Court slams EU tender methods.

The European Union's Court of Auditors have slammed the EU's tendering procedures, describing them as lacking in transparency. The criticism comes in the Court's latest review of public works contracts financed by the EU during the 1987-1993 period. It says that millions of ecus are at stake.

In as many as 50% of the cases, the court points out, technical specifications mentioned in the tender documents were inadequate. The court cites as an example a ECU28m contract for the construction of the Lusaka-Kabwe road in Zambia. The tender documents issued by the European Commission for this contract did not include any extensive topographic or geotechnical study, says the report. As a result, the execution of the contract was hampered by substantial changes, disputes over the quality of works, price revisions and compensation demands. The execution of an irrigation scheme project in the Gorgol area of Mauritania, worth ECU13.7m was also charactensed by serious disagreements over the revision of prices and other criteria not sufficiently clarified in the tender documents issued by the Commission. A similar situation emerged over a ECU23m rehabilitation programme of roads in Kampala, Uganda.

The court considered it "unacceptable" in each case that such tenders could have been launched despite the conditions stipulated in the contract being "vague, incomplete or contradictory."

Another case criticised by the court was that of the ECU14m Tunga dam project in Nigeria. Only the three lowest offers for the works were examined regardless of the quality of the others, because the consultants hired by the Commission were over-zealous in applying the rules employed by the Swiss based International Federation of Engineering Consultants instead of normal EDF procedures.

Contributing to this emerging pattern of inadequate regulation, throughout the period under examination the court noticed that different standards had been applied by the Commission to deal with bids. A case in point is the ECU56m project for the construction of the Isebania-Mukuyu and Sirari-Musoma roads in Kenya and Tanzania. None of the bids had been completed, however none had been rejected either. In a similar case, for the Faranah-Kissidougou ECU23m road project in Guinea-Conakry, none of the bids was considered as eligible and a new tender was launched.

The choice of companies who won the contracts is questionable, according to the report. In the case of the LusakaKabwe road, the contract went to a company which bidded 30% below the cost of the materials. Not surprisingly, the execution was plagued by "important deficiencies." Similarly in the Kenyan-Tanzanian contract, the lowest bid was considered as valid, although additional information should have been demanded. However, adding to the sense of incoherence surrounding EU-funded public works contracts, the four companies which offered the lowest bids for the Kampala roads contract were excluded from competition, without being given a chance to clarify their offer from a technical point of view.

Inconsistent process

Local tax and customs regulations have not always been taken sufficiently into consideration. In some cases, tenderers included customs duties and other taxes in their bid, in others they did not. All lacked the necessary explicit information from the institution which launched the tender. As a result, the lowest bid was not retained by the Commission for a road project worth ECU20.4m between Koupela and the Togolese border, in Burkina Faso.

This confusion also had consequences in the Kenya-Tanzania road project: the tender procedure in this case stipulated that fuel and asphalt supplies should be bought locally and were therefore subject to national taxes. Nevertheless, three offers which considered that these taxes would be exonerated were considered as eligible.

Confronted with the Court's criticism of this pervasive confusion, the European Commission retorted that the Court of Auditor's report was based on old news, and that the situation and regulation of public works funding had improved dramatically by 1997.

New Projects

Several new projects had been adopted by the European Development Fund by the end of 1997. One of these involves funding of up to ECU8m in business management training and providing expertise to the Zambian SMEs. For example, local firms will be taught how to set up projects which can be either financed by commercial banks or benefit from subsidies. The aim is also to promote foreign investments and technology transfers, including from South Africa, in order to enable those firms to step up their exports. About 150 SMEs and 2000 micro-enterprises should benefit from the plan which aims to restore the production capacity of this sector.

Niger, Burkina Faso gain

The EU has also approved two programmes to support structural adjustment efforts in Niger and Burkina Faso. In Niger, the EU will disburse a total ECUT5.8m out of which ECU4.5m will be immediately available to finance a general import programme. The rest will consist of budget support, which should be available from the 8th EDF. However, resources will only be disbursed in February 1998, if all the parliaments of the 15 EU member states have finally ratified the revised Lom[acute{e}] Convention by then.

The problem is even more acute for Burkina Faso, which despite having obtained ECU3O.2m of budget support, finds that this package is also earmarked under the 8th EDF. Once this obstacle has been removed, ECU10m should be disbursed immediately, but the rest will follow only after a review of the country's economic programme has been approved by the IMF -- which insists on reducing the budget deficit to 6.3% of the GDP and the reduction of inflation to a maximum 3% rate.

Donors finance demobilisations

Four of Djibouti's main donors -- France, the African Development Bank, the European Union and Japan -- are financing a $17.8m demobilisation programme of 12,500 soldiers, policeman and ex-guerillas of the Front for the Restoration of Unity and Democracy.

The objective is to scale down the army and police staff to a "sustainable" level of a maximum 4,500 troops. The programme, which began to be implemented in the second half of last year, should be completed by end-1998.

The project combines conflict prevention and support to the country's structural adjustment efforts. Its success is regarded as a key element to Djibouti's financial stabilisation. The programme represents over 10% of the country's national budget and about 3% of GDP.

Out of the whole, $14m will be used to give 'golden handshakes' to soldiers and ex-guerillas. The rest will provide for administrative costs and reinsertion projects. Very strict conditions have been imposed by the donors. The European Commission for instance, which will disburse $5m of the total, will only release funds after the government has made its own contribution. No disbursement is to be made without the consent of all the donors, whose aim is clearly to minimise as much as possible the risk of fraud.