Essay: Public procurement contracts

European Regional Policy in Romania: Facts and Recommendations
Abstract:
The scientific approach is to identify and evaluate regional development policy implementation mechanisms in Romania, the evolution of regional development policy, the degree of achievement of indicators undertaken and lessons learned. This paper aims to introduce theoretical and practical aspects less known, the application of models and interpretation of a case study highlighting the main positive and negative aspects that influence the absorption capacity of ROP (Regional Operational Programm) funds in Romania, to finance business investment in infrastructure. Mainly it makes a brief analysis of the problems caused by mismanagement of public procurement regarding private investments. THE RELEVANCE OF THE TOPIC is provided by the debate on the effectiveness of implementation of regional development policy, taking place today at national and European level. At present, regional science is a highly debated issue, developing fast under the impact of events that marks strongly this century: the development of advanced technologies; evolution in employment and unemployment; changes in ecological management plan; awareness of regional and local identity. Nationally, the topicality is underlined by the end of the first financial allocations aiming Regional Operational Programme 2007-2013, time when conclusions are to be drawn. Given that, ROP is the program with the highest absorption rate (approx. 51%), it is justified to analyze the causes absorption rates so low in relation to assumptions in 2007. The overall objective proposed by this paper is to present the current framework of EU regional development policy, the time evolution and future prospects and policy implications of the Regional Operational Programme 2007-2013 on regional competitiveness
Keywords: regional Policy, Regional Operational Programme, recommendations, public procurements.
In agreement with the European Economic and Social Cohesion Policy, Romania promotes regional policy aiming generally on long term to reduce disparities in regional development and country areas. Despite efforts by public authorities to implement the ROP and despite the implementation of a Plan of Priority Measures for strengthening the capacity of absorption of structural and cohesion funds, in Romania the absorption of European funds for regional development remains unsatisfactory.In developing new strategic programming documents for the period 2014-2020, Romania will continue to face major challenges regarding the future regional development, some “taken” in the current period, others induced by the new architecture of EU cohesion policy.
The scientific approach is to identify and evaluate regional development policy implementation mechanisms in Romania, the evolution of regional development policy, the degree of achievement of indicators undertaken and lessons learned. This paper aims to introduce theoretical and practical aspects less known, the application of models and interpretation of a case study highlighting the main positive and negative aspects that influence the absorption capacity of ROP (Regional Operational Programm) funds in Romania, to finance business investment in infrastructure. Mainly it makes a brief analysis of the problems caused by mismanagement of public procurement regarding private investments. THE RELEVANCE OF THE TOPIC is provided by the debate on the effectiveness of implementation of regional development policy, taking place today at national and European level. At present, regional science is a highly debated issue, developing fast under the impact of events that marks strongly this century: the development of advanced technologies; evolution in employment and unemployment; changes in ecological management plan; awareness of regional and local identity. Nationally, the topicality is underlined by the end of the first financial allocations aiming Regional Operational Programme 2007-2013, time when conclusions are to be drawn. Given that, ROP is the program with the highest absorption rate (approx. 51%), it is justified to analyze the causes absorption rates so low in relation to assumptions in 2007. The overall objective proposed by this paper is to present the current framework of EU regional development policy, the time evolution and future prospects and policy implications of the Regional Operational Programme 2007-2013 on regional competitiveness.
This paper addresses the theme, in five levels: main concepts,institutional architecture, legislation, diagnostic and recommendations.
I. Main concepts
The main objective of the common regional policy is the reduction of existing regional disparities and the prevention of further regional imbalances in the EU by transferring European resources to problem regions using the financial instruments of the European Union known as the Structural Funds. The common regional policy of the EU does not seek to supersede national regional policies. In accordance with the principle of subsidiarity, the Member States, through their own regional policies, are the first ones who must solve the problems in their regions by promoting infrastructures and financially supporting job-creation investments. However, the common regional policy coordinates national regional policies by formulating guidelines and establishing certain principles in order to avoid competition for regional aid between Member States. It coordinates also the various policies and financial instruments of the EU to give them a “regional dimension” and thus more impact on regions most in need of care.
