EX POST EVALUATION OF THE COHESION FUND (INCLUDING...

EX POST EVALUATION OF THE COHESION FUND (INCLUDING

FORMER ISPA) - WORK PACKAGE D:

MANAGEMENT AND IMPLEMENTATION

(N°2011.CE.16.C.AT.004)

COUNTRY REPORT – ROMANIA

February 2012

Fraser AssociatesManagement and Economics Consultants

European Policies Research Centre University of Strathclyde

Graham Hills Building 40 George Street Glasgow G1 1QE United Kingdom

Tel: +44-141-548 3339 Fax: +44-141-548 4898

E-mail: [email protected]

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mailto:[email protected]

http://www.eprc.strath.ac.uk/eprc/

Ex Post Evaluation of Cohesion Fund (incl. ISPA) - Work Package D: Management & Implementation Country Report – Romania

European Policies Research Centre Fraser Associates i

TABLE OF CONTENTS

1. INTRODUCTION ............................................................................... 1

2. ISPA/COHESION FUND INVESTMENTS IN ROMANIA .................................... 1

3. FUND MANAGEMENT AND IMPLEMENTATION ........................................... 2

3.1 The Baseline Position ........................................................................... 2

3.2 The Fund Management and Implementation Architecture, 2000-06 ................... 2

3.2.1 The Monitoring Committee ................................................................. 3

3.2.2 The Central Administration ................................................................ 4

3.3 The Effectiveness of Management and Implementation Architecture ................. 4

3.4 Evolution and the Integration of Learning .................................................. 5

4. STRATEGIC PLANNING ....................................................................... 6


4.2 Strategic Planning Arrangements, 2000-06 ................................................. 6

4.3 The Effectiveness of Strategic Planning Arrangements, 2000-06 ....................... 7

4.4 Evolution and the Integration of Learning .................................................. 7

5. PROJECT DESIGN AND DEVELOPMENT ................................................... 8


5.2 Project Design and Development Arrangements for ISPA/CF, 2000-06 ................ 9

5.3 The Effectiveness of Project Design and Development Arrangements, 2000-06 ..... 9

5.4 Experiences of the Decision Process ........................................................ 10

5.5 Evolution and the Integration of Learning ................................................. 11

6. PROCUREMENT ..............................................................................12

6.1 The Baseline Position .......................................................................... 12

6.2 Procurement Arrangements for 2000-06 ................................................... 12

6.3 The Effectiveness of Procurement Arrangements, 2000-06 ............................. 14


7. PROJECT MANAGEMENT AND IMPLEMENTATION .....................................15

7.1 The Baseline Position .......................................................................... 15

7.2 Project Implementation and Management Arrangements, 2000-06 ................... 16

7.3 The Effectiveness of Project Implementation and Management Arrangements, 2000-06 ........................................................................................ 17


8. CONCLUSIONS: A SYSTEM-WIDE PERSPECTIVE ........................................20

8.1 General ........................................................................................... 20

8.2 Performance of the Cohesion Fund Delivery System ..................................... 20

8.3 Key Learning .................................................................................... 22

8.4 The Contribution of Capacity Building Support ........................................... 23

8.5 Scope for Management Improvements: Issues for the Member State ................. 24

8.6 Scope for Administrative Reform: Issues for the Commission .......................... 24

ANNEX I: MANAGEMENT AND IMPLEMENTATION ARCHITECTURE ...............................26

ANNEX II: DOCUMENTARY SOURCES ..................................................................28

ANNEX III: LIST OF CONSULTEE ORGANISATIONS ..................................................30


European Policies Research Centre Fraser Associates ii


European Policies Research Centre Fraser Associates iii

EXECUTIVE SUMMARY

This report presents an overview and summary evaluation of the management and

implementation of the Instrument for Structural Policies for Pre-accession (ISPA) and the

Cohesion Fund (CF) in Romania from 2000 to 2011, focusing on projects approved in the

2000-06 period. It has been prepared by EPRC, Fraser Associates and Archidata. The

research in Romania and the drafting of the report were carried out October - December

2011 by Andreea Comsa and Roxana Chesoi. The report was edited by Frederike Gross, Alec

Fraser and John Bachtler.1

During 2000-06, 63 projects were planned and implemented, with total eligible expenditure

amounting to €2.7 billion. By the start of November 2011, 81.4 percent of the planned

allocation had been spent. The strategic planning arrangements were driven largely by the

accession process and were successful in maintaining a strategic focus. Overall, the

management and implementation system for ISPA was effective, although more rapid

progress with commitments/payments was not made until the 2007-13 period. The

institutional framework for managing Structural and Cohesion Funds was established

independently in the 2004-06 period.

The most significant issues concerning the performance of the delivery system were:

insufficient human resources; low project maturity (including quality issues with externally

produced supporting documentation at design stage); difficulties with local level decision

making and institutional coordination; and procurement system delays. In terms of external

factors, the most difficult to overcome included the evolution of macroeconomic indicators

and imponderables such as weather conditions which necessitated project changes.

During the 2000-06 period, the capacity of the ISPA system increased significantly including:

improvements in the legislative framework; enhanced capacity for project management and

implementation; strategic planning capacity; regionalised environmental beneficiaries to

reduce fragmentation; improved monitoring; increased procurement experience. Sources of

capacity building included TA under Phare/ISPA, EDIS requirements and ‘learning by doing’.

There has been insufficient transfer of knowhow and experienced personnel from the ISPA

systems to the CF management and implementation structures. Gaps in capacity and

expertise continue in project design and development, the management information

system, monitoring for large projects and risk management processes, and partnership

development. The changes in procurement legislation have also made the transfer of

expertise in this area very difficult. In terms of EC level reforms, the evaluation

recommended an increased advisory function within the audit process and the avoidance of

over-auditing, procedural simplification and increased risk management procedures.

1 The research team are grateful to the staff (past and present) of authorities involved in the management and implementation of ISPA and the Cohesion Fund, who were interviewed for the research and who participated in the workshop, and to the Commission officials in the DG Regio Evaluation Unit and Steering Group who provided helpful comments on an earlier version of the report. The views expressed in the report are those of the research team.


European Policies Research Centre Fraser Associates iv


European Policies Research Centre Fraser Associates 1

1. INTRODUCTION

This report presents an overview and summary evaluation of the management and

implementation of the Instrument for Structural Policies for Pre-accession (ISPA) and the

Cohesion Fund (CF) in Romania from 2000 to 2011, focusing on projects approved in the

2000-06 period. The report is based on research conducted at national level, comprising a

review of documents and data, 14 interviews with stakeholders whose collective experience

spanned the period of the evaluation, and a workshop where all levels of Romania’s

Cohesion Fund delivery system were represented. The report begins with a brief review of

the allocation and absorption of ISPA and Cohesion Fund investment in Romania, followed

by assessments of each of the components in Romania's ISPA/Cohesion Fund delivery

system, and concluding with a synthesis of findings.

2. ISPA/COHESION FUND INVESTMENTS IN ROMANIA

Prior to Romania’s accession to the EU, the country was granted ISPA investment assistance

in the areas of transport and environmental infrastructure and related technical support

measures. As a Member State from 2007, Romania became eligible for Cohesion Fund

support, and its ISPA projects continued to be implemented according to the Cohesion Fund

Regulations.

During 2000-06, 12 transport infrastructure, 36 environmental infrastructure and 15

Technical Assistance projects were planned and implemented. Total eligible expenditure on

the projects amounted to €2.7bn, of which ISPA/CF amounted to €2bn (73.6 percent). Of

this total, 46.9 percent was allocated to transport (€1.3bn eligible expenditure, €957m

ISPA/CF), 49.2 percent to environmental projects (€1.4bn eligible expenditure, €983.7m

ISPA/CF) and 3.8 percent to Technical Assistance (€105m eligible expenditures and €78.6

ISPA/CF).

In Romania, three-quarters of Cohesion Fund and ISPA spending commitments had actually

been paid by the start of November 2011. The figure for environment was even higher with

absorption at 87.3 percent. The spending ratio for Technical Assistance was 77.3 percent.

Whereas the majority of projects had been physically completed at the start of November

2011 (especially in the environment sector), formal closure is still pending for most (see

Table 2.1).

Table 2.1: ISPA/ CF commitments, payments and implementation progress

Area of investment

Commitments (€million)

Payments (€million)

Spending ratio (%)

No. of projects

Physically completed projects1

Formally closed

projects

Transport 962.7 729 75.7 12 8 0

Environment 993.2 867.5 87.3 36 35 1

TA 88.0 68 77.3 15 11 5

Total 2,043.9 1,664.5 81.4 63 54 6 1 This refers to projects, for which payments are at around 80 percent or more of commitments. Source: DG Regio, Information on Cohesion Fund financial execution, cut-off date 03.11.2011.



