Special Report No 8/2003 concerning the execution of infrastructure work financed by the EDF, together with the Commission's replies
Date: 2003-05-08
Institutions: European Court of Auditors
Subjects: ACP countries, EU financing, European Development Fund, report, transport infrastructure

31.7.2003

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I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 8/2003

concerning the execution of infrastructure work financed by the EDF, together with the
Commission’s replies

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

(2003/C 181/01)

CONTENTS

Paragraph

Page

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Works contracts financed by the EDF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Court’s audit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SIGNIFICANT DIFFERENCES BETWEEN CONTRACTS AND END RESULT . . . . . . . . . . . . . . .

Quality and quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost and duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Maintenance and accompanying measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FACTORS INFLUENCING THE RESULTS OF CONTRACT IMPLEMENTATION . . . . . . . . . . . .

Quality of studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Studies lacking in detail and not subject to adequate control . . . . . . . . . . . . . . . . . . . . . . .

Renewal requirements not updated sufficiently . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The influence of budgetary constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I-V

1-7

1-4

5-7

8-12

8-9

10

11-12

13-35

13-20

13-17

18-19

20

Changes during implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21-24

Insufficient monitoring of the financial implications of changes . . . . . . . . . . . . . . . . . . . .

Insufficient supervision of price revisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disagreement over performance programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Late and inappropriate settling of claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The role of the delegations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The role of the central departments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Technical assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

22

23

24

25-34

25-27

28-33

34

4

5

5

6

7

7

7

8

9

9

9

10

10

10

10

11

12

12

13

13

14

15

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Paragraph

Page

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

General appraisal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recommendations concerning studies and call for tender documents . . . . . . . . . . . . . . . . . .

Recommendations concerning changes during implementation . . . . . . . . . . . . . . . . . . . . . . .

Recommendations concerning the management system . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35-43

35-37

38

39-40

41-43

Annex I — Works contracts financed by the sixth, seventh and eighth EDFs . . . . . . . . . . . . . . . . . . . . . . . . . .

Annex II — Contracts reviewed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

15

15

16

16

17

18

20

22

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ABBREVIATIONS AND TERMINOLOGY USED

Abbreviations

ACP:

EDF:

Terminology

Administrative
order:

Contracting
authority:

the African, Caribbean and Pacific States that are signatories of the Lomé Convention

European Development Fund

instruction issued by the contract supervisor regarding changes to the works provided for in the contract.

government department of the ACP country concluding the contract.

Contract super-
visor:

government department or other agent which the contracting authority has made responsible for direct-
ing and monitoring the execution of the works.

General condi-
tions:

Decision No 3/90 of the ACP-EEC Council of Ministers, of 29 March 1990, adopted in the form of five
Annexes:
— general regulations governing the preparation and award of contracts financed by the EDF (Annex I);
— general conditions governing the performance of works contracts (Annex II), supply contracts

(Annex III) and service contracts (Annex IV) financed by the EDF;

— rules governing the conciliation and arbitration procedures applicable to such contracts (Annex V).

Supervisor’s
representative:

consultant, consultancy, supervisory office or other agent to which the contract supervisor delegates part
of the responsibility for directing and monitoring the execution of the works.

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SUMMARY

I.
The construction and renewal of infrastructure — mainly in the transport sector — are important
aspects of EDF-financed development cooperation. At the end of 2002 Commission payments against such
contracts represented 16 % of the total sixth, seventh and eighth EDF payments and approximately 3 200 mil-
lion euro.

II.
The objective of the Court’s audit was to examine the performance of infrastructure work financed by
the EDF. The audit mainly covered 30 contracts representing 13 % of the total works contracts financed by
the sixth, seventh and eighth EDFs, selected on the basis of risk criteria and concluded between 1987 and 2000
by seven ACP countries. This selection procedure was used with the aim of carrying out a sound analysis of
the problems encountered during the performance of the work in order to help remedy them. Most of these
contracts concerned road construction or repair. They were performed in accordance with the general condi-
tions decided in March 1990 by the ACP-EEC Council and are still applicable in support of the implementa-
tion of the Cotonou Agreement (see paragraphs 1 to 7).

III.
Most of the works examined formed part of the implementation of national or regional sectoral strat-
egies supported by the community of funding bodies. Shortcomings and errors in the design and implementa-
tion studies were the source of many of the implementation problems found, and the absence of any quality
control of these studies meant that too many contracts were based on partly incorrect or unrealistic terms and
conditions. As a result, changes were made during implementation, affecting the scope, nature and duration
of the works, as well as their cost (see paragraphs 13 to 20). In many cases the necessary changes were neither
decided nor formalised with the requisite rigour (see paragraph 21). This added to the difficulty of preventing
and containing disputes and claims that accompanied implementation (see paragraphs 23 to 24). The strategy
of calling on technical assistance to reinforce the implementation framework was not always equal to require-
ments (see paragraph 34). In some cases insufficient monitoring of divergences between contracts and results
allowed contractors to escape their responsibilities or to ignore the conditions that resulted from competitive
tendering (see paragraphs 21 to 24). The implementation framework that had been put in place to deal with
normal situations proved to be insufficient in such cases (see paragraphs 25 to 33).

The weaknesses found in the various areas mentioned above usually had an excessive impact on the
IV.
cost of works, and sometimes even their sustainability (see paragraphs 8 to 12). Many of the implementation
problems encountered recurred from one contract and one country to another, but the accumulation of experi-
ence did not result in build-up of sectoral expertise that could be applied for the benefit of all public works
contracts financed by the EDF. This deprived the Commission’s central departments’ intervention of part of its
added value (see paragraphs 26 and 28).

V.
The European Union and the ACP States must improve supervision of the implementation of works
contracts financed by the EDF and, in particular, must reduce the extent of the divergences that were found
between contracts and their actual implementation. It would therefore be appropriate for the Commission to
reinforce the support that it provides to ACP countries at the stage where contracts are being drawn up, and
subsequently at the stage where their execution is being monitored. In order to do that, it should:

(a) provide a more definite framework for the studies that form the basis on which contracts are concluded,
introduce effective quality control at that stage, and increase consultants’ accountability (see paragraph 38);

(b) place more emphasis on the justification for any changes made while works are in progress, and should
attach greater importance to the repercussions of such changes on the cost and quality of the works; it
should also emphasise the importance of identifying and resolving rapidly any problems or claims that
arise during implementation (see paragraphs 39 to 40);

(c)

reorganise its departments so as to provide the delegations and ACP countries with back-up and sectoral
expertise commensurate with the management responsibilities which it is transferring to the delegations
as part of decentralisation (paragraphs 41 to 43).

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INTRODUCTION

Works contracts financed by the EDF

Infrastructure construction and renewal are important
1.
aspects of EDF-financed development cooperation (1). At the end
of September 2002 Commission payments against such contracts
amounted to 3,2 thousand million euro, representing 16 % of
total sixth, seventh and eighth EDF payments (see Annex 1). The
highways sector absorbed most of this investment. In the strat-
egies that have been developed with each ACP State for imple-
mentation of the Cotonou Agreement infrastructure continues to
be for many countries one of the sectors in which financial aid is
concentrated.

2.
These projects are mainly implemented through works
contracts placed with European contractors or contractors from
ACP countries following international calls for tenders. Competi-
tive tendering is based on unit prices applicable to the estimates
of quantities and processes produced by the studies taken as the
basis for preparing the tender dossier. The unit prices may vary
in accordance with price revision clauses laid down in the con-
tract. The quantities invoiced are measured during implementa-
tion. Changes in quantities and processes may be ordered during

implementation, if that is necessary for the works to be carried
out satisfactorily. However, if the variation is too substantial, the
contractor is entitled to contest the unit prices that were initially
agreed, because the conditions under which the contract is being
executed are no longer those specified in the call for tenders. It is
therefore normal for the final cost of the works to differ from the
initial contract price, but if the financial management of projects
is sound, the extent of such variations will be kept under control.

3.
Article 222 of the Fourth Lomé Convention gives the ACP
States responsibility for project execution and management. It
gives the ACP States and the Community joint responsibility for
ensuring that projects are carried out properly, promptly and effi-
ciently and then for monitoring and evaluating their impact and
results. In this context Article 317 of the Convention requires the
Commission delegate to ensure that projects are properly executed
from the financial and technical viewpoints, to make regular
checks on them and to check regularly that they are progressing
in accordance with the advance timetable. Although the contract
supervisor takes the decisions that are necessary for the proper
performance of the contracts concluded between the ACP con-
tracting authority and the enterprise to which the contract was
awarded, it is the Commission that judges the advisability of hav-
ing the EDF bear the financial consequences of the decisions, when
the latter result in overruns of the initial contract price. Table 1 is

Table 1

General system for carrying out works contracts financed by the EDF

Source: Court of Auditors.

(1) At the end of 2002 three EDFs were in operation: the sixth EDF
accompanying the Third Lomé Convention, and the seventh and
eighth EDFs which accompany the Fourth Lomé Convention. The
ninth EDF will accompany implementation of the Cotonou Agree-
ment, beginning in 2003.

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a diagram of the general implementing system, as governed by the
general conditions drawn up in March 1990 (1).

4.
As support for the execution of works contracts, EDF
infrastructure projects also provide finance for technical assist-
ance with the supervision of works. Government departments in
beneficiary countries rely on this technical assistance to fulfil their
responsibilities as contract supervisors. The budgets provided for
that purpose usually allow calls on experts when necessary to
provide clarification for the contract supervisor on specialised
technical problems. In addition the government departments act-
ing as contracting authority or contract supervisor may receive
back-up from various projects financed by the EDF to enable
them to reinforce or expand their capacity as regards manage-
ment of contracts or technical aspects at the level of contracts,
projects, or sectors of operation. In drawing up its performance
programme, ensuring that it is properly carried out and helping
to resolve the problems that accompany implementation, the
contractor carrying out the work plays an important role as an
initiator in the administratively and technically complex partner-
ship that characterises implementation.

The Court’s audit

The audit objective was to assess whether the system for
5.
carrying out works contracts financed by the EDF ensured that
the inevitable differences (see paragraph 2) between the contracts
concluded and the actual end result were limited as far as possible.
Four areas of difference were examined:

The Court’s appraisal was mainly based on review of 30
6.
contracts selected in terms of risk criteria. The choice of country
and, within each country, of contracts reviewed sought, above all,
to give satisfactory geographical and value coverage of the works
contracts financed by the EDF. Recently concluded contracts, or
those at an advanced stage of implementation, were selected in
preference to others. During the selection of projects, the exist-
ence of known problems was taken into account. Some low-value
contracts were also selected. There was thus sufficient material to
identify and analyse the main implementation problems. The 30
contracts reviewed were concluded by seven beneficiary countries
between 1987 and 2000 and recorded in the accounts at the end
of September 2002 for 521 million euro, i.e. 13 % of the 3 882
million euro recorded as of the same date for all works contracts
financed by the sixth, seventh and eighth EDFs. The seven coun-
tries selected accounted for 27 % of total works contracts financed
by the sixth, seventh and eighth EDFs and the contracts examined
represented 49 % of the total works contracts recorded for these
seven countries (see Annex II).

