Training Programme on Contracts Implementation for End Recipients

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Training Programme on Contracts Implementation
for End Recipients
Bölgesel Rekabet Edebilirlik Operasyonel
Programinin Uygulanmasi için Kurumsal
Kapasitenin Olusturulmasina Yönelik Teknik
Yardim Technical Assistance on Institutional
Building for the Implementation of RCOP in Turkey

Trainer Asli Gülgör Procurement and Contract
Management Non Key Expert
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Procurement
Practical Guide to Contract procedures for EU
external actionspublished on the EuropeAid web
site in January 2012
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PRAG explains..

• The Practical Guide explains the contracting
  procedures applying to all EU external aid
  contracts financed from the EU general budget
  (Budget) and the 10th European Development Fund
  (EDF).

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What does the Practical Guide not cover?

• It does not apply to contracts for which the
  Commission acts as Contracting Authority on its
  own account.
• PRAG does not apply to operations implemented in
  the context of Humanitarian aid or emergency
  operations carried out by ECHO.
• Nor does it apply to the Contracting Authorities,
  such as beneficiary countries, international
  organisations or national bodies, where the
  Commission has authorised them to use their own
  procurement procedures.
• Direct labour operations are programmes executed
  by public or public-private agencies or services
  of the beneficiary country, where that country's
  administration possesses qualified managers.

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The PRAG

• First came into force in January 2001
• Revised versions came out on 2003, 2006(2), 2007,
  2008, 2009, 2010 and March 2011 with a
  corrigendum on September 2011, January 2012 with
  comments in August 2012
• Explains in substantial detail the contracting
  procedures that apply to EU external aid for
  service, supply, works and grants projects (FWC
  and Twinning covered under separate manuals)
• Contains standard templates which are mandatory
  http//ec.europa.eu/europeaid/work/procedures/impl
  ementation/practical_guide/index_en.htm

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• Why are we using PRAG?

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Legislative underpinnings

• The Financial Regulation No. 1605/2002 of 25 June
  2002 (General budget of European Communities )
• Council Regulation (EC) No. 1085/2006 of 17 July
  2006 establishing the Instrument for
  Pre-Accession Assistance (IPA)
• Commission Regulation (EC) No. 718/2007 of 12
  June 2007 laying down the implementing rules
  governing the provision by the Community of the
  pre-accession assistance established by Council
  Regulation (EC) No. 1085/2006 (IPA IR)
• Commission Regulation (EC) No. 80/2010 of 28
  January 2010 amending Regulation (EC) No.
  718/2007 implementing Council Regulation (EC) No.
  1085/2006 establishing the Instrument for
  Pre-Accession Assistance (IPA)
• The relevant Framework Agreement (FWA)
• PRAG with its standard documents and templates

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• Strict Rules Governed by PRAG
• Eligibility
• PRAG 2.3.3 Ground for Exclution
• Visibility
• Essentialalities
• Confidentiality

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Eligibility

• Participation in the procurement and grant
• procedures is open on equal terms to all
• natural and legal persons of the EU member
  states and the countries covered by the
  Regulation under which the contract is financed
• No restrictions for individual experts
• Regulation No 2112/2005 Article 4
• All experts engaged by tenderers may be of any
  nationality

The rule on nationality
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Eligibility (2)
Eligible Countries

• Member States of the European Community
• Austria, Belgium, Bulgaria, Cyprus, Czech
  Republic, Denmark, Estonia, Finland, France,
  Germany, Greece, Hungary, Ireland, Italy, Latvia,
  Lithuania, Luxembourg, Malta, Netherlands,
  Poland, Portugal, Romania, Slovakia, Slovenia,
  Spain, Sweden, United Kingdom
• Member States of the European Economic Area
• Liechtenstein, Norway
• Candidate Countries
• Croatia, Former Yugoslav Republic of Macedonia,
  Iceland, Montenegro, Turkey
• Potential Candidate Countries
• Albania, Bosnia and Herzegovina, Kosovo under
  UNSCR nº 1244, Serbia,
• ENPI Countries
• Algeria, Armenia, Azerbaijan, Belarus, Egypt,
  Georgia, Israel, Jordan, Lebanon, Libya, Moldova,
  Morocco, Palestinian Authority of the West Bank
  and Gaza Strip, Russian Federation, Syria,
  Tunisia, Ukraine

• Participation is also open to
• Developing Countries specified by the OECD DAC
  (thematic programmes)
• International Organisations
• Beneficiary Countries that have reciprocal access
  to External Aid
• A third country (with a derogation endorsed by
  the EC)

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Eligibility (3)
The rule of origin

• All supplies and equipment purchased must
  originate in the EU or in an eligible country as
  defined above in the nationality rules
• In its tender, a tenderer must state the origin
  of supplies

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Eligibility (5)
Exceptions to the rules

• Decided on case-by-case basis by the EC before
  the procedure is launched
• may extend eligibility to natural and legal
  persons from a country not eligible
• may allow the purchase of supplies and materials
  originating from a country not eligible
• (Price will not be accepted as justification)
• Any derogation must be foreseen at PN stage

