Special Report No 12/2008 Instrument for structural policies for pre-accession (ISPA), 2000-2006
Date: 2009-05-12
Institutions: European Court of Auditors
Subjects: accession to the European Union, activity report, disclosure of information, pre-accession aid

EUROPEAN COURT 
OF AUDITORS

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THE INSTRUMENT FOR STRUCTURAL
POLICIES FOR PREACCESSION ISPA, 
200006

EN

 
 
 
Special Report No 12  

 2008

THE INSTRUMENT
FOR STRUCTURAL POLICIES
FOR PREACCESSION ISPA, 
200006

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

EUROPEAN COURT OF AUDITORS

2

EUROPEAN COURT OF AUDITORS
12, rue Alcide De Gasperi
1615 Luxembourg
LUXEMBOURG

Tel. +352 4398-45410
Fax +352 4398-46430
E-mail: euraud@eca.europa.eu
Internet: http://www.eca.europa.eu

Special Report No 12  

 2008

More information on the European Union is available on the Internet (http://europa.eu).

Cataloguing data can be found at the end of this publication.

Luxembourg: Office for Official Publications of the European Communities, 2009

ISBN 978-92-9207-161-5

doi: 10.2865/55186

© European Communities, 2009

Reproduction is authorised provided the source is acknowledged.

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

Printed in Belgium

CONTENTS

3

Paragraph

IVI 

16 

12 
36 

GLOSSARY

 EXECUTIVE SUMMARY

INTRODUCTION

ASSISTANCE TO EU APPLICANT COUNTRIES
ISPA MANAGEMENT AND FINANCIAL RESOURCES

712 

AUDIT SCOPE AND APPROACH

1342 

1324 

1315 
1619 
2021 
2224 

2536 

2526 
2732 
3336 

3742 

3738 
3940 
4142 

AUDIT OBSERVATIONS

WAS THERE A COHERENT STRATEGY AND ADEQUATE PREPARATION SUPPORTING ISPA ACTIONS?

GENERAL FRAMEWORK AND AUDIT CRITERIA
WELL TARGETED ISPA STRATEGIES
THREE IMPORTANT GUIDANCE DOCUMENTS NOT AVAILABLE FROM THE BEGINNING OF ISPA
WEAKNESSES IN FINANCIAL AND COSTBENEFIT ANALYSIS CBA

WERE PROJECTS IMPLEMENTED ACCORDING TO PLAN?

GENERAL FRAMEWORK AND AUDIT CRITERIA
ALMOST ALL PROJECTS WERE DELAYED
FINANCIAL PLANS NOT IMPLEMENTED AS SCHEDULED

 WERE PROJECTS CONTRIBUTING TO BENEFICIARY COUNTRIES’ COMPLIANCE
WITH THE EU ENVIRONMENTAL DIRECTIVES AND TO THE IMPROVEMENT OF TENT?

GENERAL FRAMEWORK AND AUDIT CRITERIA
COMPLIANCE WITH EU ENVIRONMENTAL STANDARDS HAS INCREASED
IMPROVEMENTS IN LINKS TO THE TRANSEUROPEAN TRANSPORT NETWORK

43 

CONCLUSIONS AND RECOMMENDATIONS

ANNEX I  ISPA PROJECT MANAGEMENT STAGES AND KEY COMMISSION ACTIVITIES

REPLY OF THE COMMISSION

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

 
 
 
Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

GLOSSARY

5

Cohesion Fund: Instrument designed to promote economic and social cohesion by financ-
ing large projects in the fields of the environment and transport in Member States with 
a per capita GDP of less than 90 % of the Community average. The Cohesion Fund was 
originally implemented in Spain, Greece, Ireland and Portugal. Since 1 January 2004, 
Ireland has no longer been eligible. After their accession to the EU, the ongoing ISPA 
projects of the new Member States were converted into Cohesion Fund projects.

Cost–benefit analysis (CBA): A technique for comparing all the costs and all the benefits 
of an intervention to determine whether the benefits outweigh the costs, and if so, by 
what proportion.

Financing memorandum: Agreement defining the budgetary commitments of a project, 
as well as the physical and financial indicators to be used to monitor the performance 
of the project.

ISPA manual: Manual intended to ensure that ISPA projects programming and imple-
mentation are undertaken according to best practices. It covers the whole project cycle 
and provides practical guidance of the ISPA and coordination regulations.

National sectoral strategies: Framework for project identification, including criteria to 
select and appraise project proposals in the environment and transport sectors.

Phare: The Programme of Community aid to the countries of central and eastern Europe 
(Phare) was the main financial instrument of the pre-accession strategy for the central 
and east European countries (CEECs) which have applied for membership of the Euro-
pean Union. Although the Phare programme was originally reserved for the countries 
of central and eastern Europe, it is set to be extended to the applicant countries of the 
western Balkans.

PRAG: Practical guide providing guidelines for tendering and contracting for Phare and 
ISPA projects.

Project application: Set of documents consisting of a standard form and supporting 
documents (e.g. feasibility study, design, cost/benefit and financial analysis, environmen-
tal impact assessment) describing and justifying the proposal. It also includes supervision 
and quality control mechanisms.

Regulations: There are two main regulations governing ISPA:
Council Regulation (EC) No 1266/1999 of 21 June 1999 on coordinating aid to the appli-
cant countries in the framework of the pre-accession strategy and amending Regulation 
(EEC) No 3906/89 (OJ L 161, 26.6.1999, p. 68) (‘coordination regulation’).
Council Regulation (EC) No 1267/1999 of 21 June 1999 establishing an Instrument for 
Structural Policies for Pre-accession (OJ L 161, 26.6.1999, p. 73); amended by Regulation 
(EC) No 2382/2001 (OJ L 323, 7.12.2001, p. 1) (‘ISPA regulation’).

Sapard: Special accession programme for agriculture and rural development.

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EXECUTIVE 
SUMMARY

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

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EXECUTIVE 
SUMMARY

IV
P r o j e c t s   w e r e   n o t   i m p l e m e n t e d   a c c o r d i n g 
t o   p l a n n i n g ;   t h e r e   w e r e   s i g n i f i c a n t   d e l a y s 
and  considerable  changes  in  the  financing 
plans.

V.
The  projects  audited  by  the  Court  increase 
t h e   c o m p l i a n c e   w i t h   t h e   E U   s t a n d a r d s   o r 
i m p r o v e   t h e   l i n k s   t o   t h e   t r a n s - E u r o p e a n 
network.

VI.
T h e   C o u r t   r e c o m m e n d s   t h a t   t h e   C o m m i s -
s i o n   m a k e   a   f o l l o w - u p   o f   I S P A ’ s   i m p l e -
m e n t a t i o n   a n d   e x a m i n e   h o w   d e l a y s   c o u l d 
be  avoided  or  reduced  in  the  future,  when 
i m p l e m e n t i n g   a   s i m i l a r   i n s t r u m e n t .   I n   t h i s 
c o n t e x t ,   t h e   C o m m i s s i o n   s h o u l d   m a k e   t h e 
g u i d a n c e   d o c u m e n t s   a v a i l a b l e   b e f o r e   t h e 
c a n d i d a t e   c o u n t r i e s   s t a r t   p r e p a r i n g   t h e i r 
p r o j e c t s   a n d   g r e a t e r   a t t e n t i o n   s h o u l d   b e 
devoted to reduce time needed to complete 
procedures.

I.
ISPA was one of the instruments to assist the 
candidate  countries  of  central  and  eastern 
E u r o p e   i n   t h e   p r e p a r a t i o n   f o r   a c c e s s i o n   i n 
the period 2000–2006. Its objectives were to 
help  candidate  countries  to  apply  EU  envi-
r o n m e n t a l   s t a n d a r d s   a n d   t o   u p g r a d e   a n d 
expand  transport  networks,  including  links 
with the trans-European network. It also pro-
vided  experience  in  the  management  of  EU 
funds  for  large  infrastructure  projects.  The 
total  financial  allocation  was  7  280  million 
euro.

