Address https://gelex.eu/eli/EU/doc/http://publications.europa.eu/resource/cellar/c0fdfbf0-b22a-4a63-ab5b-60cfdf36cb85.0006.01@2016-07-11/en

Contents

1. Preamble
2. ANNEX
3. ANNEX I USERS OF TED E-TENDERING (APRIL 2016)
4. ANNEX II SUMMARY OF SURVEY RESULTS

The ECA’s special reports set out the results of its performance and compliance audits of specific budgetary areas or management topics. The ECA selects and designs these audit tasks to be of maximum impact by considering the risks to performance or compliance, the level of income or spending involved, forthcoming developments and political and public interest. This report was produced by Audit Chamber IV — headed by ECA Member Baudilio Tomé Muguruza — which specialised in auditing revenue, research and internal policies, financial and economic governance and the European Union’s institutions and bodies. The audit was led by ECA Member Alex Brenninkmeijer, supported by the Head of his private office, Antonius Moonen, and Raphael Debets, Attaché; Paul Stafford, Principal Manager; Peter Schönberger, Head of Task; Tomasz Kapera and Jurgen Manjé, Auditors. From left to right: A. Moonen, J. Manjé, P. Stafford, A. Brenninkmeijer, T. Kapera, P. Schönberger, R. Debets. Contractor an economic operator that has been awarded a contract. Economic operator any natural or legal person or public entity or consortium of such persons and/or bodies which offers to execute works, supply products and provide services. Electronic procurement (e-procurement) use of electronic communication and transaction processing by public sector organisations when buying supplies and services or tendering public works. E-notification electronic publication of notices announcing public procurement opportunities including a hyperlink to an e-tendering platform. E-submission electronic submission of tenders by economic operators when responding to a call for tenders. E-tendering (also called e-access) platform for internet publication of public procurement documentation, such as terms of reference, and electronic communication between the tenderers and the contracting organisation. EU agencies and other EU bodies distinct bodies from the EU institutions — separate legal entities set up to perform specific tasks under EU law. In total 52 agencies and other EU bodies exist. EU Financial Regulation sets out the principles and procedures governing the establishment and implementation of the EU budget and the control of the European Union’s finances. Financial Transparency System (FTS) publicly accessible online database managed by the Commission which publishes the recipients of EU funding paid by the Commission directly. Framework contract is concluded with one or more economic operators to lay down the basic terms for a series of specific contracts to be concluded over a given period (normally 4 years). Institutions of the European Union Article 13 of the TEU lists the institutions of the European Union: the European Parliament, the European Council, the Council, the European Commission, the Court of Justice of the European Union, the European Central Bank and the Court of Auditors. In addition, the EU Treaties refer to a number of other bodies that play a specialised role such as the European External Action Service and the European Investment Bank. Nomenclature of Territorial Units for Statistics (NUTS) single, coherent system for dividing up the EU’s territory; set up in order to produce regional statistics for the EU. OLAF European Anti-Fraud Office (part of the European Commission); it investigates fraud against the EU budget, corruption and serious misconduct within the EU institutions, and develops anti-fraud policy for the European Commission. Procurement directives establish common rules which contracting authorities in EU Member States have to follow above a certain value. The EU institutions have adopted their own rules which are broadly in line with the directives but do not include all its provisions. Procurement procedures an overview of the procurement procedures is given in Box 1. Publications Office interinstitutional office whose task is to publish the publications of the institutions of the European Union among which TED. Public procurement the purchasing of works, supplies and services by public authorities and bodies at local, regional, national or Union level. Rules of application (RAP) supplement the EU Financial Regulation with more detailed rules. SMEs small and medium-sized enterprises are defined in Commission recommendation 2003/361. Medium-sized enterprises have a headcount lower than 250 and a turnover equal to or less than 50 million euros or a balance total equal to or less than 43 million euros. Small enterprises have a headcount lower than 50 and a turnover equal to or less than 10 million euros or a balance total equal to or less than 10 million euros. Statement of assurance annual financial and compliance audit exercise where the European Court of Auditors audits the reliability of the EU’s accounts and the regularity of the transactions underlying them (sometimes referred to as the ‘DAS’ from the French ‘déclaration d’assurance’). TED TED (Tenders Electronic Daily) is the online version of the ‘Supplement to the Official Journal’ of the EU, dedicated to European public procurement. TED eTendering e-tendering platform offered by the Publications Office that allows contracting authorities to publish tender documents and to answer questions from tenderers electronically. Tender the offer submitted by an economic operator. Tenderer an economic operator that has submitted a tender. CPO Central Procurement Office (ECB) CPV Common Procurement Vocabulary DAS statement of assurance (from French ‘déclaration d’assurance’) DG Budget Directorate-General for Budget (European Commission) DG COMM Directorate-General for Communication (European Parliament) DG Communication Directorate-General for Communication (European Commission) DG FINS Directorate-General for Finance (European Parliament) DG Internal Market, Industry, Entrepreneurship and SMEs Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (European Commission) DG INLO Directorate-General for Infrastructure and Logistics (European Parliament) DG Research and Innovation Directorate-General for Research and Innovation (European Commission) DG Taxation and Customs Union Directorate-General for Taxation and the Customs Union (European Commission) DG Informatics Directorate-General for Informatics (European Commission) ECB European Central Bank EuropeAid Directorate-General for International Cooperation and Development (DG DEVCO) JRC Joint Research Centre (European Commission) NUTS Nomenclature of Territorial Units for Statistics OIB Office for Infrastructure and Logistics, Brussels (European Commission) OIL Office for Infrastructure and Logistics, Luxembourg (European Commission) OJ Official Journal of the European Union OLAF European Anti-Fraud Office RAP Rules of application of the EU financial regulation SMEs Small and medium-sized enterprises TED Tenders Electronic Daily TEU Treaty on European Union TFEU Treaty on Functioning of the European Union Public procurement is a significant element of the national economies in the EU. Approximately one fifth of the EU’s GDP is spent every year by public authorities in procuring works, supplies and services. The Court has recently published Special Report No 10/15 which focused on the public procurement by the Member States in the area of Cohesion expenditure co-financed from the EU budget. The current report looks at procurement by the four largest EU institutions which together amounted to some 4 billion euros in 2014. EU legislation on public procurement plays an important role in developing the single market and in ensuring the efficient and effective use of public funds. Whilst EU procurement directives apply to procurement activities of the Member States, including Cohesion expenditure, the institutions have their own procurement rules. These rules are broadly in line with the directives but there are some significant differences which the Court considers to be unwarranted. The EU institutions are required to put procurement contracts out to tender on the broadest possible basis to maximise competition. In our audit we examined to what extent the EU institutions facilitate access to their public procurement. We found that the management and control arrangements of the EU institutions are robust and in general mitigate the risk of errors which could otherwise adversely affect the possibility for economic operators to participate and their fair treatment. However most EU institutions do not systematically monitor the level of participation. In 2014 the European Parliament and the Council adopted reformed directives to render procurement easier and administratively less burdensome, in particular with a view to increasing participation of small and medium-sized enterprises. However we found that, when revising their own procurement rules in 2015, the EU institutions did not facilitate such access by simplifying rules and clarifying grey areas to the fullest possible extent. Not all procedural choices fostered competition on the broadest possible basis. Most EU institutions had no policy to undertake market consultation prior to starting the formal procurement procedure. Moreover contracts could have been divided into lots more frequently in order to stimulate participation, which would have had a positive effect in terms of access for economic operators such as SMEs. Unnecessary hurdles make life difficult for potential tenderers who want to identify procurement opportunities offered by the EU institutions. The visibility of the EU institutions’ procurement opportunities on the internet is poor. The information available is patchy and spread over many different websites. The search function of TED (Tenders Electronic Daily) did not always produce satisfactory results. Tools which allow tenders to be submitted electronically have not yet been rolled out in a comprehensive and harmonised manner. Economic operators who consider that they have been unfairly treated find it difficult to obtain a rapid review of their complaints and compensation for damages. Information on the outcome of the EU institutions’ procurement activities is not accessible in a way that allows effective monitoring by the public. The Court concludes that the EU institutions can do more to facilitate access to their public procurement and therefore makes the following recommendations so that they adopt a policy to systematically foster wider participation:

(a) In order to facilitate the monitoring of the accessibility of their procurement activities, all EU institutions should collect and analyse data both on the initial number of requests to participate and offers received and the number of offers which were taken into account for the final award decision.

(b) For the upcoming 2016 revision of the EU Financial Regulation the Commission should consolidate all relevant provisions into a single rulebook for public procurement. Participation of small and medium-sized enterprises should be explicitly encouraged.

(c) The EU institutions should proactively use preliminary market consultations wherever appropriate with a view to preparing the procurement and informing economic operators of their procurement plans.

(d) The EU institutions should divide contracts into lots wherever possible to increase participation in their procurement procedures.

(e) The EU institutions should create a common electronic one-stop shop for their procurement activities allowing economic operators to find all relevant information in a single online location and to interact with the EU institutions through this website.

(f) The Commission should propose a mechanism for a rapid review of complaints from economic operators who consider that they have been unfairly treated. Such a review should take place before economic operators may turn to the EU Ombudsman or to the EU Courts.

