FINANCIAL CORRECTION DECISION No 20

Riga Planning Region [email protected] 31.08.2023 No 11.1-13/23/1101 DECISION FINANCIAL CORRECTION DECISION No 20 Tallinn Project Est-Lat 177 “Improvement and promotion of the East Baltic Coast harbours network” (EASTBALTIC HARBOURS) Lead Partner: Riga Planning Region Beneficiaries: Pavilosta Port Authority According to the Guidelines to Financial Corrections for the Interreg V-A Estonia-Latvia programme 2014-2020 Chapter 2 and based on the 2014-2020 Structural Assistance Act subsection 6 of the paragraph 54 the Managing Authority decides: 10% of the costs of the contract SIA "Pontoni.lv"of the project partner Pavilosta Port Authority are ineligible. Circumstances The financial controller of the Estonia - Latvia programme 2014-2020 during the verification of the expenditures of the partner report of the project EASTBALTIC HARBOURS of the project partner Pavilosta Port Authority found ineligible expenditures. The project partner, Pavilosta Port Authority carried out public procurement No POP 2023/01 ESTLAT 177 “Peldošo piestātņu piegāde un uzstādīšana Pāvilostas ostā“. As a result of the procurement, the project partner has concluded the contract ESTLAT177 with the provider SIA “Pontoni.LV” on 14.04.2023. The cost of the works is € 143 673,97 including VAT. According to point 3.1.7. of the procurement regulation, the tenderer must have experience in the delivery and installation of at least one floating pontoons complex and whose estimated contract price is € 200 000,00 not including VAT. During the verification of the procurement procedure the violation of the Guidelines for the public service providers was identified, as the qualification condition established in public procurement Lõkke 4 / 10122 Tallinn / Estonia / + 372 663 8200 / [email protected] / www.rtk.ee/ Reg. code: 70007340 No POP 2023/01 ESTLAT 177 is not proportional to the subject of the public procurement contract. According to point 6.4.3. of the Guidelines for the public service providers, the procurement documents shall specify objective and proportionate requirements for the qualification of applicants. The qualification requirements set by the beneficiary regarding the technical and professional capacity of the tenderer for the value of the contract performed have been set disproportionately to the subject matter of the procurement, i.e., almost two times exceeding the estimated contract price € 120 000,00 excluding VAT. Beneficiary did not respect Guidelines for the public service providers, where the minimum capacity levels of ability for a specific contract are related but not proportionate to the subject matter of the contract. The qualification requirements of the beneficiary for the technical and professional capacity of the supplier in relation to the value of the contract performed are set disproportionately high for the task of the proposed procurement subject. The Managing Authority, before making financial correction decision, considered the following circumstances: Pursuant to the Guidelines for the public service providers, the contracting authority is obliged to follow the general principles of organizing public procurement, including acting in a transparent, controllable, and proportionate manner when organizing the procurement, treating all persons equally and ensuring that all restrictions and criteria set for persons are proportionate, relevant and justified in relation to the purpose of the public procurement. The contracting authority must also ensure the effective use of competition, use financial resources economically and efficiently, conclude a procurement contract on the basis of the best possible price-quality ratio, and conduct public procurement within a reasonable time. According to the point 6.4.3. of the Guidelines for the public service providers, the procurement documents shall specify objective and proportionate requirements for the qualification of applicants. The Managing Authority is of the opinion that by asking the tenderer to have an experience in fulfilling a contract which is almost two times greater in value than the respective procurement subject, the set criteria are considered disproportionate to the subject matter of the procurement contract. According to the Guidelines to Financial Corrections for the Interreg V-A Estonia-Latvia programme 2014-2020 point 2.3.4 when Latvian project partner is obliged to follow the Procurement Guidelines for the Public Service Providers and it has violated the obligation to comply with the Guidelines for Public Service Providers, the financial corrections rates according to the European Commission Decision of 14.5.2019, C(2019) 3452 “Guidelines for determining financial corrections to be made by the Commission to expenditure financed by the Union under shared management” (EC Guidelines) are applied, taking into account the severity of the violation. According to the EC Guidelines, for non-compliance with the rules on public procurement point 2.1 of type of irregularity No 11 (Annex section 2 subsection 2.1 Contract notice and tender specifications), in case of the use of qualification conditions limiting the access of economic operators, either a 10 or 5% financial correction rate must be applied. The Commission Guidelines allows to apply a 5% correction rate in the event where more than one bidder submitted bids in the procurement and responded to the condition set by the Contracting Authority. As there was only one tenderer in the procurement, a financial correction rate of 10% must be applied. The total ineligible costs (EUR): Expenditure Total ERDF Self- Total Ineligible Ineligible self- budget line reported cost support financing ineligible ERDF financing including support VAT Equipment 140 368.19 119 312.96 21 055.22 14 036.82 11 931.30 2105.52 Legal basis of the financial correction 1. Structural Assistance Act 2014-2020 According to the Article 54 subsection 6 of the Structural Assistance Act 2014-2020 a financial correction decision shall be based on the procedure for making a financial correction decision established in the ETC programme or in the procedure for making a financial correction decision, established on the basis of subsection 7 of the same section, while pursuant to the ETC programme the making of the financial correction decision is based on the procedure established nationally in the states participating in the programme. 