II.
The  Court  reviewed  this  instrument  by  ask-
ing  whether  there  was  a  coherent  strategy 
a n d   a d e q u a t e   p r e p a r a t i o n   t o   s u p p o r t   I S P A 
actions, whether projects were implemented 
according to planning and whether projects 
were  contributing  to  beneficiary  countries’ 
compliance with the EU environmental direc-
tives  and  contributing  to  the  improvement 
of TEN-T.

III.
The Court concludes that there was a coher-
e n t   s t r a t e g y ,   b u t   p r o j e c t s   w e r e   n o t   a l w a y s 
adequately prepared. Three important meth-
o d o l o g i c a l   g u i d a n c e   d o c u m e n t s   w e r e   p r o -
v i d e d   l a t e   i n   r e l a t i o n   t o   t h e   f i r s t   w a v e   o f 
applications.

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

INTRODUCTION

8

ASSISTANCE TO EU APPLICANT COUNTRIES

1. 

The Instrument for Structural Policies for Pre-Accession (ISPA) is one 
of the three financial instruments (with PHARE and Sapard) to assist 
candidate countries in the preparation for accession. ISPA was set up 
in  1999  to  contribute  to  the  process  of  preparation  for  accession  to 
the  European  Union  concerning  environment  and  transport 1  in  the 
former candidate countries of central and eastern Europe 2, along the 
same lines as the Cohesion Fund model designed for the least pros-
perous EU members (see Figure 1). It also helped candidate countries 
prepare for the management of EU funds after accession, by providing 
experience in their use for large infrastructure projects.

1  Article 1 of Regulation (EC) 

No 1267/1999.

2  Bulgaria, Czech Republic, Estonia, 

Hungary, Latvia, Lithuania, Poland, 

Romania, Slovakia and Slovenia.

F I G U R E   1

ISPA INTERVENTION LOGIC

NEEDS
• 
• 

 Improvement of the environmental standards
 Improvement of the transport infrastructure

OBJECTIVES
• 
• 

 Bringing countries up to EU environmental standards
 Extending trans-European networks

INPUTS
• 
• 
• 
•  Staﬀ 

 Commission coordination
 ISPA and national funds
 ISPA strategies, ﬁ nancing memoranda, Commission decisions

PROCESSES
• 

 Building and improving infrastructure in the environment
and transport sectors

OUTPUTS
• 
• 

 New and/or rehabilitated water treatment systems
 Kilometres of new road or rail network or improved network

RESULTS

IMPACT

Percentage of households/businesses 
served, time saved, accessibility gain

Environmental impact; improved
water quality
Smoother traﬃ  c ﬂ ows, improved
road/rail network

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

 
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2. 

3. 

ISPA operated during the programming period 2000–06. From January 
2007  onwards,  similar  actions  have  been  financed  under  the  Instru-
ment for Pre-Accession Assistance (IPA) 3.

ISPA MANAGEMENT AND FINANCIAL RESOURCES

Figure 2 shows the framework within which projects are developed and 
approved.

3  IPA covers Croatia, the former 

Yugoslav Republic of Macedonia, 

Turkey, Albania, Bosnia and 

Herzegovina, Montenegro, Serbia 

and Kosovo under UN Security 

Council Resolution 1244/99.

F I G U R E   2

ISPA PROCEDURAL FRAMEWORK

Programming for the Instrument for Structural policies for Pre-Accession

Accession partnership
Priority areas of acquis 
communautaire
Prepared by the Commission

National programme
Action plan for preparation 
for accession
Prepared by candidate
country

National development plan
development strategy 
prepared by candidate
country

• 

• 

 Council Regulation (EC) No 1267/1999 of 21 June 1999 establishing an Instrument for Structural Policies 
for Pre-Accession
 Council Regulation (EC) No 1266/1999 of 21 June 1999 on coordinating aid to the applicant countries in 
the framework of the pre-accession strategy

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National ISPA strategy Setting sectoral strategies and the list of priority projects
Prepared by the candidate country

Project application
Containing detailed project description

The Commission

Appraisal
Followed by two interservice consultations

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Commission decision

Financing memorandum
Co-signed by the candidate country

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

 
 
 
 
 
 
 
 
 
10

4. 

5. 

The total allocation for ISPA was 7 280 million euro for the period 2000–06 
(1 040 million euro in 1999 prices per year 4), to be distributed among 
the beneficiary countries on the basis of selected criteria. ISPA aimed 
at  using  these  funds  according  to  an  appropriate  balance  between 
measures  in  the  field  of  the  environment  and  measures  relating  to 
transport infrastructure.

In total, 366 projects were approved for ISPA, of which 201 were in the 
environment sector, 78 in the transport sector and 87 concerned tech-
nical assistance. The ISPA budget (in 2006 prices), before amendments 
and excluding technical assistance was 7 708 million euro 5. The con-
tribution to ISPA projects in the environment sector was 3 804 million 
euro and in the transport sector 3 904 million euro. In the environment 
sector (see Figure 3), the majority of the 201 projects (73 %) were in 
the field of wastewater treatment and water supply. In the transport 
sector,  the  78  ISPA  projects  were  mainly  (97  %)  in  the  railways  and 
in the roads and motorways sectors (see Figure 4).

4  Article 4 of Regulation (EC) 

No 1267/1999 and Annex II to 

the interinstitutional agreement 

of 6 May 1999 between the 

European Parliament, the Council 

and the Commission on budgetary 

discipline and improvement of the 

budgetary procedure

(OJ C 172, 18.6.1999).

5  Commission, Regional Policy DG, 

situation at 31.12.2007.

F I G U R E   3

DISTRIBUTION OF ISPA ENVIRONMENT PROJECTS

No of projects: 9
Share 4 %

No of projects: 46
Share 23 %

No of projects: 89
Share 45 %

Combined sewage networks
and treatment plants

Drinking water supply

Combined wastewater treatment
and drinking water supply

Solid waste management

No of projects: 52
Share 26 %

No of projects: 5
Share 2 %

Other

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11

6. 

The co-financing rate of ISPA may be up to 75 % of public or equivalent 
expenditure 6. The national contribution sometimes took the form of 
loans  granted  by  financial  institutions  such  as  the  European  Invest-
ment Bank (EIB) and the European Bank for Reconstruction and Devel-
opment (EBRD).

6  For projects considered 

essential for achieving the general 

objectives of ISPA, this rate can be 

increased up to 85 % according 

to Article 6(2) of Regulation (EC) 

No 1267/1999.

F I G U R E   4

DISTRIBUTION OD ISPA TRANSPORT PROJECTS

No of projects: 2
Share 3 %

No of projects: 39
Share 50 %

No of projects: 37
Share 47 %

Roads and motorways

Railway

Other

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

 
AUDIT SCOPE AND APPROACH

12

The implementation of ISPA in the candidate countries represented an 
initial exposure to large-scale investments co-financed by the Euro-
p e a n   U n i o n .   F o r   t h i s   r e a s o n ,   i n   v i e w   o f   t h e   i m p o r t a n c e   o f   I S P A   f o r 
t h e   a c c e s s i o n   o f   t h e   c a n d i d a t e   c o u n t r i e s   a n d   f i n d i n g s   o f   p r e v i o u s 
audits 7, the Court decided to carry out an audit of ISPA to answer the 
following questions.

7  The Court’s Special Report 

No 5/2003 concerning Phare and 

ISPA funding of environmental 

projects in the candidate 

countries (OJ C 167, 17.7.2003, 

p. 1), Special Report No 15/2000 

on the Cohesion Fund (OJ C 279, 

(a) 

Was there a coherent strategy and an adequate preparation sup-
porting ISPA actions?

2.1.2000, p. 1) and Special Report 

No 6/2005 on the trans-European 

(b) 

Were projects implemented according to planning?

network for transport (TEN-T) 

(OJ C 94, 21.4.2006, p. 1).

(c) 

Were  projects  contributing  to  beneficiary  countries’  compliance 
with the EU environmental directives and to the improvement of 
TEN-T?

8  The project managers 

represented 42 % of ISPA projects 

in the environment and transport 

sectors.

