11. Box 1.

The price paid by the European Parliament when purchasing the IPE 0, 1, 2 and 3 Buildings was the result of complex negotiations involving several parties, in particular the City of Strasbourg and the French State as the host country. All the relevant factors were taken into account in determining that price: the legal constraints stemming from the funding model chosen for the construction of the buildings, the price of the land, the involvement of private investors in the negotiations as owners of the buildings, the measures taken to establish the value of the buildings, the budgetary constraints faced by the City of Strasbourg and the involvement of the French State. Although the leases signed in 1979 contained no clause stipulating that the rent paid by Parliament would be taken into account in the event of the purchase of the buildings — an eventuality not envisaged at the time — the amount of rent paid was one of the parameters in the negotiations on the final purchase price for the buildings.

17.

The need for new premises was estimated in 2001 after an analysis of available data and it was integrated into the long-term planning. The estimates and the planning were then continually updated between 2001 and 2005 in order to take into account the changes in the known needs for office space resulting from a number of reasons:

Moreover, the 2001 scenario envisaged the handover of the D4 and D5 Buildings in 2004/2005. It was then revised for a number of reasons: the need to comply fully with European legislation on public procurement; the difficulties inherent in negotiating such a complex contract; the time needed to ensure that such a huge complex would be integrated into the surrounding area in such a way as to take account of neighbourhood concerns.

43.

The lack of any study designed to improve the energy performance of the buildings can be explained by the projects analysed by the Court (Annex II to the observations): they concern buildings which are rented by Parliament (Remard, Wiertz 50, Montoyer 63, Towers A and B, Goldbell), or which were originally rented by Parliament and only purchased at a later date (KAD, IPE 0, 1, 2 and 3) or, finally, which were the result of a public consultation process and are covered by purchase contracts or long leases (D4-D5 and Atrium). Parliament was not involved in the definition of the preliminary designs for the Atrium Building, but secured the incorporation of solar energy and energy recovery systems into the design for the D4-D5 Buildings.

Other projects were also the subject of detailed environmental impact assessments, the most recent being the KAD Building extension in Luxembourg. However, as long ago as 1992 Parliament called for the scope for using environment-friendly air-conditioning equipment in the LOW Building to be explored.

51 and 58.

The Court is recommending closer interinstitutional cooperation, in particular in the area of long-term planning with a view to meeting the institutions' long-term needs and the definition of a joint buildings policy, and, in general terms, exchanges of information concerning the practices employed by each institution in the buildings sphere.

Parliament shares these concerns. In that connection it should be pointed out that, in its resolution of 26 September 2006 on the discharge for implementation of the 2004 budget, Parliament instructed its Administration ‘to draw up a report examining whether it might be feasible to establish a European Buildings Authority charged with responsibility for the construction and maintenance of the buildings of the EU institutions and bodies’. That report is to be submitted to Parliament's Committee on Budgetary Control by 1 October 2007 at the latest.

58.

See reply under point 51 above.

Footnote 25.

The interest rates for the fitting out of Rolin and Woluwe Heights should be compared to a short term financing with possibility of premature pay off. In both cases, the Council used this possibility and the total costs of the fitting out of these buildings was reimbursed in the year of the delivery of the works or in the year after. In light of these facts, the interest rates charged should not be referred to as high.

43.

The General Secretariat of the Council suggests that the Court of Auditors, describing assessments of environmental impact of buildings, takes note of the actions undertaken by the GSC in this area. The actions included notably:

I.-III.

The Commission is in the process of adapting its building policy in Brussels and Luxemburg, and the new communication on this subject will be adopted before the 2007 summer break.

The Commission is of the opinion that some structural changes are needed for the future with a view to improving, in a sustainable manner, the efficiency and effectiveness of its buildings policy and the quality of life for its staff and local residents. In the review of its building policy, which will contain a strategy of housing staff in fewer, but larger buildings, the Commission will take different aspects into account: value for money, the evolution of the average market price/m2 for office buildings, the vacancy rates for office buildings, the evolution in terms of the surface occupied, where and how, the future needs.

The Commission will analyse the outcome of the intensification of its acquisition policy and the consequences it needs to draw from it: the Commission now needs to define a policy for the maintenance and renovation of buildings to preserve the level of its assets; and, in cases where property arrives at the end of its life-cycle, a strategy to encompass the demolition and re-construction of buildings.

