Committee of Independent Experts
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7.1. Regulatory and budgetary framework
7.2. Organisational structure
7.3. The report of the Court of Auditors
7.4. Delegations of responsibilities
7.5. The contracts
7.6. Project implementation and follow-up
7.7. Conclusions
7.8. Commissioners' responsibilities
7.1.1. The Commission, since the Council resolution of 22 July 1975 defining the role it ought to play in nuclear safety issues, has had the task of acting as a catalyst for Member State initiatives, seeking a common position within international organisations and promoting harmonisation of safety requirements and criteria in order to submit optimum draft Community provisions in this area to the Council.
7.1.2. Following the accident in Unit 4 at Chernobyl in 1986, the international community began to size up the risks to the planet posed by the stock of Soviet-designed nuclear reactors, which focused on meeting nuclear production requirements, while neglecting safety and environment questions. From 1990 to 1997, accordingly, the European Community allocated ECU 848.5 m for nuclear safety programmes, including ECU 786.1 m under the PHARE and TACIS programmes. Those appropriations are intended to support and speed up domestic safety upgrading programmes, but not to shoulder recipient countries' own responsibilities. Community aid represents roughly 1% of the spending which would have to be effected to upgrade 65 stations concerned.
7.1.3. Most Community aid for nuclear safety has been provided under the PHARE and TACIS programmes and represents, respectively, 2% and 20% of the commitments for those programmes. The commitments break down as follows:
7.1.4. The TACIS and PHARE rules constitute the legal framework for these measures. TACIS is covered by the Council Decisions of 15 July 1991, 19 July 1993 and 4 July 1996 on Community support to assist economic transition, firstly in the Soviet Union, subsequently (to take account of political developments) in Russia and the other New Independent States (NIS), as well as in Mongolia.
7.1.5. With regard to PHARE, the Council Decision of 18 December 1989 on economic aid to Hungary and Poland, successively amended to extend aid to the countries of Central and Eastern Europe, constitutes the applicable rules.
7.1.6. Each year, lastly, the Commission adopts a nuclear safety programme relating to TACIS and PHARE.
7.1.7. The Financial Regulation and the detailed rules for the implementation thereof plus the Commission's internal budget implementation rules constitute the other provisions. It should be pointed out that the conclusion and award of Community-financed contracts benefiting recipients of external aid are governed by Articles 113 to 119 of the Financial Regulation, notwithstanding Title IV of the Financial Regulation, with only service contracts awarded in the interests of the Commission being governed by Articles 56 to 64a of Title IV, Section I, i.e. by the ordinary provisions.
Article 118 stipulates inter alia that:
(1) contracts for services and cooperation shall be awarded after restricted invitations to tender;
(2) some contracts may be awarded by private treaty, particularly in the following cases:
7.1.8. Under the PHARE and TACIS programmes, contracts may be concluded by private treaty up to a value of ECU 200 000 (originally ECU 300 000).
7.2.1. The Commission is the authorising authority for nuclear safety expenditure for the Central and Eastern European countries (CEEC) and the NIS. It was decided to authorise the Commissioner responsible for external relations. From 1990 to 1997, the Commissioners responsible were:
7.2.2. The managing authority is DG I A, which has a total complement in Brussels of 560 officials and other staff (204 category A officials and 29 detached national experts), specifically Unit 1AC5, which is responsible for nuclear safety and the coordination of energy measures. Several other directorates-general deal with nuclear-related questions, such as the RELEX joint service created in 1998 and made up, in part, of officials from DG 1 A.
7.2.3. A PHARE/TACIS committee, comprising representatives of the Member States and chaired by the Commission representative, is consulted on proposals submitted to it by the Commission. Should the committee be unable to take a decision or should it deliver a negative opinion, the Commission may submit its proposal to the Council.
7.3.1. In its Special Report No 25/98 (OJ EC C35/1 of 9 February 1999) concerning operations undertaken by the European Union in the field of nuclear safety in central and eastern Europe (CEEC) and in the new independent States (1990 to 1997 period), the Court of Auditors criticises the approach taken by the Commission, its management of the operations, and the mobilisation of appropriations and points to the poor results.
7.3.2. The following, in particular, are called into question:
(1) the excessive transfer of Commission responsibilities to third parties (cf. 6.3.)
(2) the fact that there were no tendering procedures for contracts with on-site assistants and few contracts with supply agencies (cf. 6.9.), plus uncertainty in the share-out of work between contractors and subcontractors (cf. 6.8.)
(3) inadequate implementation monitoring and project follow-up (cf. 4.12. to 4.18).