9  For technical reasons such 

as incorrect completion of the 

questionnaire or incomplete reply, 

127 replies were usable (82 %).

ISPA was programmed for the period 2000–06 and the majority of the 
beneficiary countries acceded to the EU in May 2004. As at 31 Decem-
ber 2007, final reports on only a limited number of the 279 infrastruc-
t u r e   p r o j e c t s   w e r e   a v a i l a b l e .   A s   s u c h ,   t h e   C o u r t   c o u l d   o n l y   m a k e   a 
preliminary assessment of the performance and achievements of the 
projects.

A sample of 32 projects adopted between 2000 and 2003 (16 environment 
and  16  transport)  covering  six  beneficiary  countries  was  examined. 
S i x t e e n   p r o j e c t s   w e r e   v i s i t e d   o n   t h e   s p o t   ( e i g h t   e n v i r o n m e n t   a n d 
eight  transport)  in  the  Czech  Republic,  Poland,  Latvia  and  Romania. 
The  other  16  projects  were  subject  to  a  desk-review.  They  concern 
the abovementioned countries plus Hungary and Bulgaria.

File reviews and interviews were carried out both at the Commission 
headquarters and Commission delegations. In the candidate countries, 
meetings were held with the Ministries of Environment and Transport, 
regional and local authorities, as well as with final beneficiaries.

In addition, the Court carried out a survey by sending questionnaires to 
155 project managers and bodies responsible for day-to-day manage-
ment of projects 8 in the four countries visited, in order to collect opinions 
on the most common problems encountered during ISPA implementa-
tion. The Court received 145 answers 9 (93 % response rate).

7. 

8. 

9. 

10. 

11. 

12.  Moreover, the Court obtained advice from experts in environment and 
transport projects from international financial institutions.

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

 
 
 
 
 
 
10 Article 7(3)(a) of and Annex I to 

Regulation (EC) No 1267/1999.

AUDIT OBSERVATIONS

13

13. 

14. 

15. 

WAS THERE A COHERENT STRATEGY AND ADEQUATE 
PREPARATION SUPPORTING ISPA ACTIONS?

GENERAL FRAMEWORK AND AUDIT CRITERIA

National ISPA strategies for the environment and transport sectors were 
prepared by each beneficiary country at the request of the Commis-
sion. Their purpose was to define the priority objectives by identifying 
sector  and  sub-sector  priorities  and  geographical  priorities  such  as 
transport  bottlenecks  or  environmental  black  spots,  and  to  identify 
the  resources  needed.  The  national  ISPA  strategies  should  also  pro-
vide the framework for project identification and set out the criteria 
to be used to select and appraise proposed projects (see Annex I).

Candidate countries submitted an application to the Commission which 
had to contain, inter alia, the following elements 10:

(a) 

the timetable for implementation of the works;

(b) 

a cost–benefit analysis;

(c) 

the financial plan, including financing sources other than ISPA.

The Court analysed the strategy documentation, and the preparation of 
ISPA projects, checking whether:

(a) 

the  national  sectoral  strategies  contained  an  assessment  of  sec-
toral  needs  in  the  fields  of  environment  and  transport  designed 
t o   c a t c h   u p   w i t h   E U   e n v i r o n m e n t a l   s t a n d a r d s   a n d   u p g r a d e   a n d 
expand links with trans-European transport networks;

(b) 

t h e   C o m m i s s i o n   d e v e l o p e d   o n   t i m e   m a n u a l s   a n d   g u i d e l i n e s   t o 
e n a b l e   c a n d i d a t e   c o u n t r i e s   t o   s u b m i t   p r o p o s a l s   c o n t a i n i n g   a l l 
the relevant information.

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14

16. 

17. 

WELL TARGETED ISPA STRATEGIES

The Commission’s framework documents for the environment and trans-
port sectors proved to be effective in setting out the key criteria for 
the  preparation  of  national  ISPA  strategies  which  included  general 
priorities  and  identified  projects  to  be  implemented  with  ISPA  sup-
port (see Textbox 1).

In the cases where shortcomings were identified, the Commission provided 
support in order to address these weaknesses (see Textbox 2).

T E X T B O X   1

T E X T B O X   2

In the case of Latvia, in the environment sector, the main focus for ISPA was to concentrate on projects which 
enabled the country to comply with the requirements of Community environmental law and with the objectives 
of the accession partnership. Th  e strategy identifi es and selects projects to be proposed for fi nancing under ISPA 
that are consistent with the abovementioned criteria. Th  e selection of ISPA projects was based on the government 
guidelines, which took into consideration assumptions of environmental policy.

In Romania, the updated 2003 version of the national transport strategy did not receive unreserved consent from 
the Commission due to several shortcomings. In order to address these shortcomings, the Commission decided 
to grant a technical assistance project aimed at draft ing a general transport master plan.

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18. 

19. 

T E X T B O X   3

T E X T B O X   4

15

Even though in some cases it was not possible to explain the ranking of 
i n v e s t m e n t   p r o j e c t s 1 1,   a n   e x a m i n a t i o n   o f   t h e   s t r a t e g i e s   o f   t h e   f o u r 
countries visited has enabled the Court to conclude that, in general, 
national sectoral ISPA strategies clearly identified the needs in each 
country, also taking into consideration the existing national planning 
documents  (see  Textbox  3).  National  ISPA  strategies  acted  as  a  tool 
in the selection of ISPA projects, linking objectives and priorities to 
specific project proposals.

11 This has been pointed out also 

in the Court’s Special Report 

No 5/2003 (shortcomings in 

strategies, paragraphs 18 to 20).

In some cases the national ISPA strategies were a development of exist-
ing national strategies that had already taken into consideration the 
need to adopt the acquis communautaire in the field of the environ-
ment (see Textbox 4).

Action to protect the environment in the Baltic region was initiated by the Polish government at the beginning of 
the 1990s in cooperation with other countries. Th  e region of Krakow was already identifi ed in the Helsinki Con-
vention12 as one of the hot spots for the protection of the Baltic Sea, as this area, even though far from the coast, 
contains a high density of industries discharging waste into the Vistula River, which fl ows into the Baltic Sea. A 
common solution for the whole urban area of Krakow was prepared and included in the national programme for 
purifi cation of communal wastewater. Th  e project of a sewage treatment plant in Krakow was then included in the 
national ISPA strategy for the environment in 1999, to be implemented as one of the priority projects.

12 Helsinki Convention: convention on the protection of the marine environment of the Baltic Sea area, signed in 1974 and 

revised in 1992 which concerns all the states bordering on the Baltic Sea. The convention covers the whole of the Baltic 

Sea area, including inland waters as well as the water of the sea itself and the sea-bed. Measures are also taken in the whole 

catchment area of the Baltic Sea to reduce land-based pollution.

In Latvia the main objectives of the national environment policy plan, which was approved in 1995, were to enable 
the country to comply with the requirements of the Community environmental legal framework and with the 
objectives of the accession partnership. Th  e objectives of this policy plan were taken over in the national ISPA 
strategy for the environment. Th  e selection process for the projects was based on these objectives.

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THREE IMPORTANT GUIDANCE DOCUMENTS NOT AVAILABLE 
FROM THE BEGINNING OF ISPA

20. 

Three main guidelines were developed by the Commission and made 
available for project preparation.

(a) 

An ISPA manual was provided to the beneficiary countries in 2000, 
during the preparation phase of the first project applications.

(b) 

A second version of the ISPA manual was developed in 2002, clari-
fying in particular the tendering and contracting procedures.

(c) 

Updated  guidance  on  cost–benefit  analysis  was  made  available 
in  2002,  which  addressed  weaknesses  identified  in  the  previous 
version.  In  particular  it  gave  average  rates  of  return  and  recom-
mended  time  horizons  for  different  sectors.  However,  it  did  not 
provide any details or forecasting techniques concerning impacts 
on the environment.

21. 

22. 

