The background to the complaint

1. The present complaint concerns the rejection of cost claims under a shared-cost research and development grant contract. The grant was provided to a consortium (the 'Consortium') for the implementation of a research and technological project (hereafter the 'Project').

2. The complainant, a company incorporated under UK law, joined the Consortium on 1 July 2007, when it replaced another company. It took part in the project from 1 July 2007 until 31 March 2008, when its participation ended at the Consortium's request.

3. On 1 April 2009, the Commission received the complainant's final cost claim for the above period.

4. On 8 April 2009, the Commission informed the project coordinator about its decision to reject certain costs claimed by both the complainant and its predecessor. The rejected claims concerned costs related to the implementation of work packages WP4 and WP5. The arguments advanced by the Commission were in essence linked to the substantial delays that had occurred as regards the project development.

5. On 14 April 2009, the complainant sent a letter to the project coordinator, in which it contested the Commission's decision. It argued that the costs claimed by it for the periods July-December 2007 and January-March 2008 were eligible in full. It asked the project coordinator to communicate its views to the Commission.

6. In a letter dated 12 August 2009, the Commission informed the project coordinator that it had taken note of the remarks provided by the complainant and of the point of view of the Consortium sent to it on 13 July 2009. The Commission's final position was that the complainant did not add any new information to what had already been known to the review panel when it took the decision concerning the non-eligible costs. The Commission, therefore, announced that it would proceed with the processing of the payments in line with the previously determined acceptance of costs.

7. Not satisfied with the above Commission's decision, the complaint turned to the Ombudsman to seek redress.

The subject matter of the inquiry

8. The complainant advanced the following allegations and claim:

Allegations:

(1) The Commission's decision to reject certain costs claimed by the complainant was wrong.

(2) The information provided by the Commission concerning its decision to reject certain costs claimed by the complainant was insufficient.

Claim:

The Commission should approve and pay all the costs claimed by the complainant.

9. The complainant also expressed certain grievances concerning its project partners and in particular the project coordinator. The Ombudsman recalled in this context that he is only empowered to investigate maladministration in the activities of the Union institutions, bodies, offices and agencies and that no action by any other authority or person may be the subject of a complaint to the Ombudsman[1]. In view of the above, he informed the complainant that the latter's grievances vis-à-vis the other members of the Consortium were not covered by the present inquiry.

The inquiry

10. On 16 April 2010, the Ombudsman opened an inquiry into the complaint and invited the Commission to provide an opinion. On 9 August 2010, the Commission sent its opinion. On 13 August 2010, the Ombudsman forwarded it to the complainant. The complainant did not provide observations. On 3 March 2011, the Ombudsman requested the Commission to reply to a further question related to the subject-matter of the present complaint[2]. The Commission sent its reply on 25 July 2011, which was forwarded to the complainant for observations. The complainant did not submit any observations.

The Ombudsman's analysis and conclusions

11. The main issue in the present case is the Commission's decision to reject certain costs claimed by the complainant. The complainant challenged both the substance of the decision as well as the information communicated to it in relation to this decision. Given their connection, the Ombudsman considers it appropriate to examine both aspects together.

A. Alleged irregularities related to the Commission's decision to reject certain costs claimed by the complainant

Arguments presented to the Ombudsman

12. In its complaint to the Ombudsman, the complainant alleged that the Commission's decision to reject certain costs claimed by it was wrong and insufficiently justified. In support of its view, the complainant put forward a number of arguments that it had raised in its letter to the project coordinator, dated 14 April 2009.

13. The complainant argued, inter alia, that it had acted in good faith. While it acknowledged that delays had indeed occurred in the implementation of the Project, it argued that numerous factors, which were outside its control, hampered its efforts to deliver its work on time. It added that the Commission's decision to reject certain costs largely ignored the extent of knowledge contributions which the complainant had made to the project. The complainant also noted that the Commission's conclusion that the results of the project were not tangible or useful was subjective. In the complainant's view, the lack of success of a research and development project is not a usual criterion for approving or rejecting cost claims.

