Decision of the European Ombudsman on complaint 333/2002/ME against the European Commission

Dear Mr X.,

On 22 February 2002, you made a complaint to the European Ombudsman concerning a Phare Project.

On 20 March 2002, I forwarded the complaint to the President of the European Commission. The Commission sent its opinion on 29 May 2002. I forwarded it to you with an invitation to make observations, which you sent on 31 July 2002.

I am writing now to let you know the results of the inquiries that have been made.

THE COMPLAINT

The complainant addressed the European Ombudsman with a complaint in February 2002. The complainant had entered into a contract with the European Commission in January 1998. The contract related to a Phare Project, which would support the implementation of a Motorway Programme in an Eastern European country. The project should have been completed in November 1999, but was completed in December 2000 after an extension of the contract. The delay was due to implementation difficulties with the beneficiary, the Agency for Motorway Construction in the country concerned. An independent review was undertaken in February 2001, which concluded that only 80% of the requirements of the Terms of Reference had been fulfilled. The Commission therefore reduced its grant accordingly.

According to the complainant, for the greater part of the contract period, very little support or co-operation was received from the Agency in undertaking the project. The complainant was unable to enter into meaningful dialogue with the Agency and in December 2000, it decided to terminate the work and to have an independent review of the work performed. It was the complainant's firm opinion that he had by then fully complied with the requirements of the Terms of Reference.

As regards the independent review, which concluded that only 80% of the project had been fulfilled, the complainant stated that the Commission's evaluation of the project was inaccurate. To this effect, he provided a comparable table on the tasks that were to be carried out, the Commission's views on the fulfilment of those tasks and the complainant's comments. In particular, the complainant pointed out that the Commission performed the evaluation without having access to the final report. The Commission claimed that its conclusion would have been the same had it had access to the final report. The complainant had informed the Commission of his views and comments on the report.

In summary, the complainant alleged that the reduction of 20% of the grant was unfair and unreasonable as he fully complied with the contract. The complainant appeared to claim full payment.

THE INQUIRY

The Commission's opinion

In its opinion on the complaint, the Commission informed the Ombudsman that a contract had been signed between the complainant and the Commission in 1998. The project was a Phare Project and aimed at supporting the implementation of a Motorway Programme in an Eastern European Country. The beneficiary was the Agency for Motorway Construction in that country.

According to the Commission, the project was faced with difficulties from the start. The contractor (the complainant) had entered into a conflict with the beneficiary, inter alia as a result of delays in the delivery of the equipment to be supplied and the beneficiary was of the view that the project did not function properly. The Commission had repeatedly tried to mediate between the contractor and the beneficiary but no compromise was found.

The Commission ordered two independent reviews of the project. The first one was carried out in December 1999 and the second in February 2001. Both consultants performing the reviews arrived at the conclusion that the contractor had not delivered the full system as foreseen by the Terms of Reference of the contract. The second report concluded that 80% of the project had been fulfilled. The Commission enclosed both reports to its opinion.

On the basis of the two assessments, the Commission decided to withhold 20% of the payment foreseen for fees and direct expenses, which corresponded to the assessed level of project completion. As concerned payment for reimbursables, despite the delays in the delivery of the equipment, the full amount was paid. The Commission further pointed out that, had it decided to apply penalties for the liquidated damages for the delayed delivery (something it apparently decided not to do), those penalties would have exceeded the sum that was ultimately withheld.

The Commission summed up by stating that there had been shortcomings on the part of the complainant in the execution of the present contract, something the complainant had admitted at meetings with the Commission. The sums withheld were the financial consequences of these shortcomings.

The complainant's observations

In his observations, the complainant stated that he did not deny that he had faced difficulties with the beneficiary from the outset of the project. However, the complainant believed that he had made strenuous efforts to resolve the difficulties and to develop a project that would satisfy the requirements. The complainant had been proactive in trying to develop a system that fulfilled the technical requirements but he believed that the beneficiary had made no serious attempt to explore and evaluate the tools that the complainant had provided it with.

