Opinion No 3/2005 on the draft Regulation (EC) of the Commission amending Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities
Date: 2005-03-17
Institutions: European Court of Auditors
Subjects: award of contract, financial management, financial regulation, general budget (EU), implementation of the budget, public contract

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I

(Information)

COURT OF AUDITORS

OPINION No 3/2005

on the draft Regulation (EC) of the Commission amending Regulation
(EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed
rules for the implementation of Council Regulation (EC, Euratom)
No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to
the general budget of the European Communities

(presented in accordance with Article 279 of the EC Treaty)

(2005/C 124/01)

THE COURT OF AUDITORS OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Commu-
nity, and in particular Articles 248(4) and 279, thereof,

Whereas Directive 2004/18/EC of the European Parliament and
of the Council of 31 March 2004 on the coordination of proce-
dures for the award of public works contracts, public supply con-
tracts and public service contracts introduced amendments to and
consolidated the provisions of the Directives hitherto in force (4),

Having regard to the Treaty establishing the European Commu-
nity for atomic energy, notably Article 160 C, paragraph 4 and
Article 183, thereof,

Whereas the Commission’s proposed aim is to transpose the pro-
visions of the new Directive and to simplify management of con-
tracts and grants,
in particular where the value or amounts
involved is low,

regard

Having
Euratom)
to Council Regulation
No 1605/2002 of 25 June 2002 on the Financial Regulation
applicable to the general budget of the European Communities (1),

(EC,

HAS ADOPTED THE FOLLOWING OPINION:

Having regard to Commission Regulation (EC, Euratom)
No 2342/2002 of 23 December 2002 laying down detailed rules
for the implementation of Council Regulation (EC, Euratom)
No 1605/2002 (2),

INTRODUCTION

Having regard to the draft Commission Regulation amending
Commission Regulation (EC, Euratom) No 2342/2002 (3),

Having regard to the Commission’s request for an opinion on the
latter addressed to the Court dated 6 January 2005,

1.
Following the adoption in March 2004 of the new con-
solidated Directive 2004/18/EC of the European Parliament and
the Council of 31 March 2004 on the coordination of the award
of public works contracts, public supply contracts and public ser-
vice contracts, and taking into account preamble 24 of the Finan-
cial Regulation, the draft modification presented seeks to adapt
the implementing rules of the Financial Regulation to the new
provisions.

(1) OJ L 248, 16.9.2002as amended by OJ L 25, 30.1.2003.
(2) OJ L 357, 31.12.2002.
(3) Commission document SEC(2004) 1310.

(4) OJ L 134, 30.4.2004.

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Furthermore, preamble 25 of the implementing rules
2.
states ‘With regard to procurement, the option taken is to insert
in the present Regulation the provisions of Council Directives …
relating to the procedures for the award of public service, supply
and works contracts respectively …’. Consequently it is necessary
to modify the current implementing rules to take account of the
amendments introduced by the abovementioned Directive.

The proposed revision of the implementing rules also has
3.
as an objective to simplify the management of contracts and
grants, especially when these contracts and grants are of low
value.

4.
The Court examined the Commission’s draft proposal in
the light of the Financial Regulation and of the new Directive, tak-
ing into account the simplification objectives pursued. The Court
based its analysis on the following principles:

(a)

that the proposed revision complies with the principles of
sound financial management;

SIMPLIFICATION OF
IMPLEMENTATION

PROCEDURES AND EASE OF

7.
An objective of the draft proposals as presented by the
Commission, is to simplify the procedures and obligations con-
tained in the current implementing rules, notably for contracts of
low value and those relative to the provision of legal services, as
well as the obligation to undertake an external audit in the cases
of grants (Article 180) and for financing systems which provide
for the reimbursement of eligible costs (or expenditure) based on
lump sums, scales of unit costs and flat rates (Article 181).

8.
However, the desired simplification should always be
undertaken while ensuring the full respect of the principles estab-
lished by the Financial Regulation and taking due account of
the Directive. Furthermore, such simplification should not intro-
duce the possibility of unjustified discretionary powers and the
principle of clarity and legal certainty should be ensured.

(b)

that the desired simplification does not vary from basic prin-
ciples, is justified, effective and that the proposed modifica-
tions could be easily implemented;

9.
A simplification of the implementing rules should also
allow for ease of implementation notably as far as the new pro-
cedures proposed and the new possibilities introduced by the
Directive are concerned.

(c)

that the proposed revision should ensure an adequate trans-
position of the norms of the new Directive concerning pub-
lic procurement, taking into account the specifics of the
community context; in this regard the proposed revision
should not provide for any exception to the principles estab-
lished in that Directive;

10.
The terms used in certain modifications proposed are
inconsistent with the Directive or are different than those of the
Directive, and thus go against the requirements of legal clarity.

(d)

that the proposed revision of the implementing rules should
not provide for any exception to the principles, and norms
contained in the Financial Regulation, except to the extent
that
the Financial Regulation itself provides for such
exceptions.

5.
The Court considers that some aspects of the draft Regu-
lation need to be modified to meet the criteria stated in para-
graph 4. Further explanations are provided below. Specific obser-
vations can be found in the table annexed to this opinion
including, where relevant, proposed modifications to the text.

