

In this case, the Romanian contracting authority considered that the very specific field covered by this project and
33.
the complexity of the terms of reference required the setting up of a consortium between firms of at least two Member
States. The initial number of firms invited (16) gave a wide base for competition and six firms finally took part in the
two tenders submitted.

Tacis

34. As mentioned earlier, this practice was in complete conformity with the provisions of the Regulation and the two
bids received involved five of the eight firms initially invited.

35.
In this case, the charge arises from the suspicion that the representative of the recipient country was likely to be
biased in the evaluation. The Commission was informed of these allegations and the evaluation was the subject of close
scrutiny.

Owing to the number of members (five) of the Tacis evaluation committees, it is very difficult for only one member of
the committee to skew an evaluation. At the end of the evaluation, it was clear that the vote of the recipient’s representa-
tive had no influence on the final choice in the way suspected by the Court, in so far as that he granted his highest
mark to the complainant, and the result would have been the same even if this mark had not been taken into account.
Since the evaluation did not show evidence of any irregularity, the Commission awarded the contract.

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The information supplied to the tenderers

Rules for the formation of consortia

37. Under both Phare and Tacis tenderers are always notified if
the creation of consortia is not authorised. The choice depends
on the technical nature of the project, which is described in detail
in the terms of reference.

Mention of the financial evaluation criteria

38. The list of the general evaluation criteria was included in the
instructions to tenderers that were always attached to the Tacis
tender dossier.

39. The instructions to tenderers are normally included in the
tender dossier sent to tenderers.

Use of outside experts

of sufficient statutory personnel and of high-level technical exper-
tise that is only available on the market, it has no other choice but
to resort to the private sector to carry out such tasks. However, it
should be stressed that the external experts do not have decision-
making powers and that they only submit recommendations to
the contracting authority via the conclusions of the jury.

While these potential risks exist, the experts’ selection is com-
pletely transparent. Framework contracts were concluded follow-
ing an international invitation to tender with firms that were
selected by a very competitive process. These firms are officially
banned from taking part in invitations to tender in fields falling
within their framework contract. The sworn statements made by
the evaluators render them personally accountable, in accordance
with modern principles of sound management.

42. The Commission regrets not being able to implement the
Court’s suggestion concerning the dissemination of data on experts
giving their profiles and track records, owing to a lack of human
and material resources (in particular computer resources).

In the case of Phare, the Commission acknowledges that
43.
errors were made by the local contracting authorities, affecting
four cases in two countries.

40.
It is true that the routine use of external experts to carry out
evaluations of invitations to tender for public contracts can present
risks. The Commission considers it regrettable that, in the absence

However, the Commission does not believe there was any confu-
sion of interest in the case of Tacis (see paragraph 45).

Box 2

Phare

In this case, it is true that the Bulgarian contracting authority should have prohibited the firm from proposing

44.
the expert in question, or even eliminated this firm’s tender.

Tacis

45.
In this case, the Commission employed three people in no way involved in the tender to draw up the specifica-
tions. The fourth person, to whom the Court refers, did not take part in the drafting of the specifications and played no
role in the invitation-to-tender procedure. The contract was therefore awarded in a completely normal manner.

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Evaluation of the tenders

Operation of the evaluation committees

46.
In the case of Phare, it happened that evaluators were pre-
vented at the last minute from taking part in meetings for reasons
of force majeure (illness, travel or other impediments). Since the

objective of the contracting authority was to ensure a fair evalu-
ation by competent people, it accepted their replacement by other
competent evaluators. The case where it is alleged that an evalu-
ator signed the list of participants for a meeting he had not
attended was an exceptional case (see the detailed reply to para-
graph 47).

The Tacis case was an exceptional one.

Box 3

Phare

47.
In this case the Polish contracting authority admits the absence of the evaluator at the last meeting of the evalu-
ation committee. This evaluator sent the chairman of the committee a letter explaining his absence. The signing of the
list of participants was probably the result of a mistake as to the date. In any event, absent or not, the marks of this
evaluator in no way affected or nullified the final outcome of the invitation to tender.