The complainant referred to its earlier comments on the second report (he had not had access to the first report) and stated that his principal argument was that whilst he accepted that the report identified shortcomings, the report also made a number of recommendations against which he had already taken action by the time the report was completed, or subsequently took action, which made good these shortcomings. No account of any of these actions was taken in the Commission's decision to reduce the grant.

As regards the functioning of the system, and the beneficiary's views thereupon, the complainant stressed that the judgement should be based on the purpose of the project and not solely on the expectations of the beneficiary. To this effect, the Commission had not encouraged the beneficiary to evaluate the work but the beneficiary steadfastly refused to re-consider its views.

The complainant concluded that the beneficiary had received a set of tools that will enable it to fulfil its obligations as an Agency and that the requirements of the Terms of Reference were fulfilled.

THE DECISION

1 Reduction of the grant

1.1 The complainant entered into a Phare contract with the European Commission. The project aimed at supporting the implementation of a Motorway Programme in an Eastern European country. After an independent review of the project, the Commission had decided to reduce its grant to the complainant. The complainant alleged that the reduction of 20% of the grant was unfair and unreasonable as he fully complied with the contract. The complainant appeared to claim full payment.

1.2 The Commission stated that the project was faced with difficulties from the start. The complainant had entered into a conflict with the beneficiary and delays had occurred. Two evaluation reports had been carried out and the second report concluded that 80% of the project had been fulfilled as far as fees and direct expenses were concerned. As concerns payment for reimbursables, despite the delays in the delivery of the equipment, the full amount was paid.

1.3 The Ombudsman notes that the dispute is related to a contract concluded between the complainant and the Commission. According to Article 195 of the EC Treaty, the European Ombudsman is empowered to receive complaints "concerning instances of maladministration in the activities of the Community institutions or bodies". The Ombudsman considers that maladministration occurs when a public body fails to act in accordance with a rule or principle binding upon it. Maladministration may thus also be found when the fulfilment of obligations arising from contracts concluded by the institutions or bodies of the Communities is concerned.

1.4 However, the Ombudsman considers that the scope of the review that he can carry out in such cases is necessarily limited. In particular, the Ombudsman is of the view that he should not seek to determine whether there has been a breach of contract by either party, if the matter is in dispute. This question could be dealt with effectively only by a court of competent jurisdiction, which would have the possibility to hear the arguments of the parties concerning the relevant national law and to evaluate conflicting evidence on any disputed issues of fact.

1.5 The Ombudsman therefore takes the view that in cases concerning contractual disputes it is justified to limit his inquiry to examining whether the Community institution or body has provided him with a coherent and reasonable account of the legal basis for its actions and why it believes that its view of the contractual position is justified. If that is the case, the Ombudsman will conclude that his inquiry has not revealed an instance of maladministration. This conclusion will not affect the right of the parties to have their contractual dispute examined and authoritatively settled by a court of competent jurisdiction.

1.6 In the present case, two assessments of the project were carried out. The first report recommended that, even if the beneficiary had reservations on the complainant's ability to complete the project, an extension be granted to the contract and the complainant be allowed to proceed in order to complete the project. The second report concluded that only 80% of the contract had been carried out and the system developed was not really used by the beneficiary. The report further contained a detailed table of which tasks had been implemented. The Ombudsman notes that the complainant was informed of the second report and submitted his comments on the report to the Commission. It is noted that the complainant is of the view that after the second report was completed he carried out further tasks as recommended by the report and furthermore that some tasks, noted as shortcomings in the report, had already been carried out in the meantime. Despite these comments from the complainant, the Commission upheld its standpoint that only 80% of the project had been carried out.

1.7 The Ombudsman notes that it is for the Commission to decide on the level of fulfilment of projects it is funding. In the present case, the Commission explained its views on the fulfilment of the project in its opinion and by submitting the reports. The Ombudsman considers that the Commission has thus provided a coherent and reasonable explanation of its actions and its position in this case. There is therefore no maladministration on behalf of the Commission. It follows from this conclusion that the complainant's claim could not be met.

2 Conclusion

On the basis of the Ombudsman's inquiries into this complaint, there appears to have been no maladministration by the Commission. The Ombudsman therefore closes the case.

The President of the Commission will also be informed of this decision.

Yours sincerely,

 

Jacob SÖDERMAN