(g) To allow effective ex post monitoring of their procurement activities the EU institutions should set up a single public repository of information related to their procurement contracts which could be developed as part of TED eTendering.

(h) The European Anti-Fraud Office OLAF should produce reports and statistics on the different types of allegations under investigation and the outcome of these investigations.

(i) The EU institutions should use peer reviews for mutual learning and exchange of best practice.

This report begins with a short overview of the framework for public procurement (tendering for works, supplies and services) by the EU institutions and of our audit approach. We explain the internal controls that the EU institutions apply to reduce the number of irregularities to a minimum. We then consider the different stages of the procurement process to assess the degree of accessibility of the institutions’ procedures. Have clear and good rules been defined? Are these rules applied in a pro-competitive manner when EU staff prepare procurement procedures? Will economic operators find it easy to identify those procurement opportunities they might be interested in amongst the thousands of procurement opportunities that are published every week? Is it unnecessarily complicated to submit an offer? What happens if an economic operator feels that he has been treated in an unfair manner? And finally, do the EU institutions report on the results of their procurement activities in a way which ensures accountability? Public procurement policy is a key instrument in developing the single market and in achieving smart, sustainable and inclusive growth while ensuring the most efficient and effective use of public funds. Public procurement rules are designed to benefit both economic operators and contracting authorities. The objective is to develop market opportunities for the former whilst at the same time increasing the choice of potential contractors available to the latter. If the contracting authorities facilitate access to their public procurement, this is likely to trigger more offers in response to their procurement needs. More competition should then result in better value for money for the taxpayer (see Figure 1). The EU institutions are required to put public procurement contracts out to tender on the broadest possible basis. In 2014 the European Parliament and the Council agreed to reform public procurement policy in the EU. Amongst the main features of the reform package were measures to remove barriers to market access, in particular for small and medium-sized enterprises (SMEs). Our report examines to what extent the EU institutions´ procurement practices facilitate such access. Source:European Court of Auditors. The award of public contracts has to comply with the principles of the Treaties, and in particular the free movement of goods, freedom of establishment and the freedom to provide services, as well as the principles deriving therefrom, such as equal access and equal treatment, non-discrimination, mutual recognition, proportionality, fair competition, publicity and transparency. Public procurement in EU Member States is governed by Directive 2014/24/EU (hereinafter referred to as the ‘2014 Procurement Directive’) and a number of other directives which establish common rules which contracting authorities have to follow for procurements above a certain value. These rules have to be transposed in national legislation. Directives are not legally binding upon EU institutions. The latter have adopted their own rules which are broadly in line with the 2014 Procurement Directive with some important exceptions. For the EU institutions financed from the general budget procurement rules are laid down in the financial rules as last amended in October 2015 (hereinafter referred to as the ‘EU Financial Regulation’) and in their rules of application as last amended in October 2015 (hereinafter referred to as the ‘RAP’). The procurement rules of the European Central Bank are set out in a decision (hereinafter referred to as the ‘ECB rules on procurement’), adopted by its Executive Board in February 2016. Figure 2 shows the legal framework for EU public procurement. Source:European Court of Auditors. Based on the EU Financial Regulation the Commission’s internal procurement guide distinguishes 10 different procedures for procurement (see Box 1). The choice to be made depends on various factors, in particular on the estimated value of the contract. The most important steps of the procurement process are shown in Figure 3. Open procedure: Standard procedure that may be used for any contract starting with publication of a contract notice in the Official Journal (OJ). Any economic operator who is interested may tender. Restricted procedure: Standard procedure in two steps starting with publication of a contract notice in the OJ that may be used for any contract. Any interested economic operator may ask to participate, but only those invited may submit a tender that will be evaluated in the second step. A variant of this procedure is the dynamic purchasing system with exclusive use of electronic means. Competitive procedure with negotiation: A procedure which is similar to the restricted procedure and that may be used only under specific cases regardless of the value of the purchase. The submitted tenders (technical and financial offers) can be negotiated. Procedures following a call for expressions of interest (CEI): The CEI preselects candidates or registers vendors who may later be invited to submit offers in different procurement procedures. Negotiated procedure without publication of a contract notice: Exceptional procedure that can only be used in certain cases or circumstances (for example extreme urgency). Negotiated procedure for middle and low value contracts: The contracting authority must invite economic operators to tender who have shown their interest during ex ante publicity, and can, in addition invite candidates of its choice. For very low value contracts negotiation with a single candidate chosen by the contracting authority is allowed. Competitive dialogue: Used for complex procurements where the contracting authority is unable to define the means of meeting its needs or of assessing what the market can offer in terms of technical or financial or legal solutions without a dialogue with potential tenderers. Innovation partnership: Two step procedure for the acquisition of an innovative product that still has to be developed and for which no equivalent product is available on the market. Design contest: This enables the contracting authority to acquire a plan or design proposed by a jury after a competitive procedure with or without the award of prizes. The winner or winners are then invited to negotiate before signature of the subsequent contract. Negotiated procedure for building contracts: Building contracts (purchase, long lease, usufruct, leasing, rental or hire purchase, with or without option to buy, of land, existing buildings or other real estate) can be concluded by negotiated procedure without publication of a contract notice, after the local market has been prospected. Note: Boxes with dotted lines indicate a procedural step that is optional. The thresholds of the EU Procurement Directive are 5225000 euros for works and 135000 euros for services or supplies. Middle-value between 60 000.01 euros and 5224 999.9 euros for works and between 60 000.01 euros and 134 999.9 euros for services or supplies. Low-value between 15 000.01 and 60000 euros. Very low value between 1 000.01 and 15000 euros. For amounts up to 1000 euros no procurement procedure is required. Source:European Court of Auditors. We examined to what extent the EU institutions facilitate access to their public procurement. See Figure 4 for the prerequisites for facilitating access to public procurement. Source: European Court of Auditors. We therefore considered the following four questions:

(a) Do the EU institutions have robust systems that foster participation whilst protecting the Union’s financial interests?

(b) Do the EU institutions make the right procedural choices to increase participation in their procurement procedures?

(c) Do the EU institutions to the greatest extent possible remove hurdles that make life difficult for potential tenderers?

(d) Do the EU institutions ensure in a comprehensive and systematic manner that the outcomes of their procurement procedures are transparent and that they learn from one another?

We covered the procurement activities of the four largest EU institutions: the European Commission, the European Parliament, the Council of the European Union and the European Central Bank (ECB). In 2014 the total value of all contracts above 15000 euros (above 10000 euros for the ECB) of these four institutions is presented in Table 1: Source:European Court of Auditors based on data provided by the audited institutions. Institution In million euro Commission 3034 Parliament 497 ECB 515 Council 171 Total 4217 In addition, the following EU institutions and bodies were included in our audit to examine specific issues: the Court of Justice of the European Union for its jurisprudence in relation to public procurement by the EU institutions, the European Ombudsman who deals with maladministration in procurement procedures, the European Anti-Fraud Office (OLAF) for its investigations in connection with irregularities in procurement procedures and the Publications Office which manages online services giving access to information on public procurement. We did not look into public contracts concluded by the Commission on behalf of and on the account of beneficiaries in connection with external actions, nor at procurements where the management of EU spending involves other organisations or bodies (so-called ‘indirect management’ by the Commission) or where the management is shared with Member States. We based our observations on the following main sources of audit evidence:

(a) We carried out preliminary research with representatives of business organisations, national procurement experts and experts from the academic world;

(b) We reviewed documentation relating to procurement policies, procedures and tools;

(c) We analysed samples of procurement files covering the years 2013–2015 from the European Parliament (DG INLO and DG COMM), from the General Secretariat of the Council, from the Commission (DG Internal Market, Industry, Entrepreneurship and SMEs, Joint Research Centre (JRC)) and from the ECB;

(d) We tested the EU institutions’ online tools which are meant to assist in the identification of procurement opportunities;

(e) We interviewed EU staff;

(f) We analysed the EU institutions’ replies to our questionnaires.