Also, over the last years there has been an increased focus on security and safety which has had a knock-on effect on the Commission's wish to develop the mixed usage of its buildings.

Finally, the Commission will assess its co-operation with the local authorities.

IV.

The Commission has defined such a long-term framework for building policy, the Multi-Annual Policy Framework (MAPF), which is a rolling plan, discussed yearly with a 5-10 years perspective.

The Commission is ready to examine to what extent this framework can be the basis for an inter-institutional framework, in addition to its participation to the two inter-institutional working groups in Brussels and Luxembourg (1).

V.

The Commission gives absolute priority to purchasing or long-term rentals and has concluded short-term contracts in exceptional cases only. The policy of concluding long-term acquisition-oriented contracts must be embedded in a clear policy as to the urban poles where the Commission's presence is to be developed.

In Brussels, long-term contracts are signed if the purpose is to acquire the building under the deferred payments scheme. Shorter-term contracts of around 15 years are signed to take buildings in usufruct; this formula is economically sound. In Luxembourg, short-term contracts are currently only used awaiting the JMO2 construction. Otherwise, long-term contracts with purchase options are used.

VI.

The Commission favours a continued application and further development of its policy of diversification, which must be seen in the framework of a very-long-term strategy, taking into account such factors as prospective needs, mobility and the input of the host country.

VII.

The Commission services are currently preparing a communication on building policy, which will contain a new procedure for identifying suitable buildings to be rented or purchased, including a full consultation of the market. The Commission is nevertheless capable of conducting and achieving negotiations respecting or even below average market prices, and it certainly does well, also when compared to other private and institutional players present in the same locations.

VIII.

Over and above the stability gained through its acquisition policy, the Commission has also put in place a new way of funding acquisitions. Deferred payment purchasing is both legally and financially simpler to implement than the previous leasehold contracts (emphytéose).

IX.

The Commission is fully committed to inter-institutional co-operation in all fields (environmental and energy issues, planning, methodology for the estimation of needs, best practices, to name a few).

X.

As indicated at paragraphs 50 to 58, the Commission intends to follow up the Court’s recommendations in the new buildings policy to be adopted by the College later this year.

6.

The Commission issued two communications (2) on the staff needs resulting from the EU-10 and EU-2 enlargements. These communications served as a basis for the annual requests and thus also for the office space forecasts.

8.

First indent — See the reply to paragraph 6.

8.

Second indent — DG ADMIN, in close co-operation with the Offices for Infrastructure and Logistics, is currently preparing a long-term strategy for satisfying its building needs (until 2025) in both Brussels and Luxembourg, including the reflection on alternatives sites or complementary solutions to the existing poles for the Commission in Brussels.

9.

The Commission will continue to strive for the institutions to define and implement their building policy together or, at least, in an integrated manner. This co-operation is, however, not always possible, since each institution has its own specific needs and priorities, but some progress has been made.

In Brussels, all institutions are part of a working group (ILISWG — Inter-institutional Logistics and Internal Services Working Group), whose mandate also covers the exchange of information on the evolution of the real estate market and the needs of the institutions.

In Luxembourg, all institutions co-operate through a committee of the Heads of Administration and an inter-institutional buildings working party.

10.

The policy of purchasing buildings rather than renting them is relatively new and some of the 38 % of the surfaces are still rented as a consequence of long-term obligations contracted in the past.

At the same time, purchasing a building is not always the best solution (e.g. for the building hosting the Information Communication Technologies infrastructure, as this kind of building is technologically rapidly obsolete) and renting may then be a better solution. In exceptional cases, purchasing may even not be possible (see the reply to paragraph 27, Box 3).

Finally, the PPI offers exemptions also in other cases than full ownership, viz. when a building is taken in usufruct.

11.

The Commission has purchased one building (its conference centre at CCAB) which had been rented previously.

In the case of rentals, even if the building is (financially) depreciated, the owner has the legal obligation to maintain it in a good state of use, at his own expense and throughout the rental period. Therefore, the margin to negotiate rent reduction during the life of the contract is very much reduced. Moreover, when long-term contracts are concluded, the rent level already includes a reduction vis-à-vis short-term rentals. Finally, rent levels are driven by market conditions, and therefore, even when the contract provides for a revision of the rent, the rent paid should be assessed vis-à-vis current rent levels and not only with reference to depreciation.

However, the Commission renegotiates rents whenever possible. For instance, in 2005, the contract for the SC15 was renegotiated and extended before it came to an end. This renegotiation reduced the rent by about 40 %.