The Commission has responded to these criticisms (document attached to the Court of Auditors' report) and has forwarded additional information to the Committee of Independent Experts.
7.4.1. The DG I A unit in charge of the programmes did not have the necessary manpower at its disposal, in terms of numbers and expertise, to draw up the nuclear safety programmes, follow them up and monitor implementation. For this reason, the Commission delegated some of its responsibilities to the Twinning Programme Engineering Group (TPEG) and to supply agencies to such an extent that the Court of Auditors termed these delegations excessive and likely to clearly jeopardise the institution's independence.
7.4.2. TPEG was established on 24 July 1992 in response to the Commission's desire to rely on a single structure constituted by European Community electricity generators responsible for pressurised-water nuclear reactors. TPEG is a consortium made up of EDF (France), TRACTEBEL (Belgium), MAGNOX (United Kingdom), DTN (Spain), VGB (representing the German electricity generators RWE, KKE and GKN GmbH), ENEL (Italy), GKN (Netherlands) and IVO/TVO (Finland).
7.4.3. TPEG played an important role in drawing up the programmes. In its Special Report, the Court of Auditors considered that the Commission had delegated too many of its planning responsibilities, thus undermining its authority and independence (cf. point 2.7.).
7.4.4. In its reply to the Court of Auditors and to the Committee of Experts, DG I A pointed out that TPEG had not handled the planning on its own and that it itself had set the strategy. Furthermore, its services and Member States' experts had reviewed the TPEG proposals before the programmes had been adopted by the Commission, following consultation of the PHARE/TACIS management committee. For DG I A, in fact, making use of TPEG genuinely enhanced the independence of the expert assistance provided, since all the Member States' nuclear power stations operators, and not just one or some of them, were represented within it. Some areas were excluded from its field of activity, however, such as nuclear safeguards, nuclear waste reprocessing, security authorities and, to some extent, on-site assistance.
7.4.5. TPEG was involved in drafting virtually all the terms of reference for the design safety projects in the 1991 and subsequent TACIS programmes and the PHARE programmes as of 1992-1993. Because of its involvement, project uniformity was ensured.
7.4.6. As of 1996, TACIS rules prohibited firms which had taken part in the process of defining projects from implementing them. For that reason, starting with the 1996 programmes for TACIS and the 1998 programmes for PHARE, the terms of reference for the design safety projects, were established by the Joint Research Centre. The involvement of the JRC is longer-established, since it also carried out all the projects concerning nuclear safeguards since 1994 and took part in the 1991 TACIS evaluations, but the rules by which it used to be governed did not authorise it to take a more active role with regard to nuclear safety.
7.4.7. On account of its independence, the JRC affords considerable advantages; but it is not in a position to cover all expertise requirements needed for implementation of the programmes. For that reason, the Commission must continue to rely, in part, on the nuclear power industry of the European Union's Member States.
7.4.8. TPEG was dissolved in January 1999.
7.4.9. The Commission often resorts to supply agencies for the implementation of complex and large-scale projects. In the opinion of the Court of Auditors, interposing these agencies between the Commission and the European nuclear power station operators responsible for on-site assistance complicated programme implementation, contributed to delays and allowed excessive advances to be paid, thus artificially improving the rate of mobilisation of appropriations. In fact, the use of supply agencies was inevitable. Commission services were not in a position to take charge of project management (issuing of invitations to tender, follow-up to evaluations, contract negotiations, payments, etc.), since they did not have the necessary expertise. The alternative to making use of agencies would have been to entrust these tasks to the electricity generators responsible for on-site assistance; in 1993-1994, however, DG XX (Financial Control) judged this solution to be unacceptable, since it would have given too many powers to firms intimately involved in the programme (TPEG). DG I A therefore decided to bring in agencies as a counterweight to assist it in administering supply contracts, while requiring them to comply with precise supply rules.
7.4.10. For service contracts, the Financial Regulation stipulates the procedure involving restricted invitations to tender. However, contracts with supply agencies have often been concluded by private treaty in order to maintain service continuity. In general, such contracts represented amounts below the threshold authorised for the award of private-treaty contracts under the PHARE and TACIS programmes.
7.4.11. For their first contract, agencies had their services remunerated on the basis of flat-rate fees. Subsequently, services were financial on the basis of a fixed percentage of the value of the equipment concerned. Payments were made in instalments, as supply projects proceeded. Agencies' fees are also dependent on the degree of complexity of the specific services requested.
7.4.12. The responsibilities of the agencies were set out in their respective contracts, in particular with regard to the preparation of invitation to tender documentation. The agencies are responsible for ensuring that specifications are neutral and have the task, under Commission oversight, of opening tenders and submit to it the final evaluation report and the contractual documents for the purchase of equipment. They also work with the operators on-site, who define the technical specifications and make arrangements for evaluating tenders.