In addition, we surveyed 47 smaller EU bodies to obtain their opinions and views with regard to procurement policies and processes. 40 replies were received (response rate 85 %). Results are summarised in Annex II. The EU institutions should be able to demonstrate that they ensure accessibility in their procurement activities. To that end, they need information on the level of participation of economic operators in their procurement procedures. They must also prevent serious errors and irregularities whose occurrence could adversely affect the possibility for economic operators to participate and undermine their confidence and hence their interest in the EU institutions’ procurement. We examined the information available on serious errors and irregularities, the systems to prevent them and the participation by economic operators in the EU institutions’ procurement procedures. In our annual Statement of Assurance we detect few serious public procurement errors in the transactions directly managed by the EU institutions. As in previous years, this contrasts with the situation in shared management with the Member States. At our request OLAF analysed its information on alleged irregularities received between 1 January and 30 April 2015 to identify cases related to public procurement. In total, OLAF counted 503 different incoming information items. Only 20 out of 503 notifications concerned procurement by the EU institutions, 16 of these were dismissed at the initial case selection phase and four led to the opening of an investigation. These figures imply that, compared to the total number of procurement procedures launched by EU institutions, the share of cases with potentially serious irregularities is in the order of 1 %, if one takes into account the approximately 2000 procedures per year where a contract award notice is published in the Official Journal by the EU institutions. OLAF only produced these statistics at our specific request and they only represent a snapshot at a given point in time in order to have an idea of the number of potential cases brought to OLAF’s attention. It would have been more useful if OLAF had been able to provide statistics which allow trends to be identified and the outcome of its investigations to be assessed. Successful procurement requires a combination of technical expertise concerning the specific works, supplies and services being procured and sound knowledge of the rules and procedures to be applied. All entities whose procurement procedures we examined have dedicated units of procurement experts who advise and assist the operational services on their procurement activities. We found that the procedural expertise of the procurement experts complements the technical expertise of the operational services and that the staff resources dedicated to procurement activities are appropriate. Furthermore, procedural advice and expertise is available from the EU institutions’ legal services and/or central financial units. Most of the audited entities have internal committees in place that aim to strengthen governance and control over procurement procedures. Typically these committees are composed of staff from other parts of the organisation. Such committees have decision-making powers or can issue recommendations and they tend to deal with the larger procurements and/or with procurements with a more limited form of competition. Prior to the signature of a contract, these committees provide additional assurance that applicable rules have been followed. Furthermore, their interdisciplinary composition makes them a platform for the exchange of views in the larger institutions where procurement is decentralised. The current organisational set-up and procedures for procurement activities are to a considerable extent the result of recommendations made by the internal audit services some years ago. In the meantime, most internal audit services have focussed their attention on other areas of their institutions’ activities and allocated limited resources to public procurement. However, the internal audit services will have to revisit procurement to assess the implementation of the recent revision of the procurement rules and, based on the results of this reassessment, adjust their work programmes accordingly. In addition to internal advice, external certification can help to bring in outside knowledge and perspective and can be a driver for improvement. The Central Procurement Office (CPO) of the ECB applied for and obtained an external certification of its activities. The certification was awarded by the Chartered Institute of Purchasing & Supply (CIPS) in 2011. The ECB’s certification, called the ‘PPP Award’ (Processes, Policies and Procedures) for achieving the standard of excellence in these fields, expired at the end of 2015 and the CPO has planned to undergo a full recertification process in the first quarter of 2016. When they publish a contract award notice in the Official Journal, the EU institutions have to indicate the number of offers received for the contract in question. However, this information alone is not a sufficient basis to reliably assess the level of competition in a procedure. Competition might be weak even in cases where several offers have been received. This is in particular the case when only one offer can be taken into account for an assessment against the award criteria and the others have been eliminated before they reach the final stage of the evaluation. Offers can be eliminated from the final evaluation for various reasons, notably when they are incomplete or do not comply with the exclusion or selection criteria. Only the Commission’s JRC compiles data, collected procedure by procedure and for each type of procedure, on the number of offers received, the number of offers in order, the number offers admissible, the number of offers found compliant and the number of offers ranked. We analysed JRC’s statistics for 2013 and 2014 to compare the number of offers received with the number of offers which had made it to the final stage and could be assessed against the award criteria. 468 procedures for contracts over 60000 euros were included in the analysis. In 50 of these procedures only one candidate could be taken into account from the outset, constituting an exception to the principle of broadest possible competition. For the remaining 418 procedures in half of the cases (49 %) only one offer could be taken into account for the final award decision (see Figure 5). Source:European Court of Auditors based on data provided by the JRC. The 2015 revision of the EU Financial Regulation has maintained the division of public procurement rules between, on the one hand, the Financial Regulation itself and, on the other, its rules of application. As we pointed out in our Opinion No 1/2015 this division was detrimental to the objective of clarification underlying the revision. Furthermore, there is no discernible advantage from this division. It renders the understanding of already complicated rules even more difficult, not only for EU staff but a fortiori for economic operators. Further complication is added by the fact that not all relevant provisions are to be found in the titles and chapters of the EU Financial Regulation which specifically address public procurement issues. Important provisions feature elsewhere in the text, for example the provision concerning ‘good administration’, which is of particular importance to economic operators. The ECB rules on procurement demonstrate that it is possible to consolidate all relevant rules in a single text. Although the procurement rules of the EU institutions broadly follow the provisions of the 2014 Procurement Directive, there are deviations from these provisions which are not explained. Two of these deviations are important for the accessibility of the EU institutions’ procurement. One relates to the participation of SMEs, the other to the purpose of preliminary market consultations. One of the major objectives of the 2014 Procurement Directive is ‘facilitating in particular the participation of small- and medium-sized enterprises (SMEs) in public procurement’. In this connection, the legislator explicitly warned against the risks of excessive concentration of purchasing power from an aggregation of demand by public purchasers. Throughout the 2014 Procurement Directive, the term ‘SMEs’ appears more than 20 times. By contrast, the amendments made to the EU Financial Regulation and the recast ECB rules on procurement do not refer to SMEs at all. In our audit, we found that, with the exception of DG Internal Market, Industry, Entrepreneurship and SMEs, none of the entities audited had issued specific guidance or instructions on how to facilitate the participation of SMEs or to monitor the level of their participation. In our survey only one out of 40 respondents indicated that SME participation was one of their priorities. Nevertheless some procurement procedures clearly provided opportunities for SMEs (see Box 2). The 2014 Procurement Directive explicitly allows for preliminary market consultations before the procurement procedure itself and defines the principles to be respected. The contracting authorities may seek or accept the advice from independent experts or authorities or from market participants to be used in the planning and conduct of the procurement procedure, provided that such advice does not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency. The 2014 Procurement Directive states that such market consultations are conducted not only with a view to preparing the procurement but also to informing economic operators of the contracting authorities’ procurement plans and requirements (see Box 3). The latter objective has not been taken over in the EU Financial Regulation. In 2014 the European Parliament needed expert advice for its Committee on Environment, Public Health and Food Safety. The total estimated value of the services was 2.5 million euros over a period of 4 years. Rather than looking for a single contractor, Parliament split up the services into five lots: environmental policy, climate change, sustainable development, public health and food safety. For each lot, several suitable contractors were identified. In total the Parliament concluded contracts with 17 different companies. In 2014 the Council procured promotional products for a total value of 122566 euros. The procurement was divided into 12 lots depending on the type of products needed (such as watches, t-shirts or pens). Competition between tenderers was possible on the level of each lot and contracts were signed with three different companies. For its new premises in Frankfurt the ECB had at first failed to find a ‘general contractor’, as what was offered considerably exceeded the ECB’s budget. The ECB then decided to tender the construction works in 14 packages with 4 to 10 lots within each package. As a result of the revised tendering strategy, SMEs could participate and were awarded contracts. The ECB was able to manage some 60 construction companies working in parallel. ‘Before launching a procurement procedure, contracting authorities may conduct market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements.’ (from Article 40 of the 2014 directive, emphasis added) ‘Before launching a procurement procedure, the contracting authority may conduct a preliminary market consultation with a view to preparing the procedure.’ (from Article 105 of the 2015 EU Financial Regulation). The 2014 Procurement Directive does not apply to the acquisition or rental of land, existing buildings or other immovable property. Nevertheless, the procedures applied for such contracts should comply with the principles of the Treaty, and in particular with the principles of equal treatment and transparency. Neither the EU Financial Regulation nor the ECB rules on procurement set out how potential vendors or contractors are to be informed and contacted when the EU institutions are looking for land or for existing buildings. As a consequence this remains largely left to the discretion of the institutions’ managers. In our audit, we found cases where the latter explored the market themselves and contacted potential vendors or contractors of their choice directly, cases where external consultants were used to help identify suitable offers as well as cases where a prospection notice was published in the Official Journal. Only the Commission has made a public commitment that it will guarantee transparency by systematically publishing prospection notices in the Official Journal which indicate the minimum requirements of each specific project and the exclusion and prospection criteria that apply and also by publishing the outcome of the procedures. In our audit, we saw that the procedure was used for Commission building contracts in Brussels but not in Luxembourg. The European Parliament last issued a prospection notice in the Official Journal when it was seeking buildings in the Brussels-Capital Region in 2010. The languages to be used for public procurement are not set out in the EU Financial Regulation. Only the ECB rules on procurement set out a language regime.The procedures applied by most EU institutions risk creating an expectation gap with potential tenderers. The EU institutions publish their notices in TED in all official languages. In addition, economic operators may request translation of the detailed tender documents and may submit their tenders in any official language. Once the tenderers have become contractors, however, they often cannot continue in the official language of their choice but must fulfil the needs of the contracting authority as provided in the tender specifications. This usually includes a specific language for contacts (communication during contract execution) and for deliverables. We found that many procurement officers are under pressure to avoid litigation and/or to reduce the time and resources needed to carry out procurement procedures. This may lead to procedural choices which are defendable from a legal point of view but where a more pro-competitive interpretation of the rules would be desirable from a sound financial management perspective. Thorough market consultation before starting the formal procurement process is important for optimising the requirements and technical specifications set out in tender documents and for verifying the availability and willingness of potential tenderers to participate in a procedure. Until the most recent revisions of the Procurement Directive and the EU Financial Regulation, market consultation prior to launching calls for tenders was not mentioned in procurement rules (see paragraph above). Moreover, with the notable exception of the ECB, internal guidance or instructions issued by the EU institutions with regard to market consultation put much emphasis on the risks associated with this approach and set restrictive conditions or even discouraged the option of approaching potential bidders. For example the Parliament’s internal Vade Mecum on public procurement procedures (November 2014) recommended not to seek or accept opinions from individuals or operators with an interest in the relevant contract, as this might hinder competition. This may trigger a risk-averse attitude amongst procurement officers. In the procurement files examined, we found little evidence that comprehensive market consultation had taken place. This was also confirmed by our survey. Many respondents indicated that they rarely made use of market consultation prior to launching a procurement procedure. In contrast to the other EU institutions, the ECB’s procurement unit has issued and implemented internal guidelines for a proactive approach with suppliers before starting the formal procurement process in order to get better value for money. This involves in particular holding informal meetings with both incumbent and potential contractors in order to gain market intelligence, to explain the ECB’s requirements and to foster competition. Dividing a contract into lots increases competition and makes it easier for small and medium-sized enterprises to participate. The larger a contract, the less likely it will be awarded to SMEs. Article 168 of the RAP provides that ‘whenever appropriate, technically feasible, and cost efficient’ contracts are to be awarded in the form of separate lots within the same procedure. This wording leaves authorising officers with broad discretion whether or not to use lots. We found that dividing contracts into lots was not used to the fullest extent possible. Examples where lots could have been used are given in Box 4. Compared to the situation at central state level in Member States the share of contract notices with lots published in TED was markedly lower for EU institutions (see Figure 6). In 2014 the Council awarded a framework contract for 10 years and a value of over 93 million euros for management, maintenance, repair and adaptation of technical installations in its present or future buildings to a single company without splitting it into lots. The services to be provided include such diverse domains as: heating, ventilation, air conditioning, water and sanitary installations, electricity, emergency networks, photovoltaic, collective protective equipment, culinary equipment, emptying of grease separators, monitoring of consumption, technical assistance and works to adapt the installations. The Commission did not use lots in 2015 for the 5-year contract ‘ Your Europe Advice — the European Union’s free legal advice service’ with a value of over 8.9 million euros. This service is very complex as it concerns legal advice in all EU languages and expertise in all EU legal systems is required. The only tender was presented by the incumbent service provider as it was probably the only economic operator in a position to present a ready-made offer for such a wide scope of the service. However, the number of downloads of the tender documents (211 downloads) showed a big interest in this call. Splitting it into lots, for example by groups of countries, might have facilitated the participation of other economic operators. In 2014 the European Parliament contracted a company for the cleaning of its buildings in Strasbourg with a value of over 19.8 million euros for a period of 5 years. The services requested were described as ‘Cleaning of offices, windows, joinery and metal cladding (interior and exterior), and other general hygiene services in the European Parliament buildings in Strasbourg’ and all placed in one lot. The window cleaning could have been awarded in a separate lot, increasing the number of companies that could have benefited from this opportunity. Window cleaning is often performed as an activity separate from office cleaning by different staff, with a different frequency and requiring different experience, skills and tools. Note: When no information on the use of lots was provided in the contract notice, we assumed that no division into lots had taken place. The TED reporting category ‘European institution, agency or international organisation’ includes a very small number of contract notices of international non-EU organisations. Source: ECA based on data from the Publications Office. Whereas dividing contracts into lots and publishing them simultaneously can increase the accessibility of procurement procedures, EU institutions must not artificially split a procurement in order to avoid the need to apply a more competitive procedure. For example, the European Parliament purchased office furniture in 2014 from one supplier through four different negotiated procedures with a single tenderer in a period covering less than 2 months. The four procedures all had contract values under the applicable threshold for wider publicity, ranging from 8021 to 14110 euros and totalling 43345 euros. All four procurements were very similar, each of them dealing with office furniture for directors and directors-general housed in one specific building. The EU Financial Regulation provides that the contracting authority may use the open or the restricted procedure for any purchase. The ECB rules on procurement give priority to the open procedure as they provide that the open procedure is the standard procedure. A restricted procedure presents certain advantages, in particular if there is a need to limit the circulation of the tender documents for security/confidentiality reasons. However, at least before the latest revision of the procurement rules, there was a risk that potential tenderers refrained from participating because the invitation to tender with the detailed specifications were not available in the first phase and it was therefore difficult for them to get a clear view of what was expected by the contracting authority. Whether this will change with the revised RAP in force as from 2016 remains to be seen. The RAP provide that the procurement documents including the full tender specifications should also be made available from the start in the case of two-step procedures such as restricted procedures. The RAP include, however, an exception clause which allows derogations from this rule in justified cases, for example where there are confidentiality or technical issues. Furthermore, a restricted procedure usually takes longer than an open procedure, which in itself might discourage potential tenderers. The minimum time limit for submissions under an ordinary open procedure with electronic access to tender documents is 47 days, for the restricted procedure it is 37 plus 35 days. In addition, the two steps of a restricted procedure are disrupted by the time needed for the processing of requests to participate. Further delays might occur when applications to participate are rejected and the operators concerned object to their exclusion. Finally, no flexibility is possible to assess tenders against the award criteria first without prior check on exclusion or selection criteria which will lengthen the process further as compared to the open procedure. Over the years 2010 to 2014, for all EU institutions taken together, the number of contract awards following an open procedure has consistently been about three times higher than the number of awards under a restricted procedure. By contrast, the Council used restricted procedures in the vast majority of cases during that period. The length of these procedures was a major issue. During the period from 2011 to 2013 their average duration was almost 1 year, including an average of 170 days between the publication of the contract notice and the receipt of offers. The 2014 reform of the procurement rules has increased the scope for procurement procedures which involve negotiations with tenderers, in particular through the new ‘competitive procedure with negotiation’. For our audit it was too early to assess the impact of the new rules. In the past, negotiated procedures without prior publicity have been used four times more frequently than negotiated procedures with publicity in the Official Journal. The main reason for negotiated procedures without prior publicity was that the works, supplies or services could only be provided by a single economic operator and no reasonable alternative or substitute existed. The European Parliament used a negotiated procedure to conclude a ‘building contract’ for 133.6 million euros for a building in Brussels although the building did not exist when the contract was signed on 27 June 2012. As we explained in our Special Report No 2/2007, only existing buildings are covered by the exception from tendering on the broadest possible basis provided in Article 134(1) of the RAP. Unfinished buildings or buildings not yet constructed should be subject to open and competitive award methods. The ECB’s Executive Board expressed the need for organisational consultancy services in order to fulfil the new mission of the Bank in the field of banking supervision just a few months before the start of the Single Supervisory Mechanism in November 2014. Five potential tenderers were directly approached and invited to submit offers, but no contract notice was published based on the exception ‘when, for reasons of extreme urgency brought about by events unforeseeable for the ECB, the time limits for the procurement procedures cannot be complied with’. However, in 2013 already it was foreseeable that the creation of the Single Supervisory Mechanism would pose an organisational challenge to the ECB; and it was not demonstrated that the time limits for an accelerated restricted procedure (10 days for the receipt of applications, 10 days for the receipt of tenders) could not be complied with within the available timeframe. The value of the contract was 3.49 million euros. The use of negotiated procedures without prior publicity was closely monitored by the audited institutions, as required by the EU Financial Regulation. However, at the European Parliament and the ECB we found two cases where wider publicity would have been appropriate (see Box 5). Contrary to what the name suggests negotiated procedures did not always involve negotiations. This was in particular the case in low-value procedures. Directorates-General of the Commission and of the Parliament dealt with negotiated procedures in such a way that the best offer amongst those submitted was chosen but no attempt was made to improve the offer by way of negotiations. Tenderers might however expect that they will be given an opportunity to adjust their initial offer in price or quality following initial submission. In the absence of such a possibility these tenderers are deprived of a chance to win the contract and the institution might be missing out on a better deal. Since its revision in 2015, the EU Financial Regulation explicitly provides that the contracting authority may award a contract in a negotiated procedure on the basis of the initial tender without negotiation where it has indicated in the procurement documents that it reserves the possibility to do so. From the perspective of a tenderer, this new provision does not however remove the uncertainty described above, as negotiation may or may not take place. Framework contracts create a long-term relationship with one or more supplier(s) or service provider(s). It can be useful to conclude such contracts for the repetitive acquisition of supplies or services, when the contracting authority knows what it needs but does not know when and what quantity it will need during a certain period of time. As a rule, the maximum duration of framework contracts is 4 years to avoid anti-competitive effects. Only in exceptional cases duly justified in