These methodological guides were developed after the projects audited 
by the Court were submitted to the Commission for approval. This late 
availability  limited  their  contribution  to  familiarising  the  candidate 
c o u n t r i e s   w i t h   t h e   p o l i c i e s ,   p r o c e d u r e s   a n d   t h e   f u n d i n g   p r i n c i p l e s 
of the EU.

WEAKNESSES IN FINANCIAL AND COSTBENEFIT 
ANALYSIS CBA

Each application for ISPA assistance had to contain a financial and a 
c o s t – b e n e f i t   a n a l y s i s .   F o r   s o m e   p r o j e c t s   t h e s e   w e r e   n o t   a v a i l a b l e 
or presented weaknesses. Nevertheless, the Commission considered 
that,  since  most  of  the  projects  were  required  to  fulfil  basic  needs 
in  the  candidate  countries,  it  was  not  appropriate  to  hold  them  up 
because of shortcomings in the cost–benefit analysis.

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23. 

The Court’s review of the financial and cost–benefit analyses provided 
for the projects audited identified the following weaknesses 13:

(a) 

some missing information about discount rates used and scenario 
assumptions where a risk analysis was presented;

(b) 

i n c o n s i s t e n c i e s   o f   C B A   a n d   f i n a n c i a l   a n a l y s e s   f i g u r e s   b e t w e e n 
different documents for the same project;

(c) 

u n s u b s t a n t i a t e d   s o c i o - e c o n o m i c   b e n e f i t s   a n d   i n c o m p l e t e   e s t i -
mates of effects in the transport sector.

13 See also Special Report 

No 5/2003 (weaknesses in project 

appraisal, paragraphs 30 to 34) 

and Special Report No 6/2005 

(weaknesses in evaluation 

and selection of projects, 

paragraphs 30 to 43).

24. 

25. 

26. 

In these circumstances, the Commission was unable to confirm from the 
cost–benefit  analysis  that  the  projects  submitted  by  the  candidate 
countries represented in relative terms the highest added value.

WERE PROJECTS IMPLEMENTED ACCORDING TO PLAN?

GENERAL FRAMEWORK AND AUDIT CRITERIA

After the assessment of project application and approval by the Com-
mission, a financing memorandum was signed defining, in particular, 
the  financial  resources  and  planning  for  implementing  the  project, 
including  the  completion  date.  After  project  completion,  candidate 
countries had to present a final report.

The Court assessed to what extent the main conditions set in the financ-
ing memorandum had been respected, that is:

(a) 

whether projects had been implemented according to initial plan 
and the reasons for any delay;

(b) 

whether  the  financial  plans  for  the  projects  had  been  respected 
and if not, the reasons why.

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18

27. 

28. 

29. 

30. 

31. 

ALMOST ALL PROJECTS WERE DELAYED

If projects are delivered later than expected, the benefits are deferred and 
the problems they are intended to address continue for longer than 
n e c e s s a r y .   D e l a y s   a l s o   c r e a t e   u n c e r t a i n t i e s ,   a s   t h e   s o c i o - e c o n o m i c 
e n v i r o n m e n t   m a y   c h a n g e   a n d   m a y   m a k e   i t   d i f f i c u l t   t o   i m p l e m e n t 
projects as foreseen.

The  32  projects  in  the  Court’s  sample  were  approved  between  2000 
a n d   2 0 0 3 .   T h e   m a j o r i t y   o f   t h e   p r o j e c t s   a u d i t e d   s h o u l d   h a v e   b e e n 
completed between 2004 and 2006 according to the initial financial 
m e m o r a n d a .   H o w e v e r ,   o n l y   f i v e   h a d   b e e n   c o m p l e t e d   b y   t h e   i n i t i a l 
expected  date 14  at  the  time  of  the  audit  (two  in  the  Czech  Republic 
and three in Latvia) 15. For the other 27 projects, the completion date 
was amended. The delays vary from 2 to 5 years (Poland), 4 to 4.5 years 
( B u l g a r i a ) ,   2   t o   4 . 8   y e a r s   ( R o m a n i a ) ,   1 . 5   y e a r s   ( H u n g a r y )   a n d   1   t o 
3 years (Latvia). In the Czech Republic, there were no major delays.

In the survey addressed to the project managers in the four audited 
c o u n t r i e s ,   t h e   C o u r t   o b t a i n e d   i n f o r m a t i o n   o n   t h e   d e l a y s   i n   i m p l e -
mentation and the reasons for the delays.

14 A project is considered 

completed when the infrastructure 

is in use. Candidate countries 

had to submit a final report to 

the Commission at the latest six 

months after the completion of the 

project.

15 Out of 32 projects audited, 

24 faced delays (75 %).

16 Some projects were affected by 

more than one of the problems 

described.

17 E.g. eligibility of durable 

equipment expenditure 

(to be solved on a case-by-case 

basis), modifications of project 

decisions, procedures for the 

award of public contracts.

In the environment sector, the average scheduled duration of the projects 
was 5 years and in the transport sector, 4.2 years. According to the sur-
vey, the average delay was 2.5 years in both sectors (see Figure 5).

In the projects audited, the Court found that the main reasons for delays 
were 16:

(a) 

t h e   l a c k   o f   f a m i l i a r i t y   o f   t h e   c a n d i d a t e   c o u n t r i e s   w i t h   E U   p r o -
cedures and with project preparation and implementation as well 
as  difficulties  with  procurement  procedures  (see  e.g.  Textbox  5) 
(84 % of the projects in the sample);

(b) 

failure of companies that won tenders to carry out the work (see 
e.g. Textbox 6) (13 % of the projects in the sample);

(c) 

unrealistic planning (see e.g. 
the sample);

Textbox 7) (22 % of the projects in 

(d) 

t h e   c h a n g e   a f t e r   a c c e s s i o n   o f   t h e   I S P A   p r o j e c t s   i n t o   C o h e s i o n 
Fund projects, which have a different set of rules 17.

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19

F I G U R E   5

AVERAGE DELAYS IN PROJECT IMPLEMENTATION

s
r
a
e
Y

9

8

7

6

5

4

3

2

1

0

PL

CZ

RO

LV

ENV

PL

CZ

RO

LV

TRAN

TOTAL

Average per country/sector

Average initial duration

Delay

T E X T B O X   5

T E X T B O X   6

T E X T B O X   7

In Latvia, in a project for the development of water services, it took three years to launch the tender procedure 
aft er the signature of the fi nancing memorandum.

In Poland, in a project for sewage treatment, the construction suff ered an interruption of almost one year dur-
ing the tendering phase. Th  e project was divided into subcontracts, one of which was co-fi nanced by the EBRD. 
According to the EBRD loan agreement, the bank’s tendering rules should have been applied to the procurement 
of the whole project. Th  e tendering had to be stopped until the appropriate procedures had been agreed between 
the donors.

A project for the rehabilitation of sewage network and wastewater treatment facilities faced delays in implemen-
tation. Th  e tender had to be cancelled and repeated, due to problems with the composition of the evaluation 
committee. In addition, the company which was awarded the contract in the second tender failed to proceed with 
the works in accordance with the timetable and failed to comply with several notices by the supervising engineer. 
Th  e contract therefore had to be terminated. A third tender had to be organised, but at the time of the audit the 
project was at a standstill.

In Latvia, a project to develop water services was delayed because, amongst other reasons, the cost and the time 
needed for the study and design work for the pipelines were underestimated.

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20

32. 

33. 

The survey indicates that the main reasons for not respecting the dead-
lines in the implementation of the projects are, on the one hand, the 
length  of  the  procedures  and,  on  the  other  hand,  planning  reasons 
(see Figure 6) 18.

FINANCIAL PLANS NOT IMPLEMENTED AS SCHEDULED

I n   1 8   o u t   o f   3 2   p r o j e c t s   a u d i t e d   t h e   i n i t i a l   f i n a n c i a l   p l a n   w a s   n o t 
respected.  In  six  cases  the  total  cost  increased,  and  in  12  cases  the 
c o s t   d e c r e a s e d .   W h e n   t h e   c o s t   i n c r e a s e d   a n d   n o   a d d i t i o n a l   I S P A 
resources  were  made  available,  candidate  countries  had  to  finance 
the additional costs from their own resources (see Textbox 8).