3. FUND MANAGEMENT AND IMPLEMENTATION

3.1 The Baseline Position

Prior to 2000, strategic policy and investment in the areas of transport and environment

were under the responsibility of the two relevant ministries, namely the Ministry of

Transport, Construction & Tourism2 (MoTCT) and the Ministry of Water and Environmental

Protection3 (MoWEP), through their own strategies and annual investment programmes.

In the transport sector, the investments were on a small scale and they mainly targeted

the roads/railways repairs. Although a Master Plan for the Transport Sector was developed

in 1998 as a strategic planning tool for directing the transport investments, it was not

implemented.

In the environment sector, the main steps were undertaken following the adoption of the

National Plan for Environmental Protection in 1995, further revised and adapted in 1999,

and which focused on the priorities for transposing the Acquis Communautaire.

The accession negotiations stimulated the development of strategic planning, one result

being the National Programme for Romania’s Accession, focused on the priorities of the

Acquis Communautaire. Drafting the ISPA Strategies for Transport the Environment was an

important learning-by-doing exercise, since similar strategies did not exist until then.

MoTCT and MoWEP were responsible for the elaboration of the two ISPA National Strategies

in the areas of transport and environment respectively, based on the priorities linked to the

European Standards for the two sectors.

Preparation for ISPA also required greater development of capacity development than was

initially recognised, considering the specificity of this programme. As Romania was already

benefiting from the Phare Programme as an applicant country, it had already started the

process of developing procedures and monitoring tools following PRAG rules under the

Decentralised Implementation System (DIS). Nevertheless, at the commencement of the

ISPA period, the necessary procedures were at an early stage of development and no IT

system was in place to support ISPA monitoring.

3.2 The Fund Management and Implementation Architecture, 2000-06

The architecture of the management and implementation of ISPA in Romania was defined in

2000 by the Memorandum of Understanding between the Government of Romania and the

European Union, which also assigned the institutions, functions and responsibilities for

implementing ISPA in Romania. The allocation of responsibilities and their evolution over

time is summarised in Tables I-1 and I-2 in Annex I.

The co-ordination of the ISPA assistance was delegated to the Ministry of European

Integration as National ISPA Coordinator until 2003 and the Ministry of Public Finance after

2 Currently Ministry of Transport and Infrastructure

3 Currently Ministry of Environment and Water Management



2003. Ministry of Transport, Construction & Tourism4 (MoTCT) and Ministry of Water and

Environmental Protection5 (MoWEP) were assigned as Implementing Authorities for

transport and environment sectors respectively.

In the transport sector there were three ISPA Implementing Agencies (IAs), responsible for

the tendering, contracting, payment and technical implementation of projects – within the

National Roads Company within the Railways Company and another one responsible for

Danube projects. Within the environment sector, the Implementing Agency was assigned

at the level of the Central Finance and Contracting Unit (CFCU) that operated also as

Implementing Authority for Phare assistance in co-operation with MoWEP.

3.2.1 The Monitoring Committee

The monitoring and evaluation of the progress and effectiveness of the ISPA programme

implementation was formally carried out in the framework of the ISPA Monitoring

Committee.

Chaired by the National ISPA Co-ordinator, the Monitoring Committee brought together

biannually Commission representatives, representatives of all levels of the management

system (National Fund, Implementing Agencies, Implementing Authorities) as well as final

beneficiaries and observers from International Financial Institutions.

The meetings of the ISPA Monitoring Committee were organised with dedicated Technical

Assistance support and with the support of the National ISPA Coordinator that ensured the

secretariat functions and the activity of centralising and verifying the data.

The Monitoring Committee had an active, operational and strategic role and it has also

facilitated a framework for dialogue, analysis and debate on progress with implementation

as well as a learning framework by sharing the experience and problems which appeared in

the project preparation process, implementation, as well as procurement process.

Outside the formal mechanisms, monitoring and evaluation was supplemented by regular

meetings in the Commission Delegation offices, monitoring reports prepared by the

Implementing Bodies and site visits by Commission staff. DG Regional Policy carried out

regular audit missions into the financial management and control systems of ISPA IAs.

Although the decision–making process in terms of follow-up on the results of the Monitoring

Committee meetings was sometimes delayed, it was appreciated by all officials interviewed

that the Monitoring Committee was an useful instrument with an operational and technical

role in the monitoring of the ISPA implementation.

4 Currently Ministry of Transport and Infrastructure

5 Currently Ministry of Environment and Water Management



3.2.2 The Central Administration

Some of the structures initially established for managing Phare in a decentralised manner

became key for the management of ISPA, namely the National Fund in charge with the

financial management of ISPA and Central Finance and Contracting Unit as Implementing

Agency for the environment sector. Both the National Fund and CFCU benefited from

Technical Assistance under Phare in preparing for the Extended Decentralised

Implementation System (EDIS).

Although these two institutions had accumulated some relevant experience, the

commencement of ISPA implementation revealed a need for capacity building actions due

to the distinctive administrative requirements. Initially, capacity building needs were only

identified in general terms on a “learning by doing approach”, such as training on managing

ISPA or procurement according to the DIS Manual.

An important part of capacity building was the preparations for the switch from DIS to EDIS.

Within “Stage I - Gap Assessment”, the main elements and needs of the system were

identified, including: improvements to the manuals of procedures, procurement training,

the verification of expenditures, cash flow forecasting, internal controls, data security

policy, etc. “Stage II – Gap Plugging” was supported by an ISPA Technical Assistance

measure “Strengthening the Capacity of ISPA Implementing Agencies” which focused on the

most urgent needs, in particular, on speeding up tendering and contracting of approved

ISPA measures by improving the quality of tender documents, establishing a manual of

procedures and training of staff.

Development of a Single Management Information System for Phare and ISPA was

contracted in December 2004 using Phare Technical Assistance. The EDIS compliance

assessment recommended such a system for the effective management of ISPA/PHARE

projects and finances in line with EU standards. In 2008, a further TA contract developed a

Helpdesk facility for SMIS ISPA. The ISPA application and the helpdesk facility still function

on the Ministry of Public Finance servers but they are no longer used.

For the period 2000-2006, the impact of staff turnover at the level of the central

institutions was limited, with the exception of the transport sector which continues to

experience problems in the current period. This peaked in 2006-2007 when many of the key

people working in the system left for the private sector or other institutions.

3.3 The Effectiveness of Management and Implementation Architecture

Overall, the management and implementation architectures created for ISPA can be

assessed as effective and to have made a successful contribution to institutional and

administrative capacity building in Romania. The structures and procedures established

stimulated the high level of absorption of ISPA funds shown in Table 2.1. The investment

priorities set in the National Programme for Accession were reflected in the ISPA strategies

and transposed into concrete projects. The management and implementation of ISPA in

Romania functioned in line with the requirements of Regulations, as confirmed by the



achievement of EDIS accreditation in June 2006. Romania was the first candidate country to

complete EDIS accreditation for ISPA and Phare prior to accession.

The effectiveness of the system in terms of commitments and payments was moderate until

the end of 2008 by which time only approximately 58 percent from the ISPA allocation was

certified and paid. An accelerated rhythm was registered in the period 2009-2010 when

almost all the rest of the allocation was defrayed and in 2011 the amounts of certified

payments show a very high absorption rate. Moreover, the economies from the contracting

stage allowed the signing of new Financing Memoranda, one for the transport sector (Lugoj

Bypass) and one for the environment sector (Caraş and Suceava).

The delays in implementation were mainly registered due to the centralised system created

at the beginning with a lot of institutions involved especially in the procurement process,

but also as a consequence of weaknesses remaining from the project design and

development phase. As regards the monitoring system, the SMIS for ISPA was used but it

was more an obligation and not an instrument and parallel accounting systems were in

place – through excel files.

3.4 Evolution and the Integration of Learning

The structures established for ISPA in Romania have served since formation with limited

modification. The early stage of capacity building emphasised recruitment and training of

staff in the ISPA institutions. Between 2003 and 2006, progressive refinement of systems

and procedures was supported through a range of investments in capacity building that

were supported by Phare and ISPA Technical Assistance culminating in EDIS accreditation.

However, consultees consider that the most significant contribution to capacity building

came from the accumulation of administrative experience over the period of

implementation.

In June 2006 following the granting of EDIS accreditation, the ex-ante control function was

transferred to the Implementing Agencies. Before this in 2005, the Audit Authority was

established with functions for expenses verifications, system audit and issuing the

declarations for closing the projects.

