This section provides answers to a number of questions which may arise relating to contractual matters.
Please note that the questions and answers are provided for information purposes and may need to be complemented by individual assessments to be made in each particular case.
1. Does the statement in point 8 of the Application form only concerns the leader of a consortium?
The statement is signed by the leader of the consortium for all consortium members, since the leader is authorized by each consortium member to engage the entire consortium.
2. Is it necessary to provide a separate declaration of honour (in addition to the declaration of point 7 of the Application form) to declare that we are not in any of the situations for exclusion mentioned in the Practical guide to contract procedures for European Union external actions (PRAG), Section 2.6.10?
The declaration on honour on exclusion and selection criteria is the Annex A14 of PRAG and should be filled in by each Consortium member.
3. For an application only project references implemented by leader or partners count, but project references of subcontractors should not be included and will not be taken into account.
Usually the project references of subcontractors are not taken into account during the evaluation.
However, an economic operator may also, where appropriate and for a particular contract, rely on the capacities of other entities, regardless of the legal nature of the links which it has with them, therefore, including the subcontractors. It must in that case prove to the Contracting Authority that it will have at its disposal the resources necessary for performance of the contract, for example by producing an undertaking on the part of those entities to place those resources at its disposal. Such entitiesmust respect the same rules of eligibility as the economic operator.
4. Can a tenderer in his proposal include an expert who has been involved in appraisal and or preparation missions or in one of the first stages of the formulation of the Terms of Reference even if he will be hired on a contract basis and is not in any way connected to one of the partners?
As regards service tenders, tenderers have to provide the CVs, employer's certificate and references for the key experts proposed. The fact whether the expert described in your example will or will not be eligible, has to be assessed by the contracting authority on case by case basis taking into consideration whether his/her involvement in the initial stages of the project would or would not constitute a situation of conflict of interest, given the eventual unfair advantage or particular knowledge in relation to other tenderers not having at their disposal such expert.
5. In the application form for a service contract financed by the European Commission, we are concerned by a number of doubts about the interpretation of point 7 where it is indicated that one has to submit a signed declaration the model of which is provided further below. This foresees an annex listing "the enterprises in the same group or network". I would be grateful if you could precise:
- Which interpretation does DG DEVCO give to this text, notably to the judicial notion of a group? What about, for example, the participation in companies likely to submit their application, in parity with two other shareholders (e.g., 30/30/30/10)?
- In the case of two applications which unintentionally derive from companies of the same group, is it possible to withdraw one of the applications without impacting the other one?
As regards the first question, please note that the notion of a group of companies can only be assessed on a case-by-case basis. An abstract interpretation is therefore not possible. The possibility that you mention, in which an applicant (or member of a consortium) controls 30% of the capital of another applicant (or member of another consortium), constitutes at first sight a situation envisaged by point 7. It is, however, possible for the different members of the same group or network of companies to form a consortium.
Concerning the second question, a double participation, in competing consortiums, of companies of the same group, leads to the exclusion of both consortiums.
6. In the INSTRUCTION TO TENDERERS for Service Contract point on Financial offer there is a statement: "Financial offer [For global price contracts: The Financial offer must be presented as an amount in [ euro /<national currency> ] and must be submitted using the template for the global-price version of Annex V of part B of this tender dossier". We consider the Annex V- BUDGET is just a budget, without any signature, name of tenderer and could not be considered as the legal binding financial offer at all.
The Annex V - BUDGET is part of the tender to be submitted by tenderers in accordance with the first paragraph of the instruction to tenderers. Furthermore the tenderer confirms in the tender submission form that they will offer to provide the services requested in the tender dossier on the basis of a number of specified documents, which comprise the Technical offer and the Financial offer.
7. What is the status of subsidiaries and other partners forming a consortium and which are specified in point 1 of the Application form, where the names and nationality of leader and partners should be included. Are subsidiaries with different nationalities of the parent company participating in a service contract to be considered as partners or are they to be considered as part of the parent company, meaning that it is not necessary to provide any information of the subsidiary in the application form? The same questions could be addressed to the Commission concerning two or more public institutions under the same ministry but participating in the same contract or concerning companies forming a network for a specific task?
Subsidiaries of the same group actually taking part in the contract may put their names down as members of a consortium, provided they are separate legal entities. However, if the subsidiaries are not active in the contract they should not be considered as members of a consortium.
As regards companies forming a network with other companies, if you refer to the commercial relationship existing between a company and its subcontractors, then these companies are generally not considered as being part of the same group. The concept of network rather refers to the kind of complex relations between related entities, such as for example many larger audit firms, where there is no parent company-subsidiary-relationship between the entities of such a network.
8. According to the declaration attached to the Application form data must be provided for the individual partners of the consortium. Should a parent company, consisting of more individual business units with own management, provide consolidated data or data only for the business unit of the parent company?
If the subsidiaries are legal persons which do not contribute to the contract, they should not be included. If business units lacking legal status are part of the candidate company, they should be included in the consolidated data required.