18 Problems in project 

implementation were also pointed 

out by the Court in its Special 

Report No 5/2003 (insufficient 

management resources, delays, 

difficulties in tendering, 

paragraphs 35 to 39) but also in its 

Special Report No 6/2005 (delays 

in implementation of projects, 

paragraphs 11 to 25).

F I G U R E   6

REASONS FOR DELAYS PROJECT MANAGERS

What were the reasons for delays?

Procedural reasons

Planning reasons

Repetition
of the procedure
15 %

Other
11 %

Unrealistic planning
15 %

Appeals from bidders
8 %

Complicated
local law
9 %

Time-consuming EU
procedures
26 %

Frequent changes
of PRAG
10 %

Low quality
of tendering documents
6 %

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21

34. 

35. 

As shown in Table 1 the survey of project managers indicates that for 
the majority of ISPA projects changes had been made to the original 
financing plan.

In five cases out of the 32 projects of the sample this can be explained by 
underestimation of inflation (in 16 % of the cases) (see Textbox 9).

T A B L E   1

CHANGES TO THE ORIGINAL FINANCING PLANS

SURVEY OF PROJECT MANAGERS

Replies

123

Changes to the original 
ﬁ nancing plan

Maintenance of the original 
ﬁ nancing plan

66 %

34 %

T E X T B O X   8

T E X T B O X   9

In Latvia, in a railway project, due to price increases, the ISPA grant was not suffi  cient to cover all the elements 
initially foreseen. Th  e remaining work had to be funded from national resources.

In Latvia, in a project to develop water services, the contractor repudiated the contract because he was no longer 
in a position to work at the agreed prices as rapid infl ation occurred shortly aft er the start of the works. Th  is led 
to a revision of the contract, with an increased cost.

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22

36. 

The replies to the survey of project managers indicated that the reasons 
for  cost  overruns  can  be  explained  mainly  by  two  categories  of  fac-
tors (see Figure 7):

(a) 

p r o b l e m s   i n   p r o j e c t   p r e p a r a t i o n ,   s u c h   a s   i n a d e q u a t e   c o s t 
estimates;

(b) 

i m p l e m e n t a t i o n   p r o b l e m s ,   s u c h   a s   w e a k   m o n i t o r i n g   o r   t i m e 
delays.

F I G U R E   7

COST OVERRUNS

In case of overruns, what were the main reasons?

Planning-related reasons

Implementation-related reasons

Other
19 %

Inadequate cost
estimates
20 %

Modiﬁ cations to
the project
26 %

Weak monitoring
14 %

Technical
reasons
9 %

Time delays
12 %

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23

WERE PROJECTS CONTRIBUTING TO BENEFICIARY 
COUNTRIES’ COMPLIANCE WITH THE EU ENVIRONMENTAL 
DIRECTIVES AND TO THE IMPROVEMENT OF TENT?

GENERAL FRAMEWORK AND AUDIT CRITERIA

The main objective of ISPA was to help the candidate countries reduce 
their structural gap in the environment and transport sectors. In order 
to assess the effectiveness of the projects in terms of concrete con-
tributions to improvement of the environment and transport sectors, 
the Court examined:

(a) 

whether the environmental projects were consistent with EU direc-
tives in the fields of water supply and wastewater;

(b) 

whether transport projects contributed to the completion of the 
trans-European transport network.

As at the time of the audit final reports were available on only a limited 
number  of  the  279  infrastructure  projects  co-financed  by  ISPA,  only 
partial conclusions could be drawn.

COMPLIANCE WITH EU ENVIRONMENTAL STANDARDS 
HAS INCREASED

In  the  environmental  sector,  out  of  16  projects  in  the  sample,  only 
t h r e e   w e r e   c o m p l e t e d   a t   t h e   t i m e   o f   t h e   a u d i t .   T h e   a s s e s s m e n t   o f 
these  projects  shows  that,  in  spite  of  some  shortcomings,  they  are 
c o n t r i b u t i n g   t o   c o m p l i a n c e   w i t h   E U   e n v i r o n m e n t a l   s t a n d a r d s   ( s e e 
Textbox 10).

37. 

38. 

39. 

T E X T B O X   1 0

In Latvia, the objective of one project was to improve water supply and sewage services, ensuring that drinking 
water and purifi ed sewage conform to the national legislation and the requirements of the EU directives. Accord-
ing to the fi nal report, the project has ensured adequate quality of the treated water according to the EU urban 
wastewater treatment directive (91/271/EEC) and of the drinking water.

In Latvia, the objective of one project was to develop drinking water quality and wastewater services. Th  e EU 
standards for drinking water quality have been met. However, for wastewater, full compliance with legal require-
ments had not yet been achieved. Th  e rehabilitation and upgrading of a biological wastewater treatment plant had 
been completed but the nitrogen and phosphorus content in the effl  uent still exceeded the EU and local norms 
at the time of the audit.

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24

40. 

41. 

42. 

In spite of some shortcomings, the projects that were not completed 
a t   t h e   t i m e   o f   t h e   a u d i t ,   i f   i m p l e m e n t e d   a s   p l a n n e d ,   a r e   l i k e l y   t o 
c o n t r i b u t e   t o   c o m p l i a n c e   w i t h   E U   e n v i r o n m e n t a l   s t a n d a r d s   ( s e e 
Textbox 11).

IMPROVEMENTS IN LINKS TO THE TRANSEUROPEAN 
TRANSPORT NETWORK

In the transport sector out of 16 projects contained in the sample only 
two had been completed at the time of the audit. The assessment of 
these  projects  shows  that  they  are  contributing  to  the  completion/
development  of  trans-European  networks  (see  Figures  8  and  9  and 
Textboxes 12 and 13).

The other projects that at the time of the audit were not completed 
are  consistent  with  the  TEN-T  network  (see  for  example  Textbox  11 
a n d   F i g u r e   1 1 ) .   F o r   e x a m p l e   i n   R o m a n i a ,   t h e   B u c h a r e s t   C e r n a v o d a 
project should speed up the traffic between Bucarest and Constanta 
a n d   i s   e x p e c t e d   t o   c o n t r i b u t e   t o   t h e   d e v e l o p m e n t   o f   E u r o p e a n 
Transport Corridor No 7, Igumenitsa–Patras–Athens–Sofia–Budapest 
(see Figure 10).

T E X T B O X   1 1

T E X T B O X   1 2

T E X T B O X   1 3

In Poland, a wastewater treatment project should increase the percentage of the population of the city of Wrocław 
who are connected to the sewage network to 97 %. Th  is city, with a population of more than 600 000 inhabitants, 
was considered the main polluter of the river Odra.

In Romania, a project consisted of the rehabilitation and upgrading of a wastewater treatment plant, a sewage 
network and a drinking water network. Due to delays concerning the wastewater treatment plant, the risk of pol-
lution of the river remains.

In the Czech Republic the project ‘Modernisation of the line section Zabori–Prelouc’ is in the pan-European 
multimodal corridor IV from Dresden to Bratislava. In Figure 8, the projects co-fi nanced by ISPA in the Czech 
Republic are highlighted.

In Latvia, the upgrading of the motorway from Riga to Adazi, which is a section of Via Baltica linking Warsaw 
to Tallinn, improved the traffi  c and pedestrian safety as well as the traffi  c fl uidity by bringing this road section in 
compliance with European road standards and norms (see Figure 9).

