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Funded by European Union Introduction What is project Logical Frmwrk Schedule Budget Stakeholders Partnership Procurement Services M&E Reporting Visibility Seminar on Project Preparation Procurement Baku, 31 August – 1 September 2015

5_Procurement, conflict of interest and sub-granting

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Funded by European Union

Introduction

What is project

Logical Frmwrk

Schedule

Budget

Stakeholders

Partnership

Procurement

Services

M&E

Reporting

Visibility

Seminar on Project Preparation

Procurement

Baku, 31 August – 1 September 2015

Funded by European Union

Introduction

What is project

Logical Frmwrk

Schedule

Budget

Stakeholders

Partnership

Procurement

Services

M&E

Reporting

Visibility

Procurement

Procurement

Funded by European Union

Introduction

What is project

Logical Frmwrk

Schedule

Budget

Stakeholders

Partnership

Procurement

Services

M&E

Reporting

Visibility

How long does it take to procure?

Procurement

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So you have won a grant and are ready to start implementing your project but to do so you

may need the services of experts, to produce information materials (services), to buy

computer or other equipment (supplies) or in some cases, to commission construction

work (works). That, is you may need to procure services, supplies and/or works.

Procurement

When conducting the procurement procedure, you should take care

that:

• The correct procedure is being used;

• The forms to be utilised are in line with international standards and provisions of

Annex IV of your contract.

• The rule of origin of supplies is applied;

• The eligibility rule is observed;

If the beneficiary (or beneficiary‟s partners) fails to comply with any of these rules

expenditures in question will be considered as not eligible for EC financing.

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Rules for procurement

• Rules for procurement are defined in ‘Annex IV Procurement by grant

Beneficiaries in the context of European Community external actions’

annexed to the grant contract;

• Annex IV is applicable to the Beneficiary and all partners, regardless of

their legal status (public or private) or nationality (EU or partner country);

• For what is NOT described in Annex IV (detailed procedures, tender

documents):

• Either partner’s own procedures, but must be in accordance with

Annex IV rules, in particular „best international practice‟;

• Or may use Chapters 3 (Service), 4 (Supply), 5 (Works) of PraG and

related annexes (templates).

Procurement

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Annex IV requirements

Annex IV:

1. General principles

2. Eligibility for contracts (rules of nationality & origin)

3. Rules common to all tender procedures

4. Rules applicable to service contracts

5. Rules applicable to supply contracts

6. Rules applicable to work contracts

7. Use of negotiated procedure

8. Special cases

BUT

• References to other chapters of PRAG, e.g. what “international open tender” means, etc.

Procurement

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Difference between a call for proposals and a

call for tender

Procurement

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Procurement (Tender) Types

• Service contracts: These cover engagement of service providers, companies

and/or individuals (experts). Service contracts are used for preparation of studies,

evaluation reports, experts‟ or trainers‟ engagement, printing and publishing

services, translation, conference/events organisation, catering etc.

• Supply contracts: These cover the purchase or rental of supplies/equipment. The

delivery of products may in addition include installation and maintenance.

• Works contracts: These cover either the execution, or both the execution and

design of a „work‟. A „work‟ means the outcome of building or civil engineering works

taken as a whole that is sufficient in itself to fulfil an economic or technical function.

• Grants

among them different threshold of publication (see next slide)

Procurement

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Thresholds

Procurement

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Important note!

Artificial slicing in order to avoid

threshold for publication

NOT ALLOWED Procurement

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• selection criteria

- eligibility

- financial/economic standing

- technical/professional capacity

• award criteria

- technical criteria

- price

• once published, criteria may not be changed

Selection and award criteria

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Awarding principles

• transparency (the tender documents must contain clear and open

criteria and procedures - they must be accessible to all tenderers);

• proportionality (whatever is being requested should be limited to

what is necessary to achieve the specific purpose);

• equal treatment (the award process must be completely impartial -

the bids are selected using published eligibility and evaluation criteria);

• non-discrimination; and

• sound competition.