12.

Box 2 — The owner of the Mondrian building is a German fund whose main interest is to generate a stable and long-term cash flow. Therefore, despite the Commission having tried, it was not interested in selling the building.

The Commission took the building in usufruct nonetheless, because it was, at that time, the only building in the area matching the Commission's needs in terms of size, quality and location, it being very close to the SDME where other parts of the same Directorate-General were housed.

However, it is difficult to strictly compare the terms of a usufruct to those of an emphyteusis.

13.-14.

The Commission has repeatedly and officially stated that it favours a combination of central and peripheral presence of its services. The purpose of this policy is to decrease the pressure on the European Quarter.

Under the existing policy, the Commission has diversified its buildings. In Brussels, where it has 82,5 % of its office space, 82 % of it is in the European Quarter and 18 % elsewhere, counting the Madou building outside the European Quarter, it being very much in its outer periphery. In Luxembourg, where it has 17,5 % of its office space, 72 % of it is on the Kirchberg and 28 % elsewhere.

Even though the Commission's building strategy in the European Quarter is rather predictable, it is often in a favourable negotiating position for surfaces for which there are few candidates.

The Commission has not only further developed the Beaulieu and Genève areas of Brussels, but is also considering other options in the light of the definition of the new policy.

After defining a policy on the location of agencies, the Commission has rented a building for the executive agency of DG EAC. This building is located in Evere, well outside the European Quarter. Moreover the Commission has recently rented a building located near the North Railway Station. (the Covent Garden of 14 000 m2) for the evaluation activity of the 7th Framework Programme for Research.

15.

The Commission remains committed to enhanced co-operation with the host country.

In Belgium, in 2003, OIB’s Director was appointed as the Commission representative to discuss the development of the European Quarter with the relevant authorities, and he also participates in the meetings of the ‘Fonds Quartier européen’. Since 2005 an interinstitutional ad hoc Task Force EU-Belgium meets every two months with representatives of the federal, regional and local level to deal with matters related to building policy.

In Luxembourg, the Commission is currently (February 2007) negotiating an agreement with the Luxembourg State for its main building. This agreement will provide for a plot to be made available free of charge for the construction of the JMO2. As and when the agreement will have been signed, the Commission will define its building policy for Luxembourg.

17.

One of the principles of the new building policy is to house the Commission services in a smaller number of larger buildings, which would mitigate the effects of the annual, piecemeal increases to the staff quota of the DGs and of internal reorganisations.

The Commission services involved (DGs ADMIN, OIB and OIL) are in the process of defining a procedure based on COMREF (a personnel-related database) to assess the number of people to be housed within its premises.

The fact that HITEC (5 000 m2) stood empty for almost a year was a consequence of a delay in the selection process for enlargement translators rather than the Commission overestimating its needs.

18.

The remit of the inter-institutional working groups, both in Brussels and in Luxembourg, covers the definition of common indicators and criteria, and the Commission representatives actively contribute in this effort.

19.

The norm of 35 m2 is used for purposes of global building planning.

First indent — The part of the ‘Housing Conditions Manual’ dealing with space allocation criteria for the DGs, was approved by the Management Board of OIB on January 16, 2007.

Once the opinion of the Luxembourg Committee for Safety and Hygiene at Work will be available (expected in the spring of 2007), the Management Board of OIL will also approve this document.

It will then become applicable to both OIB and OIL.

Second indent — A similar approach will be followed in Luxembourg.

21.-23.

The Commission considers that the fitting-out works are part of the negotiated procedure used to find a building, that is fully compliant with the ‘Manuel des normes applicables à l’immeuble type’ (MIT).

If the works were to be carried out by another contractor under the responsibility of the Commission, this could result in the Commission paying rent for a non-compliant building, during the entire renovation period. Furthermore, if the contractor failed to carry out those works properly and on time, it could cause greater damage to the financial interests of the EU.

In the case of the full construction of a building when it owns the land or when it renovates a building it owns — both may happen relatively soon, in Luxembourg for JMO2 and in Brussels for Cornet-Leman- the Commission will launch a call for tenders for works.

For some buildings projects with a purely technical purpose (central kitchens, archive space, Data Centre, conference building, logistics building) an open consultation of the market took place.

The new building policy will foresee an extended consultation of the real-estate market fostering competition and respecting transparency.

24.