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25

F I G U R E   8

ISPA PROJECTS IN THE CZECH REPUBLIC

Trans-European transport network

ISPA projects
Ceska Republica

D8 motorway Prague –
Usti nad Labem – 
Czech/German border 
Section 807 Trmice-border

Modernisation of the line section
Usti nad Orlici  – Ceska Trebova

Modernisation of the line section 
Zabori–Prelouc

Optimisation of
Zabreh na Morave –
Krasikov railway section

Road R/48
Frydek Mistek – Dobra

Road I/48
Belotin by-pass

Expressway r48
Dobra–Tosanovice–Zukov, 
Stage I: Dobra–Tosanovice

TEN railway
TEN road

© EuroGeographics 2001 for the administrative boundaries
Cartography: Energy and Transport DG, 15/5/2008

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

26

F I G U R E   9

ROAD NETWORK IN LATVIA

LEITSCHEMA DES TRANSEUROPÄISCHEN VERKEHRSNETZES (Horizont 2020) 
TRANS-EUROPEAN TRANSPORT NETWORK OUTLINE PLAN (2020 horizon) 
SCHÉMA DU RÉSEAU TRANSEUROPÉEN DE TRANSPORT (horizon 2020) 

STRASSEN
ROADS
ROUTES

LATVIJA

Bestehend
Existing
Existant

Geplant
Planned
Planiﬁ é

© EuroGeographics 2001 for the administrative boundaries
Cartography: Energy and Transport DG, 29/9/2005

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

27

F I G U R E   1 0

TENT NEWORKS

PROJECT No 7
Trans-European transport network 
priority projects

MOTORWAY AXIS
IGOUMENITSA/PATRA–ATHINA–SOFIA–BUDAPEST

Existing
Planned

Priority axis No 7
Priority sections
Other priority axes

© EuroGeographics 2001 for the administrative boundaries
Cartography: Energy and Transport DG, 9/3/2005

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

F I G U R E   1 1

TENT NETWORK

28

ISPA projects
2004–08 countries

ISPA project

TEN railway

TEN road

© EuroGeographics 2001 for the administrative boundaries
Cartography: Energy and Transport DG, 4/6/2008

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

CONCLUSIONS AND
RECOMMENDATIONS

29

43. 

The Court’s main conclusions are as follows.

(a) 

A   c o h e r e n t   s t r a t e g i c   f r a m e w o r k   w a s   i n   p l a c e   a n d   n a t i o n a l   I S P A 
strategies proved to be a good programming tool clearly identify-
ing  needs,  objectives  and  resources.  Nonetheless,  projects  were 
n o t   a l w a y s   a d e q u a t e l y   p r e p a r e d   b y   a p p l i c a n t s .   T h i s   w a s   p a r t l y 
d u e   t o   t h e   f a c t   t h a t   t h r e e   i m p o r t a n t   g u i d a n c e   d o c u m e n t s   w e r e 
provided  late  in  relation  to  the  first  wave  of  applications  by  the 
Commission (see paragraphs 16 to 24).

(b) 

Projects were often not implemented as planned. Financing plans 
had  to  be  adjusted  to  changed  circumstances  and  almost  all  the 
projects  were  experiencing  significant  delays,  mainly  related  to 
the length of the procedures (at the level of the Commission and 
of  the  beneficiary  countries)  and  to  weaknesses  in  the  planning 
p r o c e s s   ( a t   t h e   l e v e l   o f   b e n e f i c i a r y   c o u n t r i e s )   ( s e e   p a r a g r a p h s 
25 to 36).

(c) 

The Court’s audit included five completed projects and 27 projects 
which are still in progress. Three of the completed projects were 
environmental. The audit shows that they increase the compliance 
w i t h   E U   e n v i r o n m e n t a l   d i r e c t i v e s   i n   t h e   r e s p e c t i v e   b e n e f i c i a r y 
states. The other two completed projects were transport related. 
The audit shows that they contribute to the improvement of the 
trans-European network in the respective beneficiary states. Fur-
thermore, the audit suggests that the 27 projects still in progress 
a r e   l i k e l y   t o   a c h i e v e   t h e   o b j e c t i v e s   i f   i m p l e m e n t e d   a s   p l a n n e d 
(see paragraphs 37 to 42).

T h e   C o u r t   r e c o m m e n d s   t h a t   t h e   C o m m i s s i o n   c l o s e l y   f o l l o w s   u p   t h e 
implementation of ISPA. The Commission should, in particular, exam-
ine how delays in the implementation of projects could be avoided or 
reduced in the future, when implementing similar instruments. In the 
Court’s view, this may require more rigorous and realistic planning by 
projects’ applicants/managers and ways to speed up the procedures, 
both  at  the  Commission  level  and  within  national  administrations  of 
beneficiary countries.

This report was adopted by the Court of Auditors in Luxembourg at its 
meeting of 11 December 2008.

For the Court of Auditors

Vítor Manuel da Silva Caldeira
President

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

 
 
 
 
 
30

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Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

32

REPLY
OF THE COMMISSION

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

33

EXECUTIVE SUMMARY
III.
The  poor  preparation  of  some  projects  was 
d u e   t o   a   l a r g e   e x t e n t   t o   a   l a c k   o f   c a p a c i t y 
and  the  short  time  frame  in  which  projects 
h a d   t o   b e   d e v e l o p e d .   G u i d a n c e   w a s   a l s o 
given through the detailed application forms 
a n d   e x i s t i n g   e x p l a n a t i o n s   o f   p r o c u r e m e n t 
procedures.

IV.
The  delays  and  changes  in  planning  which 
occurred in many of the early projects were 
hard  to  avoid  given  the  lack  of  experience 
i n   m a n a g i n g   m a j o r   i n f r a s t r u c t u r e   p r o j e c t s 
and  the  need  for  ex  ante  control  of  tender-
ing procedures.

VI.
The Commission agrees with the Court’s rec-
o m m e n d a t i o n .   I t   w i l l   c o n t i n u e   t o   m o n i t o r 
ex-ISPA projects and some will be evaluated 
in  the  2000–06  ex  post  evaluation  exercise, 
paying particular attention to cost overruns 
a n d   d e l a y s .   T h e   e x p e r i e n c e   w i t h   I S P A   h a s 
already led the Commission to take steps to 
offer greater assistance with project prepa-
ration,  such  as  the  special  EIB/Commission 
technical  assistance  facility,  Jaspers.  It  will 
continue and intensify such technical assist-
ance under the new pre-accession instrument 
IPA. The Commission has also discussed the 
problems of delays with Member States.

INTRODUCTION
6.
In practice, the grant rate is often lower than 
75  %.  For  example,  in  Romania  the  average 
rate  was  73  %,  in  Bulgaria  56  %  and  in  Slo-
vakia 54 %.

AUDIT SCOPE AND APPROACH
9.
Most of the Court’s sample was selected from 
among  the  older  ISPA  projects  approved  in 
the  first  or  early  years  of  use  of  the  instru-
m e n t .   S o m e   h a d   b e e n   p r e p a r e d   e v e n   e a r -
lier. The very short time frame in which ISPA 
h a d   t o   b e   i m p l e m e n t e d   h a d   i m p l i c a t i o n s 
f o r   p r o j e c t   m a t u r i t y   a n d   t h e   r e a d i n e s s   o f 
national authorities.

AUDIT OBSERVATIONS
13.
The Commission secured the national strat-
e g i e s   f o r   t h e   t r a n s p o r t   a n d   e n v i r o n m e n t 
sectors in the candidate countries based on 
national investment plans and programmes, 
despite this not being a regulatory require-
m e n t .   T h e   s t r a t e g i e s   w e r e   a l s o   p r e s e n t e d 
b y   t h e   C o m m i s s i o n   t o   t h e   I S P A   M a n a g e -
ment Committee (Member State representa-
tives) before the presentation of individual 
projects.

19.
T h e   C o m m i s s i o n   a c t i v e l y   e n c o u r a g e d 
n a t i o n a l   a u t h o r i t i e s   t o   b u i l d   o n   e x i s t i n g 
n a t i o n a l   p l a n s   ( f o r   e x a m p l e ,   t o   i m p l e m e n t 
the urban wastewater treatment directives) 
because of the limited time available.

20.
I n   a d d i t i o n ,   g u i d a n c e   w a s   g i v e n   t h r o u g h 
t h e   d e t a i l e d   a p p l i c a t i o n   f o r m s   w h i c h   w e r e 
m a d e   a v a i l a b l e   i n   1 9 9 9   a n d   p r o c u r e m e n t 
procedures were explained in the guidance 
d e v e l o p e d   u n d e r   p r e v i o u s   p r e - a c c e s s i o n 
instruments.

