Sixth Framework Programme Contract/Financial Guidelines

1. Sixth Framework Programme Contract/Financial Guidelines Miriam Driessen Reilly, Legal Sector 20th June 2003

2. Overview • Introduction • General contractual principles, Contract structure, Guidelines, Consortium agreement • Core contract • Signature and entry into force, General conditions, Collective responsibility of contractors • Budget & Reimbursement of costs • Financial instruments, Grant for integration: financial contribution, Cost reporting models, Subcontracting & Receipts, Payments, Maximum reimbursement rates, instruments, activities and cost models • Audits and controls, Sanctions • Rules for dissemination and use • Ownership, protection, use and dissemination, access rights, system of access rights

3. IntroductionGeneral Contractual Principles Based on Rules for Participation and: • Reduction in the number of contracts • Collective approach • Greater flexibility • Greater autonomy for participants

4. IntroductionContract Structure Core contract Annex I • the “project” (technical tasks - work to be carried out) Annex II • general conditions (standard - applicable to every instrument) • Part A: Implementation of the Project • Section 1: Implementation and Deliverables • Section 2: Termination of the contract and responsibility • Part B: Financial Provisions • Section 1: General Financial provisions • Section 2: Controls, Recoveries and Sanctions • Part C: Intellectual Property Rights Annex III • specific provisions for some instruments

5. IntroductionGuidelines • Further information and guidance notes* on • Finance (including auditing, cost reporting models) • Negotiation (including Annex I “Description of Work”) • Consortium agreement (including IPR) • Project management (including reporting) • Plus guidelines imposed by Rules for Participation • Guidelines on Evaluation and Selection procedures * under development

6. IntroductionConsortium Agreement • Regulates internal organisation and management of consortium (Commission is not a party) • Compulsory unless exempted by the call for proposals • Non binding guidelines provided by the Commission • Preferably before signing the contract, some decisions must be made by the participants before signature of contract (e.g. exclusion of pre-existing know-how) - see core contract New

7. Core contractSignature & Entry into force • Contractual link of all with the Commission • Contract enters into force upon signature of co-ordinator and Commission • Co-ordinator must ensure other contractors sign/accede within delays (established in contract) • Distribution of pre-financing to other contractors possible after minimum requirements met • Project begins on date established in the contract • Implementation and payment phases relating to the project must be completed by the final implementation date of the contract New

8. Core contract Signature & Entry into force • Contractors identified in contract • Evolution of consortium possible where one or more do not sign • Community financial contribution and total estimated costs • Reporting and payment modalities • Amendments - tacit for approval of project activity reports and for consortium changes • Special conditions* * under development

9. Core contractGeneral conditions • Performance obligations for consortium, contractors, co-ordinator, Commission • Force Majeure • Suspension and prolongation • the Consortium can propose to suspend the project in case of execution experiences strong difficulties or is uneconomic, if force majeure or exceptional circumstances the project • the Commission may suspend the project when the consortium is not performing satisfactory, in order to re-negotiate and propose necessary amendments • Termination • any contractor may request the termination of its participation/the Consortium may request to terminate the participation of any contractor • in both cases “Where the Commission does not object within six weeks, it is deemed to have approved the request” • by the Commission in case legal, financial, organisational or technical change, change of control, ...

10. Core contractCollective Responsibility of Contractors • Collective technical responsibility (applicable to all instruments) • Collective financial responsibility for some instruments* • use as a last resort • limited in proportion to the participant’s share to the project, up to the total amount they are entitled to receive Excepted from collective financial responsibility • International organisations, public bodies or entities guaranteed by MS/AS: solely responsible for their own debts * not for specific actions for SMEs and fellowships and, when duly justified, specific support actions New

11. Budget & Reimbursement of costsFinancial instruments (see FP6 decision) Grant for integration (1) Grant to the budget of a maximum of:50% for research, 35% for demonstration & 100% for certain other activities, such as training of researchers and consortium management (2) (3) Grant to the budget of a maximum of 50% of the budget (2) (3) Grant to the budget of a maximum of 100% of the budget (2) Grant to the budget of a maximum of 100% of the budget (2) (4), if necessary as a lump sum Community contribution Type of instrument Networks of excellence Integrated projects Specific targeted research or innovation projects … Coordination actions Specific support actions (1) This rate varies for different areas. (2) Subject to specific conditions specific legal entities, particularly public bodies, will receive funding of up to 100% of their marginal/additional cost. (3) The rates of assistance may be differentiated in accordance with the rules of the Community framework for State Aid for research and development depending on whether activities relate to research ( max 50%), demonstration (max 35%) or to other activities implemented, such as training of researchers (max 100%) or management of consortium (max 100%) (4) For actions in support of research infrastructure relating to preparatory technical work (including feasibility studies) and the development of new infrastructure, 6th FP participation is restricted to max 50% and 10% of the budget respectively