The review focused on supervision of the execution phase
7.
of the contracts. Audits at Commission headquarters were supple-
mented by site visits and checks on the premises of delegations,
government departments, contractors carrying out works and
consultants responsible for supervising contracts on the spot (2).
Examining whether the choice of projects was justified by their
utility was not part of the audit objective, nor was reviewing the
justification for decisions to award contracts (the latter aspect had
already been covered in a previous report by the Court (3).

SIGNIFICANT DIFFERENCES BETWEEN CONTRACTS AND END
RESULT

(a)

the substance, i.e. the nature, quantity and quality of the
works;

(b)

the length of time taken to carry out the work;

Quality and quantity

(c)

the cost;

(d) maintenance and accompanying measures having a direct
impact on the sustainability of the works and the efficient use
of them.

(1) Decision No 2/2002 of the ACP-EC Council of Ministers of 7 October
2002 regarding the implementation of Articles 28, 29 and 30 of
Annex IV to the Cotonou Agreement (OJ L 320, 23.11.2002). The
Decision amended the general regulations for the preparation and
award of contracts and renewed in identical terms the general condi-
tions of March 1990 concerning the implementation of contracts and
conciliation and arbitration procedures.

8.
Most of the works inspected had been carried out as part
of national or regional sectoral strategies supported by the com-
munity of funding bodies. Generally speaking, the work done had
been carried out correctly. However, out of the 30 cases reviewed:

(a)

the works met the initial technical objectives in 12 cases;

(2)

In the case of Madagascar tests were based on the Commission’s files,
supplemented by questionnaires to the delegation.

(3) Annual report of the Court of Auditors concerning the financial year

1996, paragraphs 12.11 to 12.80 (OJ C 348, 18.11.1997).

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(b)

(c)

in six cases the actual design of the works had been substan-
tially amended after the contracts had been signed. This was
the position with the Addis Ababa-Jimma and Addis Ababa-
Woldiya roads that were under construction in Ethiopia and
still represented technical and financial risks in September
2002;

in 12 cases it was the quantity or quality of the works that
was cut, and sometimes a combination of the two. Three
major projects, the Yaoundé-Ayos road in Cameroon, the
port of Zanzibar in Tanzania and the wastewater treatment
plant at Negril in Jamaica, ended in construction of poor-
quality works.

Compensating for cost overruns by cutting back or elimi-
9.
nating certain items of work was seldom considered to be an
abnormal situation that called for corrective action at project
management or project funding level. Cutbacks have a direct
impact on the quality of the works where, for example, they affect
the thickness of the wearing course or the depth of the base
courses of roads. Where changes of this type are made it becomes
extremely difficult to identify and quantify separately divergences
in quality or quantity between the initial objectives and the end
result.

Cost and duration

10.
Table 2 shows, for the contracts examined, the extent to
which the cost and duration of the work were affected by varia-
tions in works after contracts had been signed:

(a) optimum limitation of cost and duration divergence was
achieved where works were carried out in accordance with
the terms and conditions; any divergences could then be con-
sidered to be necessary, controlled improvements (column
1);

(b) cost and time divergence was greatest when the actual design
of the works to be carried out was amended (column 2);

(c) where cutbacks in quality or quantity (and in many cases a
combination of the two) were a main feature of implementa-
tion the overruns in time and cost were also substantial,
especially where, in reality, they were the equivalent of a
reduction in the work actually carried out (column 3).

Divergence between initial contract and completed works for the contracts examined

Table 2

Main characteristics of
execution

Carried out as
specified or improved

Design change

Quantity or quality
reduced

Total reviewed

Substantial changes

Column 1

Column 2

Column 3

Number of contracts

12

Initial price

Price increase

Price at 30.9.2002

Price increase

Time extension

138,1

18,1

156,2

13

25

6

112,3

52,8

165,1

47

66

12

171,2

32,5

203,7

19

30

Source: Contracts and variations at 30.9.2002 excluding claims pending.

30

(Mio EUR)

422

103

525

25

38

(%)

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Box 1

Differences between work planned and work done

1.
In six cases the design of the works was modified after the contracts
had been signed. They were the Addis Ababa-Mojo-Awassa and Addis
Ababa-Jimma roads and the school building at Awassa in Ethiopia, the
drainage work in Pikine in Senegal and the RN 4 road and provincial slaugh-
terhouses in Madagascar.

— In Ethiopia the design of the Addis Ababa-Jimma road had to be modi-
fied, the construction period increased from 36 months to 73 and the
cost had already risen by 61 %. As of June 2002 the bulk of the work
had not yet been undertaken, even though the contract had been signed
in March 1999.

— In Madagascar, the buildings that were the end result of the project to
build and equip seven provincial slaughterhouses remained unfinished
and unused. The government department concerned was considering
whether it should schedule them for some other purpose or transfer them
to private operators. As regards the renewal of the RN 4 road, the work
was redefined after the contract had been concluded, increasing the con-
struction period from 18 months to 44, with a cost increase of more
than 70 %.

2.
The 12 contracts involving cutbacks on quantities or quality were the
Yaoundé-Ayos road in Cameroon, the three road contracts and wastewater
treatment plants in Jamaica, the Diéma-Didiéni road in Mali, the Guéoul
Baralé, Nioro-Keur Ayib and Senoba-Ziguinchor roads in Senegal, in Tan-
zania the urban roads in Mwanza and the port of Zanzibar and in Mada-
gascar, the provincial airports.

— In Cameroon the Yaoundé-Ayos road deteriorated very quickly when it
was brought into service, to the point where it had to be closed to heavy
vehicles in 1995 and 1996. This setback may be connected with the
fact that the carriageway was undersized and the specifications, which
were already low, were not respected during construction. As regards the
flood defences for the town of Kousseri, the works for protecting the
embankments were not deep enough and this was already affecting their
stability.

— In Jamaica the instability of the edges led to the collapse of a section of
road that had been renewed, followed by a three-month closure starting
in May 2001. The durability and viability of works were also affected
by reductions in the thickness of the wearing course that were made dur-
ing construction in the interest of illusory economies. In the case of the
wastewater treatment works at Ocho Rios, and Negril in particular, the
work finally accepted was incomplete, fragile or of reduced capacity. The
works were completed in mid-1999, after three years of extensions,
while the contract price had risen by 36 %.

— In Madagascar, the cost of the provincial airports increased by more

than 40 %.

— In Senegal, the studies were updated after the contract was signed, with
the result that the length of the section of the Guéoul-Baralé road to be
resurfaced was reduced by half and by 12 % in the case of the Senoba-
Ziguinchor road, in order to keep within the budget.

— In Tanzania, the piles supporting the quays in the port of Zanzibar were
corroding, endangering the stability of the work carried out. This engi-
neering fault was detected in 1993 but satisfactory corrective action has
not yet been taken. The base course specified in the contract for roads in
the town of Mwanza was reduced in order to achieve a 6 % saving,
which was then earmarked for emergency repairs and other unspecified
requirements.

Maintenance and accompanying measures

11.
The sustainability of the completed works also depends
on an ACP State’s ability to carry out the necessary maintenance.
Article 222 of the Lomé Convention emphasises this point by
making ACP States responsible for maintenance of works financed
by the EDF. Most of the countries visited had carried out the bud-
getary, fiscal and institutional reforms required by the financing
agreements, as well as planning and carrying out maintenance of
the road network, but they did not usually succeed in implement-
ing the annual maintenance programme in full. The maintenance
constraints that were taken into account in the projects examined
were sometimes unrealistic, especially in the case of small-scale
projects or projects that were not the responsibility of the central
authorities.

The utility of the works was also influenced by the accom-
12.
panying measures provided for in the financing agreements. In
general the authorities did not succeed in enforcing the axle loads
used in drawing up the specifications for road works, thereby ser-
iously reducing the useful life of the works. In the areas of the
environment and road safety, measures adopted as part of the
design of a main project, e.g. the Bertoua-Garoua Boulaï road in
Cameroon, are more effective than accompanying measures which
suffer because they materialise as secondary features when the
projects are carried out. In the case of the wastewater treatment
contracts that were examined, the government had not been able
to put in place the necessary charging policy and there were no
connections to the installations for a large percentage of the
population affected.

Box 2

Maintenance and accompanying measures

1.
In Cameroon the resources earmarked for road maintenance were not
sufficient for current maintenance, and certainly not for periodic maintenance,
of the extensive road network. The intentions, budget and resources of Kousseri
local authority remained vague as regards the maintenance of the works pro-
tecting the banks of the watercourse. Limiting the extent of land-take, achiev-
ing a satisfactory balance between traffic speed and keeping to the existing
route and providing parking areas were environmentally sound measures and
improved safety, because they had been included in the original design of the
Bertoua-Garoua Boulaï road. The voluntarism of the government, the delega-
tion and the contracting authority in ensuring that maximum authorised axle
loads were respected paid off, but they continued to suffer the effects of the
exemptions enjoyed by fuel transporters.

2.
In Ethiopia the existing weighbridges registered excess loads, but no
penalties were imposed. The absence of parking areas had negative impacts on
road safety and the stability of the works at the customary parking spots. The
suspension of current maintenance on the Addis Ababa-Jimma road follow-
ing the award of the contract for its renewal, in 1999, was affecting the condi-
tion of the road as the renewal work had not yet been carried out.

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3.
In Jamaica the utility of the Negril and Ocho Rios sewage treatment
works was seriously compromised by the small number of consumer connec-
tions provided, by operating the installations at 25 % of capacity and by the
absence of an appropriate charging policy.

4.
In Mali a public undertaking had recently been set up to carry out
road maintenance. However, the financial resources allocated to it were not
expected to cover requirements until 2006. In 2002 the accumulation of pay-
ment arrears made it impossible to carry out routine maintenance. The newly
installed weighbridges revealed the frequency and extent of excess loads, but
no penalties were being applied at the time.

5.
In Senegal the independent agency that had been responsible for road
maintenance since 2000 was unable to keep up with routine maintenance and
had not been able to put in place a programme of periodic maintenance. The
authorities had not yet taken action to limit axle loads. Even though the roads
inspected had been scaled to carry loads of 13 tonnes per axle, actual loads
could be as much as 17 or 20 tonnes per axle.

FACTORS INFLUENCING THE RESULTS OF CONTRACT
IMPLEMENTATION

Quality of studies

Studies lacking in detail and not subject to adequate control

13.
It would be unrealistic to expect studies to anticipate all
the implementation problems that are likely to arise, as well as
providing a basis for detailed specifications of the work to be car-
ried out, especially when the latter depends on ground conditions
that will only become known once work is actually in progress.
However, the audit showed that in too many cases shortcomings
in the studies had been a major cause of excessive changes to the
original plans and of difficulties encountered during the work.
The main areas in which shortcomings were noted were:

(g) consideration of the most effective or most economical tech-
nical solutions for meeting specifications in the local envi-
ronment;

(h) consistency between the specifications for one project and
those for projects of a similar nature or between specifica-
tions and existing standards.

14.
A technical audit established that a share of the respon-
sibility for the faults in the design of the provincial airports in
Madagascar lay with the consultants. At the request of the national
authorities this aspect was also under consideration as regards the
Senoba-Ziguinchor road in Senegal. The same question could use-
fully have been raised in the case of other contracts such as the
Addis Ababa-Jimma road in Ethiopia, which was badly designed.