In the period 2004-2006, the institutional framework for managing Structural and Cohesion

Funds was established and built separately from that put in place for Phare and ISPA. The

only elements of synergy could be found in the appointment of the Ministry of Transport

and Infrastructure and Ministry of Environment and Forests as Managing Authorities for

Sectoral Operational Programme Transport and Sectoral Operational Programme

Environment respectively, and two transport Implementing Agencies that became

beneficiaries under SOP Transport (Roads and Railways). However the departmental

structure and personnel working under these departments were not transferred from the

ISPA structure, except to a small extent.

With Romania’s accession to the EU on 1 January 2007, procurement procedures had to be

aligned with national legislation transposing the EU procurement Directives and the

National Authority for Regulating Public Procurement was established. Also during 2006-

2008 some important steps were taken as part of the decentralisation process for the



environment sector, marked in 2008 by the taking over by beneficiaries of the delegated

functions of CFCU as Implementing Agency, except for the payment function.

4. STRATEGIC PLANNING


Prior to 2000, in the transport sector, investment in infrastructure was directed by the

MoTCT and its National Agencies, the National Roads Company and Railways Company and

the Railways Company, through their own strategies and annual programmes of

investments.

Investments prior to 2000 mainly targeted the rehabilitation of roads and railways. Although

at the level of the MoTCT, a General Transport Master Plan was developed in 1999 (covering

a 20 year horizon), it was not implemented due to the limited number of staff with

competencies in the area. The MoTCT acted as budget administrator and was responsible

for monitoring the progress of legal harmonisation, as well as the role of the sector entities

in enforcing the European Union legislation in the fields of transport safety, transport of

dangerous goods, environmental protection and supervising the conformity of the Romanian

legislation with the European Union. For the railway sector, the National Company for

Railways was autonomous regarding setting priorities and strategies.

Capacity building actions for MoTCT started with Phare assistance, including Phare Multi-

Country prior to 2000 that helped with creating dedicated structures for the management

of pre-accession assistance including preparing a pipeline of projects.

In the environment sector prior to 2000, MoWEP was responsible for the development of

the general environmental policy and specific legislation related to water management and

environmental protection. The Ministry elaborated the National Action Plan for

Environmental Protection in 1995, which was further updated in 1999 in compliance with

the National Plan for the Adoption of the Acquis Communitaire in order to provide a key

instrument for establishing the measures within the European integration process.

Also, in order to accelerate the preparation for Romania’s accession to EU, MoWEP,

together with other ministries, elaborated the Position Paper – Chapter 22 Environmental

protection, which comprised Romania’s environmental commitments in implementing the

Aquis Communautaire.

4.2 Strategic Planning Arrangements, 2000-06

For the implementation of ISPA, the MoTCT and the MoWEP were required to elaborate

strategies addressing priorities identified in the Accession Partnership, the National Plan for

the Adoption of the Acquis Communitaire and the Commission’s Regular Reports.

For the transport sector, MoTCT prepared the ISPA Strategy for Transport in 2000 with the

support of an external consultant within a period of 2-3 months, with the purpose of

identifying the projects to be financed from ISPA. The process of elaborating the strategy

was not an inclusive one, as the priorities were discussed directly and only with the



European Commission. The Strategy was revised twice, in May 2001 and June 2003.

The priorities identified for road and railway infrastructure were based on the TEN-T

network, mainly designed on the route of Corridor IV (North and South branch) and Corridor

IX, the results of the exercise from June 2003 for identifying the priority projects of the

trans-European transport network, known as "Van Miert Report" and TINA network.

In the environment sector, as a requirement for receiving ISPA financing, MoWEP prepared

the National ISPA Strategy for Environment. The process started in 1999 when the Ministry

gathered project proposals from municipalities which could be sent to the EC both for

water and waste. The ISPA Strategy was prepared in the second half of 2000, and it

integrated these projects. The ISPA Strategy for environment was also revised twice.

Romania’s ISPA strategy for the environment sector identified a list of priority projects

concentrated on the investment-heavy acquis, essentially related to waste water

treatment, drinking water, solid waste management and air pollution. It also assisted the

Romanian Government in the implementation of the National Action Plan for Environmental

Protection. The reference documents that represented the basis for ISPA Strategy

elaboration were on one hand, the different action plans regarding the water management

and environmental protection at the national level, and, on the other hand, the

environmental protection strategy, water management strategy and legislative

transpositions within sectoral strategies.

4.3 The Effectiveness of Strategic Planning Arrangements, 2000-06

Although in Romania prior to 2000, there was no considerable experience in strategic

planning at the level of central public administration, including for investments in the

transport and environment sectors, the strategic planning arrangements for the period

2000-2006 were driven by the requirements of the accession process and can be assessed as

successful in observing the priorities foreseen in the National Programme for Romania’s

Accession to EU, and the priorities for transposing the Acquis Communautaire. They were

constantly monitored by the EC through the Annual reports regarding Romania’s progress in

the process of EU accession.

The National ISPA Strategies for Environment and Transport sector established a clear list of

priorities that covered the period 2000-2006 and that were undertaken by the two

responsible Ministries and the National ISPA Coordinator.


The National ISPA Strategies for Transport and Environment established the priorities which

covered the entire 2000-06 period, with some updating and revision in 2003 in line with

Romania’s preparation for EU and in relation to the process of elaborating the National

Development Plan 2007-2013. The priorities established for the 2000-2006 period in the two

ISPA sectors also served as a basis for the preparation of the SOP Transport and

Environment 2007-2013. In addition, ISPA Technical Assistance was used to support the

preparation of the pipeline of projects to be financed under SOP Transport and SOP

Environment 2007-2013. During the programming phase for SCF, what changed was the

extent of the consultation process which became more inclusive and more important.



5. PROJECT DESIGN AND DEVELOPMENT


Prior to 2000 in the transport sector, the MoTCT and its agencies had responsibility for the

design and development of major transport infrastructure projects. The investment

projects for roads and infrastructure were prepared and implemented with financial

support from the State budget and International Financial Institutions. The main external

financial institutions were the International Bank for Reconstruction and Development

(BIRD), European Development Bank, European Bank for Reconstruction and Development

(BERD), European Investment Bank, Japanese Bank for International Cooperation and the

European Commission through the Phare Programme.

The main sources of Technical Assistance prior to 2000 were the Phare 1998-99 assistance,

including the Phare Multi-country Programme. An important role was also played by the

ISPA Preparation Facility. As a result, dedicated structures for the management of the

programmes were created, pipeline projects were prepared and the first IT system was

organised within the Ministry and main beneficiaries of the transport projects (roads & rail

administrations).

Although the ISPA portfolio of projects was elaborated based on the results of these

previous projects, it has been generally acknowledged that there was a low experience

before 2000 in elaboration of project applications similar to the ones in ISPA, especially

regarding Cost Benefit Analysis (CBA). Both for the railway and roads sector, the

preparation of the documentation was done through their design research institutes, except

for the CBA that were carried out with the support of external experts.

Nevertheless, this experience helped to some extent in building project design and

development capacities, as project documentation was required in order to receive loans

but there was no specific expertise to prepare the ISPA applications.

In the environment sector, prior to 2000, municipalities and water operators were

responsible for the design of their own projects. The environmental investments were

funded from the state budget or the budgets of the water operators, with limited

contribution also from International Financial Institutions. The National Action Plan for

Environmental Protection, updated version authorised by Government Decision in late 1999,

included 286 projects prepared by MoEWM, out of which 233 priority projects on the list for

short term and 53 on the list for medium term implementation. Also it was acknowledged

the need by the Romanian Government to establish the National Environmental Fund as a

co-financing facility. There was no capacity developed in terms of project design, project

implementation, and preparation of CBA or Environmental Impact Assessment (EIA) at this

time.

Although for both sectors a pipeline of priority projects was identified as part of the two

ISPA sectoral strategies, the experience of ISPA implementation has shown that numerous

projects were underdeveloped. The process of signing the Financing Memoranda, especially

at the beginning of ISPA implementation, required a long consultation period, several

revisions of technical documentations which also implied an extensive period of time



between the period of approval of the Financing Memoranda and the actual start of the

project implementation.

5.2 Project Design and Development Arrangements for ISPA/CF, 2000-06

In the transport sector, substantial support was granted towards preparation and

development of projects by the International Financial Institutions. This extended to

support Romanian specialists in training and in applying the procedures put in place by

these organisations in the specific transport sector and also by promoting and financing the

proposed projects.