Procurement

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Why excluding an applicant/tenderer?

a) bankruptcy or similar situation;

b) convicted for offence in their professional conduct;

c) proven grave professional misconduct;

d) not paid social security contributions or taxes;

e) judgement for fraud, corruption, illegal activities;

f) breach of contract financed by EC funds;

Reasons for exclusion

Procurement

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As well as:

Attempt to obtain confidential information, to influence committee

decision;

Misrepresentation in supplying the information required;

+ ethical grounds incl. impartiality/human rights/conflict of interest

(section I.7 of Rules and procedures for contracts financed from

the EC general Budget in the context of external actions).

Procurement

Reasons for exclusion (2)

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Rules of nationality/origin

Participation in tender procedures managed by the Beneficiary(ies) is open

on equal terms to all natural and legal persons of the Member States and

the States and territories of regions expressly covered and/or allowed by the

Financial Regulation and the basic acts or other instruments governing the aid

programme under which the grant is being financed.

Tenderers must state in their tenders the country of which they are nationals

by presenting the usual proof of nationality under their national legislation.

This rule does not apply to the experts proposed under service tenders

financed by the grant.

For each basic act, the detailed list of eligible countries are listed in

Annexes A2a and A2b of Practical Guide.

Procurement

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Origin - definition The term „origin‟ is defined in the relevant EU legislation on rules of origin for customs purposes: the

Customs Code (Council Regulation (EEC) No 2913/92) in particular its Articles 22 to 24 thereof,

and the Code's implementing provisions (Commission Regulation (EEC) No 2454/93).

• The country of origin is not necessarily the country from which the goods have been shipped

and supplied.

• Two basic concepts are used to determine the origin of goods, namely the concept of “wholly

obtained” products and the concept of products having undergone a "last substantial

transformation".

• If only one country is involved in the production, the "wholly obtained" concept will be

applied. In practice, these goods wholly obtained in a single country shall be regarded as

having their origin in that country. This will be restricted to mostly products obtained in their

natural state and products derived from wholly obtained products.

• If two or more countries are involved in the production of goods it is necessary to

determine which of those countries confers origin on the finished goods. For this purpose the

concept of "last, substantial transformation" is applied.

Procurement

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Rule of origin All supplies purchased under a procurement contract, or in accordance with a grant contract, financed under the EU budget or the EDF shall originate from an eligible country as per the corresponding Instrument.

However, according to the CIR, when the value of the

supplies to be purchased is below 100 000 euros per

purchase, the supplies do not have to originate from an eligible

country (full untying).

Within a grant or works contract, the rules of origin apply only to

supply purchase for an amount equal or above 100 000 euros.

Procurement

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Exceptions to the rule on origin

• Exceptions to the rule on nationality and origin may be made in

some cases;

• The award of such contract is decided on a case-by-case basis

by the Commission before the procedure is launched;

• The derogation must be mentioned in the procurement notice.

Procurement

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Derogation

The contract notice will have to indicate that the tender

procedure benefits from the derogation.

If the procurement procedure is to be divided into lots, this

applies per lot.

The division into lot shall not be used to get around the

rules of origin.

The services would have to pay special attention to the

legitimacy of the division into lot to avoid artificial slicing.

Procurement

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How to prepare a

tender dossier Procurement

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Procurement procedures – internet

Procurement

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Procurement

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Procurement

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Tender Launch

Deadline for Submission = min. 30 days

Deadline for Questions 21 days

Deadline for Answers 11 days

Tenders are valid for 90 days

Procurement

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Submission of Tenders

• Tenders must be submitted in accordance with the double

envelope system,

i.e., in an outer parcel or envelope containing two

separate, sealed envelopes,

one bearing the words "Envelope A - technical offer" and

the other "Envelope B - financial offer"

• All parts of the tender other than the financial offer must be

submitted in Envelope A.