11.
In contrast, the Commission’s proposals do not take
account of the need to facilitate the implementation of proce-
dures concerning the submission of elements of proof
(Article 134, exclusion cases). In particular, there is a need to
establish a complete list of documents and certificates to be deliv-
ered by national authorities which could be accepted in the con-
text of public procurement procedures. Such lists could be estab-
lished in liaison with the national authorities in each Member
State (see Article 45(4) of the Directive). Moreover, to facilitate the
implementation of the procedures, certain aspects concerning the
opening of tender offers sent electronically, should also be
specified.

COMPLIANCE WITH THE PRINCIPLES OF SOUND FINANCIAL
MANAGEMENT

6.
The Court welcomes the modernisation and simplification
of procedures in the draft Regulation proposed by the Commis-
sion and considers that, in the main, the new rules proposed are
consistent with the Directive and with the sound financial man-
agement principles established by the Financial Regulation.

12.
In addition, the implementing rules should take due
account of case-law of the Court of Justice in the judgement
‘ALCATEL’ (1) to provide for sufficient time between the notifica-
tion of awarding a contract and its signature to allow rejected ten-
derers to challenge the awarding decision.

(1) Case C-81/98, Alcatel Austria AG and others v Bundesministerium für

Wissenchaft und Verkehr, (1999) ECR I-7671.

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Finally, concerning grants and the use of simplified
13.
financing systems for the reimbursement of eligible costs (or
expenditure), the Commission’s proposals open up the possibil-
ity for the exercise of undue discretionary powers. Without the
requirement of a preliminary analysis of the elements which could
justify such financing, and without prior approval through a basic
act, multiple lump-sum payments as well as unit costs and for-
feitary amounts could be granted to beneficiaries on the basis of
a simple Commission decision. Whereas the Court is not opposed
to increasing thresholds for ‘lump-sum’ payments ‘per se’, as
implicitly proposed in the draft revision presented by the Com-
mission, an overall maximum ceiling should be clearly specified
in the implementing rules.

14.
In contrast, the proposed modification concerning the
obligation to conduct an independent audit for grants exceeding
certain values, would require a separate audit for all such grant
payments, with the exception of prefinancing payments, indepen-
dent of the value and timing of such payments, resulting in an
excessive burden on beneficiaries.

CORRECT TRANSPOSITION OF THE PUBLIC PROCUREMENT
DIRECTIVE

15.
One of the objectives of the Commission’s proposed
modifications is to adapt the implementing rules of the Financial
Regulation to take account of the amendments made by Direc-
tive 2004/18/EC, where they are relevant (1).

— the introduction of terms or elements which are not pro-
vided for in the Directive (Articles 118(2) and 131(2)),

— a transposition not taking into account the community con-

text (Article 117),

— contradictions within the Directive itself (Article 125(3)).

18.
The precise text of the Directive, should, where possible,
be incorporated into the implementing rules directly. Exceptions
to this rule should always be justified in order to ensure a correct
application of the norms in the community context. Such excep-
tions could be justified, for example, in the case of the terms relat-
ing to framework contracts (Article 117) and to the definition of
administrative provisions in the community context (Article 126).

CONFORMITY OF THE PROPOSED MODIFICATIONS WITH THE
PRINCIPLES AND NORMS ESTABLISHED BY THE FINANCIAL
REGULATION

19.
The draft revision presented by the Commission con-
cerns a modification of the implementing rules of the Financial
Regulation on the basis of Article 183 of that regulation: ‘The
Commission shall adopt rules for implementing this Regula-
tion’. As such, the proposals cannot deviate from or exceed the
principles and norms contained in the Financial Regulation except
in cases where the Financial Regulation provides for such a pos-
sibility, because otherwise the modifications to the implementing
rules would lack an adequate legal basis.

16.
In order to ensure clarity and legal certainty, this adap-
tation should be based on a correct transposition of the norms of
the Directive, whilst taking into account the community context
to which these norms should be applied.

Procedures for procurement

17.
Even though for most of the proposed modifications the
objective is successfully achieved, the Court notes that the trans-
position of the Directive lacks coherence in several places. This
lack of coherence is due, among others, to:

— the use of terms or definitions which are not the same as
those of the Directive, without justification of these differ-
ences (Articles 116, 125a, 126, 130, 139 and 156),

— an

incomplete

transposition

of

certain

provisions

(Articles 136, 137 and 143),

The Court considers the ‘competitive dialogue’ a good
20.
step in the modernisation process allowed by the Directive. As the
Financial Regulation does not provide for such a procedure (2),
the Commission should consider its introduction during the revi-
sion of the Regulation, currently being undertaken.

Criteria for selection of candidates/tenderers

21.
Article 89 of the Financial Regulation provides that all
public contracts financed in whole or in part by the budget shall
comply with the principles of transparency, proportionality,
equal treatment and non-discrimination. Article 97 of that Regu-
lation provides that selection criteria used to evaluate the candi-
dates’ or tenderers’ capacities should be defined in advance and set
out in the call for tender.

— an erroneous transposition of the Directive,

(1) Preamble 1 of the draft Regulation.

(2) According to Article 91 of the Financial Regulation, procurement pro-
cedures can take one of the following forms: (a) the open procedure,
(b) the restricted procedure, (c) contests and (d) the negotiated proce-
dure.

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The Court considers that Article 135(6) proposed should
22.
be modified to allow for a mininum level of documentation to be
presented in the selection process for the awards of contracts

below 50 000 euros, but that the contracting authority should
always be in a position to justify tender selection.

The present Opinion was adopted by the Court at its meeting in Luxembourg on 17 March 2005.

For the Court of Auditors
Hubert WEBER
President