9. According to the declaration attached to the Application form companies must attach a current list of enterprises in the same group or network and only include data in the application form concerning the resources and experience of the legal entity. How many levels of ownership, e.g. subsidiaries also owning subsidiaries 100% owning yet other subsidiaries 100% etc., must be included in the list?
The list should be comprehensive, to allow for the prohibition on conflict of interest between competing firms to be efficiently enforced.
10. Can the Contracting Authority prohibit a contractor to use an air carrier which is included in the European Union (EU) "blacklist"? On the contrary, can the Contracting Authority insist that a contractor takes the most direct route even if this route were only served by a blacklisted carrier?
Commission Regulation (EC) 474/2006 of 22 March 2006 established a list of air-carriers which are subject to an operating ban or operation restrictions within the EU (so-called Community "blacklist"). An operating ban means the refusal, suspension, revocation or restriction of an air carrier's operating authorisation in the EU. As a consequence of above legislation, the Commission instructed its travel agents not to cooperate with airlines on these lists with regard to all Commission staff missions.
Article 24(2) of the General Conditions for service contracts (applicable to the Budget and the 11th EDF) stipulates that the Consultant may include "time spent travelling exclusively and necessarily for the purpose of the Contract, by the most direct route" in the timesheets. However, it would be contradictory if the EC banned an airline from the EU and cancelled cooperation with this carrier with regard to its own staff because of safety concerns and then obliged its external contractors to use the carrier. Furthermore the contractor has an obligation to put in place security measures for its employees and experts located in the beneficiary country commensurate with the physical danger facing them.
In the light of these considerations, the notion "the most direct route" in the aforementioned articles has to be construed as including the most direct route that is not served by a carrier which is subject to an operating ban or operation restrictions under Regulation (EC) 474/2006 and that does not unreasonably and disproportionately prolongs the journey.
The Contracting Authority could in any event draw the contractor's attention to the existence of the blacklist to leave him the choice of the air carrier in full awareness of potential risks.
11. In the instruction to tenderers it is specified that documentary proof have to be submitted for the key experts’ diploma and experiences. What can we do if these documents are not available? In Annex IV the expert also have to specify a reference for the experience. What can we do if no reference is available, i.e. the company the expert worked for does no longer exist?
As the evaluation of the key experts as a general rule consists of 40 % of the scores allocated it is important to have reliable information. The documentary proof for the experts is needed to verify the correctness of the information submitted. If the documentary proofs or references are not available the tenderer has the possibility to justify this. The evaluation committee judges if the justification is acceptable or not and has the discretionary power to accept a tender which is missing some documentary proof.
12. The shortlist for a service contract has been published. Is it possible to modify the consortiums?
The instructions to tender ("3. participation, experts and sub-contracting" point d) indicate that tenders should be submitted by the same service provider or consortium which has submitted the application form. No changes in the identity or composition of the tenderer are permitted unless the Contracting Authority has given its prior approval.
Therefore, while the general rule is that modifications are not permitted, the Contracting Authority can still authorise minor modifications such as swapping positions within the consortium or when there are changes in the status of any of the companies, for instance because of a merge.
13. The Statement of Exclusivity and Availability (SoEA) Question: Is it correct to assume that the SoEA applies to key experts in long-term projects and for FWC assignments, but not for non key expert positions?
Answer: The published SoEA shall be used for the key experts proposed for tenders in procurement procedures for services. For global price contracts, the SoEA normally is not requested.
Q: What is meant by confirmed engagement?
A: The engagement of an expert is confirmed where such expert is committed to work as a key expert under an already signed contract financed by the EU's general budget or the EDF or where he/she is a key expert in a tender which has received a notification of award. The date of a confirmed engagement is when the notification of award is sent to the Consultant.
Q: When an expert has signed a SoEA for a project proposal, what should he/she do if he/she signs another SoEA for an overlapping project? Is there a standard procedure for updating the earlier SoEA(s) and adding the details of subsequent commitments? Should he/she fill in and sign a new version of the SoEA or simply inform the earlier contractor(s) by fax or email?
A: As mentioned in the SoEA, it is sufficient that the expert notifies the earlier contractor.
Q: When should the expert provide this updated information (making an additional commitment) – only after receiving written confirmation that he/she will be proposed for the new position or when the first approach is made?
A: The expert should inform immediately after he signs another SoEA.
Q: Shall this information be made available to the contracting authority? If the contracting authority is informed about any expert’s other possible commitments, is there not a risk that the CA will be materially influenced by this in evaluating the bids?
A: As indicated in the tender dossier, the contracting authority will evaluate the submitted tender, including the originally proposed experts, so there is no need to separately notify the contracting authority. Regardless this, the evaluation committees have the obligation to execute their duties impartially and objectively and any kind of information received will be handled in a neutral way.
Q: Is an expert required to inform the contractor(s) and contracting authority(ies) if included in a proposal for a non-EU/EDF-funded project (e.g. USAID, ADB, etc)?
A: This falls into the declaration in the statement, i.e. that the expert confirms that he/she has no other professional activity incompatible in terms of capacity and timing.