Services

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Evaluation Committee

Procurement

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Contracting

• Once tenderer is selected, informed by letter and asked to submit

additional info within 15 days

• Once received, the contract is prepared, signed and sent to

contractor who signs within 30 days

• Once signed by all, other tenderers informed with reasons

• Attention – irregularities:

Sequence not followed;

Contractor forced to sign ASAP and not within 30 days

Services

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Cancel the tender procedure

in exceptional circumstances:

• none of the tenders satisfies the selection/award criteria of the tender procedure;

• no tender achieves the minimum threshold during the technical evaluation;

• the total price (comprising both the fees and the provision) of all tenders exceeds the maximum amount available for the contract;

• irregularities in the procedure, in particular where these have prevented fair competition;

• force majeure.

Procurement

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Main differences

Services are awarded based on 80/20 ration of quality and price

while Supplies and Works are awarded to lowest technically

compliant offer;

You may have services as a part of supply tender, but should not

have supplies as a part of service tender;

Works - This is the ONLY type of procedure for which CA may ask

Tenderers to “pay” in order to receive the Tender Dossier (to cover

cost of copying and posting).

Procurement

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What are the key factors to take into account in

procurement?

Procurement

What to do What NOT to do

Do identify the applicable rules to your organisation

Do not acquire services, supplies and works ‘as usual’

Do plan all procurement at the beginning of the project

Do not assume that procurement can be done quickly

Do be aware of the thresholds for all subcontracting

Do not artificially split contracts to avoid the requirements e.g. by year or by category or by partner. Artificial splitting is not allowed and will make the total amount of all contracts ineligible (more information on artificial splitting is in section 3.6 below)

Do consult your auditor in case of doubt or just to double check

Do not trust only your past experience even if you had similar grants in the past – rules change

Do revise your usual procedures to verify that they are compliant with Annex IV of your grant contract

Again do not do it ‘as usual’

Do provide all information required, make sure the Terms of Reference are clear and include check-lists for tenderers

Do not assume that tenderers have enough experience to submit eligible bids

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CONFLICT OF INTEREST

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32

A Conflict of interest:

…occurs when the impartial and objective exercise of the

functions of the contracting authority, or observance of the

principles of competition, non-discrimination against or equality of

treatment of candidates, tenderers, applicants and contractors…

…is compromised for reasons involving family, emotional life,

political or national affinity, economic interest or any other

shared interest with a beneficiary of EU-funded programmes.

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33

Conflicts of interests and corruption are not the

same thing!

Corruption usually requires an agreement between at least two

partners and a bribe/payment/advantage of some kind.

A conflict of interests arises where a person may have the

opportunity to put private interests before his or her professional

duties.

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A conflict of interest may arise where, for instance :

a member of the evaluation committee or someone in the

contracting authority or others involved in the procedure,

grant themselves, or others:

unjustified direct or indirect advantages by influencing

the outcome;

or allow an expert or company to obtain information

leading to an unfair advantage in subsequent or related

procedures.

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TYPES OF CONFLICTS OF INTEREST

Actual conflict of

interest

Perceived conflict

of interest

Potential conflict

of interest

A public official is in

a position to be

influenced by their

private interests

when doing their job.

A public official is in

a position to appear

to be influenced by

their private

interests when doing

their job.

A public official is in

a position where

they may be

influenced in the

future by their

private interests

when doing their job.

Source: ICAC, Managing Conflict of Interest in the Public Sector, November 2004.

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Examples

• The space rented for the project office was part of a residential unit.

Inspection of documents revealed that the real estate belonged to the project

director, the other part being his own living space. Besides the clear case of

conflict of interest, it was unclear how the utilities were charged to the project.

• The office rented for the project was the apartment of the project

accountant/NGO president.

• The accountant of the project was also auditor in the company selected for

expenditure verification.

• NGO awarded several contracts to an IT advisory firm, owned by a member

of the Board of Trustees of the NGO.