The regional development policy of Romania is closely aligned with the EU cohesion policy at all levels and levels of development of the EU are used as benchmarks for defining local policies, following closely the Strategic Guidelines and the European regulations. In agreement with the European Economic and Social Cohesion Policy, Romania promotes a regional policy generally aiming on long term at reducing the disparities in the development of regions and country areas. Regional Development Act (No. 315/2004) established the main objectives of regional development policy in Romania, on reducing regional disparities, ensuring sectoral coordination at regional level and stimulating interregional cooperation. The ROP strategic objective consists in supporting the economic, social, territorially balanced and sustainable development of the Romanian Regions, according to their specific needs and resources, focusing on urban growth poles, improving the business environment and basic infrastructure, in order to make the Romanian Regions, especially the ones lagging behind, more attractive places to live, visit, invest in and work . This objective is achieved through a differentiated financial allocation by Regions, according to their level of development and in close coordination with the actions implemented by other Operational Programmes.
II. Institutional architecture
Although the Structural Funds are part of the Community budget, the way they are spent is based on a system of shared responsibility between the European Commission and Member State authorities:
‘ the Commission negotiates and approves the development programmes proposed by the Member States, and allocates resources.
‘ the Member States and their regions manage the programmes, implement them by selecting projects, control and assess them.
‘ the Commission is involved in programme monitoring, commits and pays out approved expenditure and verifies the control systems.
For each operational programme, the Member State appoints:
‘ a managing authority (a national, regional or local public authority or public/private body to manage the operational programme);
‘ a certification body (a national, regional or local public authority or body to certify the statement of expenditure and the payment applications before their transmission to the Commission);
‘ an auditing body (a national, regional or local public authority or body for each operational programme to oversee the efficient running of the management and monitoring system).
The Managing Authority for the Regional Operational Programme has been established within the structures of the Ministry of European Integration (Currently, Ministry of Regional Development and Public Administration), according to the GD 243/2006, published in the Official Journal No. 194/2006. The functions of the ROP Managing Authority with regard to the management and monitoring of the European Union’s funded operations under the Operational Programme are defined under the relevant Articles of the EC Regulations, and are detailed under the GD 128/2006 published in the Official Journal No. 90/31.01.2006, modifying the GD No.497/2004 regarding the setting up of the institutional framework for coordination, implementation and management of structural instruments. The Managing Authority may delegate some tasks to one or more Intermediate Bodies (IB) by means of a written Agreement. The MA remains nevertheless responsible for ensuring that the programme is implemented in line with the Structural Funds Regulations.
The ROP Intermediate Bodies are implementation entities at regional level. They undertake certain tasks of the MA, on the basis of a written agreement, and are the main bodies that hold the contact with the applicants. Some of their tasks are: to assist applicants in project development, to contribute to the delivery of the ROP Communications Plan at a regional level including local publicity, information and training events, to participate in the preparation of calls for proposals, to launch the calls for proposals, according to the schedule established by the ROP Managing Authority; to receive and register applications according to the relevant procedure, to check the administrative compliance and the eligibility of the applications submitted, in conformity with the criteria established by the ROP Managing Authority and approved by the ROP Monitoring Committee, to notify the applicants with regard to the results of the evaluation process of their application and informs the RCSA with regard to the projects that were proposed for financing and those that were rejected, to monitor the implementation of approved projects, present technical progress reports to the ROP MA.
The Monitoring Committee of the Regional Operational Program (ROPMC) is the national partnership without legal personality, with decision-making and strategic role in the process of implementing the Regional Operational Program 2007-2013. ROPMC’s role is to ensure efficiency and quality of program implementation. ROPMC consists of 24 members with voting right and 27 members as observers, without voting right, according to GD no.765/2007 approving the establishment of the Monitoring Committee of the Regional Operational Program 2007-2013 and the Regulation of its organization and functioning. Chairman of the Monitoring Committee of the Regional Operational Program is the Minister of Regional Development and Housing. ROPMC’s Secretariat is provided by the Managing Authority for ROP. Due to the large numer of tasks we will enhance only the main ones, so some of the ROPMC tasks are: to examine and approve the selection criteria, developed by ROPMA concerning projects funded by ROP, to examine the results of implementation, through the realization of the objectives of each priority axis and makes recommendations, to examine and approves the changes proposed to the financial allocation of ROP, between major areas of intervention of a priority axis, between the priority axes of development, and between regions.