Q: Is there a maximum number of bids an expert can participate in?
A: No, there is no maximum number of bids. It falls into the risk assessment made by the experts and tenderers when preparing a tender.
Q: Does the SoEA apply to all service contracts, including FWC?
A: The published SoEA shall be used for all tenders in all procurement procedures for services unless a modified SoEA has been approved for a particular procedure. An example of such a case is the FWC.
Q: At what stage should an expert inform other tenderers that he/she is no longer available, after he/she has been offered an assignment – the moment he/she is informed of the offer or only when he/she has a signed contract with the contractor?
A: The expert has an obligation to notify the tenderer of his/her unavailability at the time the notification of award is received, as stated in the declaration.
Q: What will happen if the expert is unavailable at the time of notification of the award?
A: If the proposed expert is unavailable the awarded tenderer will have the possibility to propose a replacement expert. The tenderer shall justify why the expert is not available and the replacements shall be at least equally good in line with the evaluation criteria.
Q: If the key expert anyway may be replaced is there an obligation for the key expert who signs the SoEA to actually be available?
A: The contracting authority will select a tenderer partly on the basis of the evaluation of the key experts presented in the tender and expects the contract to be executed by these specific experts. Should the Contracting Authority learn that a tenderer has confirmed the availability of a key expert and signed the contract although the tenderer has deliberately concealed the fact that the expert is unavailable from the date specified in the tender dossier for the start of the assignment, the contracting authority may decide to terminate the contract.
14. Is travel time considered as working time?
The following provisions apply to both key experts and non key experts and for long-term and short-term assignments.
If the expert is travelling on a mission, outside the expert's place of posting and provided for in the Terms of References (ToR) annexed to the contract, the time spent travelling may be considered as working time and may be included in the time-sheets and invoiced.
If the expert is travelling to or from the place of posting for any other reason than a mission provided for in the ToR annexed to the contract, e.g. when the expert is taking up/leaving the assignment or travels for leave purpose..General Conditions from August 2018: Time spent travelling exclusively and necessarily for the purpose of the implementation of the contract, by the most direct route, may be included in the numbers of days or hours, as appropriate, recorded in these timesheets.
1. Are public opening sessions always held for works and supply contracts?
The public opening session is only organised in the context of open international tender procedures or local open tender procedures.
2. Can a tenderer make an offer different from the one mentioned in the technical specifications of a tender for works or supplies, provided it is better?
Generally, the calls for tenders are based upon the principle that the tenderers submit an offer that complies with the technical specifications of the tender dossier that has been given to them. Any offer that does not comply with these provisions shall therefore be rejected.
To allow for the opposite would be contrary to the case-law of the Court of Justice of the European Union (notably judgment Storebaelt of 22 June 1993, Case 243/89, p. I/3353 « In this regard, it must be stated first of all that observance of the principle of equal treatment of tenderers requires that all the tenders comply with the tender conditions so as to ensure an objective comparison of the tenders submitted by the various tenderers. »). The Contracting Authority defines its needs through the technical specifications of the tender dossier. The open tender procedures for supplies and works contracts are generally based on the principle that the contract is awarded to the cheapest offer that is compliant with the tender specifications.
In some specific cases, the award criteria may be the best value for money but this is exceptional and is always specified in the tender documents.
3. Are discounts always announced at the opening for works and supplies? This can be cumbersome and very complicated.
In the case of procedures that are divided into lots, any discounts offered by tenderers need to be announced orally during the public opening session. The Instructions to tenderers stipulate the following: “A tenderer may include in its tender the overall discount it would grant in the event of some or all of the lots for which it has submitted a tender being awarded to it. The discount should be clearly indicated in such a way that it can be announced at the public tender opening session.” The standard tender submission form of the Practical guide to contract procedures for European Union external actions (PRAG) require that tenderers clearly indicate the amount of their offer as well as any discounts.
1. Can call for proposals documents be translated into the local language(s) of the beneficiary country?
At the discretion of the contracting authority, the guidelines for applicants may be translated into the local language(s) for information purposes. However, in case of discrepancies between two or more language versions, applicants must refer to the language version that prevails, as indicated by the contracting authority. The guidelines for applicants will specify in which language applications must be submitted, and all further correspondence as well as the contracts should be in the same language.
2. What kind of information may be provided to applicants when answering the questions?
Answers to questions must bear on points of clarification to the documents published in the context of the call for proposals. In virtue of the principles of non-discrimination and equal treatment of all applicants and potential applicants, the contracting authority may on no account give an appreciation on the eligibility of an actor/action or content of an application. The contracting authority may not help a specific applicant to fill in his application form.
However, the contracting authority may organise information session(s) open to all potential applicants to explain the content of the call for proposals and the way an application form must be filled in. The information provided during such session(s) may complement the clarifications published by the contracting authority.
1. May the contracting authority give a preliminary opinion on the eligibility of an applicant/partner/action based on a short presentation?
See answer A.2 above.