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Grounds for exclusion

• are in financial difficulties
• have been convicted of an offense concerning
  their professional conduct by a judgement
• have been guilty of grave professional misconduct
• have not fulfilled their obligations relating to
  social security contributions or taxes
• have been subject of a judgement for fraud,
  corruption, involvement in a criminal
  organisation or any other illegal activity
• are currently subject to an administrative
  penalty referred to relevant articles of the
  regulations

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Visibility
Communication and visibility manual

• Contractors for services, supplies, works or
  grant beneficiaries as well as entities managing
  funds on behalf of the EC must take the necessary
  measures to ensure the visibility of the EU
  financing or co-financing.
• Such measures must be in line with Communication
  and Visibility Manuals (EU adn Turkey)
• Obligation of submitting a communication plan to
  be approved by the CA.

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Other essential points

• Conflict of Interest
• Awarding principles
• No retroactive awards
• Use of standard documents
• Record Keeping
• Availability of funds
• Environmental aspects

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• WHAT IS CONFLICT OF INTEREST?

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• GENERAL DEFINITION
• A conflict between an individuals personal
  interest and his or her public duty. This can
  exist whether or not money is involved, and
  whether the conflict is actual or only perceived.
• PRAGS DEFINITION (FOR TENDERS IN GENERAL)
• Any firm or expert participating in the
  preparation of a project must be excluded from
  participating in tenders based on this
  preparatory work, unless they can prove to the
  Contracting Authority that the involvement in
  previous stages of the project does not
  constitute unfair competition.

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Examples of Conflict of Interest

• A Public Officer's relatives participating in the
  tender when the Officer is the member of the
  tender evaluation committee,
• A relative of a Public Officer attending the
  Civil Service Examination when their relative is
  in the jury,
• A tax officer auditing the company where his/her
  wife/husband works,
• A Public Officer who is responsible for the
  credits and incentives accepting the credit and
  incentive application of the company that he/she
  is a shareholder of and conducting the process,
• Brother/sister of the Mayor participate the
  tenders

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• Exeptions from PRAG
• With
• FIDIC

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For works..
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• PRAG in Procurement
• FIDIC in Implementation(execution)

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Vision in Tendering
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Vision
Rugged (Reliable)
High Performance (Short Life)
Basic (Cheap)
Luxury (Expensive) Long Life
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Short Lists
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Performance

• Loading (Hydraulic/Chemical/Biological)
• Temperature (Process Kinetics, Plant)
• Compactness
• Reliability
• Design Life
• Operability
• Compatibility

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• Conditions of Contract

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Fédération Internationale des Ingénieurs- Conseils
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• Founded in 1913
• An umbrella organization with the membership of
  national associations
• Has more than 70 members
• Represents the consulting industry

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FIDIC Documents

• Contracts
• Agreements
• Procedures
• Consultancy Documents
• Information Documents

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Standard Contracts

• FIDIC
• NEC
• ICE (The Institution of Civil Engineers)
• AIA (American Institute of Architects)
• Engineering Advancement Association of Japan
• Construction Industry Development Board Singapore
• Kreditanlage für Wiederaufbau, Germany
• Joint Contracts Tribunal for the Standard Form of
  Building Contracts

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FIDIC

• ATCEA Association of Turkish Consulting
  Engineers and Architects
• (TMMMB - Türk Müsavir Mühendisler ve Mimarlar
  Birligi)
• is the only representative body of FIDIC in
  Turkey
• Established in Ankara in 1980 and has over 200
  members
• ATCEA is a member of FIDIC since 1987
• Sells and distributes its own publications as
  well as FIDICs
• In EU funded projects, ATCEA is requested to
  appoint the DAB
• www.tmmmb.org.tr / www.atcea.org.tr

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FIDIC

• Standardisation both in technical and
  administrative matters is essential for the
  successful completion of projects of civil
  engineering constructions
• FIDIC is known throughout the world for producing
  standard forms of contract for civil engineering
  construction, and mechanical and electrical plant
  to govern international contracts
• In 1999, FIDIC standardised its model contracts,
  with the publication of first editions of a new
  family of contracts comprising four new standard
  forms of contract
• Conditions of Contract for Construction (Red
  Book)
• Conditions of Contract for Plant and Design-Build
  (Yellow Book)
• Conditions of Contract for EPC/Turnkey Projects
  (Silver Book)
• Short Form of Contract (Green Book)

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Why FIDIC

• BALANCED fair apportioning of
  risks, rights and obligations between the
  parties
• WELL TRIED long case history for
  earlier contracts
• ACCEPTED known and recognised in
  wide use for international contracts
• SUPPORTED recommended or required by
  development banks, International
  Financial Institutions, large
  development funds, etc.
• EFFECTIVE clear and complete
  conditions time limits
  provisions for adjudication

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FIDIC Standard Form of Contracts

• FIDIC New Red Book
• FIDIC New Yellow Book
• FIDIC Green Book
• FIDIC Silver Book
• FIDIC Orange Book
• FIDIC New White Book

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The New Red Book

• The Client carries out all the engineering
  services and copes with the risks.
• The Consultant is responsible for the management
  and supervision.
• Checking and supervision of the design and Works,
  approval of those or rejection are Consultant's
  responsibilities
• The Contractor is paid per production and based
  on unit prices, risk of cost overrun is the risk
  of the Client.
• During the implementation of the Works detailed
  tests are performed. Usually tests are simpler
  during the Handover Period and Start-up.
• Disputes are caused are due to unexpected extra
  Works and increase of Cost.
• There is usually a cost overrun
• Consultant works as a daily Arbitrator.

