Kompas

In accordance with Model Grant Agreement, to be eligible, costs and contributions must meet the eligibility conditions set out in this Article.  6.1 General eligibility conditions.

The general eligibility conditions for actual costs are the following:

(i) they must be actually incurred by the beneficiary

(ii) they must be incurred in the period set out in Article 4

(iii) they must be declared under one of the budget categories set out in Article 6.2 and Annex 2

(iv) they must be incurred in connection with the action as described in Annex 1 and necessary for its implementation

(v) they must be identifiable and verifiable, in particular recorded in the beneficiary’s accounts in accordance with the accounting standards applicable in the country where the beneficiary is established and with the beneficiary’s usual cost accounting practices

(vi) they must comply with the applicable national law on taxes, labour and social security and

(vii) they must be reasonable, justified and must comply with the principle of sound financial management, in particular regarding economy and efficiency.

A project budget typically consists of standard budget categories provided in the grant budget template. Nearly every budget category may include costs related to the purchase of goods, works and services.

What do the European Commission rules say about procurement under grant-funded projects? Let us examine the requirements based on the Model Grant Agreement (MGA), the Annotated Grant Agreement (AGA) and the Indicative Audit Programme.

Internal Procurement Procedures

The Model Grant Agreement does not establish thresholds for procurement carried out under grant-funded projects. When purchasing goods, works or services, beneficiaries are generally required to apply their own internal procedures (or their established organisational practice), provided that:

• the procedures are applied consistently across all of the organisation’s activities, and not only to projects funded by the European Commission;
• they ensure that contracts are awarded on the basis of best value for money or, where appropriate, the lowest price;
• they effectively prevent conflicts of interest.

The beneficiaries can choose between best value for money and lowest price, and either approach may be used depending on the circumstances. However, a competitive selection of contractors should be the default approach since it is the safest way to ensure no conflict of interest, best value for money or lowest price through direct comparisons between offers.

The beneficiary must be able to demonstrate that the criteria defining quality were clear and coherent with the purpose.

As a best practice it is recommended to entrust the decision of awarding a contract to an evaluation committee rather than to a sole person. Members of the evaluation committee should be aware that they need to disclose the existence of a conflict of interest. The beneficiary should have clear rules and guidance on situations of conflict of interest. These rules should provide information on who to contact for advice or disclose the conflict to and, where necessary, the appropriate action. It is good practice that staff involved in the procurement process formally signs a declaration of no conflict of interests before performing their duties.

What Documentation Should Beneficiaries Retain?

According to the Indicative Audit Programme, audits primarily focus on verifying whether the costs declared comply with the provisions of the Grant Agreement. Beneficiaries are therefore recommended to retain supporting documentation covering the following aspects.

Applicable Procurement Procedure

The auditor will examine in detail how the supplier or contractor was selected. In particular, auditors will normally verify:

• whether contracts were awarded in accordance with the beneficiary’s internal procurement procedures or established organisational practice;
• whether competitive offers or tenders were obtained, where required by the beneficiary’s internal rules;
• the justification for selecting the successful supplier or contractor;
• whether the selected supplier or contractor possessed the qualifications and capacity required to perform the contracted tasks.

Incurred Costs

Auditors verify the original invoices and bank statements confirming the date and amount of payment. They also assess whether:

• the invoiced amounts are consistent with the terms of the contracts concluded between the beneficiary and the suppliers or contractors;
• the costs have been properly recorded in the beneficiary’s accounting records;
• any conversion of costs into euro has been carried out in accordance with the rules laid down in the Grant Agreement.

Key Takeaways

The Model Grant Agreement does not prescribe monetary thresholds for procurement under European Commission grant projects. Instead, beneficiaries are expected to apply their own internal procurement procedures, provided these are applied consistently, ensure transparency, deliver best value for money (or, where appropriate, the lowest price), and effectively prevent conflicts of interest.

Competitive procurement should be the standard approach for selecting suppliers and contractors. Beneficiaries should also maintain comprehensive documentation supporting the procurement process, including evidence of the evaluation and award process, with decisions preferably taken by an evaluation committee, as well as documentation demonstrating effective conflict of interest management.

Disclaimer: This material has been prepared by Compass Group experts and reflects solely the views of the authors. It is provided for informational purposes only and does not constitute official legal or professional advice. It does not take into account all circumstances that may be relevant to a particular organisation or project.