The renting of a building is determined by market conditions related to supply and demand, linked in particular to its location and its corresponding value, as expressed by the price of the land. As the Court correctly states, the definition of a ‘reasonable profit for the developers’ only applies in the case of a building erected for specific needs.

In the case of a building constructed on land owned by one of the institutions, the price paid should indeed closely correspond to the costs (including a reasonable profit) incurred by the builder. The price should be the result of different calls for tenders for the works, supplies and services necessary to construct the building.

27.

In 2003, the Commission has chosen the approach of purchasing or renting, rather than having built to purpose: as a consequence the Commission chose to pay under market conditions, rather than cover construction costs. The actual price finally depends on objective factors (location, size, quality, market conditions) as well as on subjective factors, such as the priorities of seller and buyer and financial constraints to which both are submitted. Occasionally, the Commission can use its negotiating position, e.g. for large buildings such as Madou, in the sense that the Commission is then one of the few actors able to rent or buy the entire building.

Box 3 — As regards SPA3, the evaluation by the consultant is just one, indicative element of the negotiation file. The final price is what it is: the result of a negotiation. And even if there were some errors in the expert evaluation, they influenced the evaluation both ways and the difference with the price paid was 4 %, which is deemed to fall within an acceptable range.

As mentioned in the reply to paragraph 12 Box 2, the negotiation position of the Commission was limited as the Mondrian was the only acceptable building that could meet DG RTD’s needs, i.e. to be grouped in two large buildings. In effect, this DG was previously spread over five buildings. Moreover, with the size of this building (about 20 000 m2) came operational economies (maintenance, security), and given its quality, the Commission estimated that it had obtained a good deal. This building allowed the Commission to reach goals set in the 2003 Communication on Buildings Policy (COM(2003) 755): group the services in fewer and larger buildings, and provide staff with a high quality work environment.

29.

The Memorandum of Understanding between Belgium and the Commission set the general principles of the Berlaymont’s refurbishment. A second, more detailed document was signed by the Commission, Belgium and S.A. Berlaymont 2000 on July 17, 2001 to precisely define price, timing and quality standards.

If the price had been negotiated on the basis of the construction and refurbishments costs, it would have been much higher. According to S.A. Berlaymont 2000, the total cost of the building is around EUR 670 million excluding EUR 125 million for removing the asbestos. The instalments for the emphyteusis, on the contrary, were set on the basis of a value of EUR 553 million.

30.

The Commission request a set of mandatory certificates and insurance policies when it starts the examination of a building. Since 2004, a 10-year guarantee insurance policy is systematically foreseen for the buildings purchased by the Commission (Berlaymont, Madou and Beaulieu 25).

Major defects block the provisional acceptance of the building and the corresponding payments. Minor defects, to be repaired between the provisional and the final acceptance, are covered by a percentage of the financial guarantee provided by the contractor (generally around 5 % of the performance guarantee).

When, after the final acceptance, a major defect appears, the statutory 10-year guarantee or the appropriate equipment guarantee is activated.

Box 5 — As regards the Euroforum, the procedures proper to the Luxembourg site for the acceptance of works and for the release guarantees were followed.

A first guarantee, related to timely delivery (in this case EUR 500 000) was released three months after the occupation of the building and only after Euroforum S.A. paid a penalty of EUR 93 000 for the late delivery of the building.

95 % of a second guarantee, a performance guarantee for the works and installations (in this case EUR 2 500 000) was released 17 months after acceptance (3) and occupation of the building, upon repair, by Euroforum S.A., of all major defects.

Finally, a guarantee for the remaining 5 % (EUR 125 000) was kept for the repairs of some minor defects. While this amount was deemed sufficient, and the approach therefore acceptable, the Commission is willing to adopt the good practice of the Parliament.

In addition to the above guarantees, a mandatory insurance policy imposed by the contract of the Euroforum building, covers the constructor's responsibility for the 2-year and the 10-year period after delivery.

31.

The length of this period is a compromise between the completeness of the checks and the institution's wish to occupy the building, and depends on the complexity of the projects and on the available resources.

The Commission deems a period of a few weeks sufficient to identify the major defects, the remaining smaller defects being covered by the financial guarantee and the major, but hidden defects being covered by the 10-year guarantee.

In all cases, all vital controls concerning security and health and safety are completed and verified by certified companies before occupation of a building.

33.

Until now, the Commission has never built for itself for the very reasons mentioned by the Court and, of course, also because no land was made available.