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The New Yellow Book

• The Contractor carries out all the detail
  engineering services.
• The Contract deals not with "HOW TO DO" but with
  "WHAT TO DO"
• The main document is the "Employers Requirements"
  and explains what performance and quality is
  expected.
• The Contractor takes most of the risks including
  the overrun in quantity and cost.
• The Client may hold the authority to approve the
  design.
• Management and supervision of the contract is
  carried out by the Consultant.
• Checking and supervision of the design and Works,
  approval of those or rejection are Consultant's
  responsibilities
• The Contractor is paid on a calendar basis at on
  some milestones.
• During the implementation of the Works simpler
  tests are performed. Usually tests are more
  complicated during the Handover Period and
  Start-up.
• Disputes are caused are due to different
  interpretation of the "Employer's Requirements"
• Consultant works as a daily Arbitrator.

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The Silver Book

• The contractor is the designer
• The main document is the Client requisition and
  it defines the products.
• The contractor is the complete risk taker for
  the cost and price increases.
• All the work is done on turn key basis by the
  contractor.
• Design authorization is not necessary.
• Consultant is not needed. The Contractor has the
  control.
• The payment is made according to the calendar or
  per product.
• Tests are not carried out during work. The tests
  carried out for the products are highly detailed.
• Problems appear at the end of the work.
• Conflicts are mostly solved by arbitration.

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The Green Book

• Client's Representative replace the Consultant
• Design may be carried out by the Client or the
  Contractor.
• Work may be implemented and paid on unit price or
  lump sum
• The design made by the Contractor may be approved
  by the Client or by the Client's Representative.
• The Client has the right to supervise the design
  and the Works.
• Quality assurance is in Contractor's
  responsibility.
• Cost overrun may occur due to poor cost
  monitoring.
• Whoever is liable for the design is also take the
  risk of quantity and cost overrun.

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WHICH BOOK ?
Is it a straightforward and simple project?
Is there any risk on design or process?
no
no
yes
yes
Are the market and the unprecedented risks high?
Fixed price turn key Restricted client
contribution High market risks
yes
no
no
DETAILED EXAMINATION Correct according to
Clients requisitions and then create a modified
contract
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PRAG

• The Practical Guide demands some
  particularisations of FIDIC and some usage of
  non-FIDIC forms. Primarily EU wants a say in-
• The acceptance of the selected bidder
• Origination of Goods
• The powers of the Engineer to commit money
• Avoidance of Corrupt Practices
• Joint Ventures

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PRAG
Letter of Acceptance
No Letter of Acceptance will be issued under
this contract. Only the signing of the Contract
Agreement by the Employer will constitute formal
acceptance of the Tender. Any activities referred
to in the Contract which relate to the date of
issue of the Letter of Acceptance shall be
construed as being determined from the date of
signing of the Agreement by the Employer

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PRAG

• Eligibility Rule
• Also for Works Contracts

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PRAG
Limitation of Engineers Powers

• The phrase particular conditions in the General
  Conditions of Contract shall be synonymous with
  the phrase Special Conditions used in latest
  edition of the EU Practical Guide.
• The Engineer shall obtain the specific approval
  of the Employer before taking action under the
  following Sub-Clauses of these Conditions
• (a) Sub-Clause 3.5 agreeing or determining any
  matter which will increase the Contract
  Price.
• (b) Sub-Clause 8.4 agreeing or determining an
  extension of the Time for Completion
• (c) Clause 13 Instructing a Variation which is
  expected to change the Contract Price or change
  the scope, character or quality of the Works.
• Notwithstanding the above inserted sub-clauses
  the Engineer may act in isolation to alter the
  Contract Price in a matter which urgently affects
  the safety of the site, the workers and the
  public.

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• PRAG - FIDIC Integration

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PRAG Works

This project is co-financed by the European Union
and the Republic of Turkey

• PRAG FIDIC integration
• PRAG Practical Guide to Contract Procedures for
  EU External Actions
• FIDIC conditions of contract
• FIDIC replaces/changes certain documents of PRAG,
  but
• Mainly they complement each other.
• It is important to understand what each stands
  for in practice

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Which FIDIC

• Work Contract Types by nature
• Construction (Employers Design FIDIC RED BOOK)
• Plant and Design Build (FIDIC YELLOW BOOK)
• Design Build Operate
• (FIDIC YELLOW BOOK)
• (FIDIC GOLD BOOK still not finalized)
• EPC (Engineer Procure Construct) /Turnkey
  Projects (FIDIC SILVER BOOK)

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• Questions and answers