2. Does the rule of nationality apply to all the staff working in the action?
The nationality rule does not apply to staff working in the action and employed by the grant beneficiary(ies) (coordinator and co-beneficiaries), including any affiliated entities, by means of a labour contract. Similarly, the nationality rule does not apply to individuals working under procurement contracts financed by the grant and awarded by the grant beneficiary(ies), including any affiliated entities.
It is reminded that the award of procurement contracts must comply with the nationality rule, as dictated by Annex IV of the grant contract. In this context, any contractor (including single-person companies) must, in general, comply with the following: all natural persons must be nationals of, and legal persons must be effectively established in, a country, territory or region mentioned as eligible by the relevant regulation/basic act governing the eligibility rules for the grant.
3. Under what conditions can a Swiss NGO be eligible for grants awarded by EuropeAid?
Since Switzerland is a member country of the OECD, Swiss entities may be eligible for grants financed under the DCI, ENI, PI, Greenland, INSC and EDF instruments, if the action is implemented in a Least Developed Country or in a Highly Indebted Poor Country. Additionally, Swiss entities may be eligible for grants financed under the EIDHR or IcSP instruments (for more information, see Annex A2a of the PRAG).
However, potential applicants must always refer to the specific rules applicable to each call for proposals as these rules may restrict eligibility with regard to the nationality, geographical location or nature of applicants.
1. For entities without legal personality eligible under a call for proposals, what documents need to be submitted to demonstrate that the representatives of such entities have the capacity to undertake legal obligations and assume financial liability?
As far as possible, the same supporting documents required from a legal entity should be provided by an entity without legal personality.
The capacity to undertake legal obligations on behalf of the applicant must be supported by a letter of the legal representative certifying his capacity to undertake legal obligations on behalf of the organisation in addition to the documents annexed to the Legal Entity File (e.g. a copy of the statutes or equivalent or other document that shows the entity indeed exists). The guidelines for applicants may indicate additional documents to be provided.
The financial liability assumed may be examined, for example, through a comparison between the EC contribution and the net assets of the applicant's representatives and through the provision of a declaration on honour that the applicant has the financial capacity to carry out the action.
Following a risk assessment by the contracting authority, the latter may require a pre-financing guarantee or reduce the reporting period foreseen in article 15 of the general conditions of the grant contract.
2. Do the grant applicants need to provide an exhaustive translation of all the supporting documents submitted?
In direct management, with the introduction of PADOR, all applicants have to register once and have to upload all supporting documents concerning their status in their original language. If this is not an official language of the European Union, a translation into the language of the procedure must be provided by the applicant. In indirect management, PADOR is not applicable and the supporting documents (including possible translations) will need to be submitted in paper format.
3. Does the applicant need to open a specific bank account for the contract?
No. Nevertheless, it must be stressed that costs incurred by the beneficiary(ies) must comply with all eligibility criteria specified in the general conditions of the grant contract. As such, costs must be identifiable and verifiable, in particular be recorded in the accounting records of the beneficiary(ies). In this context, the coordinator must ensure that any financial report provided to the contracting authority can be properly and easily reconciled to the accounting and bookkeeping system and to the underlying accounting and other relevant records. Also, any receipts, such as payments from the contracting authority or income generated by the action, must be easily traceable, identifiable and verifiable.
4. Does the name of the auditor have to be indicated in the contract before its signature?
Yes. The signature of the grant contract by the contracting authority amounts to acceptance of the auditor. However, the contracting authority reserves the right to require, after signature of the grant contract, that the auditor be replaced if considerations, which were unknown when the grant contract was signed, cast doubt on the auditor’s independence or professional standards.
5. Who provides the name and the address of the auditor?
The auditor is proposed by the grant beneficiary (or by the coordinator in case of multiple beneficiaries).
1. Can the percentage of EU co-financing vary as a result of corrections of the budget at the stage of contract preparation?
During the preparation of the grant contract and before its signature, the budget proposed for the action by the successful applicant must be corrected to remove any arithmetical errors and/or ineligible costs. The contracting authority may decide that other clarifications or minor corrections may be made to the budget. In any case, these corrections cannot lead to an increase in either the amount of the grant or the percentage of EU co-financing. Following these corrections, the resulting decrease in the total eligible cost of the action must be reflected in the EU contribution. Therefore, both the absolute amount and the percentage of EU-contribution indicated in the award decision are to be taken as maxima and cannot be increased, but only decreased at the stage of contract preparation. Any savings made can be used by the contracting authority to finance additional grant(s) under the call for proposals (for additional information, see section 18.104.22.168 of the PRAG).
2. Does the standard grant contract apply when the beneficiary is a private company or a public body?
Yes. It applies in all cases, except where the beneficiary (or the coordinator in the case of multiple beneficiaries) is an organisation whose pillars have been positively assessed. In that case, a contribution agreement shall generally be signed.
3. Is it possible not to refer to the percentage of financing of the action and to simply indicate the maximum amount of the grant?