For two upcoming projects (JMO2 in Luxembourg and the Cornet-Leman nursery in Brussels), the Commission, conscious of the financial advantage, will cooperate with the national authorities for their construction or renovation.

34.

The Commission is of the opinion that, even if the new financial construction did cost some basis points, the margins obtained are nonetheless very competitive, when compared to other constructions.

36.

Because of the revised practice (deferred payment scheme), in 2006 the financing rate for the Madou building was set with a negative margin of –0,01 %. This margin is set against the fixed swap rate curve.

For the acquisition of the Beaulieu 25 building, the margin against the fixed swap rate curve was +0,008 % in 2006.

Box 6 — The analysis of this case must be placed in its historical context.

A global agreement had been reached after protracted negotiations in 2001/2002, and had been submitted to the ACPC (4) on August 28, 2002. The ACPC gave a favourable opinion on December 4, 2002.

These conditions were indeed favourable to the Commission, economically and functionally speaking (with a considerable regrouping of the services). Reopening the negotiations after six months would have been difficult for the Commission, as it was under pressure to abandon the CUBE building (see reply to paragraph 41 Box 7), since the fitting-out works were estimated to last well over 12 months.

In fact, since then and whenever the building project lends itself to it, the Commission negotiates the technical and functional aspects separately from its financing. For this financing, the Commission consults the financial markets for the best result possible.

37.

When such appropriations became available, the Commission has indeed used them to make scheduled and unscheduled payments.

When they were unscheduled, these payments allowed the Commission either to renegotiate emphyteusis contracts or accelerate repayments of works contracts, and only after careful analysis of the balance between savings and penalties; or to acquire a building, achieving future savings for the EU budget.

38.

The Commission applies the provisions of the Financial Regulation.

41.

A certain amount of coordination, in particular to address short-term needs, is already in place. In Brussels, the Commission made special arrangements with the Committee of the Regions (VM-2), the European Parliament (MO75) and the Council (Infopoint and the Dailly nursery). In Luxembourg, similar arrangements were made between the Commission and the other institutions.

The new building policy will be the result of careful reflection and will take into account, where appropriate, the Court’s audit observations the ongoing IAS audit and staff surveys.

Box 7 — The Commission considers that the CUBE building is a case where the interests of the two institutions involved diverged. The positive note is however the fact that, following this experience, the EU institutions in Luxembourg have strengthened their co-operation with a view to improving the harmonisation of their building policy.

42.

The issue of an overall site agreement is a complex and delicate one because the subject range is so wide, and the Commission acknowledges that such agreements have not been signed with the Belgian or with the Luxembourg authorities. In their absence, the PPI has filled the gaps in most areas, and co-operation arrangements have been set up in specific fields, e.g. in security, obviously linked to buildings.

43.

OIB has started to implement a ‘Life Cycle Cost’ methodology in order to assess the total cost incurred over the life of a building, including energy and environmental aspects. This approach has as a main objective to assess, monitor and manage all the costs related to a building's occupation. This methodology is planned to be defined in 2007 and was presented in draft form to other institutions (European Parliament, Council, and the Committees) in September 2006.

Since 2006, the Commission asks the owner to provide a report on the building's energy performance (this report has been provided for the Beaulieu 25 and SPA2).

44.

When the Commission intends to launch a call for tenders related to building-related services (e.g. insurance, maintenance, training courses in building techniques, cleaning), it consults other institutions in order for them to have the possibility to join.

In Luxembourg, a very close collaboration has been established between the Commission, the Translation Centre and the Court of Auditors.

But the Commission agrees that there is scope for enhanced co-operation.

45.

Since the second half of 2006, the Commission always resorts to a comprehensive ‘due diligence’ with an external law firm for the buildings it negotiates. This due diligence covers all the legal aspects, contracts with architects and insurance companies, official measures of the building, environmental and town-planning permits, tax matters.

Regarding the valuation of buildings, the Commission has a contract with a specialist in this field, and for technical aspects with an engineering company.

On this basis the Commission considers that its own qualified internal staff, together with the external contracts mentioned above, covers all the fields (legal, financial and technical) necessary to have a good view on its buildings projects.

46.

In October 2006, the Commission made a presentation to other institutions (European Parliament, Council, the two Committees) regarding the legal aspects of its building contracts and particularly the idea to write a manual that would be addressed to the real-estate actors. This manual will describe the main conditions for contracting with the Commission.