7.4.13. In 1996, the procedures applied to purchases made via agencies set out in more detail and standardised the description of the role of the players concerned (Commission, on-site consultant, agency and recipients).
7.4.14. The agencies discharge the following responsibilities:
7.4.15. A major criticism levelled by the Court of Auditors concerned the fact that the amounts paid to agencies inflated budget implementation with regard to the volume of contracts and did not reflect actual contracts. Of the ECU 167 m paid out, the contracts concluded by agencies in 1997 represented ECU 44.06 m. Furthermore, most of the contracts concerned were apparently concluded at the end of the year, which would have continued to improve the rate of utilisation of appropriations at year end. Lastly, large amounts of bank interest accrued which had been neither entered in the accounts nor audited by Commission services.
7.4.16. The Commissioner responsible replied to the Committee of Experts that, within the Commission, the full details of delegated operations are not recorded in real time. They are examined by DG I A services and, subsequently, by JRC services in regular reports. Interest is recorded in those reports; it is then paid back to the Commission upon expiry of contracts with supply agencies.
7.5.1. From the outset of the programmes, the Commission has concluded service contracts involving large sums without competitive tendering, with ECU 192 m out of a total of ECU 610 m, or 31% of the value of the contracts, pursuant to Article 118(2) of the Financial Regulation, having been committed by private treaty.
7.5.2. DG 1 A has justified the use made of this procedure by citing the exceptional nature of the area of action. Private treaty was used for on-site assistance in particular, since Commission services wished to call in the Union's power station operators for contracts concerning a large number of nuclear sites.
7.5.3. During his hearing before the Committee of Experts, the Commissioner pointed out that, as a rule, private-treaty contracts related only to services (safety authority assistance projects and contracts with the Union's electricity generators for on-site assistance) and that, in agreement with the Financial Controller, cost controls had been carried out by applying the hourly rates laid down on the basis of the outcome of the twenty or so invitations to tender issued for the design safety projects under the 1991 programme, which were evaluated in February/March 1993.
7.5.4. In spite of requests from nuclear power station operators, the rates have remained unchanged from the outset. Since it has not been demonstrated that the costs were too high, the Commission services consider that they have protected the Community purse.
7.5.5. As the volume of activities was the variable factor, it was described in detail in the terms of reference, which were discussed on a case-by-case basis. Estimates were analysed and discussed before contracts were concluded, but the resources available for legal checking of contracts are not specific to the nuclear programmes, since they are identical for all TACIS and PHARE contracts.
7.5.6. On 12 July 1994 the Financial Controller accepted a derogatory framework proposed by DG I A which was based on a list of the types of nuclear safety contracts as grounds for authorising derogations without the prior agreement of Financial Control. The contracts concerned were:
7.5.7. These contracts make it possible to improve the nuclear facility stock in the East by introducing European know-how. Although most such contracts can be concluded following a restricted invitation to tender, private treaty proved necessary in about 20% of cases for following up operations under previous projects or for technical reasons leading the institution to approach a particular contractor because of his expertise in a specific technology.
7.5.8. Derogations are required for this category of contract, which is the second largest, either because of the limited number of suppliers, which makes it necessary to make use of restricted rather than open invitations to tender, or for reasons concerning technical characteristics or on grounds of urgency, necessitating private treaty. Equipment contracts were concluded by private treaty mainly for spare parts in respect of which it was not possible to change supplier.
7.5.9. For such service contracts, competitive tendering would have been inappropriate: the Union's safety and regulatory authorities are non-profit-making or public-law organisations, each representing a particular technical system. If an invitation to tender were to lead to the selection of a single European partner, the system transferred to the East would constitute the first instalment of a contract which would subsequently be captive. To avoid such problems, the five annual contracts representing some ECU 8 to 10 m were concluded by private treaty with a consortium of national authorities which had decided to pool their knowledge, allowing them to provide coherent and balanced assistance.
7.5.10. In view of the limited number of nuclear operators in the European Union and the little interest shown by Western operators for this type of activity, the contracts initially concluded were by private treaty and were extended on the same basis. In 1994 there were nine contracts, with an annual volume of ECU 15 to 18 m.
7.5.11. This type of activity involves about ECU 6 m, with 100 contracts per year to provide the Commission with technical assistance services so as to help it to prepare the nuclear safety programme, make the best operational choices and follow up and evaluate projects. These contracts were concluded by private treaty with TPEG - a multinational consortium of nuclear operators established at the Commission's initiative.