12. Budget & Reimbursement of costsGrant for integration: financial contribution • Financial contribution is calculated taken into account: • degree of integration • number of researchers (and doctoral students*) • characteristics of the field of research • joint programme of activities * bonus per doctoral student is equivalent to 4,000€/year up to a maximum of 10% of the grant in respect of the number researchers

13. Budget & Reimbursement of costsCosts New • No pre-defined cost categories • To be eligible, costs must be • actual, economic and necessary for the project • incurred during the duration of the project • recorded in the accounts (or accounts of third parties) • follow contractors own accounting rules • And must exclude indirect taxes, duties, interests, costs reimbursed in respect of another Community project, and not give rise to profit

14. Budget & Reimbursement of costsCost Reporting Models • FC: actual direct and indirect costs • contractors calculate indirect costs according to their own accounting rules • FCF (variant of FC): actual direct costs + flat rate for indirect costs (20% of direct costs minus subcontracting) • limited to SMEs and organisations eligible for AC • AC: actual additional non-recurring direct costs + flat rate for indirect costs (20% of direct costs minus subcontracting) • optional for non-commercial or non-profit organisations, international organisations which cannot distinguish between direct and indirect costs - obligatory for physical persons New

15. Budget & Reimbursement of costsSubcontracting & Receipts • Subcontractors • identified in Annex I + minor services • awarded following competitive tender offering, best value for money, under conditions of transparency and equal treatment • Receipts • financial transfers or contributions in kind from third parties • depending on whether or not “resource” is at the management discretion of the contractors or whether there is a prior commitment between the contractor and the third party(ies) • income generated by the project

16. Budget & Reimbursement of costsPayments • Periodic pre-financing • initial pre-financing upon signature by Commission and co-ordinator or when minimum number of contractors have acceded or when all contractors have signed • yearly for IP and NoE (specified in the contract for other instruments) • up to 85% (80% for instruments without collective financial responsibility) • EC contribution depends on • contractor’s cost model (AC, FC, FCF) • type of activity (research and innovation, demonstration, management, training, etc.) • submission of audit certificate * • receipts * Audit certificates by external auditor (for each partner and each year for IP/NoE - for public bodies or competent public officer)

17. Budget & Reimbursement of costsMaximum reimbursement rates, instruments, activities and cost models

18. Audits and controls, SanctionsAudits and Controls • Controls • Periodic activity reports (including plan for dissemination and use) • Periodic financial reports • Supplementary reports if foreseen (in Annex I or III) • Final reports covering the whole project duration • Audits • Scientific, technological and financial audits • Annual monitoring by Commission with external experts (particularly for IP and NoE) • Ethical or other reviews • Contractors right to refuse particular expert

19. Audits and controls, SanctionsSanctions • Financial irregularity is grounds for exclusion from evaluation or selection procedure • Violation of fundamental ethical principles is grounds for exclusion from evaluation or selection procedure • Recovery decisions (Article 256 of EC Treaty) • Other sanctions in contract (liquidated damages for overclaims) calculated as: Overstated expenditure unjustified financial contribution x total claims

20. Rules for dissemination and useOwnership and Protection Ownership • Knowledge created under indirect actions = contractors • Joint ownership where joint generation • Any transfer of ownership must comply with contractual obligations (access rights, etc) Protection • Knowledge capable of industrial or commercial application to be protected • Commission may protect (where not envisaged by contractors) • Owner of knowledge may publish as long as no impact on protection • Prior notice of publication to Commission and other contractors

21. Rules for dissemination and useUse and dissemination • Contractors shall use their knowledge • not all the knowledge from the projects • Dissemination required if not adversely affecting protection or use, Commission may disseminate if contractors do not New

22. Rules for dissemination and useAccess rights • Basic principles • Granted on request and may be conditioned by specific agreements regarding confidentiality and purpose • Commission may object to grant of access to third party, particularly if not established in MS or AS • Pre-existing know-how may be specifically excluded • Access for Execution of Action • Access granted to knowledge and pre-existing know-how when needed to carry out their own work on the project(royalty-free for knowledge, also for PEKH,unless other terms agreed prior to contract signature) New

23. Rules for dissemination and useAccess rights • Access for Use • Access granted to knowledge and pre-existing know-how when needed to use their own knowledge ( royalty free for knowledge unless other terms agreed prior to signature of contract, but on fair and non-discriminatory terms to be agreed for PEKH) • Access may be requested for duration of project in relation to execution and 2 years after end of project or after termination of contractor’s participation in relation to use

24. Rules for dissemination and useSystem of Access rights Access rights to pre-existing know-how Access rights to knowledge If a participant needs them for carrying out its own work under the project For carrying out the project Royalty-free unless otherwise agreed before signing the contract Royalty-free If a participant needs them for using its own knowledge For use (exploitation + further research) Royalty-free unless otherwise agreed before contract’s signature Non-discriminatory conditions to be agreed Possibility to exclude specific pre-existing know-how before EC contract’s signature (or before entry of a new participant)

25. Web site Contract, Consortium agreement checklist: http://europa.eu.int/comm/research/fp6/working-groups/model-contract/index_en.html