15.
Delegations and national authorities consistently men-
tioned the unsuitability of the procedures for awarding study con-
tracts. In a context of tight budgets these procedures too often
resulted in the acceptance of bids that were too low for suffi-
ciently detailed studies. Furthermore, the terms of reference did
not specify the degree of accuracy to be achieved in studies. This
allowed consultants to trim the service provided according to the
value of their contracts and so to produce poor quality results.

16.
Insufficient knowledge about a country and the inad-
equacies of locally collected data have frequently been sources of
shortcomings at the design stage. Article 279 of the Fourth Lomé
Convention, which seeks to encourage the use of experts from
ACP countries in association with European experts, should help
to solve this sort of problem.

Due to the absence of quality control, technical weak-

17.
nesses in studies were rarely detected before work started.

Box 3

Studies lacking in detail and not subject to adequate control

(a) analysis and consideration of physical characteristics of the

ground, particularly in the case of clay or peat soils;

1.
In Cameroon, the horizontal and vertical alignment for lot 3 of the
Bertoua-Garoua Boulaï road had to be redone and modelling restarted during
implementation of the project, because of inconsistencies in the studies.

(b)

topographical surveys;

(c) attention to the flood risk when establishing road levels and

drawing up road drainage plans;

(d)

identification of all essential work;

(e) accuracy of quantities;

(f)

choice of techniques in relation to the strength specifications;

2.
In Ethiopia the studies for the Addis Ababa-Jimma road provided for
the same level of renewal along the full length of the route, whereas wholesale
rebuilding was necessary from km 10,6 to km 58. Although unstable clay
was known to be present, this fact was ignored. The road level was 1 m too
low over a line of eight kilometres across a flood plain. On a more general
level, as a result of errors in modelling the route, the drawings and quantities
on which the call for tenders was based were substantially wrong. The unstable
nature of the clay soils was similarly ignored in the case of the Addis Ababa-
Woldiya road. Due to errors in the calculations the quantities of bitumen
specified in the contract corresponded to only 37 % of the actual requirement.
Much of the geometry was incorrect (cross-sections, thickness of the existing
base course, level of the finished road, position of the centre line). The contract

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for the auditorium of Awassa college was based on plans and measurements
produced for a similar project on a different site, so that the quantities for site
preparation, foundations and masonry given in the specifications did not cor-
respond to the actual requirements. Many of the major errors in the studies
for these three projects would have been detected by effective quality control. In
particular the question of unstable clays and the quantities of bitumen could
not have gone unnoticed.

(c)

intervals of several months between the signing of a contract
and work starting officially;

(d)

intervals of several months between the official start of work
and the contractors actually deploying the technical resources.

In Jamaica the studies and calls for tenders for road renewal contracts
3.
omitted drainage work amounting to 22 % of the price, as well as a large
amount of other essential work corresponding to 18 % of the price. The stud-
ies and call for tenders for the Ocho Rios drainage project estimated the
amount of rock to be excavated as 4 000 m3, whereas in reality excavation of
40 000 m3 was necessary. At Negril the ground surveys were too cursory to
evaluate and take into account the presence of peat soils. These errors and
omissions could not have escaped efficient quality control.

19.
The quantities, and sometimes the nature of the work,
provided for in the contract must therefore be revised, usually
after contracts have been signed. The procedures for executing
contracts do not take sufficient account of this fact. For example,
the procedures and the rigour applied in updating requirements
and then assessing and defraying the resultant cost increases are
left to the discretion of the authorities concerned (see para-
graph 9).

In Madagascar omissions and inaccuracies in the estimates for the

4.
provincial airports could not have escaped a minimum of quality control.

The influence of budgetary constraints

5.
In Senegal the studies for the Guéoul-Louga road specified for the
base course an aggregate which did not provide the requisite strength. They
rejected the most suitable solution without technical justification. In the case
of the Baralé-Saint Louis road the studies did not consider using the economi-
cal locally available aggregate for the base course. On the contrary, they chose
an aggregate which was difficult to obtain. The width of carriageway proposed
by the studies for the Senoba-Ziguinchor road was below the regional stan-
dards.

6.
In Tanzania the studies for the port of Zanzibar omitted soil analysis.
Taking the latter and corrosion risks into account during implementation
resulted in a doubling of the cost. On two of the road projects examined water
pipes and power lines were obstacles to the work that were not identified cor-
rectly by the studies (Wazo Hill-Bagamoyo road and urban roads in Mwanza).
The levels determined by the studies for the Mwanza airport road and the
Mwanza-Nianguge road had to be raised during construction, to protect the
carriageway from the waters of Lake Victoria during the rainy season.

Renewal requirements not updated sufficiently

18.
In the area of road renewal, the passage of time is marked,
to a greater or lesser extent, by deterioration of the carriageway,
depending on the traffic and state of the road. This situation is
aggravated because government departments tend to suspend
maintenance of roads that are to be renewed. Considerable time
elapses, however, between the preparatory studies and the point
at which work actually starts:

(a)

the interval between the preliminary studies and publication
of calls for tenders;

(b)

in half the cases examined there was an interval of more than
a year between the start of the tendering process and the
signing of the contract. In the case of one road in Mali three
years elapsed between the preparatory study for the tender
dossier and the signing of the contract;

The drawing-up of specifications was constrained by a
20.
desire to carry out projects within the limits of the overall budget
decided by the Commission on the basis of estimates. A further
constraint was the mixing of technical and budgetary constraints
when the specifications for future works were being drawn up.
The complexity of the financial system and the project prepara-
tion procedures, as well as the absence of quality control, served
as incentives to cut back the specifications, with a detrimental
effect on the quality of the works. Responsibility for this was
shared between the consultants and the authorising officers who
supervised them. For example, in Ethiopia the contracting author-
ity and the Commission did not follow up the recommendations
made by the consultant who carried out the studies for the Addis
Ababa-Mojo road and stated several times that the proposed
renewal work was insufficient. In Senegal, the initial studies under-
estimated the earthwork required for the Senoba-Ziguinchor road
by approximately 8 % so as not to overrun the allotted budget. In
Cameroon the implementation study and the tender dossier cut
back the specifications for the Yaoundé-Ayos road in order to
keep within the overall budget for the project.

Changes during implementation

Insufficient monitoring of the financial
changes

implications of

21.
Article 37 of the general conditions for works contracts
financed by the EDF details the procedure to be followed in agree-
ing, by means of administrative orders, both changes that have to
be made to the proposed works, and the cost of them. In the
main, these conditions are in accordance with best practice for
the management of works contracts. However, the implementa-
tion of the provisions fell short in certain respects:

(a) because of difficulties or lack of urgency in establishing the
cost of such changes administrative orders were often issued
too long after the need for modification had been identified;

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(b)

the impact of the requested change on other work, the dura-
tion of the contract and, ultimately, the total cost of the con-
tract was rarely established;

(c) when a change was requested it often provided the contrac-
tor with the justification for requesting an extension of the
implementation period. The contract supervisor usually paid
insufficient attention to the financial implications of such
extensions which, of course, opened up the way to financial
compensation for the contractor. Extensions of this kind also
led to extra costs linked to the extensions of contracts for
assistance with the supervision of works;

(d) many contract supervisors did not keep up-to-date bills of
quantities with details of unit costs, quantities, and the final
cost of the contract, all of which are essential for sound con-
tract management. They were content to draw up lists of the
administrative orders issued. This approach did not give the
necessary analytical view. Moreover, where a change is the
result of poor quantity estimates in the contract it can be
made without an administrative order;

(e) once changes in individual or aggregate items exceeded a cer-
tain size, the contractor became entitled to financial compen-
sation, because the work was no longer being carried out
under the conditions specified in the call for tenders;

(f) where changes were expensive and led to substantial over-
runs of the contract price many contract supervisors and
contractors agreed to offset the extra cost by reducing other
quantities or work. The justification for these cutbacks was
not adequately verified, even though they are just as impor-
tant for the economics of the contract and the quality of
results as increases are.

Box 4

Insufficient supervision of the financial implications of
changes

In Ethiopia, the scale of the changes requested for the Addis Ababa-
1.
Mojo-Awassa road allowed the contractor to submit claims for compensation
for the increased duration of the work and for other indirect consequences of
the changes. These various aspects were not taken into account when the
changes were approved. In the case of the Addis Ababa-Jimma road, the con-
tractor also obtained an increase in the contractual unit prices on the basis of
the scale of the changes.

2.
In Jamaica, the decision to reduce the thickness of the wearing surface
of the renovated roads was taken without any knowledge of what, precisely,
the savings achieved and the impact on the life expectancy of the works would
be. With regard to the drainage works at Ocho Rios, substantial underesti-
mates of quantities and other inaccuracies in the contract were the subject of
corrections which led to legal action and costly extensions.

3.
In Mali, even though work on the Diéma-Didiéni road suffered con-
siderable delays, the cause of which lay with the contractor, the contract super-
visor granted an eight-month extension without changing the initial contract
price. On completion of the works, however, the contractor entered a claim
that included the costs associated with the extensions obtained.

4.
In Senegal, the contract supervisor granted an extension of 4,5
months for the execution of an administrative order concerning the Guéoul-
Baralé road, without obtaining agreement in respect of its financial conse-
quences. Under the same circumstances, they granted an extension of 12
months for the Senoba-Ziguinchor road. In this latter case the delegation
refused to endorse the extension and to commit the EDF to funding the finan-
cial repercussions of the extension.

5.
In Tanzania, new unit prices for the port of Zanzibar were set by
negotiation between the contract supervisor’s representative and the contrac-
tor, with the result that, to a significant extent, the contract price was no
longer the outcome of the initial tendering procedure. In the case of the roads
in the town of Mwanza the contractor accepted the administrative order cut-
ting back the specifications for the base course, but expressed formal reserva-
tions concerning the soundness of any works constructed in accordance with
the amended specifications. With regard to the contract for the flood defences
for the Dar Es Salaam-Kigoma railway, while the bulk of the work had been
completed in December 1996, the contract supervisor asked for changes which
extended the contractor’s involvement until October 1997. On completing the
contract, the contractor filed a claim for compensation because it had been
unable to use its equipment while the requests for changes were being exam-
ined.

Insufficient supervision of price revisions

22.
Application of the price revision clauses in contracts can
be problematic because the provisions are out of line with the
realities of the operations that are being funded. The clauses for
any one country are often copied from one contract to another,
without the best practice from other countries being considered.
Because of this compartmentalisation, the revision clauses may
prove to be very different from one contract to another, even
though the works are very similar. Some contracts use formulae
and indices, others take the real justified cost. The Commission
gains experience by dealing with the problems encountered, but
does not put it to good use by improving and standardising the
price revision clauses in all contracts of a similar nature.