14. In its opinion, the Commission clarified that its decision was taken in accordance with the provisions of the grant contract and the relevant legal framework governing the FP6 grant contracts[3]. It pointed out that the main reason for its decision to reject certain costs claimed by the complainant was the latter's inability to deliver the tasks that were required by the project work programme and reflected in the grant contract signed with the Commission[4]. Thus, the Commission took the view that since part of the work had not been delivered, the costs claimed for that work could not be accepted. The Commission also set out in detail the numerous delays that occurred in relation to the complainant's contributions.

15. The Commission further remarked that it had reviewed the complainant's arguments, presented to the project coordinator on 14 April 2009. These arguments were rejected by the Consortium in a statement made on 30 June 2009. The Consortium had fully agreed with the Commission's cost determination. The Commission added that the determination of the accepted costs was moreover endorsed on 31 July 2009 by its external reviewers. The Commission also took the view that the complainant had received detailed information both from the project coordinator and the Commission itself and had the opportunity to present its views. For the above reasons, the Commission considered that the complainant's allegations and claim were unfounded.

16. In its further opinion, the Commission explained that its letter of 12 August 2009 containing its final position did not address in detail the complainant's arguments because this letter was not addressed to the complainant and was not a response to the latter's letter of 14 April 2009. With a view to assisting the Ombudsman in his inquiry, the Commission presented its detailed comments in relation to all the arguments put forward by the complainant.

17. The complainant did not submit any observations.

The Ombudsman's assessment

18. The Ombudsman recalls that maladministration may be found when the fulfilment of obligations arising from contracts concluded by the Union institutions, bodies, offices or agencies is concerned. 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 competent court or body with the jurisdiction to decide issues of fact and law.

19. The Ombudsman, therefore, has consistently taken the view that as regards contractual disputes[5], he is justified in limiting his inquiry to examining whether the Commission 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, as regards the contractual aspects of a dispute, his inquiry has not revealed an instance of maladministration. The Ombudsman's conclusion will not affect the right of the parties to have their contractual dispute examined and authoritatively settled by a court of competent jurisdiction.

20. In the present case, the complainant's grievances are related to the Commission's decision to reject certain costs claimed by it. The Ombudsman will thus examine (i) whether the Commission's position is justified and (ii) whether it had provided the complainant with sufficient justification regarding its position.

(i) The Commission's decision to reject certain costs

21. The Ombudsman notes that in accordance with the general conditions applicable to the relevant grant agreement, the Commission's role was to "carry out review, analysis and approval of project deliverables"[6]. If the project was not implemented or implemented poorly, partially or late, the Commission was entitled "to reduce the grant initially provided for in line with the actual implementation of the project on the terms laid down in the contract"[7]. The Ombudsman further notes that in the present case, in exercising the above right, the Commission decided to accept roughly 1/3 of the costs claimed by the complainant for the second half of 2007, and to reject all the costs claimed by the latter for the first three months of 2008.

22. As noted above, the Commission rejected costs related to the implementation of work packages WP4 and WP5 of the Project. The Ombudsman notes that the complainant was the lead contractor for the deliverables due under WP4, which included two prototypes. The main reason advanced by the Commission in support of its decision was that no working prototype could be demonstrated by the end of February 2008. In this respect, the Commission presented the project review report covering the work carried out in 2007, in which the external reviewers of the project noted that there was "a significant delay in the delivery of the prototype hardware". In the subsequent report, covering the work carried out in 2008, the external reviewers added that there were "unlabeled updates" as regards the deliverables.

23. In relation to the WP5, which concerned the testing and the user validation of prototypes, according to the relevant periodic review report, "the prototype validation and the first tests [w]ere delayed". The Commission stated in its letter of 8 April 2008, that the first prototype was not ready for testing in March 2008. The Commission further provided the response of the Consortium of 30 June 2009, concerning the costs claimed by the complainant. The Consortium in essence took the view (i) that "none of the promised sub-systems were ever delivered", (ii) that the complainant had "repeatedly failed to deliver the agreed essential deliverables to the Prototype to comply with the Contract" and (iii) that it had also failed to "deliver the fallback system".

24. The complainant did not submit any observations in relation to the Commission's opinion and supporting evidence. The Ombudsman notes that the complainant thus does not appear to dispute the Commission's argument that no working prototype could be demonstrated during the project's periodic review.