The objectives and outline technical specification of road and railways transport projects

were set according to EC priorities, namely TEN-T network, Transport Corridors IV, IX and

TINA (Transport Infrastructure Needs Assessment) network.

The detailed design and technical documentation was prepared with external assistance

and either financed from the State budget/national responsible administrations budget or

with Phare support. During the implementation process, the need to update the data from

the technical projects was also identified, thus besides the ISPA measures of Technical

Assistance and project preparation, each measure had a TA component dedicated to the

revision, updating and completion of the data contained in the studies/projects of the

beneficiary. Limited availability of reliable statistical data also contributed to the need for

updates.

In the environment sector, ISPA funding was initially prioritised for large urban areas; over

time the threshold was lowered from populations higher than 300,000 inhabitants to higher

than 100,000.

The objectives and outline specifications of projects were set by beneficiaries having

regard to the priorities of the National ISPA Strategy for the Environment and the

environmental Acquis. The detailed design and specification for the pipeline of

environmental projects were outsourced. Thus, all phases from project option appraisal,

project design and technical appraisal, project cost estimation, demand assessment and

tariff-setting, identification and valuation of project socio-economic benefits (CBA),

identification and assessment of project environmental impacts / scope for mitigation

(EIA), were done with external assistance funded either from own resources or with

Phare/ISPA or IFIs support.

5.3 The Effectiveness of Project Design and Development Arrangements, 2000-06

Overall, the effectiveness of project design and development arrangements for 2000-2006

can be assessed as being moderate especially for the beginning of ISPA implementation.



Both for the transport and environment sector the project design6 process took longer at

the beginning of the ISPA implementation, the main problems identified being at the level

of revising/updating the data from the supporting documents for preparing ISPA

applications (feasibility study, economic and financial analysis including cost-benefit

analysis, environmental impact analysis). Especially for the first Financing Memoranda

signed, the feasibility studies, for example, had been prepared with the support of previous

PHARE assistance or other sources (national or IFI sources) and the data had become

obsolete at the time of the procurement stage. The CBA and EIA were entirely outsourced

and the quality of the documentation was not always at the expected standards. This,

combined with the lack of internal capacity at the level of beneficiaries and the central

authorities in appraising them, led to a practice of using these tools only as an end-of-pipe

process to meet the application requirements rather than to support project design,

including option appraisal.

Given the inconsistency of the supporting documents for some of the ISPA applications at

the time of procurement (due mainly to the long period elapsed between the signature of

the Financing Memoranda and the actual procurement and contracting phase), the need to

introduce the components of revising/updating the technical details within the Financing

Memoranda was identified. Also for the environmental sector, undertaking the EIA proved

sometimes to be a lengthy and problematic process.

The effectiveness of project design was also hindered by the high number of modifications

of the technical options during the period of preparing the ISPA applications, with

implications for the implementation period and for the overall project cost.

Differences among the beneficiaries were also noted, regarding the rhythm of submitting

the ISPA applications, especially in the transport sector, the roads sector being more

advanced.

5.4 Experiences of the Decision Process

Within the ISPA management and implementation system, the applications were appraised

by the Commission and endorsed by the ISPA Management Committee in Brussels. At the

beginning of the ISPA implementation, the evaluation of applications took more than six

months, reaching in some case also one year. Due to the capacity building process, starting

with 2004, the appraisal and selection period was reduced and on average it lasted

maximum 6 months or less.

During the process of project design and development, clarifications were requested which

were assessed by all interviewed officials as being of a reasonable nature. The number of

applications rejected was low, and based on the comments received the applications were

resubmitted.

6 I.e. all preparatory stages in the lead-up to ISPA application documents.




The portfolio of projects funded under the ISPA Strategy for Transport and Environment,

relied heavily on feasibility studies, CBAs and other financial and economic analyses

prepared either with Phare assistance or from the state budget. The gaps in technical

capacity in terms of project design and development were addressed using external

expertise that was introduced as Technical Assistance support also under the ISPA TA

measures, following the deficiencies identified in terms of accuracy of data from these

studies. In addition, the support provided under ISPA for the preparation of the portfolio of

projects to be financed under Structural and Cohesion Funds should have led to a smoother

transition and to an enhanced level of project maturity.

Nevertheless, the transition from ISPA to the Cohesion Fund led to enhanced technical and

economical complexity of the process related to the preparation of the projects under SOP

Transport and SOP Environment, as the projects became much more complex compared to

the projects financed under ISPA. Some typical problems that were encountered during the

ISPA programming period, especially in the transport sector, were also identified as main

bottlenecks leading to big delays in the planning process regarding the preparation and

submission of the financing applications under the Cohesion Fund (especially for the

projects prepared under SOP Transport). Among the main problems we can mention:

Feasibility studies prepared according to obsolete legislation that needed updating

in order to answer the current requirements;

Low quality of the Cost Benefit Analysis documentation and lack of internal

expertise in preparing and implicitly appraising its quality;

Long periods of time elapsed between the period for preparing the feasibility study

and the technical project;

Low performance of the Consultant and consequently the poor quality of the

technical documentation, etc.

This clearly shows that the lessons learned from the ISPA experience were not considered in

the project design and development process for the Cohesion Fund. Hence the transition to

the Cohesion Fund had a limited impact on the design and development phase of projects.

More precisely, it is important to underline that project design and development is actually

the area of project cycle management with the lowest rate of capacity development at the

level of central institutions responsible for directing investments for transport and

environment. This was due to the fact that project applications were mainly prepared using

external expertise, with little involvement from Romanian institutions, as the assessment

was made by the EC. This is proved also by the continuous use of Jaspers assistance under

the Cohesion Fund system.

However, the experience in project design and development accumulated for ISPA was

capitalised at the level of beneficiaries, especially in the environment sector. Based on the

findings, even if CF projects are more complex, beneficiaries of ISPA have more capacity in



project design and preparation, including in managing their contractual relations with

external consultants.

6. PROCUREMENT


Prior to 2000, the responsibility for the public procurement process was at the level of each

responsible Ministry. In most cases, although the legislative framework in Romania was not

yet created, procurement procedures had to comply with the public procurement

requirements of the International Financial Institutions (IFIs) that granted financing to

Romania for large infrastructure projects. This arrangement was to a certain extent

compatible with the EU procurement principles as they envisage ensuring transparency,

competition, etc., but the procedure itself was completely different. However, no

comprehensive national legislative framework on procurement existed at that time.

The procurement of ISPA projects had to follow PRAG rules and FIDIC which required a

change from the procedures followed before 2000 by the two responsible ministries.

However, the need for capacity building in terms of procurement for ISPA was not

identified and addressed prior to 2000, except for the limited capacity acquired by the

Implementing Agencies in the framework of the Phare implementation – which did not

include FIDIC. Basically, in terms of capacity for procurement, Romanian institutions had a

reactive approach rather than an anticipating one.

At the level of Implementing Agencies for the transport sector, there was already a

capacity developed prior to 2000 based on IFIs rules. This can be considered as an

advantage which made the process of transition to PRAG easier, as responsible bodies

would already be familiar with a set of rules and principles such as transparency and fair

competition.

The designation of CFCU as the Implementing Agency for ISPA projects in the environment

sector, responsible also for the procurement process, was beneficial because starting with

its establishment in 1999, CFCU was using PRAG for contracting in the context of the PHARE

programme. Thus, in 2000, there was a minimum level of capacity already built in terms of

PRAG.

6.2 Procurement Arrangements for 2000-06

In the period 2000-2006, as for all acceding countries, the procurement for ISPA projects

followed the rules laid down in the Practical Guide to PHARE, ISPA and SAPARD contract

procedures (PRAG) in DIS system. New sets of procedures were required at the level of ISPA

Implementing Agencies responsible for procurement based on PRAG rules. It should be

underlined, however, that although the procurement system for ISPA was based on PRAG,

procurement processes after 2000 still used IFIs regulations due to the fact that some

projects were co-financed from loans.

National legislation developed gradually over this period, through the adoption of

Emergency Governmental Ordinance No. 60/2001 (approved by Law 212/2002) and its



implementing norms set forth in Government Decision No. 461/2001, as modified. However,

in order to assure full compliance with EU rules, the Emergency Government Ordinance

34/2006 on the award of public procurement contracts, public works concession contracts,

and services concession contracts was adopted. In addition, the National Authority for

Regulating and Monitoring of Public Procurement (NARMPP) was established in 2005 as an

independent body responsible for the supervision of procurement in Romania.

