Sixth Framework Programme

Contract/Financial Guidelines

Miriam Driessen Reilly, Legal Sector

20th June 2003

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OverviewOverview

Introduction General contractual principles, Contract structure,

Guidelines, Consortium agreement

Core contract Signature and entry into force, General conditions,

Collective responsibility of contractors

Budget & Reimbursement of costs Financial instruments, Grant for integration: financial

contribution, Cost reporting models, Subcontracting & Receipts, Payments, Maximum reimbursement rates, instruments, activities and cost models

Audits and controls, Sanctions

Rules for dissemination and use Ownership, protection, use and dissemination, access

rights, system of access rights

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IntroductionIntroduction

General Contractual PrinciplesGeneral Contractual Principles

Based on Rules for Participation and:

Reduction in the number of contracts

Collective approach

Greater flexibility

Greater autonomy for participants

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Core contract

Annex I the “project” (technical tasks - work to be carried out)

Annex II general conditions (standard - applicable to every instrument)

Part A: Implementation of the Project Section 1: Implementation and Deliverables Section 2: Termination of the contract and responsibility

Part B: Financial Provisions Section 1: General Financial provisions Section 2: Controls, Recoveries and Sanctions

Part C: Intellectual Property Rights

Annex III specific provisions for some instruments

IntroductionIntroduction

Contract StructureContract Structure

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IntroductionIntroduction

GuidelinesGuidelines

Further information and guidance notes* on

Finance (including auditing, cost reporting models)

Negotiation (including Annex I “Description of Work”)

Consortium agreement (including IPR)

Project management (including reporting)

Plus guidelines imposed by Rules for Participation

Guidelines on Evaluation and Selection procedures

* under development

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IntroductionIntroduction

Consortium AgreementConsortium Agreement

Regulates internal organisation and management of consortium (Commission is not a party)

Compulsory unless exempted by the call for proposals

Non binding guidelines provided by the Commission

Preferably before signing the contract, some decisions must be made by the participants before signature of contract (e.g. exclusion of pre-existing know-how) - see core contract

NeNe

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Core contractCore contract

Signature & Entry into forceSignature & Entry into force

Contractual link of all with the Commission

Contract enters into force upon signature of co-ordinator and Commission

Co-ordinator must ensure other contractors sign/accede within delays (established in contract)

Distribution of pre-financing to other contractors possible after minimum requirements met

Project begins on date established in the contract

Implementation and payment phases relating to the project must be completed by the final implementation date of the contract

NeNe

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Core contractCore contract

Signature & Entry into force Signature & Entry into force

Contractors identified in contract

Evolution of consortium possible where one or more do not sign

Community financial contribution and total estimated costs

Reporting and payment modalities

Amendments - tacit for approval of project activity reports and for consortium changes

Special conditions*

* under development

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Core contractCore contract

General conditionsGeneral conditions Performance obligations for consortium, contractors,

co-ordinator, Commission Force Majeure Suspension and prolongation

the Consortium can propose to suspend the project in case of execution experiences strong difficulties or is uneconomic, if force majeure or exceptional circumstances the project

the Commission may suspend the project when the consortium is not performing satisfactory, in order to re-negotiate and propose necessary amendments

Termination any contractor may request the termination of its participation/the

Consortium may request to terminate the participation of any contractor in both cases “Where the Commission does not object within

six weeks, it is deemed to have approved the request” by the Commission in case legal, financial, organisational or

technical change, change of control, ...

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Core contractCore contract

Collective Responsibility of ContractorsCollective Responsibility of Contractors

Collective technical responsibility (applicable to all instruments)

Collective financial responsibility for some instruments*

use as a last resort

limited in proportion to the participant’s share to the project, up to the total amount they are entitled to receive

Excepted from collective financial responsibility

International organisations, public bodies or entities guaranteed by MS/AS: solely responsible for their own debts

* not for specific actions for SMEs and fellowships and, when duly justified, specific support actions

NeNe

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Budget & Reimbursement of costsBudget & Reimbursement of costs

Financial instruments Financial instruments (see FP6 decision)(see FP6 decision)

Type of instrument

Networks of excellence

Integrated projects

Specific targeted research or innovation projects

…

Coordination actions

Specific support actions

Community contribution

(1) This rate varies for different areas.

(2) Subject to specific conditions specific legal entities, particularly public bodies, will receive funding of up to 100% of their marginal/additional cost.

