Examination of witnesses (Questions 100
WEDNESDAY 20 MAY 1998
100. It sounds like an enormous committee.
A. No, it is
not. It is quite manageable. It is an informal group. It is a
group where we exchange project ideas, where we exchange information,
where we seek other donors, to assist in a project. Many of the
programmesat least those that are investment relatedrequire
major funding. It is quite seldom that there is only one international
financing institution involved. It can be four or five different
external donors. This is the more established, informal way of
working, through the PPC. Then we have other informal contacts
and direct linkages. As I see it, in preparation of the management
committee meetings and approving new project proposals, it is
quite important that the representative from the Member States
coordinates these interventions so that they see that, for example,
they distribute new project proposals to the national donor organisation.
Then they will have the opportunity to see that they are doing
quite similar here and this is something they should bring up
at the management committee meeting in that case.
101. This is one of the questions I expect
that you have your answer written down to so I am going to ask
the first question and then a supplementary, if that is okay.
Could you outline for us the selection process for the TACIS projects?
A. Yes. Once
a project has been approved by the management committee, it is
immediately published on the Internet as well as in the official
journal. Then the companies that are interested in implementing
these projects are supposed to submit letters of interest. Nowadays
we have a deadline I think of 60 days for submission of these
letters of interest, everything to speed up the process for TACIS.
Then, the responsible task managers put together a proposal for
a short list. We are now talking about restricted tenders. There
are three different types of tender procedures. There are direct
agreements, which are under 200,000 ECU. Then, TACIS itself chooses
directly which company to award the contract to.
102. Would that be a company in the country
that you are going to be working in or would that be a company
A. That would
be an EU company. The second type is the restricted tender which
is everything between 200,000 ECU and up to ten million ECU. This
is the major part of all the TACIS contracts. The third type is
the open tenders. This is for contracts above ten million ECU,
not so common. For the restricted tenders, we receive all these
letters of interest. We put together a proposal for a short list
of companies that we want to invite to bid on the specific project.
We are required to have a minimum of seven companies. This list
is then approved by the deputy director general. Then, the companies
in question receive a big tender package with lots of information
on budgetary requirements and how to put together the proposal.
It can be quite complicated if you are doing it for the first
time. After 60 days, we have a deadline for the submission of
the proposals which is usually quite voluminous. We appoint an
evaluation committee which is comprised of the chairman and a
secretary, two to three Commission officials and two external
experts. The external expert should be an expert in the particular
field that this project addresses. It can be a waste management
expert or something. The fifth representative is from the recipient
country. This evaluation committee goes through the technical
proposal first. There is an evaluation grid that we fill in. The
evaluation grid addresses issues like the team composition, the
qualification of the team itself, the experience of the firm,
have they worked in the NIS before or have they worked in central
and eastern Europe. Also, for example, it is integration of local
expertise which we try to emphasise and the company's overall
understanding of the project as it is defined in the terms of
reference. If the evaluation committee approves of the project,
which means that they pass a specific threshold, we proceed and
open the financial proposals. We never see any kind of financial
information prior to this. In general, in the end, I would say
we usually have five bids for each project. It is very seldom
that all the companies invited to bid actually submit a proposal.
Out of all those that we invite bid, maybe there are only two
or three where we open the financial proposal in the end. Once
we have opened the financial proposal, the criterion is either
the total amount of the bid or it is the daily rate for the EU
experts. The most commonly used criterion is the total bid. It
is quite simple. Then, the evaluation committee makes a recommendation
which is then approved by DG1A before proceeding and signing the
103. That is a very full and extremely helpful
answer, if you do not mind my saying so. I have learnt a lot through
that. Some of the other evidence that we have had would lead me
to the next question. Based upon the fact that what you have outlined
is a complicated proposal, it means that it takes time and expertise,
I would think, to even get to the final five or six, so I suspect
that you are tending to see the same consortia group over and
over again, because they know how to apply. The question that
I will ask now is how does DG1A achieve a balance between the
use of large consultancies and harnessing the talents of the smaller,
perhaps more innovative firms and institutions? The concern is
that, if the only way the smaller groups can get in is to be part
of a large group under maybe one of the big accountancy companies
in this country, for example, maybe some of the smaller groups
might not ever get to the bid state. That would start to limit
things down to a very few groups who will constantly apply and
be in the final choosing selection. It is a complicated question
but maybe we could have a little bit of your own view on that?
A. It is partly
correct that for environment there are a number of larger environmental
consultancy firms that we see submitting a letter of invitation
over and over again. We try to see if there are new companies
that we can put on the short list but the criterion is always
that we have to judge them as having the competence to actually
implement the project. Otherwise, we cannot put them on the short
list. If you look at the disbursement rate for TACIS projects,
the payment of invoices and so forth, for large projects, say,
four million ECU or something, many smaller firms cannot handle
the turnover which it requires them to have. However, smaller
firms are often used for these direct agreements, under 200,000
ECU which, for many of the smaller firms, is a fair amount and
quite a large sized project. It can be difficult for new companies
to enter into the whole cycle of TACIS.
104. It seems to me very important then
that you get a minimum of seven bids because I can see a situation
whereby you are going to finish up working with just three large
companies and that would be terrible.
A. Yes. We have
an informal rule that, if one consultancy company wins a bid over
a certain amount, if they are to receive one more contract, we
have to justify this specifically.