Another important actor in implementation mechanism of ROP is the Audit Authority. The authority functions independently from the managing authority and from the certifying authority, named by each state for the operational programme. It is in charge with auditing the efficient functioning of the control and management system.In Romania, the audit authority for structural funds is the Audit Authority within the Court of Accounts. According to the legislation, this has the following main activities: system audit, sample check and final audit;external check and audit of the structural funds Romania benefits from, starting 2007;eligible expenditures sample check; cofinancing check.
Certifying and Payment Authority is an organisation within the Ministry of Public Finance, in charge with the certifying of the ammounts of the expenditures sent to the European Commission and with receiving the funds transfered to Romania from ERDF, ESF and CF.
III. Legislation
The procurement of all contracts financed through the Structural and Cohesion Funds and corresponding national co-financing are done in compliance with EU legislation and primary and secondary national legislation implementing the EU provisions on public procurement.
As a European Union Member State, Romania started to transpose the European directives into its national law in 2006. Thus, all the regulatory acts should be in accordance with the Treaty on European Union, with the Treaty on the Functioning of the European Union, as well as with the directives on public procurement. The truth is that Romania has a complex and unstable legislation on public procurement. There are many pieces of law having changed successively in the last couple of years in order not only to comply with the European Union norms, but also to remedy deficiencies in the system. Hence the essential prerequisite for tendering for public procurement contracts in Romania is to possess good knowledge of the legislation in force at the time the contract is awarded.
In order to ensure coherence with EU procurement polices, the Romanian authorities transposed the Directives No 2004/17/EC and No 2004/18/EC, by adopting the Law No 337/2006 for approving the Emergency Government Ordinance No 34/2006 on awarding of the public procurement contracts, public works concession contracts and services concession contracts. The secondary legislation was also adopted. This legislation also takes into account the provisions of the Commission interpretative Communication on concessions under Community law of 29 April 2000 and the Commission interpretative Communication on the Community law applicable to contracts awards fully or not fully subject to the provisions of the public procurement directives of 1 August 2006.
To enforce the legal provisions, the National Authority for Regulating and Monitoring Public Procurement (NARMPP) was set up. This body has the role to develop public procurement strategies, ensure coherence with Community acquis, ensure conformity in the application of legislation, fulfil EU Directive obligations, monitor, analyse and evaluate the methods used for awarding public contracts, as well as advice and train personnel involved in procurement activities. The NARMPP has set up the framework for Romanian national procurement methodologies and is providing advice and support.
All public procurement contracts will be awarded in compliance with the new harmonised national legislation. The principles applied in contracting are: non-discrimination, equal treatment, mutual recognition, transparency, proportionality, efficiency of used funds and accountability.
The general procedures for concluding public procurement contracts are the open and the restricted tender. Only as exceptions, the competitive dialogue, the direct negotiation or offer request, the framework agreement, the electronic auction and the dynamic purchasing system are foreseen by the law. The General Inspectorate for Communication and Information Technology is the operator of the electronic system for public procurement (ESPP).
The contracts are published in the ESPP, in the National media and, where the relevant thresholds under Community Directives are applicable, in the Official Journal of the European Communities.
The eligibility and selection criteria make reference to the personal situation, the ability to exercise the professional activity, the economic and financial situation, the technical and/or professional capacity, quality assurance and environmental standards. The awarding criteria are: the most economically profitable offer or, exclusively, the lowest price.
The main national law that regulates public procurement is Order no. 1120 of 15 October 2013 on the approval of the simplified procedure applied by private beneficiaries under projects financed from structural instruments, “Convergence” objective and projects funded under the EEA and Norwegian Financial Mechanisms for awarding supply contracts, services or works Issuer: Ministry EUROPEAN FUND Published in the Official Gazette no. 650 of 22 October 2013 Effective Date: October 22, 2013 which repeals Order No. 1050/2012 Minister for European Affairs.