Box 5

Insufficient supervision of price revisions

1.
In Cameroon, the formula for revising the contract price for the
Bertoua-Garoua Boulaï road did not include bitumen, which is nevertheless
an important material in this type of work. Following an unforeseeable and
exceptional increase in the price of this product during the period when the
work was being carried out, the contractor asked for the price revision clause
in the contract to be amended. This request was rejected by the contract super-
visor. As it represented almost 11 % of the initial contract price, the request
was repeated in the form of a claim on completion of the work. As a result of
this problem, the price revision clauses in the highways contracts in prepara-
tion in Cameroon were amended and refined. This example of assimilation of
experience remains, however, an isolated one because operations are compart-
mentalised on a country by country basis.

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2.
In Jamaica, as the price revision clauses in the road-renewal contracts
examined were inapplicable in practice, a flat-rate price revision equivalent to
20,4 % of the contract total was granted by the contract supervisor during
implementation of the work. Because of the excessive weighting applied to the
fuel and bitumen indices compared with their actual cost, this revision was to
the contractors’ advantage.

3.
In Tanzania, in the case of the Wazo Hill-Bagamoyo road, different
interpretations of the price revision clause in respect of fuel oil triggered dis-
putes which were settled amicably thanks to the Commission’s mediation. The
amount of the revision agreed was not, however, the subject of an amendment
to the contract.

Disagreement over performance programmes

23.
In the case of five of the contracts examined, work was
undertaken without any performance programme having been
approved by the contract supervisor, either because the contracts
were imprecise and unrealistic, or because of disagreements over
the terms and conditions. This situation is contrary to Article 17
of the general conditions of contract and is conducive to disputes,
since the parties have no common basis for interpretation of the
contract documents. It also prevents strict control of a contrac-
tor’s progress relative to the performance schedule. The said
Article 17 does not specify any procedures for resolving this situ-
ation. The special conditions do not usually provide the neces-
sary detail, with the result that contract supervisors and delega-
tions allow this situation to persist without taking appropriate
action, to the detriment of sound management of the operations.

Late and inappropriate settling of claims

24.
The general conditions for works contracts financed by
the EDF lay down procedures for settling claims for additional
payment (Article 55) or time extensions (in Article 35) and for
settling disputes (Article 68). Details of any conciliation and arbi-
tration procedures are set out in separate rules (1) applicable to
contracts of all kinds financed by the EDF, under Article 307 of
the Fourth Lomé Convention. The purpose of these various provi-
sions is to bring about an amicable settlement of the various types
of claims as soon as possible after the events that provide the jus-
tification for them. Table 3 shows the main claims outstanding at
the end of September 2002 in relation to the contracts examined.
Implementation of the contractual provisions was defective mainly
for the following reasons:

(a)

(b)

sometimes contract supervisors, technical assistance, delega-
tions and the Commission’s central departments put off deal-
ing with claims until the end of the contract and then settled
everything together;

the resources and skills needed to examine claims were not
usually mobilised promptly, so that on the one hand the
reply deadlines provided for in the regulations were exceeded
and, on the other hand, the contractor gained the initiative;

(c)

the financial implications of an extension were not examined
at the same time as the request for extension;

(d)

the Commission’s central departments at headquarters did
not have the resources to deal with the requests for assistance
to settle disputes that were submitted to them.

Main claims outstanding in September 2002, for the contracts reviewed

Table 3

Contract

Date of initial claim

Total claim at
30.9.2002

(Mio EUR)

% of initial contract

Cameroon — Bertoua-Garoua Boulaï road

5.10.2001

Ethiopia — Addis Ababa-Awassa road

18.10.2000

Ethiopia — Addis Ababa-Jima road

Mali — Diéma-Didiéni road

4.10.2000

10.5.1999

Source: Claims filed by contractors.

Total

7,4

22,1

14,1

12,8

56,4

13,4 %

56,0 %

26,7 %

119,4 %

30,7 %

(1) Procedural rules on conciliation and arbitration of public works con-
tracts financed by the EDF (Annex V to Decision No 3/90 of the ACP-
EEC Council of Ministers of 29 March 1990).

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Box 6

Late and inappropriate settling of claims

In Cameroon, the efficiency of the technical, administrative and finan-
1.
cial management of the construction contract for the Bertoua-Garoua Boulaï
road was due to the fact that implementation problems were usually dealt with
promptly and in an appropriate manner by all the parties involved. However,
the two serious problems (the price of bitumen and maintenance work under
a public contract) which the contract supervisor and the delegation preferred
to put off dealing with until the final settlement of the contract ultimately
resulted in a substantial claim.

2.
In Ethiopia, the contractor entered claims, which were still awaiting
settlement, concerning two of the three highway contracts which they obtained.
The largest claim, which was submitted in October 2000 and concerned the
Addis Ababa-Awassa road, was for an amount equivalent to more than half
the initial contract price, and a number of other claims pending raised the
percentage involved to a total of almost 70 %. The largest claim for the Addis
Ababa-Jimma road was based on the suspension of the work in July 2000
and was equivalent to more than a quarter of the initial contract price.

3.
In Jamaica, in the case of the Negril and Ocho Rios sewage treat-
ment contracts, the inability of the delegation, the contract supervisor and
technical assistance to play their full roles, when confronted with a contractor
which also performed poorly in the discharge of its obligations, led to an accu-
mulation of unresolved questions and a climate of distrust between the parties
involved. In the end, 94 claims were entered by the contractor and 35 by the
contract supervisor. A lump-sum settlement was ultimately concluded on an
amicable footing.

4.
In Mali, in respect of the Diéma-Didieni road, the contractor submit-
ted a claim in May 1999 which was equivalent to 121 % of the initial con-
tract price. The Commission and the contract supervisor did not settle the
problem with the requisite rigour and promptness. In August 1999 they car-
ried out what was only a very superficial evaluation of the claim and in May
2000 the contracting authority asked the Commission’s central departments
to mediate. The experts called in by the Commission ten months later had still
not completed their investigations in June 2002. Such delays undermine the
position of the contracting authority.

5.
In Senegal, three of the contracts examined were the subject of dis-
putes, of which two went as far as arbitration. The arbitrators’ rulings led to
increases of approximately one third of the value of each of the contracts. The
government department did not display the necessary rigour and commitment
when dealing with these lawsuits. As the Commission and technical assistance
were equally weak the client party, as a whole, was unable to perform effec-
tively when faced with the claims of contractors which had sound and expe-
rienced legal departments at their disposal.

6.
In Tanzania, more than three years after the issue of the final invoice,
certified by the project supervisor, for the contract for the flood defences for the
Dar Es Salaam-Kigoma railway, the Commission had still not decided whether
the EDF could or could not defray the cost of the claims which accompanied
this invoice. In the case of the roads in the town of Mwanza, the contract
supervisor and the delegation did not react to the contractor’s claims before the
deadline stipulated in the contract, with the result that the contractor gained
the initiative and exercised its right to demand cancellation of the contract
together with compensation.

Management system

The role of the delegations

Staff at the delegations were not always able to fulfil their

25.
monitoring obligations, mainly for the following reasons:

(a)

(b)

in some cases there were not enough personnel to meet
requirements, so that the close monitoring that was needed
was not possible;

for the delegations the main emphasis was on increases in the
total financing. Often, however, financial problems are a
reflection of problems encountered during implementation,
when it is already too late for an effective response;

(c) when one or more parties did not fully discharge their respon-
sibilities in the management process, this shortcoming was
not detected at the appropriate level and not dealt with as
rigorously as it should have been.

26.
Many technical and organisational problems arose in an
identical manner from one country to another, but the delega-
tions and national authorities concerned were not informed of
the solutions developed by their counterparts in other countries.
Since the central departments did not systematically provide them
with back-up in this area (see paragraph 28), the delegations were
unable to give effect to Article 287 of the Fourth Lomé Conven-
tion which stipulates that project appraisal is to take account of
experience gained from similar operations, as well as considering
the results of studies already undertaken on similar types of
project or programme.

27.
Documentary checks of payment orders by the delega-
tions were not designed to detect problems concerning the real-
ity of works or conformity with contracts. Essentially, these prob-
lems are only recognised as a result of tests carried out by the
contracting authority and technical assistance and through the
certificates which they forward to delegations in support of appli-
cations for payments.

Box 7

The role of the delegations

1.
In Ethiopia, for a number of years the delegation has included two
engineers. Nevertheless, until 2002, the differences between the Commission’s
and the authorities’ ideas concerning the system for management of contracts
financed by the EDF, combined with the scale of the design and implementa-
tion problems encountered in connection with the highway contracts, were
underestimated in the reports of the delegation and the national authorising
officer. In the case of the construction of a school building in Awassa, the
incompatibility of the contract management procedures applied by the Min-
istry of Education and those favoured by the Commission ended in the Com-
mission imposing an administrative ‘freeze’ when the final payment was due,
at the expense of the small enterprise which carried out the work. The delega-
tion approved interim invoices without drawing attention to the need for
authorisation of the obvious changes in quantities revealed by the interim
progress reports.

2.
In Jamaica, the delegation only had an experienced engineer avail-
able to monitor the infrastructure projects as from January 2001. During the
difficult implementation of the projects examined the post was either vacant
(1998) or occupied by staff whose skills lay in other fields.

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3.
In Madagascar, work on the provincial slaughterhouses was not
monitored by specialist technical assistance for reasons of economy. The del-
egation did not carry out any monitoring on the spot. An audit established
that the amount of work done (in the region of 38 %) was considerably less
than stated in the progress reports drawn up while the work was in progress
and, because of this, the payments made (equivalent to 60 % of the contract)
were excessive. The contracting authority was in a difficult position as far as
recovering the overpayments was concerned, as the contract was rescinded in
September 2000 on grounds of non-performance.

4.
In Mali, the delegation only had an engineer at its disposal to moni-
tor infrastructure projects as from 1998. The heavy workload resulted in over-
long delays in reacting to the problems raised. As part of the decentralisation
of the Commission the unit in question was enlarged to three persons in mid-
2002.

In Senegal, the delegation was not in a position to monitor the infra-
5.
structure projects closely until September 2001. In 1999, the delegation
refused to endorse an important administrative order for the Senoba-Ziguinchor
road in the absence of an expert’s report evaluating the justification for it, and
took no action as disputes developed with the contractors that were carrying
out the contracts examined. It was given more staff at the beginning of 2002
as part of the decentralisation.

In Tanzania, from April 2001, the delegation had only one techni-
6.
cal consultant to monitor 20 infrastructure projects comprising approximately
40 contracts. In this situation, the objective of monitoring all the financial and
technical aspects of the projects assigned to the technical consultant in the
description of his duties could not be achieved. In the case of the roads in the
town of Mwanza, the 20 % advance paid to the contractor exceeded the proven
purchases of equipment, in contravention of Article 46 of the general condi-
tions of the contract. Ministry of Transport administrative expenditure was
charged to the contract without justification and re-invoiced by the contractor
with the application of a 25 % margin.

The role of the central departments

The central desk and operational support departments
28.
were over-compartmentalised and did not identify the key points
on which the limited number of specialists available at headquar-
ters and in the delegations should focus their attention. End-of-
project evaluations may be postponed indefinitely pending
completion of project aspects that are of secondary importance.
The lessons drawn from the problems encountered, technical
audits, evaluation and control reports are not consolidated and
circulated to all the managers concerned. The delegations’ effec-
tiveness is thus limited by the absence of sectoral expertise. The
latter should be commensurate with the Commission’s ambitions
and size and should be for the benefit of all staff in every country.