(3) The rates of assistance may be differentiated in accordance with the rules of the Community framework for State Aid for research and development depending on whether activities relate to research ( max 50%), demonstration (max 35%) or to other activities implemented, such as training of researchers (max 100%) or management of consortium (max 100%)

(4) For actions in support of research infrastructure relating to preparatory technical work (including feasibility studies) and the development of new infrastructure, 6th FP participation is restricted to max 50% and 10% of the budget respectively

Grant for integration (1)Grant to the budget of a maximum of:

50% for research, 35% for demonstration & 100% for certain other activities, such as training of researchers and

consortium management (2) (3)

Grant to the budget of a maximum of 50% of the budget (2) (3)

Grant to the budget of a maximum of 100% of the budget (2)

Grant to the budget of a maximum of 100% of the budget (2) (4), if necessary as a lump sum

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Budget & Reimbursement of costsBudget & Reimbursement of costs

Grant for integration: financial contributionGrant for integration: financial contribution Financial contribution is calculated taken into account:

degree of integration

number of researchers (and doctoral students*)

characteristics of the field of research

joint programme of activities

* bonus per doctoral student is equivalent to 4,000€/year up to a maximum of 10% of the grant in respect of the number researchers

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Budget & Reimbursement of costsBudget & Reimbursement of costs

CostsCosts

No pre-defined cost categories

To be eligible, costs must be

actual, economic and necessary for the project

incurred during the duration of the project

recorded in the accounts (or accounts of third parties)

follow contractors own accounting rules

And must exclude indirect taxes, duties, interests,

costs reimbursed in respect of another Community

project, and not give rise to profit

NeNe

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Budget & Reimbursement of costsBudget & Reimbursement of costs

Cost Reporting ModelsCost Reporting Models

FC: actual direct and indirect costs contractors calculate indirect costs according to their

own accounting rules

FCF (variant of FC): actual direct costs + flat rate for indirect costs (20% of direct costs minus subcontracting)

limited to SMEs and organisations eligible for AC

AC: actual additional non-recurring direct costs + flat rate for indirect costs (20% of direct costs minus subcontracting)

optional for non-commercial or non-profit organisations,

international organisations which cannot distinguish

between direct and indirect costs -

obligatory for physical persons

NeNe

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Budget & Reimbursement of costsBudget & Reimbursement of costs

Subcontracting & ReceiptsSubcontracting & Receipts

Subcontractors

identified in Annex I + minor services

awarded following competitive tender offering, best value for money, under conditions of transparency and equal treatment

Receipts

financial transfers or contributions in kind from third parties

depending on whether or not “resource” is at the management discretion of the contractors or whether there is a prior commitment between the contractor and the third party(ies)

income generated by the project

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Budget & Reimbursement of costsBudget & Reimbursement of costs

PaymentsPayments Periodic pre-financing

initial pre-financing upon signature by Commission and co-ordinator or when minimum number of contractors have acceded or when all contractors have signed

yearly for IP and NoE (specified in the contract for other instruments)

up to 85% (80% for instruments without collective financial responsibility)

EC contribution depends on contractor’s cost model (AC, FC, FCF) type of activity (research and innovation, demonstration,

management, training, etc.) submission of audit certificate * receipts

* Audit certificates by external auditor (for each partner and each year for IP/NoE - for public bodies or competent public officer)

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Budget & Reimbursement of costsBudget & Reimbursement of costsMaximum reimbursement rates, Maximum reimbursement rates,

instruments, activities and cost modelsinstruments, activities and cost modelsMaximum

reimbursement rates of eligible costs

Research and technological

development or innovation activities

Demonstration activities Training activitiesManagement of the

consortium activitiesOther specific activities

(*)

Network of excellence100%

(up to 7% of the contribution)(AC : eligible direct costs)

100%

Integrated projectFC/FCF : 50%

AC : 100%FC/FCF : 35%

AC : 100%100%

100%(up to 7% of the contribution)

(AC : eligible direct costs)

Specific targeted research or innovation project

FC/FCF : 50%AC : 100%

FC/FCF : 35%AC : 100%

100%(up to 7% of the contribution)

(AC : eligible direct costs)

Specific research project for SMEs

FC/FCF : 50%AC : 100%

100%(for collective research only)

100%(up to 7% of the contribution)

(AC : eligible direct costs)