Were the Commission to launch construction projects of a similar nature to those of Council, Court of Justice or Court of Auditors, it would certainly take their experience into account.

47.

Embedding inter-institutional co-operation into appropriate structures is only possible if there is a firm commitment from all the Institutions.

In addition to the elements presented in the replies to paragraphs 41 to 46, the Commission made special arrangements with the Committee of the Regions (VM2), the European Parliament (MO75) and the Council (Infopoint and the Dailly nursery) in Brussels. Significant steps have been taken by OIL and the groundwork for more actions and results has been laid.

48.

The two Commission offices do work together very closely and share their experiences on numerous subjects: technical standards for data centres, housing conditions manual, budgetary procedure, ‘housing building’ approach for ICT, training, specific calls for tenders, etc.

As said elsewhere, they also plan to standardise the office space management software.

Exchanges with other institutions do exist, but they are rather informal and need to be structured.

50.

The Commission has comments and commitments corresponding to each of the specific recommendations and these are given below, but the general introductory comment to the Commission's reply (see points I to X) has set out the basic constraints to which the Commission is subject in the four areas mentioned by the Court.

51.

The Commission agrees with the recommendation.

The definition of a coordinated multi-annual framework passes through the definition of such a framework in each institution.

The Commission has defined such a framework, the MAPF (Multi-Annual Policy Framework), which is a rolling plan discussed yearly in the Management Boards of OIB and OIL.

The Commission is also ready to examine to what extent this framework can be the basis for an inter-institutional framework.

The Preliminary Draft Budget gives information on new buildings (in surface terms) expected for the year to come, and an estimate of the global budgetary impact of building policy is included in annual report on Heading V.

Finally, such multi-annual frameworks must remain coherent with the basic building policy, which is under review.

52.-53.

The Commission accepts both parts of the recommendation.

As regards inter-institutional co-operation, it already takes place, both in Brussels and in Luxembourg (5).

The Commission gives absolute priority to long-term rentals or purchasing and has concluded short-term contracts in exceptional cases only (6). But it is clear that the policy of concluding long-term acquisition-oriented contracts is most effective when embedded in a clear policy based on a number of elements including long-term planning, needs analysis and indications as to the actual location of the few, large buildings involved, i.e. as to the urban poles where the Commission's presence is to be developed.

54.

In line with the reply to Recommendation under paragraph 53, the Commission wants to make the following points:

55.

The Commission fully supports this recommendation and will continue to act accordingly in the ILISWG for Brussels and in the GIITL for Luxembourg, and needs assessment and indicators will be systematically on their agendas.

Recognising the importance of reliable management information, OIB and OIL have decided to use the same software for managing buildings, floors and surfaces, once the harmonised ‘Housing manual’ will have been completed, which is about to be the case. This issue could be systematically discussed in the inter-institutional working parties.

A certain amount of coordination, in particular to address short-term needs, is already in place, as shown in observation 47 and the reply thereto.

56.

With respect to the market consultation procedures, the Commission wants to make its approach clear.

57.

The Commission applies the provisions of the Financial Regulation.

58.

The Commission is fully committed to inter-institutional co-operation in all fields, and has proven so in several instances (environmental and energy issues, planning, methodology for the estimation of needs, best practices, to name a few).

This commitment will be confirmed again in the new building policy, to be adopted by the College before the 2007 summer break.

As regards the co-operation with Belgium, the Commission has extended this co-operation by setting up a Task Force (with subgroups if necessary), where Vice-President Kallas’ office meets several times a year with the representatives of the Brussels Region.

As regards the co-operation with the Grand Duchy of Luxembourg, the Heads of Administration in Luxembourg similarly meet with the Chairman of the ‘Fonds Urbain et d’Aménagement du Kirchberg’ on a regular basis.

15, 22 and 45.

The Court of Justice welcomes the positive remarks made by the Court of Auditors relating to the interest in obtaining from the Luxembourg authorities the provision of sites free of charge for the buildings, to opening construction works to competition, and to arranging to use expertise so as to have administrative, financial and technical control over the construction work.

26.