No. A 'double ceiling', in terms of maximum amount and maximum percentage of EU contribution to the total eligible and/or accepted costs of the action, must be applied to the EU grant. The final amount of the grant may never exceed the maximum amount of the grant or the maximum percentage of EU contribution to the total eligible and/or accepted costs of the action specified in the grant contract.
4. Can the description of the action contain exemptions to the terms of the contract?
No. The special conditions of the grant contract prevail over the general conditions, which in turn prevail over the other annexes. Any derogation from the general conditions or any other annex to the grant contract must be stipulated in the special conditions.
5. Can the contract be amended after its signature?
Yes. Contractual provisions may be amended, unless otherwise stipulated in the grant contract, such as the maximum grant (in terms of maximum amount and maximum percentage of EU contribution) which cannot be increased. Also, the general conditions of the grant contract may only be amended through the special conditions, by including supplementary or derogatory clauses.
However, it is important to underline that an amendment may not have the purpose or the effect of making changes to the grant contract that would call into question the grant award decision or be contrary to the equal treatment of applicants. Following this logic, certain amendments, for example, to Annex IV of the grant contract (“Procurement by grant beneficiaries in the context of European Union external actions”) or to the payment arrangements included in the special and general conditions might be considered as contrary to the principle of equal treatment of applicants and thus prohibited (see also Article 9 of the general conditions of the grant contract).
6. Under what conditions can one insert additions or derogations from the general conditions in special conditions - Article 7?
Any supplementary or derogatory clauses are subject to the approval of the contracting authority. Certain conditions linked to the inclusion of such clauses are laid down in the special conditions, in particular Articles 7(1) and 7(2).
7. What are the obligations of the co-beneficiaries and affiliated entities of the beneficiary(ies)?
Co-beneficiaries and affiliated entities participate in the design and implementation of the action. For this reason, the general conditions of the grant contract include provisions that apply to them accordingly. For example, costs incurred by the co-beneficiaries are eligible in the same way as those incurred by the beneficiary, whereas for the affiliated entities the costs incurred may be accepted as eligible, provided that they comply with all relevant rules applicable to the beneficiary under the grant contract. Also, the guidelines for applicants specify that affiliated entities are subject to the same eligibility criteria as the lead applicant and co-applicant(s).
8. In the grant contract only a limited portion of the action can be subcontracted. What does it mean exactly?
The idea is that the grant beneficiaries may not act as mere intermediaries. It is expected that they actively implement the activities, which aim to achieve the objectives of the action. Therefore, the following conditions must be complied with:
subcontracting does not cover core tasks of the action;
recourse to subcontracting is justified because of the nature of the action and what is necessary for its implementation;
the estimated costs of the subcontracting are clearly identifiable in the estimated budget of the action;
any recourse to subcontracting, if not provided for in Annex I, is communicated by the beneficiary and approved by the contracting authority.
9. For indirect costs, the guidelines state that applicants may be asked to justify the percentage before contracting. Will this apply systematically?
No. However, if the contracting authority has doubts concerning the amount, percentage or coverage of indirect costs, it may ask for further explanations. Once the percentage has been agreed upon and the contract is signed, applicants will not be required to provide any supporting documents later on.
1. Is it possible to provide for more than one report per year to be submitted by the beneficiary?
By default, the reporting period corresponds to a twelve-month period. However, the special conditions may foresee a different period if necessary.
2. According to Article 15(7) of the general conditions, expenditure verifications are required if the grant is more than EUR 100 000. In this context, does 'grant' refer to the amount of the EU contribution or the total costs of the action?
'Grant' refers to the amount of the EU-contribution, since the purpose of the expenditure verification is to gain assurance on the correct use of EU funds. Consequently, for example, a grant of EUR 95 000 where the total cost of the action is EUR 110 000 would not require the submission of an expenditure verification report. Similarly, a grant of EUR 120 000 for which, at the end of the action, the Beneficiary(ies) declare to have spent only EUR 95 000 (from the EU grant) would not require the submission of an expenditure verification report.
1. Are the amounts of the pre-financing instalments in option 2 fixed freely (Article 15(1) GC)?
Yes, according to the specific cash-flow needs of the action. The amount to be request as further pre-financing corresponds to 100% of the part of the estimated budget financed by the contracting authority for the following reporting period (excluding not authorised contingencies). However, in certain cases, further pre-financing payments may be reduced by the contracting authority (see also Article 15 of the general conditions of the grant contract and question F.2). Also, the total sum of pre-financing payments cannot exceed 90% of the amount of the grant, excluding not authorised contingencies.
2. How to change the amounts of the pre-financing instalments when the beneficiary spends more or less than anticipated?
The amounts of pre-financing payments indicated in the special conditions are indicative. In the case of actions with an implementation period of more than 12 months and a grant of more than EUR 100 000:
- If at the end of the reporting period the part of the expenditure actually incurred which is financed by the contracting authority is less than 70% of the previous payment (and 100 % of any previous payments), the further pre-financing payment shall be reduced by the amount corresponding to the difference between the 70 % of the previous pre-financing payment and the part of the expenditure actually incurred which is financed by the contracting authority.