(a)

the added value of appropriate recourse, in good time, to
regular technical audits and reports by technical experts on
specific points that are complementary to the control mis-
sion, for example, carriageway, disputes, composition of sur-
facing, etc;

(b)

the necessity of calculating the load-bearing qualities of soils
when exposed to varying levels of water saturation;

(c)

the practical value of radar measurements to check the thick-
ness of the base courses, whether at initial acceptance or dur-
ing the works, before the wearing course is laid;

(d)

the practical value of imposing implementation and control
techniques that are compatible with the narrow tolerances
used in specifying the thickness of base courses;

(e)

the sensitivity of price and environmental impact to techni-
cal parameters or route parameters that may be submerged
in the mass of specifications, for example, the reference speed,
the width of land-take, the gradient or flow speed necessitat-
ing the provision of concrete drainage channels, the eleva-
tion of the roadway.

30.
The guidelines and support tools supplied by the central
departments concentrated on contract preparation and conclu-
sion, and then on the financial implementation of them. Their
coverage of the performance-monitoring aspect was insufficient,
so that, in an area as demanding and complex as infrastructure
projects, this aspect was the responsibility of individual delega-
tions and countries and relied over-much on the experience and
capabilities of the staff in post. The delegations did not have pre-
cise descriptions of duties or management reports that could be
used to optimise the allocation of their human resources to project
follow-up. The useful practices of non-objection to administra-
tive orders introduced empirically by certain delegations are not
integrated into the Commission procedures.

31.
Central departments did not keep records of the prob-
lems encountered in relations with consultants and public works
contractors, so that it was difficult to apply the exclusion clauses
laid down by the general conditions.

32.
The unit responsible for acting as the Commission’s
mediator in disputes did not have the human resources needed to
respond effectively to applications concerning works contracts,
which were on the increase. It provided support only when the
ACP State concerned asked for mediation. As of end-September
2002 it was aware of only one of the four claims shown in Table 3.

29.
The construction of the Bertoua-Garoua Boulaï road in
Cameroon encapsulated a number of points that are important
for good design and execution of highway works and could use-
fully be taken into account for projects of this type financed by
the EDF or by the EU budget:

33.
The Commission’s accounting and management systems
did not provide exact information about the position regarding
works contracts financed by the EDF:

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(a) many contracts were split up between several account num-
bers without the related accounts being identified and with-
out the possibility of consolidation;

(b) works contracts financed by the EDF as part of programme

estimates were not recorded;

(c)

(d)

the object of the contract was not always registered. The
nature of the works and the type of infrastructure involved
were not registered;

the amount initially entered in the accounts was not the total
for the contract on the date that it was concluded. At the
authorising officer’s discretion it included provisions, so that
it was not possible to monitor and analyse changes in the
cost of the contracts on the basis of data in the accounts;

(e)

the estimate of final cost and the financial claims were not
recorded.

Technical assistance

The mechanisms for ensuring that financial management
34.
of implementation of contracts financed by the EDF is sound
were weakened by the number of parties involved and the com-
plexity of the administrative and decision-making procedures. In
the context of individual countries a strategy of calling on appro-
priate technical assistance, as in Cameroon for example, is neces-
sary if the EDF is to perform the client role effectively in relation
to the contractors carrying out the works. Where the Commis-
sion and the national authorities were unable to guarantee the
sound management of operations themselves and were unable to
agree on judicious means of reinforcing the weak links in the
mechanisms, the effectiveness and efficiency of investing in stud-
ies and assistance with supervision were reduced, as was the case
in Ethiopia. Although Article 275 of the Lomé Convention speci-
fies that technical assistance is to be made available only at the
request of an ACP State, it also requires programme appraisal to
take due account of national human resources constraints and to
promote those resources. The financing agreements are insuffi-
ciently detailed in this area.

2.
In Ethiopia, the technical assistance attached to the contract supervi-
sor was assigned responsibilities at one and the same time, rather unrealisti-
cally, for horizontal tasks concerned with capacity building, as well as for
operational tasks concerning contract management. It was therefore unable to
handle the numerous design and implementation problems arising from the
contracts financed by the EDF. The contracting authority’s reluctance to rec-
ognise the Commission’s right of inspection as regards the implementation of
the contracts, combined with the authority’s prevarication, greatly reduced the
efficiency of the control offices that had been instructed to assist in supervising
the implementation of each contract, as well as reducing the motivation for
them to become an integral part of the management system.

3.
In Jamaica, the Commission, the contracting authority and the con-
tract supervisor did not succeed in control of the projects that were reviewed.
In the case of the highway projects, technical assistance resources were not
reinforced to deal with the question of price revisions. As regards the Negril
and Ocho Rios sewage treatment contracts, shortcomings in contract manage-
ment led to an increase in the costs of supervision borne by the EDF, from 1
million euro to 4,1 million euro. This increase of 300 % was contrary to the
internal rules restricting increases in works and service contracts to 50 % of
their initial amount.

In Mali, the contract for assistance with supervision was concluded
4.
seven months after work on the Diéma-Didiéni road began. There was then a
succession of five different team leaders. The quality of the analysis of the con-
tractor’s claims was inadequate.

5.
In Senegal, the assistance with supervision was found to have been
defective as regards several of the contracts examined, but no action was taken
to remedy the shortcomings. In the case of the Mékhé-Saint Louis road, delays
accumulated in the drawing-up of final accounts, progress reports and plans,
and daily construction records. As the service contract had expired, no techni-
cal assistance was available for supervision of the final work and for final
acceptance. In the case of the Senoba-Ziguinchor road there was a succession
of three different team leaders, the final report remained incomplete, differ-
ences between bills of quantities and quantities invoiced remained unexplained
and the analysis of the contractor’s claims was insufficient. In the case of the
Guéoul-Louga road, the analysis of the contractor’s claims proved unusable,
partly because it contained no figures.

CONCLUSIONS AND RECOMMENDATIONS

Box 8

Technical assistance

General appraisal

In Cameroon the synergy between the skills of the delegation engineer
1.
and the coordination unit for regional road projects that had been set up in
the contracting authority ensured that in the case of the Bertoua-Garoua Bou-
laï road: the non-objection procedure in respect of administrative orders worked
smoothly; implementation problems met with a response and specialists were
called in due time; regular audits were effectively implemented; there was
appropriate resistance to any excessive claims that were made by the contrac-
tor; and lastly, a constructive partnership was established with the contractor.
Furthermore, there is reasonable certainty that the experience gained will ben-
efit the design of forthcoming projects in the country, and the supporting mea-
sures were the subject of careful monitoring.

35.
In overall terms the works financed by the EDF made a
significant and relevant contribution to national infrastructure
development strategies. All too often, however, the end result,
costs and time taken were substantially different from the initial
terms of the contracts. Although projects of this type are naturally
subject to variation and unforeseen factors, the Court noted that
the management system that had been designed to monitor
whether work was progressing in accordance with the terms of
contract did not provide any guarantee that financial manage-
ment of the operations would be sound in cases where the design
or scope of the works was substantially modified (see paragraphs 8
to 10).

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Shortcomings and errors in the design or implementa-
36.
tion studies were the starting point for much of the slippage that
was found. Studies were not subject to quality control, and as a
result too many contracts were based on faulty or unrealistic
terms and conditions (see paragraphs 13 to 20). Too often the
Commission’s central departments and delegations, as well as the
national departments concerned, were not sufficiently decisive in
their application of the implementing procedures. This situation
then allowed contractors to evade their responsibilities or, where
the changes were substantial, to contest the prices that resulted
from competitive tendering. The implementing procedures estab-
lished to deal with normal situations proved inadequate in such
situations (see paragraphs 21 to 25 and 32). The strategy of call-
ing on technical assistance did not always provide the means of
strengthening weak links in individual countries’ own mech-
anisms (see paragraph 34).

37.
Many of the implementation problems encountered
recurred from one contract and one country to another. Unfor-
tunately, the organisation of the central departments, like that of
the links between those departments and the delegations, did not
allow them to build up sectoral expertise that could be applied to
the advantage of all works contracts financed by the EDF, and
thus robbed the Commission’s involvement of some of its added
value. The key points on which project monitoring should focus
were not clearly defined and the monitoring focused excessively
on formal authorisation of payments (see paragraphs 26 to 30).
Contractors whose performance was inadequate were not suffi-
ciently detected and monitored (see paragraphs 14 and 31).
Accounting and management information and systems were
unsuitable for close monitoring of the technical and financial
execution of projects (see paragraph 33).

Articles 14(5) and 17(3) of the general conditions for service contracts should
be transposed, in detail, to the general conditions of contracts, so that consult-
ants can be held responsible. The level of detail of the studies and on-site sur-
veys provided for in the bids should be combined with guarantees as to the
precision of the quantities and methods adopted in the tender dossier. This
would help to eliminate the submission of bids that are not adequately bud-
geted.

Recommendations concerning changes during implementation

Recommendation 2

Administrative orders should always include a numeri-
39.
cal estimate of quantitative and financial impact. Changes that
entail a reduction in the scope or quality of the works should
be subject to a reasoned authorisation.

Quantification should not only cover the items of the bills of quantities that
are directly affected. It should also cover the other items, as well as the dura-
tion of the work.

Reductions should not lightly be considered as savings, especially where they
are made in order to render unexpected cost overruns acceptable. The follow-
ing points should be examined:

— any change in the price structure that is to the contractor’s advantage,

— the implications for the viability of the works,

— alternative possibilities of increasing the project budget.

Recommendations concerning studies and call for tender
documents

Recommendation 1

Recommendation 3

38.
Quality control should be increased for studies and
consultants should be held financially liable for any profes-
sional negligence on their part.

Quality control of studies should focus on the following points:

— definition of the precision of the study and of any additional studies

needed prior to implementation,

— adequacy of the budget allowed for studies and work and involvement

of experts from ACP countries,

40.
Supervisors should immediately call on the experts
needed to resolve implementation problems. The practice of
deferring treatment of claims to the end of the contract should
be abandoned.

When implementation problems are raised, supervisors should immediately
obtain the expert advice needed to assess the problems and resolve them
authoritatively.

Any claim or notification by the contractor of events that are likely to give rise
to a claim should be subject to follow-up on the basis of pre-set deadlines for:

— acknowledgement of receipt and request for quantification and justifica-

— errors and omissions and reliability of bills of quantities. Precision could

tion by the supervisor,

be set at around 10 %,

— production of quantified data and supporting documents by the con-

— consistency of studies relating to the same project,

tractor,

— price revision clauses and details added to the general conditions by the
special conditions, especially as regards the handling of disputes,

— acceptance or rejection by the supervisor, on the basis of appropriate

expert advice within the time allowed.

-

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Recommendations concerning the management system

Recommendation 5

Recommendation 4

41.
Devolution of responsibility to the delegations should
go hand-in-hand with a reorganisation that allows central
departments to provide delegations with back-up in the form
of sectoral expertise.