7.5.12. By their nature these contracts, based on the notion of partnership, can only be concluded by private treaty.
7.5.13. Derogations from customary competitive tendering procedures are justified:
7.5.14. As regards two thirds of the remainder of the contracts, the Court of Auditors considered that some invitations to tender tended to create the impression that there was satisfactory competition whereas, in fact, the Commission was in a quasi-monopolistic or oligopolistic position which encouraged private treaty. In those cases, alternative procedures should have been used to verify the prices emerging from invitations to tender (itemising and analysis of prices or framework contracts) (cf. 5.12.).
7.5.15. In his replies to the Committee of Independent Experts, the Commissioner responsible acknowledged that that had been the situation, but that it had been a special case where the beneficiary wished to make improvements to a radioactive-waste incineration plant. Contracts - concluded outside the TACIS framework - had existed between the power station and a company since the start of the 1990s. The Commission's choice was between requesting a derogation to award a contract by private treaty with the firm or seeking to widen the potential choice through competitive tendering. So as not to seek derogations at a time when it was possible to organise an invitation to tender, it opted for the second solution. A single tender was received, and the contract was concluded with the original bidder. The Commissioner stresses that this was a works contract, whereas the TACIS programme makes provision only for service or supply contracts. The alternative for DG I A would have been to abandon the project.
7.5.16. In its report, the Court of Auditors pointed out that, in many instances, design safety research contracts go to Russian design institutes via subcontractors and that the specifications in the subcontracts are often identical to those in the main contract, thus making it extremely difficult to evaluate the respective workloads of European Union contractors and their Russian subcontractors (cf. 5.19.). The way in which work is divided between contractors and subcontractors is vital, however, since Western experts' fees are far higher than fees for Eastern European experts with equivalent expertise. The Court of Auditors concluded that the subcontracting arrangements were likely to enable European Union contractors to make sizeable profits which cannot be verified (cf. 2.12.)
7.5.17. Appearing before the Committee of Experts, the Commissioner responsible replied that the approach chosen, in particular for study contracts under the 1991 TACIS programme, consisted in requiring bidders, for subcontracts, to accept a flat rate laid down by the Commission on the basis of a technical opinion by European Union experts. In all instances bar one, that rate had been accepted by the Russian subcontractors.
7.5.18. Subcontracts were negotiated by the main contractors selected under invitations to tender on the basis of a budget imposed by the Commission. During negotiations, almost all the firms adopted the same approach, i.e. they included general terms in the subcontract which were similar to those in the main contract plus payment arrangements based on the staged submission of reports or information by the Russian side. The Commission subsequently instructed TPEG to define in greater detail, when the terms of reference were being drawn up, the respective tasks of the main contractor and the subcontractor. In 1993, the terms and conditions documents systematically laid down a precise breakdown: the maximum amount allocated for the Russian subcontractors' tasks was consistently defined in terms of workload or subcontracted budgets when the terms and conditions were accepted by the beneficiary.
7.6.1. With regard to project implementation, according to the Court of Auditors, 14 of the 52 projects relating to on-site assistance for the 1992 to 1994 programmes had been carried out, and 11 cancelled, at the end of the financial year 1997.
7.6.2. The Commissioner responsible explained to the Committee of Experts that the need to commit global amounts each year, after consulting the Management Committee, had often led to the adoption of budgets by site before project content had been fleshed out. Consequently, the feasibility of equipment projects was all the more uncertain because, in general, equipment was requested which was unsuitable and difficult to introduce in the local context. For recipients, the heavy plant aspect often takes precedence over organisational considerations and consideration of raising awareness of safety questions, which, in their view, the European side took exaggerated account of.
7.6.3. The major disparity between budgets for on-site assistance and budgets for actual projects relating to such assistance (cf. 5.11.) is accounted for by the fact that, with regard to general assistance for operations, spending is always immediate (pooling of operational experience through training seminars, training periods in Europe and virtually permanent presence of Western experts on sites). Equipment is supplied after protracted discussions between electricity generators at the sites and the Russian and Ukrainian partners. Payments are made even later, following submission of invoices, and come up against difficulties relating to differences in technical specifications and administrative formalities such as customs.
7.6.4. The Court of Auditors also pointed to the delay in turning budgetary decisions into contracts (63% of allocations) and payments (37%). The figures are even lower in the case of Chernobyl (20% and 8% respectively) (cf. 5.2.2.).
7.6.5. The Commissioner responsible replied to the Committee of Experts that, in order to improve the situation, DG I A had introduced the following changes:
7.6.6. At the start of the 1990s, under pressure from the European Parliament and the Council, priority had been given to the immediate organisation of operations on the basis of applications from recipient countries. Those applications were piecemeal and involved small-scale action. Only on the basis of this experience was the Commission able, some years later, to respond to needs by cancelling certain projects.