• The family members (son, husband) of NGO president were hired in the

project without having proper qualifications and experience.

• A staff member of the final beneficiary of the project was hired as expert.

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Examples

• The spouse of a contracting authority‟s desk officer in charge of

monitoring a tendering procedure works for one of the bidders.

• A person owns shares in a company. This company takes part in a

tendering procedure in which this person is appointed as a member of

the evaluation committee.

• The head of a contracting authority has spent a week‟s holiday with

the CEO of a firm which bids in a tendering procedure launched by

the contracting authority.

• An officer in a contracting authority and the CEO of one of the

tendering firms have responsibilities in the same political party.

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Examples

Tendering and Purchasing: A person owns shares in a company. This

company takes part in a tendering procedure in which this person is appointed as

a member of the evaluation committee.

Staff Recruitment : A member of a selection panel has a close relationship with

one of the applicants for the job. This conflict of interest could bias, or could

reasonably be expected to bias, the decision of the panel.

Secondary employment : Two police officers have second jobs as bouncers at a

nightclub. Local residents have complained to the police several times about

noise levels at the club and problems with drunks and underage drinking, but no

action appears to have been taken. The impartiality of the police officers has

been compromised as it may be perceived that they are using their influence to

make sure the club is not investigated.

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Examples

Dealing with former public officials : A senior employee of a government

department awarded a particular firm several valuable contracts. Shortly after

awarding the contracts, he resigned from his job and went to work for the firm. It

could appear that the offer of employment was a personal benefit, in return for

favors given. Other competitors might be disadvantaged if staff at the agency

were influenced by their previous colleague and continued to award contracts to

his firm. This situation must be carefully managed to ensure favoritism or the

perception of favoritism does not occur.

Gifts, benefits and hospitality: A regular supplier offered the purchasing officer

of a government department a free weekend for two at a beach resort. The

officer's impartiality when dealing with the supplier could be compromised if she

accepted the offer.

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Examples

Local Government Planning Approvals

A senior council planner often had to advise applicants on how to make their

development applications comply with council's codes. He suggested to some

applicants that they should use the services of a local architectural firm where his

brother worked.

Although the necessary work was mainly done by staff at the firm, the planner

was sometimes paid to prepare the drawings himself. The planner's job was to

act in the public interest and to provide impartial advice about council's policies.

By recommending his brother's firm, he put the private interests of his brother and

himself before his public duty.

A similar conflict can occur when councils have a dual role as developer and

regulator. Councils that decide to develop a piece of land they own may make

decisions in their own commercial interest and unfairly disadvantage other

developers. It may be difficult for councils to be impartial when they are effectively

having to assess their own applications.

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Licensing

A health inspector is friendly with the owner of a local butcher's shop and often

gets given extra meat with his family's order. As part of his job, the inspector has

to inspect the butcher's shop to check it complies with health regulations. The

personal relationship between the butcher and the inspector, and his acceptance

of free meat, could reasonably be expected to influence his assessment of the

health standards in the shop.

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Examples

Elected officials

Many councilors have business and professional interests in the local

government area they represent. Conflicts can arise if their public positions allow

them access to information and opportunities that could be used to advance their

personal and business interests. For example, a councilor may be tempted to

influence an application to set up a new business in the town if his own business

could lose custom as a result

Source: (ICAC Practical Guide, 1996. http://www.icac.nsw.gov.au/files/html/pub2_27cp.htm

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What action must be taken if a risk of conflict of interests is identified or a

conflict of interests is declared/detected before or during the procedure?

Subject to the relevant national law, relevant measures to safeguard the

public procurement procedure should be taken.

The following steps should be considered, depending on the existence or

not of a declaration of absence of conflict of interests, the nature of the

conflict of interests and the stage of the procedure:

where appropriate discussing the elements of facts with the

person concerned to clarify the situation

excluding the person concerned from the public procurement

procedure, whether he/she is a staff member or an external expert,

change in division of duties and responsibilities among the staff

cancelling the procurement procedure.