The organisation and tasks of the central departments should take the follow-
ing points into consideration:

— abandoning the geographical organisation of the central departments in
favour of skills centres for use by all projects of a similar type,

— reinforcing the delegation’s basic management tools: description of the
key points on which management should focus, monitoring the estimate
of the final cost of the works contract, management reports, examples
of the interpretation of the general conditions, records of any informa-
tion that may help the Commission expand its sectoral expertise,

— carrying out end-of-project evaluations for all large-scale projects as

soon as they have been substantially completed.

Accompanying measures that have a decisive impact
42.
on the viability and durability of the works should receive
extra attention.

More attention should be given to the following points:

— the constraints of supervising and maintaining small projects and

projects that are scattered over a wide area,

— maintenance and control of axle loads in the case of roads, charging and

connection policies in the case of wastewater treatment,

— possibility of partnership with contractors combining road construction

and maintenance.

Recommendation 6

43.
The general conditions relating to the implementation
of works contracts have not changed since March 1990. They
should be re-examined in the light of the experience acquired
since then.

The following information should be collected and circulated to delegations:

The following points should receive special attention:

— performance of technical assistance, consultants and the contractors

holding works contracts,

— differences over the interpretation of the general and special conditions
of contracts, even when they have been settled amicably at local level,

— main implementation problems encountered and the solutions found,

— payment of advances to facilitate start-up and the deployment of plant
and machinery should be linked to formal follow-up of the deployment
and to financial penalties where it does not take place within the time
specified,

— penalty clauses dealing with delays could also provide for bonuses in

cases where deadlines are met or anticipated,

— strategy for the use of technical assistance. This should be assessed at

— the absence of agreement over the performance programme should have

the time of the financing proposal.

repercussions.

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 8 May 2003.

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

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ANNEX I

Works contracts financed by the sixth, seventh and eighth EDFs

Country

Contracts registered

Payments

(Mio EUR)

Angola

Antigua and Barbuda

Bahamas

Barbados

Belize

Benin

Botswana

Burkina Faso

Burundi

Cameroon

Cape Verde

Comoros

Congo (Brazzaville)

Regional cooperation

Côte d’Ivoire

Djibouti

Eritrea

Ethiopia

Fiji

Gabon

Gambia

Ghana

Grenada

Guinea

Equatorial Guinea

Guinea-Bissau

Guyana

Haïti

Jamaica

Kenya

Kiribati

Lesotho

Liberia

Madagascar

Malawi

Mali

Mauritius

Mauritania

Mozambique

Namibia

Niger

Nigeria

Uganda

Papua New Guinea

Democratic Republic of Congo

48,36

4,64

6,97

32,31

23,12

189,77

23,61

212,89

75,76

164,57

28,84

22,99

27,92

0,00

19,90

16,39

17,35

163,94

14,48

45,14

6,20

82,64

0,43

187,21

7,81

44,40

20,72

56,33

63,78

70,21

0,10

52,39

3,00

116,67

145,80

171,12

41,04

90,57

133,51

33,38

134,20

58,70

103,95

53,35

43,85

38,52

4,64

6,97

30,53

23,12

126,13

23,36

139,66

73,27

141,49

27,90

22,93

27,64

0,00

19,75

16,03

7,38

92,84

14,48

44,66

6,20

69,52

0,43

122,49

6,29

28,81

20,21

34,00

61,65

70,21

0,10

44,85

2,74

113,29

128,55

117,21

36,34

72,63

110,26

31,77

112,03

58,04

101,19

53,30

39,24

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Central African Republic

Dominican Republic

Rwanda

Saint Kitts and Nevis

Saint Vincent and the Grenadines

Saint Lucia

Solomon Islands

Samoa

São Tomé and Príncipe

Senegal

Seychelles

Sierra Leone

Somalia

Sudan

Suriname

Swaziland

Tanzania

Chad

Togo

Tonga

Trinidad and Tobago

Vanuatu

Zambia

Zimbabwe

83,77

30,67

63,30

7,92

7,09

2,61

2,89

21,00

10,86

147,05

6,97

37,27

3,49

7,38

12,90

23,74

233,71

102,04

21,40

6,43

16,17

3,99

89,54

15,49

(Mio EUR)

83,56

20,33

58,03

7,91

7,09

2,61

2,89

18,41

8,96

117,87

6,92

35,52

3,31

7,38

12,79

23,68

211,60

68,02

21,40

6,20

5,74

3,93

75,67

15,36

Total African, Carribean and Pacific

3 818,03

3 147,83

Anguilla

Netherlands Antilles

Aruba

Cayman Islands

Virgin Islands

Mayotte

Montserrat

New Caledonia

French Polynesia

Saint Pierre and Miquelon

Saint Helena

Turks and Caicos Islands

Wallis and Futuna

1,55

3,24

9,01

1,49

2,47

9,01

4,20

10,07

13,37

2,60

1,39

4,76

0,55

1,55

3,24

9,01

1,49

2,47

8,98

4,20

9,18

10,31

2,60

1,39

4,76

0,55

Total overseas countries and territories

Total works contracts registered

Total EDF 6, 7 and 8

Percentage of works contracts registered

63,72

3 881,74

23 598,14

16 %

59,72

3 207,55

20 610,88

16 %

Source: Commission accounts at 30.9.2002 reprocessed in order to allocate regional projects to beneficiary countries.
The contracts reviewed in the report relate to the countries in bold type (see details in Annex II).

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Official Journal of the European Union

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ANNEX II

Contracts reviewed

Account number reference

Description

Date of
contract

Initial
contract total
excluding
provisions

Total commit-
ted at
30.9.2000

Total paid at
30.9.2002

Total works
contracts
registered

(Mio EUR)

% examined

Yaoundé — Ayos road

05/91

62,4

66,2

66,2

03/99

55,1

68,2

59,8

5 CM 44, 45
6 CM 17 1, 18 1, 42 1

6 RPR 555 2
7 RPR 630 3,4, 12 to 15
7 CM 50 2, 50 3

7 CM 43 7, 8 CM 11 3

Bertoua — Garoua Boulaï
road

Defences, drainage —
town of Kousseri

7 CM 43 5, 44 1

Roads town of Kousseri

Subtotal Cameroon

7 ET 93 1, 94 1

7 ET 99 01, 8 ET 3 3

8 ET 4 1

7 ET 90 3

Subtotal Ethiopia

Addis Ababa — Mojo —
Awasa road

Addis Ababa — Jimma
road

Addis Ababa — Woldya
Lot 2

School building Awassa
agricultural college

4

4

7 JM 6 7, 8 JM 12 2

7 JM 6 8, 8 JM 12 3

Chovey-Highgate, Port
Maria-Water Valley road

Highgate-Richmond,
Highgate-Tavern Hill road

7 JM 23 2 and 3, 24 1 and 2 Drainage Negril and Ocho

Rios

Subtotal Jamaica

4

7 JM 6 5, 8 JM 12 1

Papine — Buff Bay road

03/99

03/98

06/97

09/97

03/99

11/00

10/99

03/99

03/99

05/94

02/96

7 MAG 33 2

6 MAG 69 13

6 MAG 85 5

RN 4 and bridge to
Kamolandy

Provincial slaugtherhouses

12/97

Provincial airports

10/97

Subtotal Madagascar

7 MLI 80 5, RPR 386 1

Segou-Faramana road

7 MLI 80 3

7 MLI 80 4

8 MLI 06 1

Diéma-Didiémi dirt road

Ouan-Sévaré road

Sévaré-Bandiagara road

6 MLI 27 59

Miyou-Macina road

Subtotal Mali

3

5

7 SE 1 3

7 SE 1 4

7 SE 1 5

Guéoul-Barale road

Meckhe — St Louis road

Nioro du Rip -Keur Ayib
road

05/96

04/96

04/96

11/99

05/00

05/93

08/95

12/95

4,5

2,3

4,7

2,4

4,7

2,4

124,3

141,6

133,1

164,6

86 %

39,4

52,7

35,9

0,2

128,2

6,2

2,9

2,7

26,4

38,1

14,1

1,8

6,6

22,4

11,4

10,8

3,1

5,0

3,9

34,1

3,8

11,2

2,0

49,1

70,0

38,3

0,2

157,6

8,6

3,6

2,8

32,0

47,0

25,2

1,8

7,2

34,2

13,1

12,3

3,8

5,8

4,5

39,5

3,3

13,6

2,6

44,6

30,6

12,2

0,2

87,7

8,4

3,5

2,8

29,7

44,5

25,2

0,8

7,2

33,2

12,1

10,5

3,8

5,8

3,9

36,2

2,9

10,4

2,6

163,9

96 %

63,8

74 %

116,7

29 %

171,1

23 %

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(Mio EUR)

147,0

26 %

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Official Journal of the European Union

7 SE 1 6

8 SE 31 1

Senoba-Ziguinchor road

Pikine (St Louis)

Subtotal Senegal

5

5 TA 42, 6 TA 11 1

Port of Zanzibar (began
with 5th EDF)

8 TA 10 1

7 RPR 27 10

7 TA 111 10

7 TA 89 1

Subtotal Tanzania

Total

Audit coverage

Mwanza roads

Flood defences

Road renewal in Dar Es
Salaam

Bagamoya road (excluding
work financed bilaterally
by Italy)

5

30

04/96

07/00

12/87

10/00

08/95

12/98

04/96

11,6

4,1

32,6

13,5

22,5

3,0

1,6

1,3

41,8

421,7

15,4

4,1

38,9

23,9

25,7

7,2

1,7

2,0

60,5

12,2

4,1

32,2

23,9

9,6

7,2

1,7

1,8

44,1

Total works contracts registered for EDF 6, 7 and 8

3 881,7

3 207,6

3 881,7

Source: Contracts and Commission revenue and expenditure accounts at 30.9.2002.

519,3

411,0

1 060,8

13 %

13 %

27 %

233,7

26 %

49 %

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Official Journal of the European Union

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THE COMMISSION’S REPLIES

SUMMARY

tries. In addition, staff numbers in delegations are being progres-
sively increased under the devolution arrangements.

I.
The Commission welcomes the analysis of the Court into
the reasons why some works contracts encountered problems,
and what might be done to improve the ways in which such
problems can be prevented. The focus on risk areas helps to iden-
tify issues that need to be tackled on a wide front. The Commis-
sion is not alone in financing infrastructure projects in ACP coun-
tries, and other donors have faced similar difficulties.

IV.

(a) The Commission’s procedures for engaging consultants
were completely revised in 2000, in a way which should
improve quality and performance. It is the responsibil-
ity of the contracting authority (usually the govern-
ment) to pursue any action necessary in relation to pro-
fessional negligence.

Procedures adopted by the Commission in recent years, notably
the publication in 1996 of transport-sector guidelines and the
revision in 2000 of tendering procedures, already address these
problems. The Commission now endeavours to ensure that design
studies be completed before the financing of the works contract
is decided, and expects that this will further contribute to address
the identified problems.

II.
The Commission’s 1994 evaluation of its programmes in
the transport sector concluded that establishing sustainable road
networks requires a sectoral approach, and this strategy has been
developed in partnership with other donors, particularly the Mem-
ber States and the World Bank.