25. In light of the above, the Ombudsman concludes that the Commission's decision to reject certain costs claimed by the complainant under WP4 does not appear to be unreasonable or wrong. In addition, in the absence of a satisfactory such prototype, the Ombudsman considers that the Commission's decision not to accept any costs claims for the prototype validation and testing under WP5 does not appear to be unreasonable.

26. The Ombudsman notes that, in its complaint, although it did not contest that delays in the implementation of the project deliverables had indeed occurred, the complainant argued that these delays were due to factors falling outside its control. In this respect, the Ombudsman notes that it does not result from the information submitted to him that the complainant brought to the Commission's or to the project coordinator's attention, in a timely manner, the existence of any factors that might have enabled the complainant to rely on a case of force majeure or a similar type of exception. The Ombudsman thus concludes that the complainant's argument to that effect cannot be upheld.

27. It follows from the above that the Commission has provided the Ombudsman with a coherent and reasonable account of the legal basis for its decision to reject the costs in question. Hence, there has not been maladministration in this respect.

(ii) The Commission's communication with the complainant

28. The Ombudsman has already underlined the importance of the right to be properly informed of the reasons for a decision, which enables an individual better to understand why a decision has been taken. In the present case, the Ombudsman notes that the Commission set out the reasons for its decision to reject some of the costs claimed by the complainant in its letter of 8 April 2009. The Ombudsman considers that the arguments advanced by the Commission in this letter, combined with the information on the status of the deliverables presented in the periodic review reports written by the project's external reviewers constitute sufficient justification for the Commission's position.

29. That being said, the Ombudsman notes that the above-mentioned information was communicated to the complainant through the project coordinator. In response, the complainant advanced a number of arguments in order to contest the Commission's decision. Those arguments were not raised directly with the Commission, but through the project coordinator. The Ombudsman notes that while the Commission confirmed that it had taken into account the complainant's remarks in order to reach its final decision, it did not appear to have addressed the specific arguments raised by the complainant.

30. In the Ombudsman's view, while the Commission was not legally obliged to provide a reply to the complainant, especially in view of the fact that the complainant's letter was not directly addressed to the Commission, it would have been in line with the principles of good administration to have provided a more detailed answer to the complainant's specific arguments. Despite this initial failure, the Ombudsman notes with satisfaction that, in its further opinion to the Ombudsman, the Commission provided detailed and thoroughly reasoned comments in relation to all the arguments raised by the complainant in its letter of 14 April 2009. The Ombudsman is, therefore, satisfied with the quality of the explanations which the Commission provided to the complainant in this respect.

31. In light of the above, and taking into account that the complainant did not provide any comments or further observations in relation to the Commission's initial and further opinion, the Ombudsman considers that there is no need to pursue this aspect of the case any further.

B. Conclusions

On the basis of his inquiry into this complaint, the Ombudsman closes it with the following conclusions:

There has been no maladministration in relation to the complainant's first allegation.

No further inquiries are justified into the complainant's second allegation.

The complainant and the Commission will be informed of this decision.

 

P. Nikiforos Diamandouros

Done in Strasbourg on 18 June 2013

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[1] Article 228 of the Treaty on the Functioning of the European Union.

[2] The Ombudsman asked the Commission to reply to the following question:

"In its letter to the Commission dated 14 April 2009, the complainant advanced a number of arguments in support of its view that the costs it had claimed were eligible in full and should, therefore, be accepted by the Commission. The Commission did not, however, address these arguments, in either its letter dated 12 August 2009, or its opinion on the present complaint. Could the Commission, therefore, please inform me of its views concerning the complainant's arguments?"

[3] The said abbreviation stands for the Sixth Framework Programme (see Council Decision 2002/834/EC of 30 September 2002 adopting a specific programme for research, technological development and demonstration: ‘Integrating and strengthening the European Research Area’ (2002-2006), OJ L 294, 29.10.2002, p. 1).

[4] According to the Commission, these problems were already identified during the periodic reviews of the project.

[5] See for example the Ombudsman's decision in complaint 1141/2002/GG.

[6] Article II.3.4 (b) of Annex II of the grant agreement.

[7] Article II.28.5, idem.