(c)
The  previous  version  of  the  ‘Guide  to  cost–
b e n e f i t   a n a l y s i s   o f   i n v e s t m e n t   p r o j e c t s ’ , 
which explained the main principles of CBA, 
had been available since 1997. The 2002 ver-
sion of the guide responded to the changed 
regulatory environment and addressed vari-
ous issues in more depth.

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

34

21.
The  ISPA  regulations  were  adopted  in  1999 
a n d   t h e   f i r s t   I S P A   m a n u a l   w a s   p r o v i d e d   i n 
2000.  The  advice  given  in  the  ISPA  manual 
a n d   t h r o u g h   v a r i o u s   o t h e r   c h a n n e l s   ( s e e 
r e p l y   t o   2 0 )   h a d   t o   b e   d e v e l o p e d   t o g e t h e r 
with the candidate countries concerned and 
t o   t a k e   a c c o u n t   o f   t h e i r   i m p l e m e n t a t i o n 
realities which were evolving. In addition to 
formal guidance, a major effort was made to 
prepare the ground for ISPA in a very limited 
time  frame,  for  example  through  meetings 
h e l d   i n   a l l   c a n d i d a t e   c o u n t r i e s   f r o m   1 9 9 8 
onwards with support from Phare to prepare 
project pipelines.

22.
The shortcomings in CBAs and financial ana-
lyses were often due to lack of a consistent 
a p p r o a c h   a m o n g   t h e   m a n y   i n t e r n a t i o n a l 
c o n s u l t a n t s   t h a t   p r e p a r e d   t h e   m a j o r i t y   o f 
p r o j e c t s ,   p o o r   d a t a ,   o r   a   l a c k   o f   e x p e r t i s e 
within the national administrations. Never-
t h e l e s s ,   t h e   C o m m i s s i o n   e n s u r e d   t h a t   r e v -
e n u e - g e n e r a t i n g   p r o j e c t s   a l l   h a d   a t   l e a s t 
a   c o m p l e t e   f i n a n c i a l   a n a l y s i s .   I t   a c c e p t e d 
n o n - q u a n t i f i e d   s o c i o - e c o n m i c   a n a l y s e s   o r 
s t a t e m e n t s   i n   p l a c e   o f   a   c o m p l e t e   C B A   f o r 
environment projects, in view of the absence 
o f   a   g e n e r a l l y   a c c e p t e d   m e t h o d o l o g y   f o r 
quantifying environmental benefits and the 
f a c t   t h a t   t h e s e   p r o j e c t s   w e r e   i n   t h e   m a i n 
i m p l e m e n t e d   i n   o r d e r   t o   c o m p l y   w i t h   E U 
directives.

23.
(a)
T h e   2 0 0 0 – 0 1   I S P A   p r o j e c t s   w e r e   t h e   f i r s t 
ones in which CBA was used.

(b)
Where there were inconsistencies, the Com-
mission routinely asked for clarifications or 
corrections. These exchanges improved the 
reliability of the analyses.

(c)
T h e   C o m m i s s i o n   r e f e r s   t o   i t s   r e p l y   a t 
point 22.

24.
T h e   C o m m i s s i o n   a t t e m p t e d   t o   e n s u r e   t h a t 
beneficiaries justified their projects accord-
ing  to  an  economic  and  financial  rationale, 
a n d   b y   r e f e r e n c e   t o   c o n s i d e r a t i o n s   s u c h 
a s   v i a b i l i t y   a n d   a f f o r d a b i l i t y   t o   t h e   p o p u -
l a t i o n   s e r v e d .   H o w e v e r ,   f o r   e n v i r o n m e n t a l 
projects cost–benefit analysis was of limited 
relevance where there were no alternatives 
and  the  projects  had  to  be  carried  out  any-
way to implement the acquis. In some cases 
a   b e t t e r   c o s t – b e n e f i t   a n a l y s i s   w o u l d   h a v e 
d e l a y e d   t h e   p r o j e c t   w i t h o u t   a d d i n g   m u c h 
value.

27.
The Commission made every effort to moni-
tor  the  projects  and  help  national  authori-
ties to mitigate the consequences of delays. 
S p e c i f i c   a c t i o n   p l a n s   w e r e   p r e p a r e d   i n 
s o m e   c o u n t r i e s   f o r   t h e   m o s t   p r o b l e m a t i c 
projects.

28.
B y   t h e   e n d   o f   S e p t e m b e r   2 0 0 8 ,   a   f u r t h e r 
three of the projects in the sample had been 
completed by the original date.

30.
W h i l e   d e l a y s   a r e   c e r t a i n l y   n o t   u n c o m m o n 
for large infrastructure projects, in the par-
t i c u l a r   c a s e   o f   I S P A   b e n e f i c i a r y   c o u n t r i e s 
t h e   f i r s t   I S P A   p r o j e c t s   w e r e   v i c t i m s   o f   t h e 
s t a r t - u p   p h a s e   o f   a   n e w   i n s t r u m e n t   i n   t h e 
c a n d i d a t e   c o u n t r i e s .   T h e r e   w a s   n o   e x p e r i -
e n c e   w i t h   e x t e r n a l   i n v e s t m e n t   a s s i s t a n c e 
p r o g r a m m e s   o n   t h i s   s c a l e   p r i o r   t o   I S P A . 
H o w e v e r   t h e   l e a r n i n g   c u r v e   ( b o t h   i n   t h e 
accession countries and in the Commission) 
i m p r o v e d   s i g n i f i c a n t l y   f r o m   t h e   m i d d l e   o f 
the programming period onwards.

I n   g e n e r a l ,   d e l a y e d   t e n d e r i n g   p r o c e d u r e s 
w e r e   t h e   m a i n   f a c t o r .   O n c e   w o r k s   s t a r t e d , 
m o s t   p r o j e c t s   m a d e   g o o d   p r o g r e s s .   T h e 
e x   a n t e   c o n t r o l   b y   t h e   E C   d e l e g a t i o n s   o f 
p r o c u r e m e n t   w a s   m a n d a t o r y .   D e l a y s   w e r e 
one of the costs of ensuring value for money 
t h r o u g h   f a i r   a n d   t r a n s p a r e n t   p r o c u r e m e n t 
procedures.

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

35

31.
(a)
I S P A   w a s   i n t e n d e d   t o   p r o v i d e   c a n d i d a t e 
countries with experience in this area during 
the pre-accession period, so that they would 
have  fewer  problems  with  using  the  Struc-
t u r a l   a n d   C o h e s i o n   F u n d s   a f t e r   a c c e s s i o n . 
Delays due to ex ante control procedures and 
retendering were one of the costs of ensur-
ing fair and transparent procurement. Other 
c o n t r i b u t o r y   f a c t o r s   w e r e   i n a d e q u a t e   l a n d 
a c q u i s i t i o n   p r o c e d u r e s   a n d   b u r e a u c r a t i c 
building permit processes.

Textbox 5
P r o c u r e m e n t   p r o c e d u r e s   i n   L a t v i a   h a v e 
much  improved  since  the  start  of  ISPA.  For 
instance, tenders for Cohesion Fund projects 
approved  in  2005  were  launched  promptly 
and implementation of most projects started 
in 2006.

The  importance  of  a  fair  and  effective  ten-
dering procedure must take precedence over 
the risk of delays.

Textbox 6
Retendering protected the Community inter-
est in this case. Work has since resumed on 
this project.

(c)
T h e   C o m m i s s i o n   r e f e r s   t o   i t s   r e p l y   a t 
point 30.

Textbox 7
For large and complex infrastructure projects 
which are expected to be implemented over 
the  period  of  several  years  it  is  not  uncom-
mon for certain adjustments to be required 
to initial plans.

(d)
The Commission provided guidance in Janu-
a r y   2 0 0 5   t o   a v o i d   p r o b l e m s   i n   t h e   t r a n s i -
tion from ISPA to Cohesion Fund rules in the 
10 new EU Member States after accession.