2. The Guidelines to Financial Corrections The Guidelines to Financial Corrections for the Estonia – Latvia Programme 2014-2020 establishes a range of corrections of up to 5%, 10%, 25% and 100% that are applied to the expenditure of a contract. They take into account the seriousness of the irregularity and the principle of proportionality. These rates of corrections are applied when it is not possible to quantify precisely the financial implications for the contract in question. 3. The Guidelines for the public service providers Guidelines for the public service providers point 6.4.3. states that procurement documents shall specify objective and proportionate requirements for the qualification of applicants. 4. The Common Provisions Regulation According to the Article 143(2) of the Regulation No 1303/2013 of the European Parliament and of the Council of 17 December 2013, the Member States shall in the first instance be responsible for investigating irregularities and for making the financial corrections required and pursuing recoveries. In the case of a systemic irregularity, the Member State shall extend its investigation to cover all operations potentially affected. 5. Protection of the European Communities financial interests Article 4(1) of the European Union Council Regulation (EC, Euratom) No 2988/95 on of 18 December 1995 stipulates that any irregularity shall involve withdrawal of the wrongly obtained advantage. Point d) of the Article 5(1) of the same regulation stipulates that intentional irregularities or those caused by negligence may lead to the following administrative penalties: total or partial removal of an advantage granted by Community rules, even if the operator wrongly benefited from only a part of that advantage. According to the Article 160(1) of the Regulation (EU) No 2018/1046 all contracts financed in whole or in part by the budget shall respect the principles of transparency, proportionality, equal treatment and non-discrimination and according to the point 2 of the Article 160 all contracts shall be put out to competition on the broadest possible basis. 6. Programme Manual for the Estonia - Latvia Programme 2014-2020 According to the Estonia - Latvia programme 2014-2020 manual point 5.3.4 each partner organisation is responsible for ensuring that EU and national public procurement rules are respected and that all contracts comply with the basic principles of transparency, non- discrimination and equal treatment as defined in the EC Treaty and the Commission Interpretative Communication on the Community law applicable to contract awards below the EU thresholds. 7. Programme Manual Annex 6. Guidelines to Financial Corrections According to the Programme Manual Annex 6. Guidelines to Financial Corrections Chapter 2.3.3 Financial correction in case of irregularity related to non-compliance with the general rules on procurement when the Estonian partner is a contracting authority for the purposes of the procurement, when Estonian beneficiary or partner is a contracting authority for the purposes of the public procurement, and the estimated value of a service, goods or building works is equal to or in excess of simple procurement threshold has violated the obligation to comply with the general principles of procurement, the financial correction rate of 5, 10, 25 or 100 percent may be applied depending on the severity of the violation by using the financial correction principles according to the EC Guidelines. According to the Programme Manual Annex 6. Guidelines to Financial Corrections Chapter 2.5 Repayment to the Managing Authority, when MA, JS, FC detect an error in expenditure that has already been paid out to the project, the programme can deduct the amount from the next project progress report. In cases where the amount cannot be corrected by deducting it from the next project progress report, LP is required to repay the amount to the programme, as specified in the financial correction decision within 60 calendar days as of the date of entry into force of the financial correction decision in the indicated amount and date. 8. Subsidy Contract Article 1 of the Subsidy Contract stipulates that the partners should also follow the EU and national principles on protection of environment, sustainable development, equal opportunities, non- discrimination. Point 2 of the Article 3 of the Subsidy Contract regulates that the Lead Partner and Project Partner shall implement the project with the requisite care, efficiency, transparency and diligence, in line with best practice in the field concerned and in compliance with this Contract. For this purpose, the Lead Partner and Project Partner shall mobilise all the financial, human and material resources required for full implementation of the project as specified in the approved application. DECISION 1. Based on the 2014-2020 Structural Assistance Act, adopted by the Parliament of the Republic of Estonia on 13 June 2018, and Guidelines to Financial Corrections for the Estonia - Latvia Programme 2014-2020, the Managing Authority decides to apply: 10 % of the costs of the contract SIA "Pontoni.LV" of the project partner Pavilosta Port Authority are ineligible. 2. The ineligible costs of the project partner’s ERDF support to the project must be reduced in the project partner’s budget. 3. Financial correction is 10% of the total cost of the contract of the SIA “Pontoni.LV”, in total ineligible amount is €14 036,82 (including VAT), out of which €11 931.30 is ERDF support and €2105.52 is self-financing. The ERDF support € 11 931.30 and self-financing €2105.52 has been reduced by the financial controller. Appeal of the decision The present Financial Correction Decision No 20 may be appealed in accordance with the Annex 4 to the Programme Manual, which is available on the web-site https://old.estlat.eu/. (signed digitally) Helena Musthallik Acting as the Head of the Managing Authority Cooperation Programme Interreg V-A Estonia-Latvia Grants Development Department Külli Kaare 663 1950 [email protected]