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Declarations of absence of conflicts of interests

It is highly recommended that people be asked to sign a declaration of

absence of conflict of interests as soon as they take part in the procedure.

The declaration of absence of conflict of interests should contain the

definition of a conflict of interests and all the requirements of any code of

conduct or ethics applicable to the process and related to conflict of

interests.

The declaration should give:

(a) a clear reference to the procurement procedure concerned;

(b) the signatory‟s full name, date of birth, position in the organisation, and

function in the public procurement procedure;

(c) the date of signature.

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The declaration should enable the signatory to declare officially:

whether to his/her knowledge he/she is in an apparent/potential/actual

conflict of interests linked to the procurement procedure referred to;

whether there are circumstances that might place him/her in an

apparent/potential/actual conflict of interests in the near future; and

that he/she commits to declaring immediately any potential conflict of

interests in the event of any circumstance that might lead to such a

conclusion.

The declaration should include a reference to the

disciplinary/administrative/criminal sanctions for making a false

declaration.

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46

GC -ARTICLE 4 - CONFLICT OF INTERESTS

• The Beneficiary(ies) shall take all necessary measures to prevent or end

any situation that could compromise the impartial and objective

performance of this Contract. Such conflict of interests may arise in

particular as a result of economic interest, political or national affinity,

family or emotional ties, or any other relevant connection or shared

interest.

• Any conflict of interests which may arise during performance of this

Contract must be notified in writing to the Contracting Authority without

delay. In the event of such conflict, the Coordinator shall immediately

take all necessary steps to resolve it.

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GC -ARTICLE 4 - CONFLICT OF INTERESTS

• The Contracting Authority reserves the right to verify that the

measures taken are appropriate and may require additional

measures to be taken if necessary.

• The Beneficiary(ies) shall ensure that its staff, including its

management, is not placed in a situation which could give rise to

conflict of interests. Without prejudice to its obligation under this

Contract, the Beneficiary(ies) shall replace, immediately and

without compensation from the Contracting Authority, any

member of its staff in such a situation.

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Sub-granting - suggested practice (but please consult with your CA about all the details)

Procurement

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Sub-granting - Background

Procurement

The European Commission (EC) re-introduced in May 2007 the

option of sub-granting in its grant contracts1.

Sub-granting is an indirect financial contribution through an EC

grant Beneficiary to a sub-grant Beneficiary for an action intended

helping to achieve an objective of the EC grant contract.

Before the award of financial support to third parties, the EU

Delegation will have to be informed. The modalities for information

will be defined before signature of the grant contract.

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Guidelines for grant Applicants

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The Calls for Proposal Guidelines specify that the Applicant must set out the

following in the proposal on sub-granting:

(i) the objectives and results to be obtained with the financial support;

(ii) the different types of activities eligible for financial support, on the basis of

a fixed list;

(iii) the types of persons or categories of persons which may receive financial

support;

(iv) the criteria for selecting these entities and giving the financial support;

(v) the criteria for determining the exact amount of financial support for each

third entity, and

(vi) the maximum amount which may be given.

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Ineligible activities

Procurement

As sub-granting does not imply the transfer of responsibility, the Beneficiary of the

EC grant needs to take into consideration the eligibility of all expenditure and that

costs related to the following actions are considered to be ineligible:

• debts and debt service charges (interest);

• provisions for losses or potential future liabilities;

• costs declared by the Beneficiary(ies) and financed by another action or work

programme receiving a Union (including through EDF) grant;

• purchases of land or buildings, except where necessary for the direct

implementation of the Action, in which case ownership shall be transferred to the

final beneficiaries and/or local Beneficiary(ies), at the latest at the end of the

Action, in accordance with Article 7.5;

• currency exchange losses;

• credits to third parties, unless otherwise specified in the Special Conditions.