48. All the evaluators signed the evaluation report, thus affirming the validity of the procedure (Bulgarian contract-
ing authority).

In response to the Court’s comments, the Commission delegation in Romania requested an explanation from the
49.
chairman of the local contracting authority’s evaluation committee. He explained that the remarks of the evaluator
quoted by the Court arose from the fact that some evaluators finished their individual evaluations more quickly than
others and that all were present when the interviews were held. All members were also present at the final phase of the
evaluation, namely the discussions and the reaching of conclusions concerning the committee’s final recommendation.
Furthermore, all the evaluators filled in their sheets and evaluation grids correctly, and the procedure was conducted in
normal conditions of confidentiality in the room where the tenders were kept permanently under lock and key.

Marks awarded to the technical proposals

50. To ensure a good cost-benefit ratio and maintain the quality
of projects costing millions of euro, it is better to avoid false
economies when it comes to technical assistance. The fact that the
best technical bids were chosen in almost all cases is fully conso-
nant with the objectives of the Phare and Tacis programmes.

51. For both Phare and Tacis, the range of marks can vary mark-
edly as a result of different mentalities and cultures. Evaluators
work quite independently, and any significant divergence has to
be justified. A procedure can only be cancelled if the marking
reveals irregularities, not because of a wide range of marks, which
can be completely justified and accepted by the evaluation com-
mittee and the contracting authority.

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Box 4

Phare

52.
In this case, (the Polish contracting authority), while it is true that the marks awarded by one of the evaluators
diverged from those awarded by the other members of the committee, this same person awarded top marks to tenderers
that did not win the contract. Thus any suspicion of bias is unfounded.

Tacis

In this case the results of the financial evaluation had most weight and led to the choice of the successful tenderer.

53.
The technical marks of the recipient’s representative therefore did influence the award of the contract.

54. The Court’s suggestion that the top and bottom marks be
discarded is very difficult to put into practice since it would mean
systematically summoning five members of an evaluation com-
mittee only to rule out the marks of two of them. Moreover, the
chairmen of evaluation committees check whether any significant
variation in the marks is the result of an evaluator’s bias. If that
turns out to be the case, either the evaluation is cancelled and
referred to another committee or the marks of the evaluator in
question are not taken into account.

Interviews

55. Both for Phare and Tacis, setting a precise percentage for the
interview does not necessarily offer any methodological advan-
tage. Indeed, interviews take place when the evaluators have
examined the written technical proposals. The aim of interviews
is to go into some aspects of the proposal in greater detail and get
a better idea of the abilities of the team proposed. As soon as they
have finished, the evaluators indicate whether or not and to what
extent the interviews are likely to affect, favourably or unfavour-
ably, their initial opinion. If necessary, they then modify some of
their marks accordingly.

It is quite normal for final technical marks to be reconsidered fol-
lowing the interviews when it appears that, despite the quality of
written bid, the experts’ skills or suitability fall short. The weight
of interviews may vary from one procedure to another in rela-
tion to the project in question, the complexity of the work and
the role of each expert.

comparable to an examination in two parts, written then oral. It
avoids unnecessary expense for tenderers who have no chance of
being awarded the contract.

Financial evaluation methods

57. Under both Phare and Tacis there were two methods of
evaluating financial bids during the reference period:

(a) the total price: method used for projects where the expected
result was clearly defined in terms of an end product or a pre-
cise number of man-days of specific expertise;

(b) the total price divided by the number of experts: method used
for projects where the expected result was defined in terms of
objectives and it was up to the tenderer to specify the type and
duration of the technical assistance deemed necessary to
achieve these objectives.

The two methods could be combined, depending on whether
reimbursable expenditure was taken into account, or the cost of
equipment, and depending on the specific nature of the invita-
tion to tender.

