public procurement : - verifications – audits of operations (checklists) - main irregularities

maio 2014

PUBLIC PROCUREMENT:- Verifications – Audits of Operations (checklists)

- Main irregularities

Audit and Control Unit

27-05-2014

maio 2014

INTERVENIENTS / ACTORS

- European Court Accounts

- European Commission

Audit Authority

Cohesion & Development Agency

Management Authority / Intermediate Bodies

Beneficiaries • Application Form - Information about the Public Procedures related with the operation – on going procedures and finished procedures

• Sends to MA relevant tender documents

An MA example…• Internal control procedures - Validation of expenses includes

Checks for all Public Procurement Procedures, with application of the Commission guidelines for determining financial corrections, if financial corrections are necessary.

• Guidelines to the beneficiaries with alerts for the main audit findings on Public Procurement matters

Audit and Control Unit – Segregated Control Structure• Public Procurement checks - Audits on operations

• Public Procurement checks - System Audits / Specific Audits

• Audit opinions on the work of other entities

Certifying Authority• Attest that all Public Procurement Procedures are checked

before expenditure is certified to the Commission

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AUDIT AND CONTROL UNIT - CDAGENCY

Responsibility for audits of operations: ERDF, CF, ESF

How do we check PPP (Public Procurement Procedures)?

Procedures Manual

Public Procurement specific checklists approved by AA

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maio 2014

PP specific checklists approved by AA

Entity Framework / Scope / Extent

Contract Framework / Scope / Extent

Direct Award (Simplified / Regular)

Open Tender Procedure

Restricted Tender Procedure with pre-qualification

Framework Agreements

Negotiated procedure

Competitive dialogue

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Main Contents - PP specific checklists approved by AA

Checklists are organized considering the two main phases of the public procurement procedures:

1 – Pre-contractual procedures2 – Contract performance procedures

Auditing operations are based on the documentation collected from the beneficiary’s records and

information’s.

1 – Main concerns while auditing the pre-contractual procedures :A - Qualified authority

B – Advertising Non adequate and/or inexistent degree of publicity; Non-compliance with time limits for receipt of tenders or request to participate; Non-compliance with extending time limits advertising actions; Insufficient detail of selection and award criteria;

C – Artificial splitting of works/services/supplies Non-compliance of the whole set of works/services/supplies regarding the chosen

contract notice (requiring publication on Official Journal of the European Union);

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1 – Main concerns while auditing the pre-contractual procedures (cont):

D – Tender Documentation Non-compliance with all legal binding required information; Unlawful and/or discriminatory selection and/or award criteria; Discriminatory technical specifications

E – Tender Evaluation Unlawful evaluation of each bid; Rejection of abnormally low tenders wihtout justification Unclear, unjustified and lacking transparency of the score given to each bid;

F – Contract Qualification documents of the chosen supplier; Compliance of the contract terms with the tender documentation;

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2 – Main concerns while auditing the contract performance procedures :

A – Start up procedures Compliance with the committed timings; Compliance with the formal procedures regarding the start of works;

B – On going contract procedures Illegal award of additional works/services/supplies; Additional works/services/supplies exceeding the limits laid down in the contract

provisions; Illegal suppression of works/services/supplies; Revision of prices;

C – Final contract procedures Due time for works/services/supplies deliverance; Final contract evaluation (values/works/failings/etc)

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Main Results / Findings on NSRF

1 - ERDF/CF :Main Findings

Incorrect Procedure (wrong choice) e.g. due to • artificial splitting of contracts• additional works/services that didn’t result of unforeseen

circumstances• procedure without prior call for competition/Direct award

Non adequate degree of publicity (mainly due to inexistent publicity of extending time limits)

Illegal Award Criteria

Principles of the Treaty (equal treatment, non discrimination, transparency, proportionality)

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Practical examples - NSRF (Corrections based on EU guidelines)

1 - ERDF / CF

- Example 1: Principles of the Treaty

The content of the Preliminary and Final Reports, which specifies the tenders analysis, doesn´t allow to determine the way that the “Commission of proposals” reached the final score (the way the qualitative judgment in technical merit was transformed into a quantitative expression, relevant and indispensable to assign a score to the proposals).

Subsequently, it was considered that the principles of equality, transparency, fairness and competition, were violated, thus should be applied to the expense subject to co-financing a financial correction of 25%, in accordance with paragraph 16 of the Financial Corrections table annexed to the EC Decision C (2013) end of December 19, 2013 9527.

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1 - ERDF / CF

- Example 2: Artificial Splitting- There were 5 contracts, awarded by direct setting, with benefits of the same type (public works contracts), making up, in the

whole set, a total charge of 556.578,96€; - The respective dates of grant reveal a time gap of about 4 months between the first and the last contract;- Al the works appear in Multiannual Investment Plan of the year of 2009, approved at town meeting; - As to its geographical location, it should be noted that the 5 contracts were limited to municipal perimeter (either in avenues

within the city, or in its adjacent roads).