105. We have heard some criticisms from
some of the small organisations working with you, firstly, that
you do not allow enough for management costs; the cost of actually
managing a project is not somehow allowed for in the way that
you cost things. This is obviously a problem for small firms.
As you say, big firms can absorb the costs of running a project
because they have flexibility but, for small firms, paying for
an extra member of staff to manage a project is very difficult
for them. Is that a fair criticism? They may have to hire somebody
to run a project and that is somehow not allowed for in the rules.
A. In my opinion,
this is not a fair criticism because the amount of the total project
budget that goes to management is, in many cases, quite substantial.
It depends also on the type of project. For example, I work with
multicountry projects which means that, under one project, the
contractor is obliged to work in all of the 13 NIS countries.
The management cost of such a project is obviously much higher
than if you work in one specific country. We take this into account
when we evaluate bids.
106. The other criticism that we have heard
from small organisations is the difficulty in getting money up
front. Again, to set up a project and to submit bids and so on
is entailing them in costs and man hours before they even know
whether they are going to get it. Even when they know they are
going to get the project, when they embark on it, they are still
not getting the money. How long does it take, from approval of
a project, to get the money flowing?
A. For all projects,
there is an advance payment. I cannot say exactly but in general
I think it is 35 per cent of the total sum of the project. This
is how they are supposed to start up the project.
107. Is there a delay in paying that at
all or not?
A. In general,
I would not say for the advance payment because they are not supposed
to forward any invoices. There are no costs for TACIS to approve.
108. As soon as you have approved a project,
you provide them with 35 per cent?
A. Yes. This
will happen, but I cannot say exactly the number of days.
109. Within weeks rather than months?
A. Yes. For payment
of subsequent invoices, the procedure has been improved very much
in the last year. It is not taking as long as it used to.
Lord Hughes of Woodside
110. We have been led to understand that
the Commission imposes a ceiling on the value of contracts awarded
to firms, universities etc., from the particular EU Member State
and for TACIS and other programme work in any one year. This ceiling
is somehow or other determined by their government's contribution
to the overall TACIS and other programme budgets. Is that so?
A. No, it is
not. When putting together the short lists, we try to achieve
some kind of geographical distribution as to which country the
companies come from. It would be difficult to approve of a short
list where you had seven UK companies. It could happen on certain
short lists, depending on the project. Maybe for some projects,
some of the consultancy firms are more concentrated in some countries.
Then the short list could comprise two or three companies from
one and the same country. This is doable, but we have to justify
it specifically, as to why we feel that there is a necessity to
have so many on the short list.
111. There is an attempt to share the work
out on a geographical basis?
A. The first
attempt is that the companies on the short list must be competent.
Then, the second is also, yes, to have some kind of geographical
distribution in order for all the Member States to have the possibility
at least to bid on the project. Now, it is quite clear that some
of the Member States have the major amount of the contracts, whereas
some other Member States have practically no contracts at all.
Especially for the newer Member StatesSweden, Austria,
Finlandthey have had some difficulties getting into the
whole system and cycle.
Lord Mackie of Benshie
112. Do you notice that, if you give a lot
of work to British firms, the contribution from Britain rises
the year after?
A. I could not
Lord Hughes of Woodside
113. If it was not too difficult, I wonder
if you could let us have an analysis of which countries have which
contracts by value. We can then scrutinise it and, if necessary,
follow it up.
A. There is a
compilation of such information quite easily accessible. Some
of the Member States have the major part of the contracts and
the UK is one of those countries.
114. When we looked at PHARE, I think it
was the Dutch who allegedly cornered the marked for this sort
A. The Dutch
are also strong; Germany is strong. Now, I look at environment
115. What is the situation about American
firms who have one foot in Europe? Are they allowed to bid for
contracts? If an American firm had an office in Europe or half
its staff were European?
A. It would have
to be registered as a European company.
116. But it could be a subsidiary of an
A. Yes, but it
must have an official European status registered. Otherwise, we
could not approve it. It happens rarely that we approve of expatriate
experts that do not come from the European Union. We always have
to justify this specifically. It can only be a minor part of the
total input of experts in that specific project. It has to be
a person where you cannot really find the competence and knowledge
anywhere. Obviously, this does not happen very often.
Countess of Mar
117. We are led to understand that the fundamental
thinking of TACIS is that it is supposed to have a people to people
approach. There has been some criticism of the working in that
you tend to use professional consultancy firms. Do you see this
criticism as being fair and are you taking any steps to alleviate
A. The major
part of TACIS projects involves these larger consultancy firms.
We also have something we call the small project programmes, which
are operated in a different manner. Under that, we have something
called the Lien programme which is targeted towards NGOs. The
ones who implement these projects are actually the NGOs. There
is a city twinning programme involving municipalities.
118. We heard from some of them last week.
We were very impressed by what they were doing.
A. The Lien programme
is working on the development of NGOs.
Countess of Mar
119. Do you provide any assistance to NGOs
for preparing tenders? Do you have an advice package?
A. We have an
advice package which is given to all bidders. The small project
programme is operated in a different way. I am not dealing with
this myself but I think it is contracts between 20,000 and a maximum
of 200,000 ECU. For the small project programme, you apply and
there is a specific application form so it is not this whole procedure
with the restricted tender, the submitting of the technical proposal
and so on. It is a more simple procedure with applications.