The Commission has in recent years adopted improved practices
for addressing problems related to delays in construction.
Approaches such as completing all design work before awarding
works contracts, retaining the design consultants also to supervise
the works construction are significantly reducing the incidence of
technical, financial and managerial problems. In parallel, sectoral
policy and project management training programmes have been
running for Commission officials since the mid-1990s. There is
now a far better understanding of the kinds of issue raised in the
Court’s audit.

The important role of the ACP country authorities in managing
the phase of implementation of projects and ensuring the mea-
sures are in place to maintain the infrastructure after completion,
should be highlighted. The Commission emphasises the impor-
tance of the various powers conferred in the Lomé Conventions
and the Cotonou Agreement on the local institutions. In some
cases noted by the Court, weaknesses in project design stemmed
directly from studies in which the Commission was not involved.
However, large projects of this kind cannot be perfectly planned
beforehand, and many problems cannot be anticipated. It is sound
management to respond to the need to amend a project in a way
which identifies the most cost-effective solution.

(b) The Commission already examines carefully the issues
listed by the Court when a variation on the original
contract is asked for by the Contractor. It will try to
ensure that existing guidance on documenting the rea-
sons for the relevant analysis is fully respected.

(c)

The reorganisation, decided in February 2003, is cur-
rently being implemented.

INTRODUCTION

3.
The important role of the ACP country authorities in man-
aging the phase of implementation of projects and ensuring the
measures are in place to maintain the infrastructure after comple-
tion should be highlighted. The Commission emphasises the
importance of the various powers conferred on the local institu-
tions by the Lomé Conventions and the Cotonou Agreement. In
some cases noted by the Court, weaknesses in project design
stemmed directly from studies in which the Commission was not
involved.

6.
The Commission acknowledges that the checks carried out
the Court enabled it to identify the main problems arising from
implementation of work contracts. It notes that the audit has not
examined the economic impact of the projects.

EXCESSIVE DIFFERENCES BETWEEN CONTRACTS AND END
RESULT

III.
In spite of the technical and financial problems, the audited
road projects have been economic successes, improving access to
local markets and increasing regional trade. The revised functions
of the central services at the Commission, which are being intro-
duced, provide for them to ensure that best practices are adopted
quickly in the different countries. Moreover there is a rotation of
staff between headquarters and the delegations in the ACP coun-

8.
The Commission considers that the fact that the works
were in most of cases of a satisfactory standard is a positive
assessment and achievement. The audited road projects have been
economic successes, improving access to local markets and increas-
ing regional trade. They join the list of road projects financed
since the late 1980s, amounting to some 30 000 km that have
provided significant benefits to the countries and regions con-
cerned

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(b) The Commission now believes that the technical and finan-
cial risks associated with the Addis Ababa-Jimma and Addis
Ababa-Woldiya routes in Ethiopia have now been contained.

For the port of Zanzibar, plans are now under way to launch a
revised project.

(c)

Important efforts were made to learn the lessons of the
Yaoundé-Ayos Road, to the advantage of the subsequent
project of Bertoua-Garoua Boulaï Road: taking into account
of environment concerns in project conception, identifica-
tion and resolution in good time of problems occurring dur-
ing works execution, optimisation of project under execu-
tion. In Zanzibar, aid was suspended for a time, but plans
are now under way to launch a revised project.

9.
Compensating for cost overruns by reducing or omitting
certain work is a decision which needs to take into account the
costs and benefits of the alternative solutions and is not in itself
an abnormal situation.

10. (b) For some projects a principal reason for the augmenta-
tion of cost was the higher specifications set in the imple-
mentation phase.

Box 1, point 1. The fact that a new feasibility study is being planned
for the expansion of the section of Addis Ababa-Modjo Road,
does not imply that the realised works were underdesigned with
regard to traffic. The design modifications introduced during con-
struction, mainly the third climbing lane, have greatly contributed
to a practically unhindered flow of traffic at the design speed. The
new feasibility study could instead be considered as in-time plan-
ning in an evolving situation, since any works that may result out
of that study will not be realised before eight to ten more years.
By then, the examined project will be well in its second decade
and will, therefore, have fully satisfied its objective.

Box 1, point 2, first indent. The protections in the town of Kousseri
in Cameroon, are of insufficient depth in specific points only. Up
to now, no stability problems have been reported.

The Court correctly identifies road maintenance as the
11.
principal aspect of the sustainability of road networks. Such a
conclusion was also a highlight of the Commission’s transport
sector evaluation of 1993/94. Moreover, the evaluation recom-
mended that establishing sustainable maintenance at a country
level involved moving from a project approach to a sectoral
approach.

The Commission, in coordination with the Member States, pub-
lished in 1996 practical transport sector guidelines ‘Towards sus-
tainable transport: a sectoral approach in practice’. These guidelines
shape the Commission’s strategy for supporting transport, par-
ticularly the roads sector, in countries where transport is a focal
sector. Working with Member States and the World Bank a sec-
tor wide programme has developed in many partner countries,
for example, Benin, Ghana, Senegal, Cameroon, Chad, Ethiopia,
Kenya, Tanzania, Uganda, Malawi, Madagascar, Mozambique and
Zambia.

The Commission’s communication 422 of July 2000 ‘Promoting
sustainable transport in development cooperation’ develops the
sectoral approach by setting principles for transport.

The communication and the transport sector guidelines provided
a sound foundation for ‘Programming guidelines for the transport sec-
tor’ developed for the 9th EDF. These guidelines address the main-
tenance concerns expressed by the Court and provide a road map
for defining the Community response strategy in transport in
Country Strategy Papers and National Indicative Programmes.

The Commission therefore gives priority to the issue of road
maintenance and sustainability of the roads sector and in 2002
launched a global evaluation of its interventions in the transport
sector. This evaluation will address the issues raised by the Court
and provide valuable feedback for improving the application of
the sectoral approach.

Box 1, point 2, second indent. On the three roads contracts in
Jamaica, a possible solution with zero risk from instability of
slopes was not cost-effective. The shoulder problem mentioned in
the Court’s report was limited to certain lengths of road. The only
alternative solution was to reduce the number of kilometres. This
was not the option retained, as it would have implied a perma-
nent disruption of traffic.

12.
The Commission and many other donors share the Court’s
concerns of axle load control and road safety. Enforcement of
traffic regulations is complex as it involves many agencies and
institutions, for example, traffic police, road agency inspectors,
and local magistrate courts. And, examples of good practice in
sub-Saharan Africa are few. Other sectors experience similar prob-
lems.

On the Wastewater Project in Jamaica, the ex post evaluation of
the project concludes by affirming that ‘both sewerage systems
work steadily and up to now, only very few breakdowns have
occurred during over three years of operation’.

In Ethiopia, the Government is beginning to implement the rec-
ommendations of the Community-financed studies into axle load
management and updating of the traffic regulations.

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Road safety in ACP countries has a low priority in terms of gov-
ernment policy, despite the high cost of accidents on the economy
and the negative social impact. The Community is supporting the
governments of Ethiopia and Lesotho to increase road-safety
awareness and reduce accidents.

Part of the answer lies in ensuring that the contract for the design
study is awarded with the main emphasis on technical quality,
and this has been strengthened since the changes in tender pro-
cedures introduced in 2000.

Box 2, point 1. The objectives of maintenance operations in Cam-
eroon were fixed in terms of a priority road network and not of
the national road network, as a whole, which is indeed vast. The
situation in this domain, although not satisfactory yet, has
improved substantially since the creation of the Road Fund and
the start of the EDF-financed ‘Perfed2’ programme, especially in
the resources mobilised and the capacity of small and medium-
sized enterprises and consultants, but also in view of the achieved
results.

Box 2, point 2. Measures for application of fines on overloaded
vehicles in Ethiopia should be incorporated in the existing Road
Transport Regulation, prior to application. A study financed under
EDF was completed in October 2002, providing draft legislation,
which is expected to be presented to Parliament in early 2003.

The necessity to control parking for reasons of safety, or of struc-
tural stability, is acknowledged. The choice of the most suitable
technical solution to the problem (i.e. construction of parking
places or some other scheme) is a matter of debate.

On the Addis Ababa-Jimma Road, maintenance could not be car-
ried out at the sections of road handed over to the contractor. The
unforeseen suspension of works for almost two years did affect
the maintenance programme under national resources in these
sections. During the last dry season (2002), maintenance work
was carried out to good effect at the most severely deteriorated
stretches, in order to alleviate the situation.

Box 2, point 3. In Jamaica, the ex post evaluation of the water treat-
ment project, completed in November 2002, recommends lines
of action to overcome the identified shortcomings. These consist
in defining a revised plan for a customer assistance programme
and providing for septic tanks and cesspits disposal. Cooperation
with the national water commission in Jamaica is ongoing, after
the end of the project.

FACTORS INFLUENCING THE RESULTS OF CONTRACT
IMPLEMENTATION

13.
The Commission is conscious of the importance of design
studies, and of the difficulties which are likely to ensue if these
studies are deficient.

14.
It is the responsibility of the Contracting Authority —
under the Lomé Convention this is usually the ACP Government
— to pursue any action in relation to professional negligence.

15.
The existing procedures for adjudication of service con-
tracts effective since 2000 provide for an increased weighting on
technical quality, including for the preparatory studies for infra-
structure projects.

The Commission believes that an improvement in the technical
quality of studies can be achieved by adopting a higher degree of
precision of their terms of reference.

16.
In order to avoid the problems identified by the Court,
ACP experts are invariably associated with EU experts in studies
and other technical assistance activities. The local involvement
can be up to 80 % of the person-months required for the contract
work. The same principle applies to works contracts. EU compa-
nies engage local companies as subcontractors for significant
amounts of the work. Local companies also benefit from the
transfer of technology.

The Commission is increasing the quality control of pre-

17.
paratory studies.

Especially in the case of complex projects such as hydroelectric
plants this can be arranged through the signature of separate con-
tracts with consultants other than those responsible for prepara-
tory studies.

Box 3, point 2. Modifications to the design of the Addis Ababa-
Jimma road project were made necessary due to either the faster-
than-expected deterioration of the road quality, experienced
between the time of the design and the construction period or in
order to effect solutions that were fitting better to the actual
project requirements. The accentuated nature of highly expansive
soil materials necessitated the implementation of adequate techni-
cal solutions. Consequently, contract quantities were modified in
order to reflect the technical solution finally adopted.

The design of Addis Ababa-Woldiya road project was carried out
under the responsibility and financing of the Government of
Ethiopia. At the time of the design, it is possible that ERA did not
have the capacity to identify potential problems of the design. The
Commission even embarked on precautionary cross-checking of
the road design as soon as the potential for same-nature problems
became apparent in other Community-financed projects, i.e. the
Addis Ababa-Jimma Road.

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The information on the Auditorium of Awassa is correct. It reveals
capacity problems at the level of the contracting authority. In
order to upgrade the administrative capacity of the Ministry of
Education, particularly with regard to tender procedures, a sup-
port programme has been approved and launched (8. ACP.
ET.021).

(c)

The Commission’s present service contracts contain all nec-
essary general provision or allow for appropriate, case-by-
case modifications under the special conditions, to cover
such control needs. The Commission will be vigilant to see
that they are applied.