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Selection of sub-grant Beneficiaries

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• Sub-grants awarded by the Beneficiary are subject to the nationality rules as

referred to in Annex IV. (eligibility is governed by the same criteria as for

Beneficiaries and Partners as published in the Call for Proposals

Guidelines for Applicants);

• In order to select the most suitable sub-grant Beneficiary, the Beneficiary has

to evaluate according to the criteria set out in the Description of the Action

(Annex I) and following the principles of transparency, fairness and non-

discrimination, which should be reflected in the selection criteria in a

justifiable and well documented manner.

• The evaluation process of a sub-grant Beneficiary must be well

documented and might be subject to prior approval by the Contracting

Authority.

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Evaluation of sub-grant proposals

Procurement

For the proper evaluation of sub-grant proposals the Beneficiary may use the

following evaluation grid and include the selection criteria as established in

Annex I of the EC grant contract.

Once proposals for sub-granting have been assessed, a list could be

established with the proposed actions ranked according to their total score.

Score

1. Operational criteria

As listed in the Description of the Action (Annex I).

2. Financial criteria

As listed in the Description of the Action (Annex I).

Total score

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Contractual Agreement between Grant Beneficiary

and Sub-grant Beneficiary

Procurement

• Sub-granting is bound by the provisions of the Special and General

Conditions of the EC grant contract.

• The Beneficiary shall be accountable to the Contracting Authority for

the implementation of the Action. It shall undertake that the conditions

applicable to it, especially under Articles 1, 3, 4, 5, 6, 7, 8, 10, 14, 16 and

17 of the General Conditions (Annex II) shall also apply to its sub-grant

Beneficiary.

• The Beneficiary shall include provisions to that effect as appropriate in

its formal agreement with the sub-grant Beneficiary so as to ensure the

proper execution of the EC grant contract.

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Contractual Agreement between Grant Beneficiary

and Sub-grant Beneficiary (1)

Procurement

Below issues could be taken up in a formal agreement between the

Beneficiary and the sub-grant Beneficiary:

A. Purpose of the sub-grant:

In the agreement reference should be made to the fact that the sub-grant is

awarded in the context of an EC grant contract with the Beneficiary

including reference to the Special and General Conditions.

Moreover, a clear description of the activities expected to be carried out by

the sub-grant Beneficiary should be provided.

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Implementing modalities

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The following issues need to be addressed:

• Implementation period: start and end date;

• Maximum amount of sub-granting in Euro. Please note that reference to local

currency should be avoided in order not to incur exchange rate losses, which are

ineligible;

• Indication of eligible budget items (attach copy of the budget to the agreement

with a clear reference to the budget items sub-granted.)

• Definition of responsibilities of the sub-grant Beneficiary regarding personal

taxes, social and related benefits for the personnel working under the grant;

• Declaration of the sub-grant Beneficiary;

• Contact addresses of the Parties.

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Payment and reporting modalities

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• Payment arrangements: specify the amount of pre-financing and payment

installments.

• Payments should be based on the periodic financial reports submitted applying the

percentage of EC contribution to the agreed bank account.

• Original documents should be sent with each request for payment and the grant

Beneficiary shall return these documents after stamping them "certified as original".

• Beneficiary should designate authorized signatories and track the transactions

related to the sub-grant.

• Agreement on the type and frequency of narrative and financial reporting:

template to be used in line with EC grant contract.

• Agreement on the consequences of a lower than expected EC payment as a result of

the application of the maximum funding percentage under the EC grant contract: who

pays the sub-grant Beneficiary in case the total eligible costs are lower than

expected.

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Evaluation, audits, visibility

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• It is advisable that both parties agree about audit approach and

modalities

and

• that monitoring missions and checks of the sub-grant Beneficiary

accounts and records are carried out by the Beneficiary of the EC

grant.

• Any publication or information on the project should be agreed in

advance between the two parties.

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Evaluation, audits, visibility (1)

Procurement

Prior approval by the Contacting Authority should be provided upon

concluding an agreement with the sub-grant Beneficiary.

