PRACTICAL ISSUES IN IMPLEMENTATION OF INFRASTRUCTURE PROJECTS IN CEEC’s COFINANCED FROM EU FUNDS

1. PRACTICAL ISSUES IN IMPLEMENTATION OF INFRASTRUCTURE PROJECTS IN CEEC’s COFINANCED FROM EU FUNDS Sharing the Romanian Experience Warsaw, Poland – 23/24 October 2008

2. Presentation Issues: • Romania’ Public Procurement Law - legal provisions, involved bodies and capitalised experience • Application of FIDIC Conditions of Contract in infrastructure projects in Romania • Gathered experience and knowledge to be shared

3. Lecturer Introduction Florin NICULESCU: • Civil Engineer; • Over 3.5 years of experience with EC Delegation in Bucharest as Transport Task Manager; • Specialised in Public Procurement and Contract Implementation matters, including Claims and Disputes Resolution; • Currently working as freelance engineer – self-employed; • Nominee on SIDiR President’ DB Members List; • Volunteer of www.AllExperts.com – Construction Law.

4. Romanian Public Procurement Law • Public Procurement regulated by Emergency Government Ordinance 34/2006; • Harmonised with EC Procurement Directives; • Provides: • procedures for Works, Services and Goods; • thresholds for different procurement procedures, from Direct Agreement to International Open Tender; • allowance for procurement in case of emergency • equal, fair, transparent procurement; • possibility to increase the contracts value, under certain conditions.

5. Romanian Public Procurement Law • Involved bodies: • “registered” Contracting Authorities – deal with procurement/ contracting; • National Agency for Regulating Public Procurement – issues public procurement regulation; • Central Unit for Checking Public Procurement – verifies observance of public procurement rules in force; • Court of Accounts – overall check of expenditures, including their legality in terms of procurement.

6. Public Procurement Proceduresand FIDIC • Often people are mistaking the FIDIC as being involved in the procurement and fear eventual restrictions or additional procedures; • FIDIC only involved during procurement, at the time of preparation the Tender Dossier (Bidding Documents), when preparing the Conditions of Contract to be used during the Contract implementation; • FIDIC actually used once the Contract is signed and implementation starts.

7. FIDIC Conditions of Contract • FIDIC usage in Romania • History • Experience • Encountered difficulties • Order of Finance Minister 915/2008 – translation of FIDIC Conditions of Contract for Red, Yellow and Green Books

8. FIDIC usage in Romania - History • applied for over 15 years in international contracts financed by the WB, EIB, EBRD, EC, JBIC, etc – probably all internationally financed projects; • application started with roads and subsequently railways and other Transport infrastructure projects (Red Book ’87 and now ’99); • as soon as Environmental projects were launched, e.g. waste water treatment plant projects, FIDIC was used again (Yellow Book ’99); • when first ISPA projects to be launched, usage of PRAG Conditions of Contract was unsuccessfully attempted – ever since, always FIDIC;

9. FIDIC usage in Romania - Experience Nowadays: • many central authorities got the exercise and acquired the knowledge of using FIDIC – unfortunately limited experience at local level; • local experts now increasingly acquaint with FIDIC; • growing local FIDIC “community” made of Employers, Contractors and Engineers, using a common vocabulary and practice;

10. FIDIC usage in Romania– Encountered difficulties • rigid legal context – not always easy to accommodate the “reasonable” spirit of FIDIC; • limited of knowledge at working level; • lack of understanding at decision making level; • difficulties in understanding the Engineer role and allowing sufficient power (!!!); • design errors; • difficulties in understanding the new contractual framework – e.g. claims time barring;

11. Encountered difficulties– Limitation of Engineer’s Authority In an attempt of controlling all contractual aspects and often due to lack of trust in Engineer’s skills and professionalism, Employers drastically limited Engineers authority; Net result: • Engineer transformed into a ‘mailbox’, passing documents between Employer and Contractor; • Employers flooded with documents they have neither the capacity to process, nor the expertise to handle; • Internal bureaucratic approval procedures, having nothing to do with FIDIC and dealt with by people unaware of the actual contract context (EC included).

12. Encountered difficulties– Design errors • Main reasons for encountered design errors: • insufficient topographical, geotechnical, hydrological, archaeological, etc, surveys, due to short allocated time; • land acquisition – based on early design and long, difficult and costly process • inappropriate budget estimation, either due to poor Consultants, either due to time span between Feasibility Studies and actual contract tendering/ implementation – duration of Financing Agreements(!!!); • standards change; • changes in political strategies.

13. FIDIC usage in Romania– Encountered difficulties • Claims: • limited capacity to handle intricate Claims; • limited authority in agreeing a compromise before the Claim developed into a Dispute, mainly generated by: • no buffers in case of budget increasing; • difficulties in agreeing Extension of Time, due to Financing Agreement constraints. • not always experienced, or sometimes too zealous Engineers.

14. FIDIC usage in Romania– Encountered difficulties • Disputes: • most of Claims issued by Contractors; • inadequate back-up support for quick reaction; • difficulties in appreciating the larger contractual context – similar international case (jurisprudence); • many decisions against Employers.

15. Order of Finance Minister 915/2008 • introduces translation of FIDIC Conditions of Contract (Red, Yellow and Green Books) in the Romanian legislation; • other independent translations available – different terms used for translating the same word; • Potential deviations from the original FIDIC text – careful usage, not always counting on previous knowledge; • provides a set of mandatory Special Conditions, harmonising the FIDIC provisions with other related Romanian legislation; • DAB also introduced.

16. Way Forward • capitalise knowledge at level of both Employers and Contractors/ Consultants, particularly local ones – getting a mature local market; • emerging new local experts for handling Claims and Disputes; • financial buffers for budget exceedings; • flexible Financial Agreements for allowing time exceedings; • stand-by highly specialised expertise; • increased Engineers authority; • increased Employers autonomy.

17. Contact details: • Florin NICULESCU Tel: 00 40 727 340 623 nifcons@yahoo.com www.abinitio.ro