The EU Delegation played an important role of ex-ante control, offering assurance to

Romanian Implementing Agencies regarding the application of law. The Delegation

monitored capacity building using a “rejection indicator”. During the procurement cycle, 10

documents had to be checked, each with a different degree of importance. An indicator

was developed taking account of the relative importance assigned to a certain document

and differentiating between minor or major errors. Up to 2006, the value of this indicator

fluctuated around 40 percent; performance by this measure improved over time, but not

significantly.

Following the EDIS accreditation in June 2006, the ex-ante control function was performed

by national institutions. Once the EDIS accreditation was received in June 2006, the period

of decentralisation of the procurement process following the PRAG rules was short; an

acceleration of the procurement process as well as of the implementation mechanism

(faster approval of variation orders) was registered.

Capacity building in the field of procurement was supported throughout the period through

the use of Phare and ISPA funds and also direct transfer of know how to beneficiaries as the

Technical Assistance contracts within each measure were utilised for preparing the tender

documentation for the works contracts. The need for support was obvious in all areas of

procurement, but especially regarding contract implementing rules and claim management,

and FIDIC rules. The procedures were adapted and improved gradually along the process of

preparing for the EDIS accreditation requirements.

For the transport sector, the procurement responsibilities were assigned to the

Implementing Agencies: Romanian National Company of Motorways and National Roads

(CNADNR), Romanian National Railway Company (CFR) and the Agency for the

implementation of Danube projects within the Ministry of Transport, which had experience

in procurement following rules of IFIs. For the environment sector, some peculiarity

resulted from the fact that CFCU was designated as Implementing Agency. Beneficiaries

were participating in the tender evaluation process by being part of the evaluation team.

Although the CFCU had experience in applying PRAG following the earlier start of the Phare

programme, the complex institutional structure led to problems.7 The CFCU was also

confronted with a shortage of staff and a high workload due to the fact that there were 45

7 E.g. regarding problems stemming from a certain understanding of the division of responsibilities under the implementation agreements between the CFCU and the FB, with some technical responsibilities delegated to the latter on the one hand and the obligations derived from the contracts signed between CFCU and the Contractors on the other hand. This led to a dilution of accountability in relation to the Contractor.



ISPA measures on environment, each of them with an average of five contracts per

measure.

6.3 The Effectiveness of Procurement Arrangements, 2000-06

The arrangements for procurement for 2000-2006 are assessed as being successful, as they

were able to bring forward a good choice of offers, reduced number of disputes (if disputes

were registered, they were formulated more on the tender documentation rather than the

results of the selection process), the majority of contracts were finalised without major

problems. Claims and penalties from contractors were registered for 5-10% of environment

projects and 20% for transport, especially for Railways sector – most of these claims were

due to the fact that beneficiaries were not able to ensure the conditions for implementing

the contract.

It is important to underline, however, that procurement arrangements in 2000-2006 were

characterised by delays due to the poor quality of documentation prepared or long approval

periods since there were no deadlines to observe. Due to the fact that procurement and

contracting occurred two to three years after the project drafting period, there was a

negative impact on implementation. Although at the level of tendering the projects budget

were observing the allocations from the approved Financing Memoranda, during the

implementation it proved difficult, especially for the Contractors under FIDIC yellow rules,

to follow the technical projects execution details due to the fact that procurement and

actual contract implementation were carried out 3-4 years after project preparation. In

addition, implementation was hindered by external factors such as weather conditions,

changing legislation, inflation etc.. External factors also affected the contracts following

the FIDIC red book.

Thus, there were additional costs identified, as well as increases of costs on the market.

The additional costs resulted were covered mainly from the state budget through

Government Ordinance 135/2007 regarding the allocation from the state budget of the

necessary funds for continuing and finalising the ex-ISPA measures.

The EDIS accreditation led to shorter periods for decision-making as the EU Delegation was

no longer performing the ex-ante control. In addition, the role of EU Delegation was

perceived to be positive.

Yet, even if considered successful, the context for assessing the effectiveness of 2000-2006

procurement arrangements needs to be further explained: after 2007, procurement

arrangements, based upon national legislation harmonised with EU Directives, became

much more bureaucratic and led to bottlenecks, the main problems becoming the

significant number of appeals both at the level of tender documentation and on the

selection result. Thus the use of PRAG is considered to have been more effective and with

limited number of appeals; the funds allocated to Romania on ISPA were significant and

thus many companies, especially international, were interested; and access to tenders was

easier as the documentation was in English. Thus, behind the successful assessment of the

procurement system prior to 2006 there is a series of external factors which can lead to

subjective opinions regarding the success of procurement.



In conclusion, the research carried out shows that the procurement arrangements for 2000-

2006 faced difficulties in the beginning of the ISPA implementation period, which were

surpassed later on through an intensive learning and capacity development process

achieved as a result of a learning-by-doing process.


The main organisational changes and investments in capacity building took place over the

period 2002-2005, consistent with the gap plugging phase of the EDIS process. This resulted

in a continuous development of procedures, staff trained on PRAG and FIDIC, which led to

better capacity for preparing tender documentation and overall shorter periods of time

dedicated to the procurement process.

There were two sources of support provided: transfer of know how within the framework of

Technical Assistance contracts for supervision of works within each ISPA measure; and

horizontal training on PRAG, FIDIC, etc. offered within ISPA measures or Phare Technical

Assistance projects at central level. Nevertheless, the capacity building in the procurement

area was more of a “learning by doing” process.

During the interviews, officials consistently highlighted that the experience on procurement

gathered during 2000-2006 was not exploited for Cohesion Fund projects for 2007-2013.

This is due to the fact that the legislation had changed completely, and institutional

knowledge was not transferred. National legislation in procurement was applied both for

ISPA and CF projects starting with 2007 and it brought significant changes in terms of

increased levels of formalisation and bureaucracy, transition from restricted procedures8 to

open procedures9 and from evaluating the quality of technical offers to evaluating the

quantity (e.g. number of risks, number of relevant aspects, etc.).

For example, for the environment sector, although the CFCU built significant capacity in

procurement for ISPA, this is not used in the current programming period. ISPA had,

however, a positive impact at the level of beneficiaries for environment as PRAG made

them aware of EU procurement legislation based on the principles of transparency, fair

competition, etc. When responsibility transferred to beneficiaries in 2008, those in the

environment sector were in a better position to integrate and manage public procurement

based on national legislation.

7. PROJECT MANAGEMENT AND IMPLEMENTATION


Transport sector projects were managed and implemented prior to 2000 at the level of

the MoTCT and Transport National Agencies: Romanian National Administration of Roads

(now National Company of Motorways and National Roads (CNADNR)) and Romanian National

8 According to PRAG, calls for tender are restricted where all economic operators may be asked to take part but only candidates satisfying the selection criteria may submit a tender.

9 All interested economic operators may submit a tender.



Railway Company (CFR). However, the projects implemented before 2000 were smaller,

targeting only road and railway rehabilitation compared to the investments financed from

ISPA, which addressed modernisation and new construction works, including motorways.

Due to the Phare programme implementation (including Phare Multi-country) at the level of

MoTCT, institutional capacity in project management in the context of EU funded projects

was acquired starting with 1991. No specific changes were identified for ISPA before 2000;

institutions adapted and developed their capacity for project implementation based on EU

requirements.

Investments in the environment sector were managed and implemented at the level of

public entities for water, sewage, wastewater and waste, heating, etc., established as

national companies. The reorganisation of public utilities operators for these sectors

started with Emergency Government Ordinance no. 30/1997 which provided for the public

autonomous entities to reorganise as public companies. The investments before 2000 were

characterised by small scale projects managed and implemented by the national

companies.

For the Environment sector, CFCU, later appointed as Implementing Agency, benefited from

capacity building in the area of project management and implementation before 2000

based on their responsibility regarding Phare funds. However, no specific experience on

infrastructure projects in the environment sector was recorded.

To sum up, at the beginning of the ISPA implementation, there were no strong reliable

structures to manage and implement projects in the two ISPA sectors (Transport and

Environment) within the line ministries, but for Environment the situation was better due

to the strong involvement of the EC Delegation and appointment of CFCU.

7.2 Project Implementation and Management Arrangements, 2000-06

The implementation of ISPA projects required structural changes as well as administrative

capacity. At the national level, the National ISPA Coordinator was in charge with the overall

planning, implementation and monitoring of projects. At the Beneficiary level, both for

environment and transport, the Project Implementing Units (PIUs) were created with the

role of managing the project, monitoring and implementation, reporting. The added value of

PIUs consisted in increased capacity for project physical monitoring as well as quality control

on the contractor’s performance through the supervisor engineer.