Should the sub-grant Beneficiary fail to implement the approved

activities in accordance with the Description of the Action (Annex I) and with

a view to achieving the objectives laid down therein, a recovery order of

the sub granted amount should be enforced.

Note that the Contracting Authority does not acknowledge any contractual

link between itself and the sub-grant Beneficiary.

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Information of the Beneficiary of sub-granting

Procurement

The Beneficiary of the EC grant should inform the sub-grant Beneficiary about

the content of the annexes of the Special Conditions of the EC grant contract:

• Annex II: General Conditions applicable to European Community-financed

grant contracts for external Actions;

• Annex III: Budget for the Action;

• Annex IV: Contract-award procedures;

• Annex V: Standard request for payment and financial identification form;

• Annex VI: Model narrative and financial report;

• Annex VII: Model report of factual findings and terms of reference for an

expenditure verification of an EC financed grant contract for external actions;

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Declaration by the Beneficiary of a sub-grant

Procurement

In order to provide the Beneficiary with a reasonable assurance that the sub-

grant Beneficiary is able to carry out the agreed upon actions, the authorised

signatory of the sub-grant Beneficiary should declare that they will be excluded

from participation if:

a) they are bankrupt or being wound up, are having their affairs administered

by the courts, have entered into an arrangement with creditors, have

suspended business activities, are the subject of proceedings concerning

those matters, or are in any analogous situation arising from a similar

procedure provided for in national legislation or regulations;

b) they have been convicted of an offence concerning their professional

conduct by a judgment which has the force of res judicata;

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Declaration by the Beneficiary of a sub-grant (1)

Procurement

c) they have been guilty of grave professional misconduct proven by any means which the

Beneficiary can justify;

d) they have not fulfilled obligations relating to the payment of social security contributions

or the payment of taxes in accordance with the legal provisions of the country in which

they are established or with those of the country of the Beneficiary or those of the country

where the contract is to be performed;

e) they have been the subject of a judgment which has the force of res judicata for fraud,

corruption, involvement in a criminal organisation or any other illegal activity detrimental

to the Communities' financial interests;

f) they are currently subject to an administrative penalty referred to in section 2.3.5 of the

Practical Guide to contract procedures for EC external actions.

The authorised signatory of the sub-grant Beneficiary must certify that he is not in one of the

situations listed above and signed on behalf of the sub-grant holder. At the approval stage the

Contracting Authority will ensure that this declaration is provided by the sub-grant Beneficiary.

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VAT

Procurement

• As is the case with EC grant Beneficiaries VAT is not eligible for sub-grant

Beneficiaries (except if duly justified).

• In order to insure that zero VAT is granted the Beneficiary shall inform the

Ministry of Finance at an early stage of the sub-granting component of its

EC grant contract.

• If there is any problem in obtaining the zero VAT the EC office should be

informed in order to facilitate the procedure.

• Procedure defers from one country to another.

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Audits

Procurement

• In case of sub-granting in the EC grant contract the auditor should be

informed at an early stage.

• Before submitting a proposal to the EC, an auditor should be consulted

for a price quote, which would take into account the sub-granting as this

would entail more work for the auditor and therefore a higher audit fee.

• Ensure that enough funds are included in the project budget to cover this

type of audit.

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Audits (1)

Procurement

• During the audit of actions with sub-granting, the auditor should verify

the expenditures of each sub-grant Beneficiary and ensure that the

activities involved are in line with those of the EC grant contract.

• Furthermore, the auditor should verify the eligibility of the costs

incurred by the sub-grant Beneficiary, the respect of the zero-VAT

issues and the use of the correct exchange rates as per the provisions

under the EC grant contract.

• The Beneficiary should keep copies of all supporting documents

related to sub-grants for the period as specified in the General

Conditions of the EC grant contract. As for the sub-grant Beneficiaries

original copies should be kept for the same period.