Integrated infrastructures initiative

FC/FCF : 50%AC : 100%

FC/FCF : 35%AC : 100%

100%(up to 7% of the contribution)

(AC : eligible direct costs)100%

Coordination action 100%(FC indirect costs : f lat rate(**))

100%(up to 7% of the contribution)

(AC : eligible direct costs)(FC indirect costs : f lat rate(**))

100%(FC indirect costs : f lat rate(**))

Specific support action

100%(up to 7% of the contribution)

(AC : eligible direct costs)(FC indirect costs : f lat rate(**))

100%(FC indirect costs : f lat rate(**))

(*): Other specif ic activities means: - for Netw ork of Excellence : Joint Programme of Activities, except management of the consortium activities.- for Integrated infrastructures initiative: any "specif ic activity" covered by Annex I, including transnational access to infrastructures- for Coordination Action: Coordination activities, except management of the consortium activities- for Specif ic support action: any "specif ic activity" covered by Annex I, including transnational access to infrastructures

(**): Flat rate for FC indirect costs : 20% of all their eligible direct costs minus the eligible direct costs of sub-contracts.

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Audits and controls, SanctionsAudits and controls, Sanctions

Audits and ControlsAudits and Controls

Controls Periodic activity reports (including plan for dissemination

and use)

Periodic financial reports

Supplementary reports if foreseen (in Annex I or III)

Final reports covering the whole project duration

Audits Scientific, technological and financial audits

Annual monitoring by Commission with external experts (particularly for IP and NoE)

Ethical or other reviews

Contractors right to refuse particular expert

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Audits and controls, SanctionsAudits and controls, Sanctions

SanctionsSanctions

Financial irregularity is grounds for exclusion from evaluation or selection procedure

Violation of fundamental ethical principles is grounds for exclusion from evaluation or selection procedure

Recovery decisions (Article 256 of EC Treaty)

Other sanctions in contract (liquidated damages for overclaims) calculated as:

Overstated expenditure unjustified financial contribution x

total claims

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Rules for dissemination and useRules for dissemination and use

Ownership and ProtectionOwnership and Protection

Ownership Knowledge created under indirect actions = contractors Joint ownership where joint generation Any transfer of ownership must comply with contractual

obligations (access rights, etc)

Protection Knowledge capable of industrial or commercial application

to be protected Commission may protect (where not envisaged by

contractors) Owner of knowledge may publish as long as no impact on

protection Prior notice of publication to Commission and other

contractors

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Rules for dissemination and useRules for dissemination and use

Use and disseminationUse and dissemination

Contractors shall use their knowledge

not all the knowledge from the projects

Dissemination required if not adversely affecting

protection or use, Commission may disseminate if

contractors do not

NeNe

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Rules for dissemination and useRules for dissemination and use

Access rightsAccess rights

Basic principles

Granted on request and may be conditioned by specific agreements regarding confidentiality and purpose

Commission may object to grant of access to third party, particularly if not established in MS or AS

Pre-existing know-how may be specifically excluded

Access for Execution of Action

Access granted to knowledge and pre-existing know-how when needed to carry out their own work on the project(royalty-free for knowledge, also for PEKH,unless other terms agreed prior to contract signature)

NeNe

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Rules for dissemination and useRules for dissemination and use

Access rightsAccess rights

Access for Use

Access granted to knowledge and pre-existing

know-how when needed to use their own

knowledge ( royalty free for knowledge unless other

terms agreed prior to signature of contract, but on fair

and non-discriminatory terms to be agreed for PEKH)

Access may be requested for duration of project in

relation to execution and 2 years after end of project

or after termination of contractor’s participation in

relation to use

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Rules for dissemination and useRules for dissemination and use

System of Access rightsSystem of Access rights

Access rights to pre-existing know-how

Access rights to knowledge

If a participant needs them for carrying out its own work under the projectFor carrying

out the projectRoyalty-free

unless otherwise agreed before signing the contract

Royalty-free

If a participant needs them for using its own knowledge

For use(exploitation +

further research)

Non-discriminatory conditions to be agreed

Royalty-free unless otherwise agreed

before contract’s signature

Possibility to exclude specific pre-existing know-how before EC

contract’s signature (or before entry of a new participant)

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Web siteWeb site

Contract, Consortium agreement checklist:

http://europa.eu.int/comm/research/fp6/working-groups/model-contract/index_en.html