Capacity building actions were undertaken throughout the period in support of project level

management for ISPA. ISPA assisted the EDIS Stage II exercise with the TA measure

“Strengthen the capacity of ISPA Implementing Agencies” which was intended to speed up

and improve the quality of implementation of the ISPA Implementing Agencies in both

sectors.

Gap plugging was carried out also with the help of the PHARE Horizontal Programme. A TA

contract was signed by the NF and implemented during May 2004 - January 2005 for the NF

and PHARE/ISPA Implementing Agencies resulting in: improvement of the accounting,



treatment of irregularities and internal audit working procedure manuals, as well as

training for staff in accounting, risk management, internal audit and irregularities.

For the transport sector, the PIUs and Implementing Agencies were created within the

national entities with responsibilities in the area of transport infrastructure (Ministry of

Transports, National Company of Motorways and National Roads (CNADNR) and Romanian

National Railway Company (CFR)). Most PIUs had to rely on their internal resources before

being able to contract third party external consultancy services project implementation and

for works supervision.

The final beneficiaries for environment were established at the level of national companies

in the area of water and sewage (considering that they have a better management capacity

than local authorities), or at the level of local authorities for waste.

7.3 The Effectiveness of Project Implementation and Management Arrangements, 2000-06

The arrangements for implementing and managing ISPA projects are perceived as being

successful, clear and straightforward. The system was based on a good procedural system

which was developed gradually over time. It led to a good absorption rate also due to

available co-financing from other international financial institutions and the existence of

the buffer fund.

Participants in the workshop from both sectors drew attention to the fact that although the

majority of ISPA measures were only finalised in 2010 or even 2011 (one measure scheduled

to finish in 2012 in the transport sector), one cannot say that there were delays in

implementing ISPA. This is due to the fact that Financing Memoranda were extended, first

until 2008, secondly until 2010 and third until 2011. Nevertheless, the transport projects

were implemented with a lower efficiency and in a longer time span than environment.

Overall, the budget has increased by approximately 35 percent due to changes in prices in

the period 2005 – 2009 compared to 2000. The budgetary increases were covered from the

state budget, based on Emergency Government Ordinance no. 135/2007 for the allocation

from the state budget of the necessary funds for the continuation and finalisation of ISPA

measures, with subsequent modifications. The percentage varies between sectors and

between different Implementing Agencies. The best situation is registered for Environment,

and the worst for Rail projects, the budgetary increases in some cases led to the state

budget covering for more than 50 percent of project budget, more than the ISPA allocation.

The Technical Assistance contracts for each measure were quite beneficial for ensuring

updates of technical specifications at the moment of launching the procurement process, as

well as for project management and implementation transfer of expertise, although views

may differ at the level of certain beneficiaries due to poor contractor performance. Apart

from this, it is important to note that in the transport sector, the role of TA was perceived

as being more of consultative nature rather than actual support.

Regarding the transport sector, in terms of compliance with initial physical specifications

and budgets, the research exercise showed that the main causes for deviations were:



Low quality of the technical project and technical specification, including the fact

that they became obsolete by the time the project started following delays in

procurement;

Lack of geo- and topographic studies which led to insufficient knowledge about land

conditions and thus impossibility to correctly assess all the specifications from the

stage of project design;

Slow decision making process at the level of local administration;

Weak contractor performance in some cases;

Impossibility for beneficiaries to assure the necessary conditions for contract

implementation due to the lack of a legislative framework (e.g. expropriations);

Big staff turnover and insufficient professional capacity of existing staff for project

management; and

Modification of the legislative framework on procurement in 2007.

Rail infrastructure projects have registered a more significant deviation, due to the

insufficient capacity of the National Railways Company, as compared to the National Roads

Company, in terms of decision making, staffing and also due to the complexity of the

works.

In the environment sector, a few projects experienced significant deviations from physical

specifications and budgetary allocations, mostly due to differences between the physical

indicators realised at the end of the project as compared to the initial project, as

legislation and requirements changed compared to 2000 (e.g. different capacity of the

wastewater treatment plant, additional networks needed) which were not accepted at the

winding-up declarations as eligible expenses. Other reasons for deviations consisted in:

Low quality of the technical project and technical specification, including the fact

that they became obsolete by the time the project started following the delays in

procurement;

Lack of thorough topographic and geographic studies which led to insufficient

knowledge about conditions below land and thus impossibility to correctly assess all

the specifications from the stage of project design;

Slow decision making process at the level of local administration, low level of

awareness about environment obligations, political influence at local level;

Weak contractor performance in some cases; and

Modification of the legislative framework on procurement in 2007.




It can be concluded that the experience of managing and implementing ISPA and Cohesion

Fund projects in 2000-06 was a successful one. A key development in capacity building for

project management was the establishment of the Implementing Agencies for transport and

the Implementing Agency for environmental infrastructure projects in 2000 and of the

Project Implementation Units at the level of beneficiaries. The Implementing Agencies as

well as the beneficiaries have grown in terms of their capacities and regarding staff numbers

(e.g. the staff of the Implementing Agencies increased from fewer than 10 in 2000 to over 40

in 2011). However, there are notable differences between environment and transport.

Project implementation and management capacities at the level of beneficiaries for the

environment sector have improved significantly since 2000 and the expertise was

capitalised to a certain extent in the establishment of PIUs for CF projects. Thus, the ISPA

arrangements had the highest impact on the beneficiaries (operators in the water of waste

sector) as it helped them consolidate capacity and to regionalise, including through the

transfer of functions which occurred in 2008. They also organised as Intercommunity

Associations which allowed them to distance themselves from political influence. All this

was achieved also with the help of two Technical Assistance projects aimed at building

capacity at the level of beneficiaries (FOPIP I and FOPIP II).

Although during the period 2000-2006 the responsibilities for contract management were at

the level of the CFCU, the institutional arrangements changed in 2008 by

delegating/transferring responsibilities for project management to beneficiaries, except for

the payment function, which remained at the level of CFCU. This change was perceived as

very helpful by beneficiaries, as it improved the decision making process, the speeding up

of project implementation and most importantly, led to important gains in terms of

capacity. Nevertheless, there was a small number of beneficiaries that refused to take over

the responsibilities, which showed for some of them their unreadiness to commit or a lack

of capacity to take over these responsibilities.

For the transport sector, a capitalisation of ISPA lessons is notable to a limited extent in

the roads area, as it results from analysing the current situation on SOP Transport. To a

certain extent, weaknesses in project management for the transport sector were also due

to parallel roles for ex-ante control following accession (Ministry of Transport, Construction

and Tourism, Implementing Agencies, Unit for Coordinating and Verifying Public

Procurement) which led to bottlenecks in decision making.

Regarding the central institutional arrangements, there was no continuity assured between

pre-accession period and CF. Part of the functioning institutional arrangements for 2000-

2006, and especially the experience of staff involved, is not used for the 2007-2013

programming period. For example:

When the MA for Environment was created, within the Ministry of Environment

there was no similar structure for pre-accession funds, as the contracting and

paying functions were held by CFCU;

The Implementing Agencies were not involved in the preparation of Structural and



Cohesion Funds;

No co-ordination occurred between the Authority for Coordinating Structural Funds

and the Managing Authority for ex-ISPA in order to capitalise their experience, the

ex-ISPA MA was not involved in the preparation or implementation of SCF; and

In most cases, people who worked on ISPA were not transferred to work on the

Structural and Cohesion Funds (exception for a limited number of staff from the

CFCU who were transferred to the MA for SOP Environment).

The workshop participants recommended that the management of current and future

projects could be improved by acknowledging and limiting the over-audit of projects. All

institutions which are part of the ISPA project management and implementation

arrangements have confronted with contradictory audit opinions, subjective interpretation

of procedures by auditors. This over-auditing of projects has led to delays and bottlenecks

in implementation, all responsible authorities from all levels of ISPA implementation

establishing a stricter risk assessment mechanism (requiring detailed documents, checklists

for each step of project cycle).

8. CONCLUSIONS: A SYSTEM-WIDE PERSPECTIVE

8.1 General

In concluding the report, this section brings together the main findings from the evaluation

of the different components of the overall CF delivery system. It considers the interaction

of the different components and their performance as an overall system: where the most

significant bottlenecks occurred; the most difficult issues confronting institutions; the main

lessons learned; and the scope for further capacity building in order to improve the

effectiveness of the Cohesion Fund management and implementation.

It is important to note that this not only reflects findings based on desk research and

interviewees opinion but also includes the insights from the workshop and judgements by

the evaluators.

8.2 Performance of the Cohesion Fund Delivery System

The evaluation of ISPA management and implementation arrangements in Romania showed

that the system was substantially successful if considering the period 2000-2011 from the

perspective of the actual absorption rate, although it faced a gradual development curve

until June 2006 that marked the conferral of EDIS accreditation and implicitly the

acknowledgment of the system functionality.