7.6.7. With regard to Chernobyl, the project could not commence until there had been sufficient progress in the negotiations with Ukraine on shutting down the power station.
7.6.8. Project follow-up was carried out be means of missions by Commission officials and contracted experts. For each project, furthermore, checks were arranged throughout the process by Commission services acting to:
7.6.9. Supply agency projects are also monitored by the task manager on the spot in the beneficiary countries.
7.6.10. At central level, the programme follow-up tools are as follows:
7.6.11. The Désirée records faithfully reflect all actual TACIS contracts signed with contractors.
Only supply contracts awarded by supply agencies are not recorded in Désirée, but each invitation to tender and each contract prepared and awarded by supply agencies is verified by the Commission as part of the payment procedure.
7.6.12. The 1992 TACIS programme earmarked a budget of ECU 1 million for project management and coordination by a Joint Management Unit (JMU) based in Moscow. The purpose of that unit, made up of staff from the Ministry for Atomic Energy (MINATOM), the safety authority (GAN), nuclear power station operators (REA), other Russian organisations involved and Western experts, was to make sure that TACIS operations were properly implemented and facilitate relations with Western institutions. The need for such a structure was restated in the 1993 TACIS programme. In October 1997, the representatives of the Russian Ministry for Atomic Energy expressed their disappointment at the lack of progress made in setting up the JMU. Contracts were concluded in November 1997 in order to finance it until 30 September 1999; those contracts were charged to the 1994 and 1996 programmes. The Court of Auditors considered that the lack of a JMU in Moscow had prevented any continuous monitoring of programmes in Russia until the end of 1997.
7.6.13. In its reply to the Court, the Commission pointed out that the JMU had been established to help the Russian authorities to coordinate their participation in the nuclear safety programme, particularly at the programme definition stage, and to act as a clearing house for information. Appearing before the Committee of Experts, the Commissioner responsible explained that the setting up of the JMU had come up against difficulties because MINATOM was unwilling to make premises and staff available, except in return for financial compensation under TACIS, despite the fact that the JMU is described as a joint unit, and because the Russian coordinator - the official partner for the entire TACIS programme - was hostile to the creation of a specific nuclear structure on the fringes of the coordination unit.
7.7.1. Two main questions are raised:
7.7.2. The Commission does not have sufficient human resources at is disposal, in terms of numbers and expertise, to manage programmes of such complexity. Staff assigned to the nuclear safety programmes are on fixed-term contracts, with a maximum of three years for detached national experts and one to three years for auxiliaries. Because of this permanent turnover, staff must be trained when they take up their duties; and when they leave the institution, their knowledge disappears with them. This loss of knowledge is not offset - again because of a lack of staff - by sufficient arrangements to keep and archive files.
7.7.3. Furthermore, the services responsible for nuclear safety programme implementation are not grouped together, which necessitates major coordination efforts with no guarantee of success. For that reason, an inter-departmental group was set up in 1998, bringing together officials from DG I A, DG II (Economic and Financial Affairs), DG XI (Environment, Nuclear Safety and Civil Protection), DG XII (Science, Research and Development), DG XVII (Energy) and the Joint Research Centre.
7.7.4. The Commission considers that programme implementation ought to be improved because of the setting up of the inter-departmental group and the RELEX joint service, the use of the resources available at the JRC and the setting up of the JMU in Moscow. However, the complexity of the structures and the fact that they are fragmented lead the Committee of Experts to put a question mark against the effectiveness of the solutions adopted by the Commission.
7.7.5. In spite of the replies given by the Commission, the problem of the award of contracts to European Union industrial firms remains, given an oligopolistic and indeed even monopolistic market because of the need to apportion contracts among the Member States, with extremely high risks of concerted practices. Regardless of whether contracts are concluded by invitation to tender or private treaty, there are question marks against the Commission's ability to carry out appropriate cost analyses by specialised technical services and to make provision, in contracts, for the legal means for cost control on an a posteriori basis.
7.7.6. The Commission's reply concerning the setting of hourly rates on the basis of the twenty or so invitations to tender issued in 1991 did not answer this question sufficiently pertinently.
7.8.1. From the examination undertaken by the Committee of Independent Experts, exclusively on the basis of the Court of Auditors' recent report, of the Commission's replies and from the discussion with the Commissioner responsible, it emerges that there are no grounds for contending, as matters stand at present, that the implementation of nuclear safety programmes in Eastern countries gave rise to fraud or serious irregularities.