- The coordinator may submit a request for further pre-financing payment before the end of the reporting period, when the part of the expenditure actually incurred which is financed by the contracting authority is more than 70% of the previous payment (and 100 % of any previous payments). In this case, the following reporting period starts anew from the end date of the period covered by this payment request.
- In addition, for grants of more than EUR 5 000 000, a further pre-financing payment may be made only if the part financed by the contracting authority of the eligible costs approved is at least equal to the total amount of all the previous payments excluding the last one.
In any case, each request for further pre-financing must be accompanied by a narrative and financial report and in certain cases also by an expenditure verification report.
3. When is a guarantee required for the pre-financing of a grant?
As a general rule, the contracting authority may request a financial guarantee if the grant exceeds EUR 60 000, for the amount of the initial pre-financing payment, subject to a risk analysis.
Unless otherwise stipulated in the special conditions, the guarantee shall not be requested if the Coordinator is a:
- non-profit organisation,
- government department or public body,
- organisation that has signed a framework partnership agreement with the European
1. Does the Commission pay for the expenditure verification?
The expenditure verification is an eligible cost of the action. The contracting authority will therefore contribute to the cost.
2. Does the Commission pay for the financial guarantee?
The costs linked to the financial guarantee are an eligible cost of the action. The contracting authority will therefore contribute to the cost.
3. To be considered as eligible under Article 14(1) of the general conditions, the direct costs must have actually been incurred during the implementation period of the action. When do we consider that costs 'have actually been incurred'?
An incurred cost in accrual accounting is the moment in time when a resource or asset is consumed and an expense is recorded. That means that costs have to be related to services, works and purchase of goods for activities performed during the implementation period. Note that the beneficiary can sign a contract to purchase items, services or hire staff before the implementation period but for goods to be delivered and used; services to be provided or staff to work during the implementation period. As a consequence, procedures to award contracts may have been initiated and contracts may have been signed before the start of the implementation period.
However, signing a contract, placing an order, hiring personal, etc. during the implementation period but for services, works or supplies to be delivered after the expiry of the implementation period are not eligible.
Incurred costs should be paid before the submission of the final report. Nevertheless, they can be paid afterwards, provided they are listed in the final report together with the estimated date of payment.
An exception is foreseen for cost related to final reports, including expenditure verification, audit and final evaluation of the action, which may be incurred after the implementation period of the action.
4. Are the living and travel expenses of the staff of the grant beneficiary's partners included in the eligible costs under Article 14(2) GC?
Yes. Travel and subsistence costs of any person taking part in the action may be eligible, including staff of the beneficiaries, associates, affiliated entities and the final beneficiary(ies) of the action.
5. Must the grant beneficiary provide proof of expenditures (restaurant bills, taxi slips…) for travel and subsistence costs of staff taking part in the action?
Travel and subsistence costs are subject to the eligibility criteria of Article 14 of the general conditions of the grant contract. These costs may be reimbursed on the basis of either actual costs or on the basis of a flat-rate (per diems), depending on the details specified in the budget of the action. In case a flat-rate is used, no supporting documents are required, provided there is sufficient proof that the travel actually took place. Per diems should be traceable to supporting schedules (number and names of staff, number of times the per diem was paid, per diem rates and countries concerned) and the beneficiaries' records (accounting, payroll, bank transfer).
6. When can taxes be considered eligible costs in the budget of the action?
Duties, taxes and charges, including VAT, paid and not recoverable by the beneficiary(ies) are eligible, unless otherwise provided in the special conditions of the grant contract.
As a consequence, unless the special conditions of the grant contact exclude the eligibility of taxes, the beneficiary(ies) (or, where applicable, its affiliated entity(ies)) must show that it is not tax exempted and that it cannot recover taxes under the applicable national law. The beneficiary(ies) (or, where applicable, its affiliated entity(ies)) will have to prove that it has undertaken the necessary steps to obtain an exemption or the recovery of paid taxes vis-à-vis the relevant authorities.
This evidence may take the following forms:
- An official document from the competent tax authority stating that the entity is not entitled to reclaim taxes incurred for the activities in question (and that this does not depend on the simple fact that it does not wish to be subject to VAT). This official document may be a specific declaration or a refused claim for reimbursement by the competent tax authority.
- The absence of a reply by the competent tax authority within the legal deadline set by the applicable national law to a request submitted in due time (or 6 months in the absence of a legal deadline).
- The entity’s annual accounts complemented, if deemed necessary by the contracting authority, for example by an extract of the national VAT tax law showing that the entity does not have to account for VAT, a declaration of honour from the entity concerned accompanied by an expert statement (e.g. by a lawyer, auditor etc.).
The beneficiary(ies) (or, where applicable, its affiliated entity(ies)) shall provide the evidence at the latest when submitting the final report.
In certain specific cases, the beneficiary(ies) (or, where applicable, its affiliated entity(ies)) will not be required to seek exemption or provide proof of non-recovery of taxes (for more information on this point, see Annex J of the guidelines for applicants).