The rigorous and systematic approach for EDIS preparation, played an important role in

establishing proper financial control mechanisms and sound management that was useful in

preparing for the 2007-2013 programming period for Structural and Cohesion Funds. It also

gave the institutions involved ISPA management a basis for evaluating capacity gaps and

estimating the resources needed to perform their future tasks adequately.



Overall, the management and implementation of ISPA contributed useful experience in

terms of project preparation, management and monitoring at national and regional/local

levels. However, this experience was not fully exploited within the Structural and Cohesion

Fund management system.

Capacity for strategic planning has been considerably stimulated by the elaboration of the

National Development Plan 2007-2013, the CSRF and further by the preparation of the

Operational Programmes for the two sectors that show that the planning process for

Romanian infrastructure projects was progressively becoming more systematic.

Among the most important internal factors that hindered the performance of the system

were:

Insufficient human resources - An important problem from the system perspective

was represented by the insufficient staffing, the personnel being overstretched due

to the high volume of activity, a common problem for both sectors. Starting with

2006, the turnover rate (especially for the transport sector) increased firstly due to

the financial attractiveness of working in the private sector and secondly in 2008

due to the crisis measures of cutting off the incentives and salaries of the personnel

working in public administration;

Low project maturity level – although there was a clear pipeline of projects

established for both the environment and transport sectors, the initial poor quality

of the technical projects and technical specifications led to additional costs that

had to be covered by the state budget or other IFI’s co-financing. It also

demonstrated that the projects were not sufficiently mature at the beginning of

ISPA implementation;

Difficulties in the decision making process at the level of local public authorities,

especially as concerning the environmental sectors due to political pressure and

lack of co-ordination and consensus among the institutions at regional and local

level (city halls, municipalities); and

Delays within the procurement system – lack of standardised documents at the

beginning of ISPA implementation and weak procurement expertise at the level of

Implementing Agencies (especially at the level of tender documentation design and

appraisal), combined with the ex-ante control performed by the EC delegation,

caused delays of one year and even more in the procurement process in the first

years of implementation. Further on, when Romanian institutions became more

knowledgeable of the system, procurement began functioning more efficiently

(mainly within the period 2004-2006), especially after the EDIS accreditation.

Starting with 2007, however, the transposition of the public procurement rules into

Romanian legislation led to a slowing down of the procurement process due to

problems related to appeals and disputes on the tender dossier and finally on the

selection.



In terms of external factors, among the most difficult issues to overcome, were the

following:

Evolution of the macroeconomic indicators, particularly inflation costs that led to

big differences between the initial estimated value of the projects and the

effective value of the costs necessary for implementing them;

External conditions that determined variations orders and modifications of

technical solutions – weather conditions, for example.

8.3 Key Learning

The ISPA financial management and control structures were generally prepared

satisfactorily, the main driving force being the preparation for meeting the objective of

EDIS accreditation.

Key lessons learnt from the ISPA implementation during the period 2000-06 and also until

now include:

improvement of the legislative framework (for example, for the transport sector

where the legislation was insufficiently developed – Law no 198/2004 on

expropriations, which brought serious problems to the implementation of the

infrastructure projects due to the long periods required for the expropriations, has

been amended by Law 2005/2011.);

enhanced institutional capacity as well as good practices in project

implementation at the level of beneficiaries, especially for environment, in terms

of investment needs identification, monitoring tools, etc.;

qualified and experienced staff from the institutions involved in the ISPA

management system must be safeguarded/motivated against leaving the system

and their experience should be capitalised for the Cohesion Fund implementation.

Given that the preparation for the next programming period of Structural and

Cohesion Funds will start in 2012, their involvement in the planning and

programming process is essential;

strategic planning capacity and preparation of large investment projects has been

improved since the elaboration of the National Development Plan and further of

the National Strategic Reference Framework that set the priorities for the 2007-

2013 timeframe both for environment and transport sector;

regionalisation among environment sector beneficiaries has reduced the

fragmentation which characterised the sector in the pre-accession period and

enabled investment to realise economies of scale.

Unfortunately, there are also some key lessons that were not capitalised from ISPA

experience, namely:



Early planning, phasing and prioritisation of investments – good project preparation

takes time - a good preparation of a complex infrastructure project, especially in

the case of the transport sector, can have a necessary time span of two to three

years. The current experience under SOP Transport, for example, has led to cases

where the project documentation (feasibility studies, cost benefit analysis etc.),

had to be revised as they were not adequately designed, which led to delays in the

submission of the applications as per the initially foreseen planning;

Enhanced monitoring function for large infrastructure projects and preventive risk

management process – ISPA experience has provided a fund of knowledge, for

example, in relation to delays to the implementation of complex infrastructure

projects that can arise due to internal and external factors such as legislative

problems (obtaining of different permits, authorisations, local decisions, ensuring

co-financing etc), the expiration of different permits, unfavourable weather

conditions, encountering archaeological sites, etc. Thus there is a need for an

enhanced capacity in monitoring and using the monitoring results and the risk

management process for a better prevention of major problems during the

implementation process.

8.4 The Contribution of Capacity Building Support

During the 2000-06 period, the capacity of the ISPA delivery system has increased

significantly, the main instruments for this development being the Technical Assistance

projects under Phare and the ISPA Technical Assistance. In addition, the Monitoring

Committee meetings, coupled with the recommendations of the EDIS audit missions,

contributed to capacity building in the ISPA implementing system.

The Technical Assistance measures were mainly dedicated to:

Development of the monitoring system – Support was granted for the developing of

the Single Management Information System for both Phare and ISPA under several

TA initiatives;

Revising/updating the technical projects/execution details – given the

inconsistencies experienced at the level of the contracting process due to delays

between the preparation period of technical projects and the finalisation of

procurement process, besides the ISPA measures for project preparation, each ISPA

measure had included a component of TA for revising the technical project and

execution details;

Meeting the EDIS Requirements - Technical Assistance under Phare played a

horizontal role, especially in the gap assessment process while the ISPA TA measure

assisted the gap plugging phase with the purpose to speed up and improve the

quality of implementation by the ISPA implementing agencies in both sectors;

Enhancing the capacity of the beneficiaries, especially in the environment sector

that benefited of two TA projects aimed at building capacity at the level of

beneficiaries (FOPIP I and FOPIP II).



8.5 Scope for Management Improvements: Issues for the Member State

As mentioned under the previous sections, the systems and procedures for Cohesion Fund

are significantly different than for the ISPA. Although during the period 2000-2006 capacity

for project planning and preparation was enhanced in the context of ISPA, failure to

integrate this experience has meant that Cohesion Fund management and implementation

has faced the same learning curve. Despite the experience gained under ISPA, the

contracting and disbursement rates under SOP Transport and SOP Environment do not show

significant improvements, with transport infrastructure projects registering least progress.

The research found that the gaps in capacity remain at the level of:

Planning and preparation of projects - this area still faces problems of relevance

and design. Expertise in project design for large complex transport and

environmental projects is still weak among the central institutions, reflected in the

low quality of the feasibility studies and costs benefit analyses that require revision

and updating;

Information system – the use of management information to support the decision

making process is still limited as the data available in SMIS are only used by the

Managing Authorities for the elaboration of expenditure declarations;

Partnership development – the feedback received from the beneficiaries has

highlighted problems in obtaining the environmental agreements (GO no 28/2008)

and the public consultation through the EIA process has revealed a need for earlier

and wider involvement of the civil society in planning large infrastructure

investments.

In addition, procurement legislation continues to be problematic; delays of up to a year can

arise from the project tendering process.

8.6 Scope for Administrative Reform: Issues for the Commission

The scope for simplification or the reform of the EU administrative requirements to

contribute to an improved performance of the ISPA / Cohesion Fund delivery system was

also explored with interviewees and participants of the workshop. The following were

highlighted as possible directions for simplification and reform:

Increasing the advisory function of the audit process. Currently there is a tendency

to over-audit the projects. According to the discussion that emerged from the

workshop, audit functions are often duplicated in time or by purpose and also there

are different audit opinions. This led to blockages, the responsible institutions

being forced to undertake a strict risk assessment, namely a more formalised

process before signing each contract;

Simplification of procedures – currently there is an excessive formality of

procedures which has a lengthening impact on the duration of the evaluation,

selection and contracting process of infrastructure projects. Also the

implementation procedures that require addenda for each type of modification to



the contracts slow down the process due to the long process of approval and high

workload of the staff;

Need for a more integrated approach in the next programming period that

capitalises the lessons learnt and personnel expertise acquired both from ISPA

implementation and from current SCF implementation.