Given the nature of the works (repair and paving of roads), its location, the fact that they are all included in a Multiannual Investment Plan, approved by the competent municipal qualified authority, and as a result, in the prior knowledge of the beneficiary, to which must be added a non-relevant time gap in a way that put the concomitance of these endeavors, one cannot fail to considered that there was a splitting of the whole set of expenses, embodied in the work breakdown into 5 partial procedures.All facts considered, given the nature of the work, it was mandatory the adoption of a public tender procedure for the whole set of the expenditure regarding the 5 contracts, in respect of contracts under applicable law and by the principles of transparency, equality and competition.Subsequently, it was not given fulfilment to the provided in article 22 of the CCP (Article 9(3) of the Directive 2004/18/EC), so the situation in question is considered an irregularity for the purposes of co-financing .Thus, considering the guidelines for determining Financial corrections to be applied to the Co-financed Expenditure by the structural funds and the Cohesion Fund (COCOF table 07/003703-EN), it is considered to be applying a correction of 25% the expenditure in reference (Nr. 21 Type of irregularity – failure of an appropriate degree of publicity and transparency) – previous guidelines

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TOTAL ERRORS on ESF, related to Public Procurement

2 – European Social Fund :

FINANCIAL CORRECTIONS ESF / NSRF - TOTAL

(until April/2014)

FUNDAMENTALS FREQUENCY (%)

AMOUNT (%)

(……)

16 - ………………

17 - Failures / Infringements in public procurement 0,57% 6,71%

18 - ………………

(……)

TOTAL 100% 100%

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§ f), n. 4, Article 5 - DL 18/2008 - Education and vocational training services

Category N. Subject CPC

Reference N.

CPV Reference N.

… … … …

24 Education and vocational education services 92

From 80100000-5 to 80430000-

7

… … … …

Annex II B – Directive 2004/18/CE (31/03/2004) altered by Annex VII – Reg. (EC) n. 2013/2008 (28/11/2007)

National Law – DL 18/2008 (29/01/2008)

Partially excluded from

the application of public

procurement procedures

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maio 2014

The contracts having for object “Education and vocational education services” : Listed as Category 24, in the ANNEX VII to the COMMISSION REGULATION (EC) Nº 213/2008 of 28 November 2007 amending Regulation (EC) Nº 2195/2002 of the European Parliament and of the Council on the Common Procurement Vocabulary (CPV) and Directives 2004/17/EC and 2004/18/EC of the European Parliament and of the Council on public procurement procedures, as regards the revision of the CPV refering to services from CPV reference n.º 80100000-5 to CPV reference n.º 80660000-8 (except 80533000-9, 80533100-0, 80533200-1), listed in the ANNEX I to the mentioned Regulation



Partially excluded from the application of public procurement procedures

80100000-5 Primary education services80110000-8 Pre-school education services80200000-6 Secondary education services80210000-9 Technical and vocational secondary education services80211000-6 Technical secondary education services80212000-3 Vocational secondary education services80300000-7 Higher education services80310000-0 Youth education services(…)80400000-8 Adult and other education services80410000-1 Various school services

(…)80420000-4 E-learning services80430000-7 Adult-education services at university level(…)80500000-9 Training services80510000-2 Specialist training services80511000-9 Staff training services(…)80521000-2 Training programme services80522000-9 Training seminars80530000-8 Vocational training services(…)

Contracts which have as their object services listed in Annex II B shall be subject solely to Article 23-Technical specifications and Article 35(4) – Notice after the award of the contract.

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MAIN ERRORS on ESF, related to Public Procurement:

Lack of publication of contract notice (N. 1 of Commission Decision 9257, of 19/12/2013)

Artificial splitting of works / services / supplies contracts (N. 2 of Commission Decision 9257, of 19/12/2013)


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2 - European Social Fund

Example 1 - Lack of publication- Contracting Authority and Open tender Procedure (Year: 2012)

- Contract Amount = 250.000€ (> Community threshold amount for public contracts, applied on 2012 = 200.000€)

- Notice: Portuguese Official Journal + Portuguese newspaper of wide circulation

- Notice after the award of the contract: Portuguese Official Journal

MANDATORY:

- Notice: Official Journal of the European Union + Portuguese Official Journal

- Notice after the award of the contract: Official Journal of the European Union

FINANCIAL CORRECTION =

25% of Contract Amount

(according to N.1 of Commission Decision 9257, of

19/12/2013 )- 15 -

maio 2014


2 - European Social Fund

Example 2 - Incorrect procedure in relation to the amount involved- Contracting Authority and DIRECT AWARD (Year: 2009)

- Purchase of a multifunctional device: copying, printing and scanning (for 3 years)

- Contract Amount = 72.000€ (Portuguese threshold amount for Direct Award = 75.000€)

- Contract Price: Fixed Amount – 72.000€

Variable amount depending on number of copies (0,03€/copy)

AA understanding:

- “… the maximum value of the contract to be awarded is the maximum value of the economic benefit that can be obtained by the tenderer in the execution of all services which constitute its object …”

- AA estimated the total value of the contract in 145.000€ OPEN TENDER

FINANCIAL CORRECTION =

10% of Contract Amount

(according to Portuguese Audit

Authority Decision)

< Community Threshold but> Portuguese Threshold

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abril 2014

Thank you very much

public procurement : - verifications – audits of operations (checklists) - main irregularities

Documents

public procedures

contractual procedures

main phases

main audit findings

aa1 main concerns

contract terms

chosen contract notice

european union