7. To what does the percentage of eligible indirect costs apply?
A fixed percentage of the total amount of direct eligible costs of the action not exceeding the percentage laid down in the special conditions may be claimed to cover indirect costs for the action. This fixed percentage cannot exceed 7% and will be fixed on the basis of the budget proposed by the beneficiary(ies) in the context of its grant application as corrected, if applicable, before signature of the grant contract.
The final absolute amount of indirect costs that may be claimed shall thus depend on the amount of total direct eligible costs reported in the final financial report and approved by the contracting authority.
The percentage of indirect costs is considered a flat-rate (see also question G.10)
8. Exceptional exchange-rate fluctuations: what are the implications of the second paragraph of Article 15(10) of the general conditions of the grant contract?
This paragraph states the following: 'In the event of an exceptional exchange-rate fluctuation, the parties shall consult each other with a view to amending the action in order to lessen the impact of such a fluctuation. Where necessary, the contracting authority may take additional measures such as terminating the contract.'
There is no specific definition of an exceptional exchange-rate fluctuation.
Depending on the impact of the fluctuation on the implementation of the action, different remedial actions may be envisaged:
- amending the action - for example, a project component could be removed/modified
- suspension or termination of the contract
- use of the contingency reserve (Article 14(7) of the general conditions of the grant contract).
Under no circumstances can the amount of the grant be increased.
9. May direct revenue foreseen by the Action be counted as the applicant’s financial contribution?
Expected 'revenue from the action' (also referred to as 'income generated by the action') may be accepted as co-financing (see Annex B of the guidelines for applicants – 'Budget').
Having said that, it is important to underline that a surplus of the receipts over the eligible costs approved by the contracting authority when the request for payment of the balance is made shall be considered as profit. Yet, in accordance with Article 17(3) of the general conditions of the grant contract, a grant may not produce a profit for the beneficiary(ies), unless it falls under one or more exceptions foreseen in Article 17(7) of the general conditions of the grant contract and/or specified otherwise in the special conditions.
Where a profit is made, the final amount of the grant shall be reduced by the percentage of the profit corresponding to the final EU contribution to the eligible costs actually incurred and approved by the contracting authority.
10. What are indirect eligible costs?
The indirect costs for the action are those eligible costs that may not be identified as specific costs directly linked to the implementation of the action and may not be booked to it directly according to the conditions of eligibility in Article 14(1) of the general conditions of the grant contract. However, they are incurred by the beneficiary(ies) in connection with the eligible direct costs for the action. They may not include ineligible costs as referred to in Article 14(9) or costs already declared under another costs item or heading of the budget of this contract.
Lead applicants may be asked to justify the percentage requested before the grant contract is signed. However, once the flat rate has been fixed in the special conditions of the grant contract, no supporting documents need to be provided.
11. What and who decides how the budget should be structured, notably if eligible costs should go under the 'indirect costs' heading or 'direct costs'?
Applicants must prepare their budget with due respect to the instructions given in the guidelines for applicants and, in particular, the footnotes of the budget template (Annex B of the guidelines for applicants). For a definition of 'indirect eligible costs', see question G.10.
1. What is meant by 'contribution in kind' and when can it be accepted?
Contributions in kind mean the provision of goods or services to a beneficiary(ies) or affiliated entities free of charge by a third party.
Consequently, contributions in kind cannot appear in the budget of the action as eligible costs (except for the case of volunteers’ work – see below), although they may be accepted by the contracting authority as co-financing (if that is the case, the guidelines for applicants will define the applicable rules).
However, in the case of contracts signed further to calls for proposals published after the entry into force of the new 'Financial Regulation' (Regulation 2018/1046), volunteers’ work may be recognized as an eligible cost, up to 50% of the co-financing. In addition, once the relevant guidance will be available, beneficiaries will be able to declare personnel costs carried out by volunteers based on unit costs. In this context, the contracting authority will define specific unit costs per group of countries and these unit costs will be specified in the call for proposals’ documentation.
2. Is the provision of staff a contribution in kind?
According to Article 14(2) of the general conditions of the grant contract, the cost of staff assigned to the action, corresponding to actual gross salaries including social security charges and other remuneration-related costs (excluding performance-based bonuses), may be included in the direct eligible costs and is not considered as a 'contribution in kind'.
It is underlined that salaries and costs shall not exceed those normally borne by the beneficiary(ies), unless it is justified by showing that it is essential to carry out the action.
3. Can the beneficiary's own equipment be an eligible cost?
Subject to the eligibility conditions stipulated in the grant contract, depreciation costs for equipment (new or used) and supplies specifically dedicated to the purposes of the action may be included in the direct eligible costs of the action.
However, if such depreciation costs may not be identified as specific costs directly linked to the implementation of the action and may not be booked to it directly according to the eligibility conditions stipulated in the grant contract, they shall be covered by the indirect costs.