particular by the subject of the framework contract may its duration exceed 4 years. Reducing administrative costs for the contracting authority should not be considered a valid reason. In contrast to the other entities audited, during the years 2013 to 2015 the Council has frequently used the exception clause to extend considerably the duration of framework contracts awarded in connection with its buildings. Box 6 lists such contracts with a duration of seven years or more. UCA 093/13: Management, maintenance, repair and adaptation of technical installations in the Council’s present or future buildings with a maximum duration of 10 years. Total value: 94 million euros. UCA 14/048: Modernisation and all-purpose maintenance of lifts at the Council of the European Union’s Justus Lipsius Building with a duration of 10 years. Total value: 3.35 million euros. UCA 14/100: Partitioning and finishing works in the buildings of the General Secretariat of the Council of the European Union with a maximum duration of 7 years. Total value: 6.66 million euros. UCA 15/010: Replacement and maintenance of supervision and management equipment for electrical and electromechanical installations in the Justus Lipsius Building with a duration of 17 years. No contract award notice published. UCA 15/011: Improvement and maintenance works for Council of the European Union buildings with a duration of 7 years. Total value: 31.2 million euros. UCA 034/15: Purchase and maintenance of mobile explosive detection devices with a duration of 10 years. No contract award notice published. Source: European Court of Auditors. We examined how easy it was to identify procurement opportunities offered by the EU institutions and whether tools were available to help potential tenderers to submit their bid without unnecessary cost and to obtain an effective review in case of procedural problems. Best practice would be to offer a one-stop shop allowing economic operators to find all relevant information in a single online location (platform) and to interact with the EU institutions through this website. Ideally, procurement procedures including communication on rules applicable, business opportunities, relevant procurement documents, submission of tenders and all other communication between the institutions and economic operators should be handled via one electronic channel. Electronic procurement (see Box 7) provides the tools to meet this objective. Electronic (public) procurement (e-procurement) is the use of electronic communication and transaction processing by public sector organisations when buying supplies and services or tendering public works. All phases of the procurement process can be executed or supported by electronic means. Currently the focus is on: e-notification: electronic publication of notices announcing public procurement opportunities including a hyperlink to an e-tendering platform e-tendering (also e-access): platform for internet publication of public procurement documentation, such as terms of reference, and for electronic communication between the tenderers and the procuring organisation e-submission: electronic submission of tenders by economic operators when responding to a call for tenders See the COM(2012) 179 final ‘A strategy for e-procurement’ and COM(2013) 453 final ‘End-to-end e-procurement to modernise public administration’. From the perspective of an economic operator, good visibility of the procurement activities of the EU institutions is important for three reasons: it facilitates access to information on contract opportunities, it helps to understand the rules and how to best submit an offer and it generates trust in a fair outcome of the procedures through transparency which will encourage operators to participate. Europa.eu is the official website of the European Union. According to its own brief, it should be ‘a good starting point if you are looking for information and services provided by the EU but you don’t know your way around our sites’. Beyond referring to the existence of procurement by EU institutions, Europa.eu does not give any introductory information on the EU institutions’ procurement activities and the applicable rules. The visitor to the website will only find links to the procurement sections of the different EU institutions (a total of 11 links) and to the EU Bookshop for a free download of a 2009 booklet ‘Doing business with the European Commission’. Another website which is likely to be visited as a first contact with the EU institutions’ procurement is the Commission’s central public procurement page. This website shows a list of policy areas where the Commission might have procurement needs with links to the websites of the different directorates-general in charge of these policies. No further information is provided. In contrast to the central websites, the websites of the Commission’s directorates-general and of the other EU institutions provide more information. However, the scope of the topics covered varies significantly, as can be seen from Table 2, which summarises the results of our analysis of 11 different websites. Note: The analysis took place between 24 June and 6 July 2015. Source:European Court of Auditors. Total per category Parliament Council ECB Commission Key: Y – yes P – partly R – only after registration DG Communication DG Informatics EUROPEAID DG Internal Market, Industry, Entrepreneurship and SMEs JRC OIB OIL DG Research and Innovation DG Taxation and Customs Union General information about the EU institution’s procurement 6 Y Y Y Y Y Y Guide for suppliers on how to submit a bid 5 Y Y Y Y Y Information about the legal basis of EU institutions’ procurement 8 Y Y Y Y Y Y Y Y General terms and conditions and/or template documents 8 Y Y Y Y Y Y Y Y Additional training or learning tools (e-learning, guide for internet users) 3 Y Y Y Opportunity to submit questions related to procurement 8 Y Y Y Y Y Y Y Y Registration for alerts about new opportunities 8 Y Y Y Y Y Y Y Y Tender documents available electronically 12 Y R R Y Y Y Y Y Y Y Y Y Additional search options within website available 3 Y Y Y Information about current procurement opportunities of high value 12 Y Y Y Y Y Y Y Y Y Y Y Y Indication of future or planned procedures of high value 4 Y Y P Y Information about current procurement opportunities of low value 6 Y Y Y Y Y Y Indication of future or planned procedures of low value 4 Y Y Y Y Total per website examined 5 11 6 3 8 13 8 7 9 4 5 8 Among the websites analysed, EuropeAid’s website is an example of best practice, as all necessary information is available. There is a user-friendly advanced system for searching for procurement opportunities with many search options. In addition, guidance and e-learning are available. Another important difference in comparison to other websites is that detailed guidelines for procurement procedures are published on EuropeAid’s website. Elsewhere such guidelines are treated as internal documents and not published on the official websites. This is for example the case with the Vade-mecum on Public Procurement in the Commission produced by the Central Financial Service of DG Budget. The latest version of this Vade-mecum is from November 2015, but only earlier versions of it can be found on the internet and then only because they have been published by a private law firm and a civil society organisation. TED (Tenders Electronic Daily) is the online version of the ‘Supplement to the Official Journal’ of the EU, dedicated to European public procurement. Every day, from Tuesday to Saturday, around 1800 public procurement notices are published on TED. The bulk of these notices originate from contracting authorities of EU Member States. Contract notices from the EU institutions are also published via TED when their estimated value is equal to or above the thresholds of the 2014 Procurement Directive, except in the case of a negotiated procedure without publication of a contract notice, as provided for in Article 134 RAP. Given the high number of procurement notices, an effective, intuitive search function is crucial for the user-friendliness of TED. Notices in TED can be sorted and searched by country, business sector, place of delivery and a number of other criteria. The TED search function allows different criteria to be combined to search for potentially interesting contract notices. Through tests we identified several issues concerning search options which returned unsatisfactory results. Examples are given in Box 8. A search in ongoing contract notices combining the business sector ‘Construction and real estate’ with ‘European institution/agency or international organisation’ provided a total of 124 hits. However, the elements displayed included numerous contract notices which clearly had nothing to do with ‘Construction and real estate’, e.g. contract notices related to the ‘translation services’, to a ‘study to support the fitness check of EU consumer law’ or to ‘SME instrument business community and academy’. Another search in ongoing contract notices limited to the business sector ‘Mining and Ores’ in combination with ‘European institution/agency or international organisation’ gave such unrelated elements as ‘Sun protection devices’ or ‘Construction work for buildings relating to railway transport’. We tested this combination of search criteria on different dates. Several times the search function only retrieved contract notices which had nothing to do with ‘Mining and Ores’. The full text search function did not always produce satisfactory results. We followed the instructions to use inverted commas and typed in for example ‘security services’ in combination with ‘European institution/agency or international organisation’ and obtained 147 hits including such unrelated elements as ‘Support for developing better country knowledge on public administration and institutional capacity building’ or ‘Technical assistance for water ambassador education and awareness-raising project’. TED’s search functionality for notices of a given EU institution was improved in December 2015 but was still not fully reliable. For example, ticking the box for Council of the European Union gave a mix of notices published by the Council and by the European External Action Service (EEAS). However, some of these EEAS notices were not shown when one directly ticked the box for the EEAS. Furthermore, finding contract notices of a given EU agency continued to be cumbersome. (Test searches carried out in January/February 2016) The accuracy of TED results depends on the correct input of data by the contracting authorities, in particular as regards the classification tools used by TED. The ‘Common Procurement Vocabulary’ (CPV) is the most important classification tool. The purpose of the CPV is to make it easier for bidders to identify relevant tender notices by business sector. There are about 10000 codes structured in a five-level tree hierarchy. Each code is made up of eight digits and a wording that describes the type of works, supplies or services forming the subject of the contract. A study commissioned by the European Commission revealed that a relatively high proportion of contract notices contain inaccurate codes. A test with a sample of 405 contract notices showed that the code was inaccurate in about 23 % of the notices. In around 10 % of cases the code applied did not describe the work/supply/service procured; in some 8 %, the code applied was too general, and in about 4 %, the code was too specific. In our audit, we identified contract notices of the Commission with inaccurate codes. Examples are given in Box 9. For a study contract related to ‘Statistics and forecasts analysis of different markets for motor vehicles’ the contracting authority used the code for ‘public road transport services’ (code 60112000). Value of the contract awarded: 429300 euros. For a study contract ‘in the fields of emissions and competitiveness and economic analysis of the automotive industry’ the code for ‘transport equipment and auxiliary equipment to transportation’ (code 34000000) was used. Value of the contract awarded: 5000000 euros. For a contract ‘Collection of key qualitative and quantitative information on the European Commission’s merger decisions’ the code for ‘market research’ (code 79310000) was used. The procedure was unsuccessful, no contract awarded. The Nomenclature of Territorial Units for Statistics (NUTS) was established by Eurostat, the EU’s statistical office, in order to provide a single uniform breakdown of territorial units for the production of regional statistics for the European Union. In contract notices it can be used to indicate the place of execution/performance of the works, for supply of products or of the provision of services. Most Commission services did not use NUTS codes in their contract notices. If a contracting authority has not specified a NUTS code indicating the place of delivery of the contract, it might escape the attention of potential tenderers. The TED eTendering platform can be used by all EU institutions and agencies and has the potential to become the central point of access to all their calls for tender. It is managed by the Publications Office and registration is free of charge for interested economic operators. The platform is synchronised with the TED website and gives:

(a) electronic access to all publicly available tender documents;

(b) the opportunity to submit questions in any EU official language and to view other questions and answers;

(c) real-time notifications when updates in selected calls for tenders are published.

Using TED eTendering has been possible since April 2011 but is not compulsory for the Commission’s directorates-general (DGs) and executive agencies, although DG Budget encourages them to use the system. The same holds for the European Parliament, where the aim is that all DGs use TED eTendering. The Council intends to start using TED eTendering in 2016. The ECB has no plans to use TED eTendering. Annex I provides a list of all entities which had used TED eTendering by mid-April 2016. The limited number of EU bodies and agencies on the list confirms the finding of our survey that about two thirds of them rarely or never use TED eTendering. Article 95(2) of the EU Financial Regulation requires the institutions and bodies to establish and apply uniform standards for the electronic exchange of information with third parties participating in procurement and grant procedures. The objective is to put in place a single ‘electronic data interchange area’ for applicants, candidates and tenderers. Article 111(2) tasks the Commission with ensuring that tenderers may enter the contents of the tenders and any supporting evidence in an electronic format. At the Commission testing of e-submission started in November 2014. The full roll-out has not yet taken place and is planned to begin in July 2016. At the European Parliament e-submission is possible for low value contracts only. For high value contracts, submission by electronic means is hindered by the fact that Parliament’s e-mail system does not fulfil all requirements set out in the EU Financial Regulation (see Box 10). Since 2014 DG INLO has encouraged tenderers to submit parts of their tender files electronically on a memory stick. ‘(…) devices for the electronic receipt of tenders and requests to participate shall guarantee, through technical means and appropriate procedures, that:

(a) the economic operator can be authenticated with certainty;

(b) the exact time and date of the receipt of tenders and requests to participate can be determined precisely;

(c) it may be reasonably ensured that, before the time limits laid down, no one can have access to data transmitted under these requirements;

(d) only authorised persons may set or change the dates for opening data received;

(e) during the different stages of the procurement procedure only authorised persons may have access to all data submitted and may give access to these data as needed for the procedure;

(f) it may be reasonably ensured that any attempt to infringe any of the conditions set out in points (a) to (e) can be detected.’

(Article 155(2) of the rules of application of the EU Financial Regulation) Among the EU institutions the Council has been the pioneer of e-submission but with mixed results. E-submission has been possible since May 2009 with the introduction of the dedicated ‘Consilium tendering’ website. However submitting offers electronically was optional: procurement managers could decide not to use this option. Where the option was available, tenderers nevertheless were allowed to submit their offers on paper. According to the Council, less than half of the offers were submitted electronically. ‘Consilium tendering’ is no longer used and the Council is interested in joining the Commission’s e-submission system. The ECB plans to gradually roll out an electronic tendering system in 2016 which allows tenderers to submit offers electronically via a user account (user name plus password). When tenderers submit their offers electronically, the system will generate a standard unique identifier cover sheet that the tenderers can print out, sign and submit to the ECB in hardcopy to confirm that their offer is valid and legally binding. Effective tools to deal with cases where economic operators consider that they have been unfairly treated are important both for the EU institutions and for the economic operators concerned. Such tools enhance the credibility of the EU institutions and strengthen the confidence of economic operators that they will be fairly treated and that it is therefore worth the effort to work with the EU Institutions. The Remedies Directives set common standards to ensure that rapid and effective means of redress are available in all EU countries when bidders believe that contracts have been awarded unfairly. The review may be carried out by existing judicial or administrative review bodies. Alternatively an independent specialised non-judicial Review Body may be set up whose decisions can be subjected to judicial review. Another option foreseen in these directives is that the economic operator concerned first has to seek review with the contracting authority before he can resort to the Courts. As is the case with all directives, the Remedies Directives do not apply directly to the EU institutions. Some elements from the directives have been incorporated in the EU Financial Regulation and in the ECB’s Rules on Procurement whilst others have been left aside. In particular, no independent specialised non-judicial Review Body has been established to deal with procurement issues related to the EU institutions and whose decisions can be subjected to judicial review despite the fact that such bodies generally have a shorter review length for interim reviews and pre-contractual remedies. In line with the Remedies Directives, the EU Financial Regulation provides for a standstill period of 15 calendar days before signature of the contract. This period is reduced to 10 days where the contracting authority uses electronic means to notify the successful and unsuccessful tenderers of its intention to sign a contract. If unsuccessful or aggrieved tenderers or candidates submit requests or comments during the standstill period, the contracting authority may suspend the signing of the contract for additional examination. This provision of the Financial Regulation is less favourable for unsuccessful tenderers than the provisions of the Remedies Directives under which the submission of an application for review to the contracting authority results in the automatic suspension of the possibility to conclude the contract. Among the audited entities, only the ECB had a robust internal review mechanism to deal with complaints. This so-called ‘appeal procedure’ is described in Box 11. The ECB’s rules on procurement allow unsuccessful candidates/tenderers to address an appeal to its Procurement Review Body (PRB). The PRB is an internal body composed of senior managers and supported by the Bank’s legal service. If the PRB considers that the decision to reject the appellant’s application or tender infringes the Rules on Procurement or general principles of procurement law it must either order that the tender procedure or parts of it are repeated or take a final decision. The PRB notifies the appellant in writing of its decision within 1 month following the receipt of the appeal. Since 2007, 35 appeals have been received, of which one was pending as at December 2015, six were upheld, 20 were rejected and eight were forwarded to the responsible Procurement Committee and not further pursued by the appellant. The General Court has inter alia jurisdiction to hear and determine at first instance actions brought by economic operators against acts or failures to act by the EU institutions. In the 6-year period from 2009 to 2014 the General Court completed 3419 cases of which 106 dealt with public procurement by the EU institutions (3.1 %), or on average 17.6 cases per year. The 106 cases relating to public procurement gave rise to a total of 123 decisions: 66 judgments and 57 orders. The breakdown by EU institutions or bodies concerned is shown in Table 3. Source: European Court of Auditors. Judgments Orders European Commission 41 40 European Parliament 5 4 Council 3 3 European Maritime Safety Agency 3 Court of Justice of the European Union 2 European Food Safety Authority 2 European Medicine Agency 2 European Central Bank 1 2 European Investment Bank 1 European Centre for Drugs and Drug Addiction 1 European Institute for Gender Equality 1 Frontex 1 European Environmental Agency 1 Fusion for Energy Joint Undertaking 1 3 Europol 1 European Court of Auditors 1 European External Action Service 1 Office for Harmonisation in the Internal Market 1 European Chemicals Agency 1 European Centre for Disease Prevention and Control 1 During the period examined, actions for annulment were successful in 13 cases, based on the finding that the contracting authority decided unlawfully. The average duration of proceedings of the General Court in the area of public procurement (judgments) was around 35 months. The most important damage suffered by participants in a tendering procedure is the loss of profit which they would have gained had they been awarded the contract. During the period examined (2009-2014) there were no successful actions for damages. However, in two more recent cases the General Court ordered the contracting authority to pay compensation for the damages suffered by the economic operator for the loss of an opportunity to be awarded a contract. This may suggest that the General Court is now more inclined to award damages in such cases. During the period examined there were no successful applications for interim measures and all 16 appeals brought by economic operators to the Court of Justice against decisions of the General Court were unsuccessful. However, in one of the most significant decisions of 2015 concerning EU institutions’ public procurement procedures, the Vice-President of the Court of Justice ruled that, even if the harm invoked is not irreparable, the sufficiently manifest and serious nature of the illegalities identified prima facie may justify the imposition of interim measures. The Vice-President of the Court of Justice thus favourably received the General Court’s new and more flexible approach as regards the conditions to grant interim measures referring to the right to effective judicial protection. The European Ombudsman investigates complaints of maladministration in the EU institutions and bodies, including complaints concerning public procurement activities. Through a search on the Ombudsman’s website, we identified 60 decisions related to public procurement over the period from 18 February 2008 to 17 February 2015. The majority of these 60 decisions (34 cases) related to procurement activities outside the EU, frequently involving EU Delegations. The analysis of the 60 decisions is summarised in Table 4. Source: European Court of Auditors. Category Number of occurrences Explanation Total number of decisions 60 Total number of decisions related to public procurement published on the Ombudsman’s website under subject matter ‘Award of tender or grants’. No maladministration 30 The Ombudsman found no maladministration Friendly solution implemented 8 A friendly solution or remedy action has been agreed and implemented. This category includes the following subcategories: Information provided 6 The friendly solution consisted of making available satisfactory information or explanation of reasons. Payment of costs 1 The friendly solution consisted of reimbursement of justified costs borne by the complainant. Solution not specified (under negotiation) 1 Negotiations on a friendly solution took place but the result is not known. Maladministration 20 The Ombudsman found maladministration in at least one of the aspects of the case. This category includes the following subcategories: Friendly solution rejected 5 The proposed friendly solution was rejected by the institution concerned in four out of the five cases. Friendly solution not possible 13 A friendly solution was no longer possible. Friendly solution not necessary 2 A friendly solution was not necessary because the claim was not examined as the procedure had been cancelled or it was not needed because it had no consequence on the outcome of the procedure. Court of Justice case — not examined further 1 The case was not examined by the Ombudsman because it was subject to proceedings by the General Court. Case withdrawn by complainant 1 Case was withdrawn by the complainant without further explanation. The average duration from the opening of a case to the decision was 20 months which is less than the duration of a Court case (see paragraph 82). However, complaints ‘must be preceded by the appropriate administrative approaches to the institutions and bodies concerned’ before the Ombudsman may launch an enquiry. This means that the economic operator has first to address his complaint to the institution concerned and wait for a reply. This lengthens the process and virtually rules out a swift intervention of the Ombudsman before a contract is signed. When a friendly solution was agreed on the basis of a proposal by the Ombudsman, it usually consisted of granting the complainant access to information or giving a satisfactory explanation of the reasons for rejecting his tender. No Ombudsman’s inquiries have ever resulted in the cancellation of an award decision and the reopening of a procurement procedure by an EU institution. Remedial action has never consisted of compensation to the complainant for loss of a procurement opportunity or loss of profit. Reimbursement of costs incurred by the complainant because of his participation in a procurement procedure was granted once. The Ombudsman is proactive and includes in her decisions ‘further remarks’ which are recommendations that are intended to encourage the EU institutions to change their practices in the future. Examples of ‘further remarks’ are in Box 12. The right to petition is one of the fundamental rights of European citizens. Any citizen and any natural or legal person residing or having its registered office in a Member State has the right to petition the European Parliament. However, the Committee on Petitions of the European Parliament stated on its Petitions Portal that petitions concerning cases of maladministration by the EU institutions would be inadmissible: ‘Inadmissibility of a petition (…) Please note that questions concerning maladministration within the Institutions or bodies of the EU should be addressed to the European Ombudsman.’ In this way it excluded petitions concerning allegations of maladministration in public procurement by the EU institutions. ‘Subject to the terms of the contract, in future cases in which contractors ask whether or not their contract will be renewed, the Publications Office could at least indicate the approximate timeframe within which it intends to take a decision.’ (Decision of the European Ombudsman closing the inquiry into complaint 1922/2010/(VIK)ER against the Publications Office of the European Union (19/12/2013)) ‘In cases, such as the present one, where, after having cancelled a tender procedure, an EU Delegation chooses to proceed to a negotiated procedure with some of the initial tenderers, the Delegation would be well advised to consider informing the unsuccessful tenderers openly and proactively about that development. Doing so would further strengthen the perception of legality and transparency of tender procedures implemented by EU Delegations’. (Decision of the European Ombudsman closing his inquiry into complaint 1325/2011/VL against the European Commission (17/05/2013)) ‘In view of the terminological confusion that the present case revealed and in order to avoid any possible misunderstandings in the future, the Ombudsman considers it useful to invite the Commission to review the documentation it provides in the context of its procurement procedures, so as to eliminate any lack of precision and terminological inconsistency and to ensure that tenderers are clearly and unambiguously informed of the eligibility conditions relating to their establishment/incorporation/registration/nationality. It would also be useful if, in the context of this review, the Commission could ensure that such key terms in the procurement process are clearly defined either in the procurement notice itself or in a document to which it makes clear reference and which is easily accessible.’ (Decision of the European Ombudsman closing his inquiry into complaint 920/2010/VIK against the European Commission (18/07/2011)) One of the most effective ways of fighting corruption and malpractice in public procurement and of preventing unjustified restrictions on competition is by increasing the transparency of processes and procedures. Transparency is not only important for economic operators but also for the discharge authority and the wider public who can contribute to improving the performance of the EU institutions by monitoring procurement activities. To allow effective monitoring by stakeholders the following minimum information needs to be available in a single place on the internet and continually updated for every contract above 15000 euros once it has been signed by an EU institution, indicating:

(a) the subject of the contract;

(b) the type of contract;

(c) the value of the contract;

(d) the duration of the contract;

(e) the type of award procedure (with a justification in the case of the negotiated procedure without prior publication);

(f) the award criteria and their weighting;

(g) the number of tenders received and the number of tenders taken into consideration for the final award decision (with a breakdown by Member States/third countries and indicating the number of tenders from SMEs);

(h) the name and address of the successful tenderer including information whether the successful tenderer is an SME;

(i) the proportion of the contract likely to be subcontracted to third parties.

Such a repository of information related to EU contracts should also provide relevant links to other documents (e.g. procurement documents, notices in TED, copies of the contracts signed). Currently there are no tools which allow an overall view of the outcome of the EU institutions’ procurement activities. Information is provided piecemeal and most of the time not in a harmonised manner. Not all closed procurement procedures can be found in TED as the publication of contract award notices is not mandatory in all cases. Searching for those procedures which are included in TED is difficult as the search results are not always satisfactory (see paragraphs 63 to 65). The TED eTendering platform is not used by all EU institutions. Furthermore, some institutions block the possibility to download tender documents from the platform once the deadline for submitting tenders has elapsed. The European Parliament publishes a complete annual list on its website of all its contractors who obtained contracts with a value of more than 15000 euros. This list indicates the name and address of the contractor, the type and subject of the contract, its duration, its value, the procedure followed and the relevant directorate-general. The list is part of the annual report on the contracts awarded by the European Parliament. It is more comprehensive and detailed than the consolidated information published by the other institutions audited and goes beyond the transparency requirements set out in the EU Financial Regulation. As procurement activities at the Commission are decentralised, reporting takes place in the annual activity reports (AAR) of the different directorates-general but in a standardised manner. However, not all the information from the different AARs is consolidated into a single report at central Commission level. At Commission level, the Commission includes in its Annual Synthesis of the Commission’s management achievements an analytical report on the negotiated procedures. The Commission’s Financial Transparency System (FTS) is designed to provide information on recipients of EU funds. However, it does not include any information on the type of procurement procedure which led to the award of contracts. The ECB publishes on its website annual lists of contracts with a value above 50000 euros that were awarded without publication of a contract notice. The lists specify the name of the contractors to whom contracts were awarded, the subject and the estimated value of the contracts and indicate whether the duration of a contract was longer than 12 months. Past contract notices and contract award notices from TED and past voluntary contract notices are centrally available in the archive section. The Council’s secure tendering website for contracts above 60000 euros provided a search function not only for calls in progress but also for closed calls and for cancelled calls. However, not all closed calls were retrieved when we tested the search function. Annual lists of contracts for which no specific award notice was published have been published via TED. However, there was no link to these lists on the Council’s website. The EU Open Data Portal, which is managed by the Publications Office, holds datasets relating to public procurement. The most comprehensive datasets are directly based on TED. These datasets suffer from the same issues as described in paragraphs 63-64, i.e. not always producing satisfactory results and sometimes incompleteness of data. As the public procurement of the EU institutions is largely decentralised, cooperation between different organisations can bring improvements thanks to mutual learning and cross-fertilisation. We noted considerable cooperation and exchange of experience between the different institutions and, in the case of the bigger institutions, between the different procurement units. Interinstitutional procurement procedures take place. Channels for asking questions and discussion fora exist. Peer reviews permit a structured exchange of best practices between participating organisations. In the field of EU procurement this tool has not yet been applied. A good example of improvements introduced thanks to peer reviews is the European Statistical System. The JRC periodically carries out ex post checks of its procurement files in the framework of checks of payments. The set-up of these ex post checks has some similarities with peer reviews. Public procurement in the EU is governed by rules which are intended to remove barriers and open up markets in a non-discriminatory and transparent way to foster competition. The objective of public procurement is to increase the choice of potential contractors available to public bodies, resulting in better value for money, whilst at the same time developing market opportunities for companies. The Court concludes that the EU institutions can do more to facilitate access to their public procurement. The EU institutions have robust systems and capable staff to keep the risk of errors and irregularities under control. We detect few serious public procurement errors in the transactions directly managed by the EU institutions which we examine as part of our annual Statement of Assurance. Few allegations are sent to OLAF which suggests that the number of serious irregularities and fraud cases is limited in this field (see paragraphs 15 to 22). To monitor and demonstrate the accessibility of their procurement activities the EU institutions need information on the level of participation by economic operators in their procurement procedures. Most EU institutions do not systematically measure the level of participation in their procurement procedures. Among the entities we audited only the Joint Research Centre of the Commission collects comprehensive statistics on this. The others comply with the minimum requirement to indicate the number of offers received in the contract award notices published in TED (see paragraphs 23 to 25). In order to facilitate the monitoring of the accessibility of their procurement activities, all EU institutions should collect and analyse data, procedure by procedure and for each type of procedure, not only on the number of offers or requests to participate initially received but also on the number of offers which were taken into account for the final award decision. Target implementation date:As from 2017 When revising their procurement rules in 2015, the EU institutions did not facilitate access to their public procurement by simplifying rules and clarifying grey areas to the fullest extent possible (see paragraphs 26 to 35):

(a) the EU Financial Regulation and its rules of application have not been consolidated into a single document and remain an unnecessarily complex piece of legislation;

(b) deviations from the new procurement directive are not always clearly indicated or explained;

(c) participation of small and medium-sized enterprises is not explicitly encouraged;

(d) how to prospect the market prior to the conclusion of building contracts has not been clarified;

(e) only the ECB has set out the language regime applicable to its procurement procedures in its procurement rules.