Increased role of the risk management function - need for a risk management plan

related to the implementation of major projects – it would be necessary that the

Managing Authority for SOP Transport and SOP Environment require the

beneficiaries to present a project implementation plan. This must be drawn up

together with the Contractor of the works that considers all the risks that may

affect the project implementation with the identification of major risks as well as

proposed measures for mitigating them.



ANNEX I: MANAGEMENT AND IMPLEMENTATION ARCHITECTURE

Table I-1: Management and Implementation Architecture for Transport Projects in Romania

ISPA (2000-06) CF (2007-13)

Managing Authority Ministry of European Integration (until 2003) / Ministry of Public Finance (after 2003) through the Managing Authority for Infrastructure (National ISPA Coordinator) later Managing Authority ex-ISPA (since 200/)

Ministry of Transport and Infrastructure Managing Authority for the Sectoral Operational Programme Transport

Paying Authority Ministry of Public Finance - National Fund Directorate General

Ministry of Public Finance - Certifying and Paying Authority Directorate General

Intermediate Bodies Ministry of Transport – Directorate General External Financial Relations

None

Implementing Bodies Implementing Agencies within:

Romanian National Company of Motorways and National Roads (CNADNR)

Romanian National Railway Company (CFR)

Agency for the implementation of Danube projects (within Ministry of Transports)

None

Key beneficiaries Romanian National Company of Motorways and National Roads (CNADNR)


Agency for the implementation of Danube projects



Agency within Ministry of Transports and Infrastructure



Table I-2: Management and Implementation Architecture for Environment Projects in Romania

ISPA (2000-04) CF (2007-13)

Managing Authority Ministry of European Integration (until 2003) / Ministry of Public Finance (after 2003) through the Managing Authority for Infrastructure (National ISPA Coordinator) later Managing Authority ex-ISPA (since 200/)

Ministry of Environment and Forests – Managing Authority for the Sectoral Operational Programme Environment

Paying Authority Ministry of Public Finance - National Fund Directorate General

Ministry of Public Finance - Certifying and Paying Authority Directorate General

Intermediate Bodies None None

Implementing Bodies Ministry of Public Finance - Central Finance and Contracting Unit (CFCU)

None

Key beneficiaries Autonomous Public Entities for Water (later transformed in state-owned Companies)

Local Public Administration (for waste)

Water and Wastewater state-owned Companies

Local Public Administration at regional/county level (for the Heating sector)



ANNEX II: DOCUMENTARY SOURCES

ISPA: Manuals, documentation and information, see

http://ec.europa.eu/regional_policy/archive/funds/ispa/ispa_en.htm#manuals

CE Annual Reports on ISPA,

http://ec.europa.eu/regional_policy/archive/funds/ispa/docum_en.htm

European Court of Auditors (2008) The Instrument for Structural Policies for Pre-Accession

(ISPA), 2000-06, Special Report no. 12,

http://eca.europa.eu/portal/pls/portal/docs/1/8428724.PDF

Ex Post Evaluation for Cohesion Fund (including former ISPA) 2000-2006, Work Package A:

Contribution to EU Transport and Environmental Policies, see

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/expost2006/wpa_en.ht

m

Ex Post Evaluation for Cohesion Fund (including former ISPA) 2000-2006, Work Package B:

Cost benefit analysis of selected transport projects, see

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/expost2006/wpb_en.ht

m

Ex Post Evaluation for Cohesion Fund (including former ISPA) 2000-2006, Work Package C:

Cost benefit analysis of selected environment projects, see

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/expost2006/wpc_en.ht

m

Ex Post evaluation of a sample of projects co-financed by the Cohesion Fund (1993-2002),

Synthesis Report, ECORYS Transport, EC, DG Regional policy, 2005

Memorandum of Understanding on the Utilisation of the National Fund for ISPA signed

between the European Community and the Government of Romania on 20th of October,

2000 approved through Government Decision no. 1328/2000, see

http://www.monitoruljuridic.ro/act/memorandum-de-intelegere-din-20-octombrie-2000-

privind-utilizarea-fondului-national-pentru-ispa-emitent-guvernul-publicat-n-25895.html

National ISPA strategy: Environment sector, Ministry of Environment, 2000, 1st revision of

May 2001, 2nd revision June 2003;

National ISPA strategy: Transport sector, Ministry of Transport, 2000, 1st revision of May

2001, 2nd revision June 2003;

Briefing Notes EC Delegation: ISPA in Romania, 2003, 2004, 2005

AUDITOR’S REPORT ON COMPLIANCE of National fund, CFCU, Danube Agency, Romanian

National Company of Motorways And National Roads (CNADNR), Romanian National Railway

Company (CFR), on Phare and ISPA program management to EDIS requirements, prepared by

Ernst & Young (1st compliance assessment audit 2005)

http://ec.europa.eu/regional_policy/archive/funds/ispa/ispa_en.htm#manuals

http://ec.europa.eu/regional_policy/archive/funds/ispa/docum_en.htm

http://eca.europa.eu/portal/pls/portal/docs/1/8428724.PDF

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/expost2006/wpa_en.htm

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/expost2006/wpa_en.htm

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/expost2006/wpb_en.htm

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/expost2006/wpb_en.htm

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/expost2006/wpc_en.htm

http://ec.europa.eu/regional_policy/sources/docgener/evaluation/expost2006/wpc_en.htm

http://www.monitoruljuridic.ro/act/memorandum-de-intelegere-din-20-octombrie-2000-privind-utilizarea-fondului-national-pentru-ispa-emitent-guvernul-publicat-n-25895.html

http://www.monitoruljuridic.ro/act/memorandum-de-intelegere-din-20-octombrie-2000-privind-utilizarea-fondului-national-pentru-ispa-emitent-guvernul-publicat-n-25895.html



National Action Plan for Environmental Protection (NAPEP), 1995

National Plan for the Adoption of the Aquis Communautaire

Negotiation Chapter 9 – Policy in the Area of Transport

Negotiation Chapter 22 – Environment Protection

National Development Plan (NDP) for 2002-2004

Law no 203/2003 (republished) on developing and modernizing the transport network of

national and European importance

Law 71/1996 for approval of the National Territorial Planning – Section I – Communication

ways

National Development Plan (NDP) for 2007-2013, http://www.fonduri-ue.ro/pnd-2007-2013-

173

National Strategic Reference Framework (NSRF) 2007-2013, http://www.fonduri-

ue.ro/cadrul-strategic-naional-de-referin-2007-2013-172-a2

Sectoral Operational Programme Environment 2007-2013,

http://www.posmediu.ro/ShowDocument.aspx?path=NFw1XDQucGRm

Sectoral Operational Programme Transport 2007-2013,

http://www.mt.ro/engleza/strategii/post/POS%20Transport%20final%2012%20aprilie%20200

6%20MFP%20-%20MTCT.pdf

Practical Guide to PHARE, ISPA and SAPARD contract procedures (PRAG)

Government Emergency Ordinance no. 34/2006 concerning the award of public

procurement contracts, public works concession contracts, and services concession

contracts

http://www.fonduri-ue.ro/pnd-2007-2013-173

http://www.fonduri-ue.ro/pnd-2007-2013-173

http://www.fonduri-ue.ro/cadrul-strategic-naional-de-referin-2007-2013-172-a2

http://www.fonduri-ue.ro/cadrul-strategic-naional-de-referin-2007-2013-172-a2

http://www.posmediu.ro/ShowDocument.aspx?path=NFw1XDQucGRm

http://www.mt.ro/engleza/strategii/post/POS%20Transport%20final%2012%20aprilie%202006%20MFP%20-%20MTCT.pdf

http://www.mt.ro/engleza/strategii/post/POS%20Transport%20final%2012%20aprilie%202006%20MFP%20-%20MTCT.pdf



ANNEX III: LIST OF CONSULTEE ORGANISATIONS

Ministry of Public Finance, Managing Authority for ex-ISPA

Ministry of Public Finance, Certifying and Paying Authority

Ministry of Transport and Infrastructure, General Directorate External Financial Relations,

Managing Authority for the Sectoral Operational Programme Transport

Ministry of Environment, Managing Authority for the Sectoral Operational Programme

Environment

Former EU Delegation for ISPA implementation in Romania, Transport Task Manager

Ministry of Public Finance, Central Finance and Contracting Unit (CFCU)



Compania de Apă Oltenia S.A. (Water Company), ISPA Project Implementing Unit

Argeş County Council, ISPA Project Implementing Unit

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