1. Within what limits can the beneficiary modify the budget unilaterally?
Where the amendment to the budget does not affect the expected results of the action (i.e. impact, outcomes, outputs), and the financial impact is limited to a transfer between items within the same main budget heading including cancellation or introduction of an item, or a transfer between main budget headings involving a variation of 25% or less of the amount originally entered (or as modified by addendum) in relation to each concerned main heading for eligible costs, the coordinator may amend the budget and must inform the contracting authority accordingly, in writing and at the latest in the next report. This method may not be used to amend the headings for indirect costs, for the contingency reserve, for in-kind contributions or the amounts or rates of simplified cost options defined in the contract.
2. Can the beneficiary modify the unit rates provided for in the contract budget?
Yes, under the conditions stipulated in the grant contract and in particular Article 9 of the general conditions.
3. Is a confirmation letter from the contracting authority necessary to officialise a change of address, bank account or auditor?
No. The letter or report sent by the grant beneficiary to the contracting authority is enough to amend the contract in these specific cases. However, in duly substantiated circumstances, the contracting authority may oppose the change.
4. During the implementation phase the NGO beneficiary of a grant changes its legal status and becomes a profit making body. Should the contract be terminated?
The contracting authority may, after having duly consulted the coordinator, terminate a grant contract or the participation of any beneficiary(ies) without any indemnity on its part if a change to a beneficiary’s(ies’) legal, financial, technical, organisational or ownership situation substantially affects the implementation of the contract or calls into question the decision awarding the grant.
In this context, for example, if the guidelines for applicants of the call for proposals under which a grant contract has been awarded foresee that only not-for-profit entities are eligible, then the modification of the legal status of a beneficiary of that grant from “not-for-profit” to “for-profit” might call into question the decision awarding the grant. Therefore, in this situation, such a modification may lead to the termination of the grant contract or to the termination of that specific beneficiary’s participation in the action.
1. Do grant beneficiaries have to apply the procedures and templates of the practical guide for subcontracting?
No. Instead, they must apply the rules stipulated in annex IV to the grant contract. Compliance with those rules shall be subject to an ex-post control by the EU.
The templates included in the PRAG may be used, but it is not an obligation.
2. Does the Commission publish the calls for tenders launched by grant beneficiaries for the implementation of an action? (Annex IV to the standard grant contract)
No. The grant beneficiary(ies) and their affiliated entities manage the action, including any tendering, autonomously, and must publish calls for tenders on their own account. The EU carries out ex-post checks in order to ensure that the applicable procurement rules have been complied with.
3. According to annex IV of the standard grant contract, we need to provide proof of origin for supplies which unit cost is above EUR 5 000. Does that imply that supplies with a unit cost up to EUR 5 000 may originate from any country?
If the basic act or the other instruments applicable to the programme under which the grant is financed contain rules of origin for supplies acquired by the beneficiary in the context of the grant (under the CIR Regulation 236/2014 (i.e. not IPA I) and the EDF supplies may originate from any country if the amount of the supplies to be procured is below EUR 100 000 per purchase), the tenderer must be requested to state the origin of the supplies, and the selected contractor will always have to prove the origin of the supplies, irrespective of the unit cost of each supply.
For equipment and vehicles of a unit cost on purchase of more than EUR 5 000, contractors must in addition present proof of origin to the beneficiary(ies) at the latest when the first invoice is presented. The certificate of origin must be made out by the competent authorities of the country of origin of the supplies and must comply with the rules laid down by the relevant Union legislation. Failure to comply with this condition may result in the termination of the contract and/or suspension of payment.
Where supplies may originate from any country, no certificate of origin needs to be submitted.
1. Is sub-granting always allowed? Are there any specific rules governing this?
The Guidelines shall specify if sub-granting (which may take the form of 'financial support to third parties') is allowed. If it is the case and applicants wish to include it in their actions, detailed information on the conditions for awarding financial support to third parties will have to be defined in their proposals, in accordance with the requirements of the guidelines for applicants.
1. What are the supporting documents that must be kept by the grant beneficiary in case of an inspection?
They must be such as to provide full and clear evidence of the costs’ eligibility. A non-exhaustive list is provided in Article 16(9) of the general conditions of the grant contract. Supporting documents must be kept for at least 5 years after the payment of the balance (3 years in the case of a grant not exceeding EUR 60 000).
2. Article 7(5) of the general conditions establishes that 'equipment, vehicles and supplies paid for by the budget for the action must be transferred'. Can the beneficiary sell these goods?
Unless otherwise clearly specified in the description of the action (Annex I to the grant contract), the equipment, vehicles and supplies paid for by the budget for the action shall be transferred to the final beneficiaries of the action, at the latest when submitting the final report. If this is not feasible, the beneficiary(ies) may transfer these items to local authorities, local beneficiaries, local affiliated entities, to another action funded by the EU or, exceptionally, retain ownership of these items (for additional details on the requirements, see Article 7(5) of the general conditions of the grant contract).
In no event may the use of such equipment, vehicles and supplies jeopardize the sustainability of the action or result in a profit for the beneficiary(ies), including their affiliated entities.