For the upcoming 2016 revision of the EU Financial Regulation the Commission should propose a single rulebook for public procurement. Therein, participation of small and medium-sized enterprises should be explicitly encouraged. Furthermore, rules on market prospection prior to building contracts and on the language regime for procurement procedures should be included. Deviations from the 2014 Procurement Directive should be justified. Target implementation date:2017 as part of the revised EU Financial Regulation Not all procedural choices fostered competition on the broadest possible basis. Most EU institutions had no policy for preliminary market consultations prior to starting the formal procurement procedure. Such consultation is important to inform potential tenderers and to optimise requirements to be set out in the tender documents. EU institutions must not artificially split a procurement in order to avoid the need to apply a more competitive procedure. However dividing contracts into lots and publishing them simultaneously can increase the accessibility of procurement procedures, in particular for SMEs. This practice was not sufficiently used by the EU institutions (see paragraphs 37 to 55). The EU institutions should proactively use preliminary market consultations wherever appropriate with a view to preparing the procurement procedure and informing economic operators of their procurement plans and requirements. Target implementation date:Immediately The EU institutions should divide contracts into lots wherever possible to increase participation in their procurement procedures. Target implementation date:Immediately Unnecessary hurdles make life difficult for potential tenderers who want to identify procurement opportunities offered by the EU institutions and benefit from them. The visibility of the EU institutions’ procurement opportunities on the internet is poor. The information available is patchy and spread over many different websites. The search function of TED (Tenders Electronic Daily) did not always produce satisfactory results. Tools which allow tenders to be submitted electronically have not yet been rolled out in a comprehensive and harmonised manner (see paragraphs 56 to 75). The EU institutions should create a common electronic one-stop shop for their procurement activities allowing economic operators to find all relevant information in a single online location and to interact with the EU institutions through this website. Procurement procedures including communication on rules applicable, business opportunities, relevant procurement documents, submission of tenders and all other communication between institutions and economic operators should all be managed via such a one-stop shop. Target implementation date:2018 For economic operators who consider that they have been unfairly treated it is difficult to obtain a rapid review of their complaints and compensation for damages. Only the ECB has a robust internal complaint procedure in place (see paragraphs 76 to 88). The Commission should propose amendments to the EU Financial Regulation to allow for a rapid review of complaints from economic operators who consider that they have been unfairly treated. Such a review should take place before economic operators may turn to the EU Ombudsman or to the EU Courts. Target implementation date: 2017 as part of the revised EU Financial Regulation Information on the outcome of the EU institutions’ procurement activities is not accessible in a way that allows effective monitoring by the discharge authority and the wider public in order to increase transparency and build up confidence. Such information is only provided piecemeal and most of the time not in a harmonised manner (see paragraphs 89-97). OLAF’s reporting on its investigations does not allow trends over time to be assessed (see paragraphs 16 to 17). To allow effective ex post monitoring of their procurement activities the EU institutions should set up a single public repository of information related to their procurement contracts which could be developed as part of TED eTendering. Target implementation date:2018 OLAF should improve its case management system to produce reports and statistics on the different types of allegations under investigation and the outcome of these investigations. Target implementation date: 2017 As the procurement activities of the EU institutions are largely decentralised cooperation amongst them can bring improvements thanks to mutual learning and cross-fertilisation. We noted considerable cooperation and exchange of experience between the different institutions and, in the case of the bigger institutions, between the different procurement units. However peer reviews, which are the most advanced tool for a structured exchange of best practices, were not used (see paragraphs 98 to 99). The EU institutions should use peer reviews for mutual learning and exchange of best public procurement practice. Target implementation date: First peer review to start in 2018 This report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 24 May 2016. For the Court of Auditors Vítor Manuel da Silva Caldeira President

ANNEX

ANNEX I USERS OF TED E-TENDERING (APRIL 2016)

European Parliament, DG Communication European Parliament, DG Infrastructure and Logistics European Parliament, DG Innovation and Technological support Council of the European Union European Commission, DG Agriculture and Rural Development European Commission, DG Budget European Commission, DG Communication European Commission, DG Communications Networks, Content and Technology European Commission, DG Environment + DG Climate Action European Commission, DG Employment, Social Affairs and Inclusion European Commission, DG Energy European Commission, DG Financial Stability, Financial Services and Capital Markets Union European Commission, DG Health and Food Safety European Commission, DG Human Resources and Security European Commission, DG Humanitarian Aid and Civil Protection European Commission, DG Informatics European Commission, DG Internal Market, Industry, Entrepreneurship and SMEs European Commission, DG International Cooperation and Development European Commission, DG Justice and Consumers European Commission, DG Mobility and Transport European Commission, DG Regional and Urban Policy European Commission, DG Research and Innovation European Commission, DG Trade Joint Research Centre Office for Infrastructure and Logistics in Brussels Office for Infrastructure and Logistics in Luxembourg Executive Agency for Small and Medium Sized Enterprises (EASME) European Court of Auditors European Investment Bank European Anti-Fraud Office (OLAF) Eurostat Publications Office of the European Union EUROJUST European Agency for the Management of Operational Cooperation at the External Borders (Frontex) European Centre for Disease Prevention and Control (ECDC) European Chemicals Agency (ECHA) European Defence Agency (EDA) European Environment Agency (EEA) European Fisheries Control Agency (EFCA) European Food Safety Authority (EFSA) European Insurance and Occupational Pensions Authority (EIOPA) European Medicines Agency (EMA) European Police Office (EUROPOL) European Railway Agency (ERA) European Securities and Markets Authority (ESMA) European Union Agency for Network and Information Security (ENISA) Fusion for Energy (F4E) Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM)

ANNEX II SUMMARY OF SURVEY RESULTS

CONTEXT

In connection with the performance audit on public procurement of the EU institutions, it was deemed valuable to include the opinions and views on the procurement processes of smaller EU bodies in order to obtain a broader picture. The survey was sent to 47 such bodies, with a response rate of 85 %.

I. PROCUREMENT POLICIES 01020304

Procurement policies are relevant because they show the thinking behind EU institutions’ procurement practices. They are particularly relevant in terms of improving access to the procurement process and building confidence, as they increase the accountability of the tendering institutions and the trust of those interested in submitting bids. The three main priorities listed by agencies, joint undertakings and other EU institutions were (in descending order): achieving a high price/quality ratio, ensuring impartiality and simplifying administration. When asked whether they had a procurement policy, a majority of respondents (57 %) answered in the affirmative. However, the remaining respondents (43 %) had no policy at all. With regards to public availability, 56 % of the respondents made their policies publicly available.

II. STREAMLINING PUBLIC PROCUREMENT 010203

There are various ways of making procurement easier and less burdensome, such as providing guidance on tendering methods, using eProcurement tools, monitoring participation or conducting market consultation. When asked whether they provided documents to procurement staff offering guidance on selecting tendering methods, a majority (60 %) replied they made use of this practice. eProcurement is recognised by the Commission as a key to making procurement easier. It includes e-Submission of tenders, e-Tendering and e-Contracting, among other things. However, only 35 % of respondents used any of these tools.

III. MARKET CONSULTATION 0102

It is vital to conduct market consultation prior to starting a tender process, in order to know the market and prepare a successful tendering process. However, almost half of the agencies surveyed either did not conduct or rarely conducted market consultation. In this regard, the use of market consultation templates is also relevant, but only three respondents made use of such templates. Monitoring participation and keeping lists of suppliers can also help to make the pre-tendering phase less burdensome. 15 % of respondents said they kept lists of suppliers and over 75 % stated that they monitored average participation.

IV. PARTICIPATION 0102

From the outset, participation did not pose a particular problem to respondents, but they sought to improve it nevertheless. They identified the following problems with participation: poor competition, complex legislation and the fact that local markets are often too small. In order to counter the detrimental impact of these problems on participation, respondents provide ethical guidance to their staff, aim to make their administrative processes less complex and standardise their requirements.

V. TRANSPARENCY 010203

Transparency is key to achieving impartiality — one of the procurement priorities. Disclosure of subsidiaries and parent companies could help to make the process more transparent, and 94 % of the respondents agreed that this should be mandatory. Almost half of the respondents (47 %) still do not publish their procurement policies.

Versions

1. 2016-07-11