32.
D e l a y s   h a v e   m a i n l y   b e e n   d u e   t o   e n s u r i n g 
compliance with procurement rules in order 
to protect the Communities’ financial inter-
est. Such delays and the associated potential 
cost increases due to late tendering are the 
price  to  pay  for  financial  soundness,  a  fact 
which the Court has recognised in its previ-
o u s   a u d i t s   o f   I S P A ,   w h e r e   i t   h a s   a c k n o w l -
e d g e d   t h e   b e n e f i c i a l   e f f e c t   o f   t h e   e x   a n t e 
control by EC delegations (e.g., point 8.42 of 
the Court’s 2003 annual report). In any case, 
faster approval of flawed tender documents 
might well have resulted in higher bids or to 
disputes leading in the end to much higher 
costs.

D e l a y s   d u e   t o   c l a r i f i c a t i o n   o f   a p p l i c a t i o n s 
a n d   c o s t – b e n e f i t   a n a l y s e s   m u s t   a l s o   b e 
accepted.

33.
The  failure  to  keep  to  initial  cost  estimates 
was due to inadequate project preparation, 
d e s p i t e   t h e   u s e   o f   i n t e r n a t i o n a l   c o n s u l t -
a n t s ,   a n d   a l s o   t o   p o o r   c o s t   c o n t r o l   d u r i n g 
i m p l e m e n t a t i o n .   S o m e   c o u n t r i e s   s u f f e r e d 
high cost inflation in the construction sector 
due  to  fast  economic  growth.  As  a  general 
r u l e   I S P A   f i n a n c i n g   m e m o r a n d a   w e r e   n o t 
a m e n d e d   t o   a l l o w   f o r   c o s t   i n c r e a s e s   t h u s 
p u t t i n g   p r e s s u r e   o n   n a t i o n a l   a u t h o r i t e s   t o 
take action to control these.

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

36

35.
The sharp acceleration of inflation in some of 
the new Member States after accession was 
unexpected and not predicted by the finan-
c i a l   i n s t i t u t i o n s .   I t   w a s   d u e   t o   r a p i d   p r i c e 
increases of specific raw materials on world 
m a r k e t s   a n d   f a s t   e c o n o m i c   g r o w t h   i n   t h e 
majority of the new Member States which led 
to a boom in the construction sector result-
ing  in  above-average  price  increases  in  the 
industry.

Textbox 10
Second paragraph: While at the time of the 
audit full compliance with EU standards had 
not been achieved, the Commission expects 
this  to  be  the  case  after  completion  of  the 
project.

Textbox 11
Second paragraph: The Commission is moni-
toring the implementation of this project in 
order to accelerate its completion.

36.
Other factors contributing to cost overruns 
included:

41.
By the end of September 2008 a further four 
of the projects had been completed.

• 

• 

p r o j e c t s   b e i n g   s u b m i t t e d   t o   t h e   C o m -
m i s s i o n   a t   a   v e r y   e a r l y   s t a g e   w h e r e   n o 
detailed technical documentation for the 
best solution existed;
e u r o / n a t i o n a l   c u r r e n c y   e x c h a n g e   r a t e 
fluctuations,  especially  in  favour  of  the 
national currencies.

(a)
The underestimation of costs sometimes led 
t o   n o   b i d s   b e i n g   r e c e i v e d   a t   t h e   p l a n n e d 
prices.

(b)
D e l a y s   o f t e n   o c c u r r e d   b e t w e e n   t h e   a w a r d 
o f   t h e   g r a n t   a n d   t h e   s t a r t   o f   t h e   c o n s t r u c -
tion phase.

37.
ISPA also had other objectives, of which the 
main one was to prepare for using the Struc-
tural and Cohesion Funds. The relatively low 
allocation of ISPA in relation to needs means 
that  it  could  only  begin  to  close  the  infra-
structure gap.

39.
By the end of September 2008 a further three 
of the projects had been completed.

CONCLUSIONS AND
RECOMMENDATIONS

43.
(a)
The inadequate preparation was principally 
d u e   t o   l a c k   o f   c a p a c i t y   a n d   i n   s o m e   c a s e s 
to the variable performance of the interna-
tional  consultants  used,  rather  than  to  the 
availability of guidance documents.

Guidance was also given through the detailed 
application forms which were made available 
in  1999  and  procurement  procedures  were 
explained in the guidance developed under 
previous pre-accession instruments.

(b)
Procedures  (for  example,  procurement)  are 
necessary to protect the taxpayer. They may 
be lengthy.

D e s p i t e   t h e   d e l a y s ,   b y   t h e   e n d   o f   S e p -
t e m b e r   2 0 0 8 ,   8 0   o f   t h e   2 7 9   i n f r a s t r u c t u r e 
projects had been physically completed.

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

37

(c)
B y   t h e   e n d   o f   S e p t e m b e r   2 0 0 8   a   f u r t h e r 
seven  of  the  32  projects  audited  had  been 
completed.

44.
T h e   C o m m i s s i o n   a g r e e s   w i t h   t h e   C o u r t ’ s 
recommendation and will continue to moni-
t o r   c l o s e l y   t h e   i m p l e m e n t a t i o n   o f   e x - I S P A 
p r o j e c t s .   S o m e   p r o j e c t s   w i l l   b e   e v a l u a t e d 
a s   p a r t   o f   t h e   2 0 0 0 – 0 6   e x   p o s t   e v a l u a t i o n 
exercise, paying particular attention to cost 
overruns and delays in implementation and 
i n c l u d i n g   r e c o m m e n d a t i o n s   o n   h o w   r i s k 
analysis  (an  important  but  often  weak  part 
of cost–benefit analysis) can be improved.

The new regulations for pre-accession assist-
a n c e   w e r e   a d o p t e d   i n   2 0 0 6   a n d   2 0 0 7 .   T h e 
n e w   a p p r o a c h   i s   m u c h   w i d e r   t h a n   u n d e r 
ISPA with its narrow focus on infrastructure 
p r o j e c t s ,   a n d   i s   i n   f a c t   a   m i n i - S t r u c t u r a l 
Fund. The regional development component 
of IPA takes up earlier recommendations of 
the  Court  regarding  the  adequate  prepara-
tion of candidate countries for the Structural 
Funds.  The  Commission  has  also  discussed 
the problems of delays with Member States 
in  the  Funds  Coordination  Committee,  pro-
posing solutions.

B e s i d e s   t h e   t e c h n i c a l   a s s i s t a n c e   f a c i l i t y , 
 Jaspers  which  is  available  in  the  new  Mem-
ber States, other means of improving project 
p r e p a r a t i o n   a n d   i m p l e m e n t a t i o n   t h a t   t h e 
Commission is encouraging include starting 
approval procedures early with pre-apprais-
als and advancing tender preparation.

Special Report No 12/2008 — The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

European Court of Auditors

Special Report No 12/2008

The Instrument for Structural Policies for Pre-Accession (ISPA), 2000–06

Luxembourg: Office for Official Publications of the European Communities

2009 — 37 pp. — 21 x 29.7 cm

ISBN 978-92-9207-161-5

doi: 10.2865/55186

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Q
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ISPA WAS  ONE  OF THE  INSTRUMENTS TO  ASSIST THE  CANDIDATE 

COUNTRIES OF CENTRAL AND EASTERN EUROPE IN THE PREPARATION 

FOR ACCESSION TO THE EUROPEAN UNION. IT SUPPORTED PROJECTS 

IN THE ENVIRONMENT AND TRANSPORT SECTORS. IN THIS REPORT THE 

COURT ANALYSES WHETHER THERE WAS A COHERENT STRATEGY AND 

ADEQUATE PREPARATION, WHETHER PROJECTS WERE IMPLEMENTED 

ACCORDING TO  PLAN  AND WHETHER  PROJEC TS  CONTRIBUTED TO 

COMPLIANCE WITH THE  EU  ENVIRONMENTAL  DIREC TIVES  AND TO 

THE IMPROVEMENT OF TRANSEUROPEAN NETWORKS. 

EUROPEAN COURT OF AUDITORS

ISBN 978-92-9207-161-5