Other regulations that governs public procurements are Government Decision no. 71/2007 for approval of the application of the provisions relating to the award of public works concession contracts and services concession from the Government Emergency Ordinance no. 34/2006, Art. 60 of Regulation (EC) no. 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) no. 1,260 / 1999, as amended and supplemented, Order no. 509 of 14.09.2011, the President of the National Authority for Regulating and Monitoring Public Procurement on formulating qualification and selection criteria
From the point of ROP regulations we can mention: GEO no. 84/2013 amending and supplementing Government Emergency Ordinance no. 64/2009 on the financial management of structural instruments and their use for the convergence objective with subsequent modifications, Decision no. 925 of 19 July 2006 (* updated *) to approve rules implementing the provisions relating to the award of procurement of Government Emergency Ordinance no. 34/2006 regarding the award of public procurement of public works concession contracts and services concession contracts, Government Ordinance no. 79/2003 of 08/28/2013 on the control and recovery of Community funds and financing funds misused, published in Official Gazette no. 662 of 08/30/2003, Directive 2004/18 / EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 31 March 2004 coordinating procedures for the award of public works contracts and services.
In order to have a good management regarding ROP procurement regulations, the Managing Authority issued some documents named Instructions. We can mention here: the instruction for applying the procedural provisions of the Order of the Ministry of European Funds no. 1120/2013, Instruction MAROP no. 122 / 06.02.2014 on the acquisition audit services for contracts financed by ROP 2007-2013, the Order approving the expenditure categories eligible for area of intervention “Support the development of micro-enterprises” under Priority Axis “Strengthening regional and local business environment” of the Regional Operational Programme 2007-2013, published in the Official Monitor no. 164 of 4 March 2008,
IV Diagnostic and recommendations
At the level of the program
The problems that generated partial fulfillment of program indicators and targets are largely similar to those found in all operational programs in Romania and refer both cases the management authority level and at the level of beneficiaries.
A first problem identified is related to the failure of project implementation schedules. Most of the projects within all lines ROP does not fulfill its initial implementation schedule or budget. Causes for this are: superficial planning supraoptimist original graphics without a safety margin for Contingency and especially the lack of risk management. In the case of POR projects according to annual progress reports ROP 2007-2013, the average procurement approval process works is at least 6 months, that while the projects have a graph between 12 and 24 months. The difficulties created by the complexity of the procurement were amplified incoherent and inconsistent interpretation and application of the legal framework by ANRMAP Audit Authority or the European Commission. Different resolutions on the same case often led to financial corrections beneficiaries. Even more serious consequence was the suspension during periods of 2011-2012, payments to beneficiaries.
Another element that contributed to significant delays was the difficulty to ensure sources of financing and financial flows of the project.The economic crisis of the period 2011-2012 coupled with tighter credit conditions was a negative element in providing the copayment and maintaining a positive cash-flow. Without the ability to contract a loan most of the time determined the contract termination. MAROP estimated, in the List of canceled contracts issued in 2014, that about 183 beneficiaries have stopped the financing contracts.
The problem of not achieving project indicators was another common problem in projects submitted. This situation led to the application of consistent financial corrections which, in turn, led to delays to the original implementation schedule and obviously, higher costs for beneficiaries. The economic crisis has created difficulties in reaching some result indicators, for example: achieving the turnover proposed in the project, the number of tourists arrivals in tourists structures, the number of companies attracted within the pale of business structures. The issue of financial corrections for not achieving the outcome indicators is questionable and should be applied on a case by case basis. Thus, if for indicators such as the number of km road making or rehabilitated, is justified that kind of financial correction, the indicators on the number of sightseeing or reducing the time of intervention in emergencies, such a penalty is most of the time irrelevant and especially counterproductive.
Public procurement represented perhaps the greatest challenge both for the beneficiaries and implementing bodies. The biggest problems were encountered in developing proper tender documentation in conjunction with different points of view developed by the institutions and verification lengthy procurement files. Obviously, poor management led to financial corrections which led in turn to cash flow imbalances.
Programmatic document analysis and evaluation reports highlighted a number of issues identified at the program level. Regarding the needs and objectives correlations it seems that the regional analisys is not sufficiently clear in terms of representing the development needs of Romania. As a recommendation, we propose a better fundamentation of specific needs and a special attention to financial sustenability.
Another problematic issue regarding ROP is the inadequate connection of objectives to the national strategies (health, education, transport). That fact limits the economic impact of financial interventions of ROP and diminish their regional relevance. As a solution we propose for the next programming period, that the intervention planning should be done only after ensuring full correlation between the National Regional Development Strategy 2014-2020 and strategic plans in the health, education, transport.
