Training Programme on Contracts Implementation for End Recipients

1. Bölgesel Rekabet Edebilirlik Operasyonel Programı’nın Uygulanması için Kurumsal Kapasitenin Oluşturulmasına Yönelik Teknik Yardım Technical Assistance on Institutional Building for the Implementation of RCOP in Turkey Training Programme on Contracts Implementationfor End Recipients Trainer: Aslı Gülgör Procurement and Contract Management Non Key Expert

2. Procurement Practical Guide to Contract procedures for EU external actionspublished on the EuropeAid web site in January 2012

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

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

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

6. Why are we using PRAG?

7. Legislative underpinnings • The Financial Regulation No. 966/2012 and 1268/2012(Financial Rules applicable for General budget of Union) • Council Regulation (EC) No. 1085/2006 of 17 July 2006 – establishing the Instrument for Pre-Accession Assistance (IPA) • Commission Regulation (EC) No.718/2007 of 12 June 2007 laying down the implementing rules governing the provision by the Community of the pre-accession assistance established by Council Regulation (EC) No. 1085/2006 (IPA IR) • Commission Regulation (EC) No. 80/2010 of 28 January 2010 amending Regulation (EC) No. 718/2007 implementing Council Regulation (EC) No. 1085/2006establishing the Instrument for Pre-Accession Assistance (IPA) • The relevant Framework Agreement (FWA) • PRAG with its standard documents and templates

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

9. Eligibility • Participation in the procurement and grant procedures is open on equal terms to all natural and legal persons of the EU member states and the countries covered by the Regulation under which the contract is financed No restrictions for individual experts Regulation No 2112/2005 Article4: “All experts engaged by tenderers may be of any nationality” The rule on nationality

10. Eligibility (2) Eligible Countries • Member States of the European Community: • Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom • Member States of the European Economic Area: • Liechtenstein, Norway • Candidate Countries: • Croatia, Former Yugoslav Republic of Macedonia,Iceland, Montenegro, Turkey • Potential Candidate Countries: • Albania, Bosnia and Herzegovina, Kosovo under UNSCR nº 1244, Serbia, • ENPI Countries: • Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, Palestinian Authority of the West Bank and Gaza Strip, Russian Federation, Syria, Tunisia, Ukraine • Participation is also open to: • Developing Countries specified by the OECD DAC (thematic programmes) • International Organisations • Beneficiary Countries that have reciprocal access to External Aid • A third country (with a derogation endorsed by the EC)

11. Eligibility (3) The rule of origin • All supplies and equipment purchased must originate in the EU or in an eligible country as defined above in the nationality rules • In its tender, a tenderer must state the origin of supplies

12. Eligibility (5) Decided on case-by-case basis by the EC before the procedure is launched • may extend eligibility to natural and legal persons from a country not eligible • may allow the purchase of supplies and materials originating from a country not eligible (Price will not be accepted as justification) Any derogation must be foreseen at PN stage Exceptions to the rules

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

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

15. Other essential points • Conflict of Interest • Awarding principles • No retroactive awards • Use of standard documents • Record Keeping • Availability of funds • Environmental aspects

16. WHAT IS CONFLICT OF INTEREST?

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

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

19. Exeptions from PRAG With FIDIC

20. For works..

21. Advanced Training PRAG Works 5-7 April 2011 PRAG Works This project is co-financed by the European Union and the Republic of Turkey • PRAG & FIDIC integration • PRAG; Practical Guide to Contract Procedures for EU ExternalActions • FIDIC; conditions of contract • FIDIC replaces/changes certain documents of PRAG, but • Mainly they complement each other. • It is important to understand what each stands for in practice…

22. Works Contracts • Work Contract Types by nature • Construction (Employer’s Design FIDIC RED BOOK) • Plant and Design – Build (FIDIC YELLOW BOOK) • Design Build Operate • (FIDIC YELLOW BOOK) • (FIDIC GOLD BOOK – still not finalized) • EPC (Engineer Procure Construct) /Turnkey Projects (FIDIC SILVER BOOK)

23. PRAG in Procurement • FIDIC in Implementation(execution)

24. Vision in Tendering

25. Vision • Rugged (Reliable) High Performance (Short Life) Basic (Cheap) Luxury (Expensive) Long Life

26. Short Lists

27. Criteria.. • Performance • Consumption • Compactness • Reliability • Design Life • Operability • Compatibility

28. Conditions of Contract

29. Fédération Internationale des Ingénieurs- Conseils

30. Founded in 1913 • An umbrella organization with the membership of national associations • Has more than 70 members • Represents the consulting industry

31. FIDIC Documents • Contracts • Agreements • Procedures • Consultancy Documents • Information Documents

32. Standard Contracts • FIDIC • NEC3 (New Engineering Contract) • ICE (The Institution of Civil Engineers) • AIA (American Institute of Architects) • Engineering Advancement Association of Japan • Construction Industry Development Board Singapore • Kreditanlage für Wiederaufbau, Germany

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

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

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

36. FIDIC New Red Book FIDIC New Yellow Book FIDIC Green Book FIDIC Silver Book FIDIC Orange Book FIDIC New White Book FIDIC Standard Form of Contracts

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

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

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

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

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

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

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

44. PRAG • Eligibility Rule • Also for Works Contracts

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

46. PRAG - FIDIC Integration

47. Advanced Training PRAG Works 5-7 April 2011 PRAG Works This project is co-financed by the European Union and the Republic of Turkey • PRAG & FIDIC integration • PRAG; Practical Guide to Contract Procedures for EU ExternalActions • FIDIC; conditions of contract • FIDIC replaces/changes certain documents of PRAG, but • Mainly they complement each other. • It is important to understand what each stands for in practice…

48. Which FIDIC • Work Contract Types by nature • Construction (Employer’s Design FIDIC RED BOOK) • Plant and Design – Build (FIDIC YELLOW BOOK) • Design Build Operate • (FIDIC YELLOW BOOK) • (FIDIC GOLD BOOK – still not finalized) • EPC (Engineer Procure Construct) /Turnkey Projects (FIDIC SILVER BOOK)

49. Questions and answers