It is not possible or desirable to lay down once and for all every
last detail of a method and render it immutable. On the contrary,
by combining evaluation methods we can take account of the
individual features of each case, and so make the best choice.

56. The option of interviews is taken on the basis of the nature
of the project and the profiles sought. The possibility of interview
is always mentioned in the instructions to tenderers and is the
decision of the evaluation committee.

For example, the cost of some components of a contract might
be fixed and laid down in the specifications (the cost of equip-
ment) and so it would be useless to take account of it in the finan-
cial evaluation.

The practice of not inviting firms whose written technical bid
does not meet the minimum quality threshold is a procedure

58 and 59. For a team made up of a given number and type of
experts, a private firm would be taking a major risk if it proposed
a higher proportion of European experts than necessary to satisfy

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the technical specifications, given the considerable difference
between the cost of an EU expert and the cost of a local one (of
three to one). The alleged advantage accorded to EU experts is
thus debatable.

This method of financial evaluation has been abandoned, how-
ever, because of the political drawbacks and its complexity.

Changes in the methods of financial evaluation

60.
In the case of Phare, the Commission acknowledges that
methods other than those announced should not have been
applied by the contracting authorities concerned. However, it
should be noted that in all the cases in question, the financial
evaluation method was decided before the opening of technical
and financial bids, which excluded any discrimination or favourit-
ism in the award of these contracts.

Box 5

Phare

61 and 62. Errors were indeed made in these two cases.

In the Tacis cases cited by the Court a financial criterion
63.
other than that adopted before the opening of the tenders was
indeed applied, for duly justified reasons. In any event, the changes
had no influence on the outcome of the three invitations to ten-
der in question.

File management

64. The dispersal of documents is inherent in the decentralised
and devolved nature of a programme such as Phare, where the
recipients are countries applying for accession. The Commission
admits that in some cases, as a result of local circumstances, the
documentation was not kept in a uniform way. The fact that Phare
is decentralised means that it is extremely difficult to ensure that
presentation is uniform and that the local contracting authorities
routinely keep complete files. However, in June 1999 the Com-
mission gave the delegations detailed instructions on the keeping
of files.

As to Tacis, the Commission notes that the management of files,
though not irreproachable, is acceptable.

65. The Commission acknowledges that, for the period under
consideration by the Court, there were problems with the file-
keeping for Phare. Measures have been taken since then to tackle
these problems.

While not all financial bids were put in the Tacis files at the time,
the evaluation reports, including the detailed minutes on proce-
dures endorsed by the members of the committees, were rou-
tinely included.

Instructions on the archiving of Phare files were given on

67.
3 June 1999.

68. The management of information on contracts by a private
operator is rendered necessary by the lack of statutory staff. At
the moment the Commission does not have any choice but to
farm out this work.

However, the Commission has always made sure that the risk of
conflict of interest is kept to a minimum. Since the beginning of
the Tacis programme, the contractor of the procurement unit has
never been in charge of managing calls for tenders in which its
partners took part. Since 1997, the PU contract has carried a
clause excluding the contractor and all who work for him from
Tacis contracts and financing.

69. The remark concerning the excessive turnover of managers
is fully supported by the Commission. In the absence of sufficient
statutory staff at both head office and in the delegations, recourse
to non-statutory staff was and is the only solution. The periodic
rotation of this non-permanent staff, which takes place at the end
of contracts entails a loss of institutional memory, which does
nothing to help file-keeping.

OBSERVATIONS CONCERNING FRAMEWORK CONTRACTS

The experts’ activity reports are documents that are placed in the
file of the evaluator’s contract, not in that of the dossier for the
tender in which they took part.

72. The tendering procedure for new framework contracts cov-
ering all external aid is over. The contracts entered into force in
April this year. To bridge the gap, existing Phare framework con-
tracts were extended until the end of March.