Regarding the compliance with the program indicators, specialized studies show that ROP presents (at the level of 2013) a satisfactory level of compliance with indicators, in comparison with the other programms in Romania. The rate of compliance indicators exeeds 50%. However the data for 2014 is not published yet. MA, should conduct exploratory studies for data collection and preliminary calculation of parameter values whose degree of achievement is totally unknown at this time (eg occupancy rates business structures), according to the deadlines.
Financial management is still a big concern in terms of ROP efficiency. Even though, during the alocation of 2007-2014 there were a lot of financial realocations that allowed the spending of locked expenditure from unaccessed lines, those measures were too late. We propose the simplification of financial reallocation and shortening the approval process of these shifts.
In terms of contracting process there were a lot of problems regarding the evaluation of the projects, periodic changes in the release schedule lines, focusing the submission only on certain years etc. Another problem was encountered was the fact that official documents related to calls for projects, were not always sufficiently clear and explicit, being necessary a lot of modifications. Those modifications let to important delays. The recommandations in this case are: Improving the service help desk for beneficiaries and potential beneficiaries, offering a period of at least 3 weeks for public consultation guidelines, establishing fixed timetables for launching calls for projects that should be amended only in exceptional cases.
In terms of public procurement management
By and large, the Romanian system of public procurement is governed by Government Emergency Ordinance no. 34/2006 on awarding public procurement contracts, concession contracts of public works and services. Before its adoption, the Romanian legislation and practice on procurement had experienced serious problems. This is important, because some of the habits from that time left their marks until today, despite the emergence of a new legal framework, for instance by the perpetuation of the habit to tilt the bid to the advantage of a certain winner; manipulate prices; or include post factum annexes to the contract which change substantially the nature of volume of goods and services to be delivered.
Regarding equitable management of public funds ROP encountered a lot of difficulties, especially regarding the right price for the investments. Therefore we propose creating a common database for all programs with reference prices for goods services and types of work. The database should work as a reference point for the proposed costs in projects.
There were significant delays in assessing procurement files and addenda to the contract, due to the lack of staff and the delayed external personnel expert contracting. MA should contract external expert staff before launching the financing lines and specialize their staff on issues aimed at procurement.
Anothe aspect is excessive bureaucracy regarding the tender documentation and procurement files. This is due to the large number of documents required in addition to those provided by law. The solution could be to simplify submission of tender documentation by creating a web portal allowing online boarding documentation without the need to deposit at least 4 copies of each file.
Even though MAROP communication system with beneficiaries proved to be a good example of best practice among Opere”ional programs, the communication system of MAROP with other agencies involved proved to be deficient. The best recomandation is that POR programmatic document should be harmonized with specific criteria DMI legislative changes at national and establishment of a specialized department within MAROP to adapt these laws.
The problems identified in the analysis, does not target only the management authority but also the beneficiaries of the project. There is an entire body of case law, with high economic significance for Romania, showing that private operators may engage in anticompetitive practices without the direct involvement of the contracting authority. Unfortunately, a systematic analysis of this body does not exist, as it is more difficult to be studied than the public authorities’ abuses, such as those listed above. The network of institutions monitoring and controlling the public procurement field has been built primarily to detect and correct the procedural errors or irregularities of the contracting authority, and not the final effects (distortions of the purchasing price). These institutions do not have the required type of human resources or the logistical capacity to undertake effective market analysis.
The most frequent types of irregularities discovered include: using, in inappropriate circumstance, some awarding procedures which would normally be applied as exceptions; dividing a contract into several smaller contracts, to avoid going through procurement procedures; ignoring rules on publicity, especially those regarding the publication of the awarding notice in the period specified by law; inadequate and subjective use, during the evaluation of offers, of criteria included in the awarding documentation.
Overall, ROP got probably the best compromise possible, given available resources and current management system, between the multiple needs of the program – compliance with legislation and regulations, speed of implementation, solving unforeseen issues, effectiveness, efficiency. ROP 2007-2013 is in an advanced stage of implementation, the main challenge at this stage is represented by scrolling smoothly and timely completion of contracted projects.
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