As indicated by the Court of Auditors, the framework contract between the Court of Justice and the Luxembourg authorities provides for the appointment of an independent expert responsible for determining the sale price of the building. The Luxembourg State launched a call for tenders for the purpose of selecting that expert. The procedure was declared unsuccessful as no tender was submitted. A new tendering procedure has been launched so that such an expert can be appointed in the very near future. According to the latest information from the Luxembourg authorities, the independent expert will be able to be appointed within the next few days. The delay in the appointment will not prevent the expert from fulfilling his duties in accordance with Article 6.2 of the framework contract and from determining the sale price of the building pursuant to Article 6.3 of that contract. Already all invoices issued by the companies working on the building site are verified by the external consultant chosen by the Court of Justice to assist it in the monitoring and control of the building project. As soon as the independent expert has been appointed, invoices will be sent to him so that he can determine the final sale price of the building.

The Court of Auditors also maintains that the framework contract only sets out general principles without determining precise procedures concerning control, performance deadlines, penalties for delay or budgetary limits. This analysis warrants some qualification:

35.

The Court of Justice welcomes the comment of the Court of Auditors that the financial arrangement used, while complex, is favourable owing to the recourse to the European Investment Bank. For the financing of the future upgrading and renovation works to be performed in annexes A, B and C, the Court of Justice will ensure that it is involved in the tendering procedure for the financing of those works, in order to take into account the observations of the Court of Auditors.

Annex I.

The Court of Justice notes that, unlike budgetary documents, the table in annex I does not distinguish between appropriations for pure rental and those for the financing of the lease-purchase payment made for the purpose of acquiring the buildings. That distinction appears in the Court's budget, which contains two different budgetary items. The respective allocations for those two items illustrate the buildings policy pursued by the Court for a number of years, which, through lease-purchase, seeks to become the owner of the buildings which it is required to occupy long term.

28. Box 4.

1.

When the European Parliament vacated the ‘Jacques Delors’ building (Belliard 99-101) in 1998, it still had a lease contract for this building until 2007. The EP, acting also as the Budgetary Authority, decided to request the Committees to take over the EP's contract. The Committees had no choice but to comply with this request, since the EP had put half of the Committees’ annual budget for rent in reserve, the corresponding amount being released only after the Committees would have signed a new lease agreement for taking over the existing contract of the EP. Initially, the Committees did not request this operation, since the facilities at their disposal at the time were satisfying their needs (the only exception being the plenary sessions of the Committee of the Regions — five per year — which were held in the EP premises). Since the EP's contract expired only in 2007, it is clear that the owners were in a strong negotiating position (they would receive, until 2007, an annual indexed amount of around EUR 6.7 million, even if the building was not used).

2.

This unusual and quite difficult situation was underlined by the Court of Auditors in its annual report on the 2000 budget, paragraph 7.68 [on the Belliard 99-101 building]:

‘the Committeesfound themselves in a difficult position as a result of an obligation placed on them by Parliament, i.e. that of taking over this building, for which the Parliament had signed a lease running until 2007’.

Furthermore, in that same report, the Court also stated that:

‘Nevertheless, they [the Committees] succeeded in reintroducing an element of negotiation by deciding to refer to the market in the summer of 2000. The prices finally agreed are more in line with those offered on the Brussels market for this type of building’.

The Committees share this analysis and are convinced that no better price could have been negotiated for the ‘Belliard 99-101’ building. Negotiations were indeed very tough and the price obtained was in line with market conditions. The project, as a whole, was successful in terms of quality of the result and respect of the deadlines.

3.

The EP was kept closely informed on the evolution of the negotiation process. Indeed, the Committees signed the contract after approval from the Budgetary Authority, in full compliance with the Financial Regulations.

4.

With respect to the financial analysis in the Court’s special report, it is based on a rental value of the fully renovated building of EUR 8,28 million (the amount of the annual emphyteusis). This corresponds to ± EUR 221/m2. However, in the report ‘Office Market trends’ (December 2004, Catella), page 14, the prime rent for the ‘Léopold’ area was situated rather around EUR 240/m2 at the time the contract was signed (December 2000). Therefore, the Committees believe that the calculated ‘value’ of the building, according to the method referred to in the Court’s report (application of a theoretical yield of 6,5 %, based on an annual indexed rent) should not be EUR 127 million, but EUR 138 million. The corresponding annual instalment, calculated according to the Court’s method, would then amount to EUR 7,42 million (instead of EUR 6,83 million). Furthermore, this calculated annual instalment is heavily dependent on the expected inflation over 27 years. As an example, a reduction in inflation of only 0,5 % (which reduces the future annual payments, as these are indexed) would result in an increase of the corresponding annual instalment of ± EUR 400 000.

41. Box 7.

Please refer to the Committee's comments on Box 4.