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74. On the subject of Tacis, the Commission does not share the
Court’s opinion that setting a minimum number of experts was a
dubious condition. The contracting authority should be able to
check tenderers’ mobilisation capacity in terms of quality and
quantity. This is by no means nullified by the possibility open to
the Commission and the recipient to propose experts, because
both options were provided for in the framework contracts. The
evaluation committee excluded tenders on the basis of objective,
clear and transparent controls, following the selection criteria set
out in the tender dossier.

Tacis: the award criteria and mention of the possibility of inter-
view were included in the instructions to tenderers attached to the
tender dossier. It is true that financial bids of the tenderers not
selected were not routinely filed in the reference period under
consideration by the Court (1994 to 1998). Files are now com-
plete. In any event, the Commission notes that the errors in ques-
tion had no influence on the final outcome of the invitations to
tender.

No firm has complained about the procedures used nor about the
results published in the Official Journal.

75. The Commission does not question the logic of the Court’s
proposal; however, in the spirit of the administrative reform of
the Commission now under way, the approach envisaged is that
of decentralisation of responsibility to the authorising officers of
the Directorates-General in the framework of clearer rules and
more rigorous audits.

81 (a). The methods and criteria for technical and financial
evaluation are now routinely included in the tender dossier.

81 (b). The DIS manual contains detailed instructions for evalu-
ation committees which have to be followed by the national con-
tracting authorities.

81 (c) and (d). Delegations received instructions on the filing of
financial dossiers and contracts by summer 1999.

CONCLUSIONS AND RECOMMENDATIONS

81 (e). This procedure is always followed.

76. The Commission attaches great importance to compliance
with contract-award procedures. Since 1997 many measures have
been taken to improve the procedural framework of service con-
tracts. Without denying that there were problems in the reference
period, the Commission stresses that, of the 68 cases listed by the
Court, 36 concern exclusively the incompleteness of the files. Of
the 32 others, only five Phare cases had a real effect on the out-
come of the tendering procedure.

Effectiveness of the procedures

82. The Commission fully agrees with the Court’s remark about
excessive staff turnover. It would like to have sufficient statutory
staff to avoid this situation arising and provide more continuity,
something which is impossible with precarious staff.

Competition between tenderers

Responsibilities of the parties involved in the procedures

77. Setting up consortia was a deliberate policy at the time, dic-
tated by operational considerations and, in the case of Tacis, it
was one of the provisions of the Regulation in force.

83. The problems cited were quite circumstantial. Absences of
evaluators, in so far as they remain within reasonable limits, are
inevitable and natural (illnesses and various other impediments)
on a committee made up of five members from very different
environments. The same holds for the differences in marking.

Transparency of procedures

79. Phare: the possibility of interview is always mentioned and
the financial evaluation methods are explained. Without denying
that the specific problems observed in the sample examined by
the Court did occur, the Commission stresses that overall the
errors had very little influence on the final outcome of the invita-
tions to tender (five of the 80 cases).

84. The recommendation about better controls on participants
and eliminating the risk of confusion of roles has already been
implemented in the context of the new procedures.

The systematic discarding of the top and bottom marks is imprac-
ticable.

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The Court recommends that an agent of the Commission attend
the evaluation committees convened by the local contracting
authorities. Implementing this suggestion requires sufficient Com-
mission delegation staff in the recipient countries, which is not
the case currently.

General conclusion

85. Since the reference period of the audit, many measures to
improve the award of contracts have been introduced or are in
hand:

— a new instruction manual for Phare and Tacis, applicable from
this year (2000), that is designed to harmonise the proc-
edures,

— the drafting of instructions to improve the filing system in the

delegations,

— the creation of an SCR website where advance information on
contracts, contract notices and follow-up information is posted
in order to improve transparency,

— the standardisation of tender dossiers and contracts with a

view to a more rational documentation system.

86. The Commission fully supports the Court’s comments con-
cerning the need to employ statutory staff for the work involved
in tendering procedures. However, in the current context of staff
shortages, it is impossible to do so and still keep big programmes
like Phare and Tacis operating normally.