18.
The Commission acknowledges that these factors pose a
problem. It is inevitable that several months are needed to con-
duct tender procedures and for the contractor to mobilise. Also,
several months can pass until the work force can deal with the
farthermost stretches of road. Consequently, there can be an
interval of two to three years between the completion of the stud-
ies and the execution of remedial works for certain lengths of
road. The rapidly increasing volume of traffic on African main
highways during the 1990s and the inadequacy of historical traf-
fic data made it very difficult for designers to foresee the true con-
struction needs over such periods. Added to that was the fact that
most roads in need of periodic maintenance were of the multi-
layer type (bitumen spread over graded gravel, in two or three lay-
ers). This tended to break down rapidly under the ever-increasing
volume of traffic.

(d) The Commission considers that more important modifica-
tions, implying serious financial or other consequences,
should be the object of a formal rider, with a record of the
final (provisional) quantities and budget (in detailed and in
global figures) should be kept and regularly updated.

The Commission notes the Court comments and will seek to
ensure that this is always the case.

(e)

Significant modifications in quantities can lead to conditions
of execution dissimilar to those under which the contractor
has tendered. (It should be noted that the agreement on new
prices is one between the contractor and the contracting
authority.)

Whenever availability of finance allows, roads are now designed
with a higher resistance to axle loads and are built of pre-mix
asphalt (which provides far better quality control and, thereby,
longer periods between major maintenance).

(f)

The Commission notes the Court’s comments and will remind
the relevant services of the need to verify the justification for
such modifications.

19.

See comments under point 9.

20.
Investment in infrastructure demands considerable funds.
Different solutions are applied on a case-by-case basis, for instance
limiting the size of the planned infrastructure, which may still
provide a cost-effective solution. In the immediate future, the
Commission will examine which solutions are adapted to the
constraints of the new Financial Regulation for the EDF.

New procedures for the engagement of appropriate consultants,
insistence that design studies are fully completed before the financ-
ing decision is taken and the time constraints imposed by the new
Financial Regulation should ensure that the studies and works
programmes are better structured, and that thereby cost increases
are significantly less frequent.

The Commission is conscious of the difficulties identified

21.
by the Court.

(a) The observations here are acknowledged in relation to the
audited projects. The shortcomings should not have occurred
since they are normally the responsibility of the supervising
consultant to keep a close check on such matters on behalf
of the contracting authority.

(b)

Prior to modifying the activities covered by a works contract
it is normal to carry out an extensive and detailed control of
all financial and other consequences of these modifications
(including consequences on the timetable). The Commission
notes the Court comments, and will remind the relevant ser-
vices to ensure the applications of the rule in all cases.

22.
The Commission accepts the need to identify best prac-
tice on this question and is preparing a revision of price formula
to be proposed to delegations. This is a good example of the role
which has been defined for the services at headquarters after the
devolution of functions to the Commission’s delegations, which
is currently under way.

23.
The Commission agrees that the works timetable pro-
vided for in Article 17 of the general conditions of contracts is an
essential tool for the follow-up of works and should have been
available in all the cases examined by the Court. The Commission
will take action to ensure that the provisions of Article 17 are
respected by contracting authorities.

Please see the Commission’s observations to point 32 on

24.
the question of claims.

Concerning the Jimma Project, substantial progress was recorded
with prompt follow up by the contracting authority of claims
submitted by the contractor.

(a)

It is indeed preferable to deal with claims as they arise and
not leave them to be treated as a joint operation at the end
of the project. The Commission is examining the procedures
in order to ensure that as far as possible they are dealt with
at the time they arise. The Commission may be unable, in
delegations or in headquarters, to treat claims in real time.
Claims are initiated by the works contractor and arise between
him and the contracting authority, making it difficult for the
Commission to achieve progress alone.

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(c)

It is not always possible to identify the financial cost of
extensions at the time they occur but the Commission will
seek ways of developing capacities in this area.

In the context of the reform of the RELEX services,
28 .
including the devolution of responsibilities to delegations, the
volume of sectoral expertise available to the Commission is being
increased. In addition, the Commission is continually seeking to
improve the dissemination of lessons learned amongst its service.

(d) According to Article 5 of the procedural rules on concilia-
tion and arbitration of contracts financed by the EDF, a party
may, before a request for arbitration, request the amicable
intervention of the Commission or the settlement of the dis-
pute by conciliation.

The Commission does not have an obligation to take on
requests for mediation.

29.
The Commission agrees that the parameters and tools,
among others, identified by the Court have their importance in
the technical assessment of infrastructure projects. Training pro-
grammes are helping to improve delegation staff knowledge in
technical practices. Sectoral specialists in Brussels are identifying
specific training needs.

The fundamental point to be borne in mind is that if
25.
there is a technical contingency an appropriate solution has to be
found. It has to be found quickly (or contractor ‘standing time’
costs are incurred) and there is a resulting additional cost to the
project.

30.
Delegations used to ensure the necessary operational
follow-up, as they continue to do in non-devolved delegations.
Agents were usually limited to one sole agent — an engineer, on
whose experience and capacity the operational aspects largely
depended. This used to correspond to the adopted policy and
standards for staff in delegations. In such a context, management
tools mostly covered policy and other non-technical issues.

The delegation’s role is to judge whether the optimum financial
solution has been chosen in relation to technical aspects and the
resulting timetable for the works. As far as possible, since 2001,
all necessary technical and financial studies (field and office) have
been carried out before financing the works. This significantly
reduces the risk of major contingencies arising.

Systematic tools for monitoring and reporting by agents in post
are being developed in the devolved delegations, as well as between
these and headquarters. It is expected that standard tools will be
available by the end of 2003.

Coupled with a policy of retaining the design consultant also for
the site supervision, costly unforeseen modifications to the works
should be significantly less frequent.

26.
Staff is in rotation between headquarters and delegations,
as well as between delegations, covering diversified fields of exper-
tise.

The policy of devolution, which will come into effect in most
ACP countries in 2004, has an important bearing on this issue.
Moreover, the purpose of the new organisation chart for head-
quarters, which is being introduced, is precisely to strengthen the
role of headquarters in making best practice more widely known
and providing technical support.

The situation will substantially change in devolved delegations in
the near future, as two operational agents (initiator and validator)
should enter into line with two finance/contracts agents and the
head of delegation in the visa circuit, in accordance with the new
Financial Regulation, making it difficult to anticipate one or other
of the visas, therefore making it useless to speak unofficially with
the supervisor. A clear working scheme is expected by the end of
2003.

It is therefore very probable that the schemes and tools of opera-
tional cooperation, follow-up and reporting that will be adopted
in fine will have a strong compulsory side, based on the precepts
of the new Financial Regulation.

The Practical Guide makes provision for evaluation of

31.
services provided by consultants.

27.
Two series of controls are operated in delegations:
financial/accountant and operational. The first series to which this
point mainly refers is supported by the online accounting system,
or its manual ancestor. They are indirectly based on operational
controls operated by the supervisor and his representatives and
also on direct, regular or ad hoc participation of the delegation’s
operational staff in meetings, visits, reception of works or other
events.

32.
A claim may give rise to a dispute, but not necessarily.
However, claims are unavoidable and inherent to contracts of this
kind. (cf. Articles 21, 37, 38, 48 and 55 of the general conditions
for works contracts financed by the EDF; they all foresee the pos-
sibility for the contractor to introduce claims of some sort). So the
fact that the unit has only knowledge of some of the claims con-
firms that not all claims give rise to disputes which have been
referred to the Commission.

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The management system will be further improved with

33.
the foreseen integration of OLAS into CRIS.

Recommendation No 1

Although practice has always shown an important degree
34.
of implication and valorisation of the local human resources in
the course of preparation and execution of an infrastructure
project, the Commission accepts to be attentive in the proper for-
mulation covering Article 275 of Lomé Convention, to be inserted
in future Financing Agreements.

38.
The Commission’s procedures for engaging consultants
were completely revised in 2000. One objective was to ensure
that only fully competent firms of consultants would be selected,
and that thereby, the quality of studies should be entirely satisfac-
tory. This should lead to a significant reduction in the incidence
of cost increases in works contracts. Should it be necessary from
time to time to seek a second opinion about study reports, it is
possible for the EDF to finance such actions.

CONCLUSIONS AND RECOMMENDATIONS

35.
The Court, through its examination of works contracts,
has highlighted a number of complex problems to which solu-
tions are being sought (not just by the Commission but also by
other donors). The projects involved are by nature costly, often
carried out in remote areas affected by special circumstances (lack
of basic amenities, difficult terrain, armed conflict, etc.) and in
cooperation with administrations which are unused to managing
projects of this scope. The Commission will pursue its efforts to
develop appropriate contractual and technical solutions.

These already include carrying out all technical design (field and
office) and detailed financial estimates prior to financing the works
and retaining the design consultants to carry out the supervision.
These two requirements alone, introduced as of 2001, should
normally result in a significant reduction in the risk of technical
modification and, thereby, cost increase.

36.
The difficulty of foreseeing all possible problems in the
execution of a major works contract, particularly road construc-
tion in remote areas, is acknowledged by the Court. The Commis-
sion accepts however that more attention needs to be paid to this
area, particularly in the clear definition of the terms of reference
of these studies.

37.
The reorganisation of the services in headquarters in Feb-
ruary 2003, taking into account the devolution process, is intended
to allow the staff in headquarters to play precisely the role recom-
mended by the Court. Support to the delegations will be provided
by sectoral units. Separate units will ensure the management of
programmes remaining under headquarters’ responsibility.

It is the responsibility of the contracting authority (in the case of
ACP countries, usually the Government) to pursue any action in
relation to professional negligence. The Commission encourages
them to do so but there is often reluctance on their part because
the process is costly, difficult and long.

In some cases (as when the physical approach during the design
study is difficult), the figure of 10 % may be difficult to achieve.

Recommendation No 2

The principles under this recommendation fully comply
39.
with current Commission practices and the Commission sub-
scribes to these.

Recommendation No 3

40.
The Commission’s current practice is to provide for the
necessary competence to solve execution problems under the
contract for technical assistance to supervise. This concerns day-
to-day execution problems, as well as specific or exceptional
execution problems. Under the general conditions, the supervi-
sor is invested with the necessary authority to evaluate and solve
problems.

The Commission fully subscribes to this part of the recommenda-
tion, which will be communicated to delegations for a proper
follow-up.

The Commission’s project monitoring system was already the
subject of reform in 2002; this should provide regular informa-
tion on how far major projects are meeting their objectives.

Recommendation No 4

The practical guide makes provision for evaluation of services
provided by consultants.

This reorganisation was undertaken in February 2003

41.
and is currently being implemented.

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Recommendation No 5

and agreed between the ACP State and the Commission (and in
most cases with other important international donors as well).

42.
This recommendation is already part of the Commis-
sion’s current preparation and follow-up to an infrastructure
project. The accompanying measures form an integral part of a
Financing Proposal that is presented to the EDF Committee for a
decision and are further integrated in the Financing Convention
that is signed with the ACP State. In particular, concerning the
transport sector, the Commission demands that the essential ele-
ments of a sustainable national transport policy are well defined

Recommendation No 6

The general conditions to be applied under the 9th EDF
43.
are currently under revision, prior to an agreement with Member
States and the adoption of a decision of the ACP-EU Council of
Ministers.