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MEMO/07/341

Brussels, 5 September 2007

Memo questions and answers - Commission buildings policy

What is the total combined expenditure of all the European institutions on buildings in all their sites (Brussels, Strasbourg and Luxembourg)?

Budget expenditure on the purchase and rent of buildings is about 8% of the EU institutions' administrative expenditure, or EUR 532 million. The total floor area of buildings occupied by the European institutions in Brussels, Strasbourg and Luxembourg is approximately 2 million square metres.

How much building space does the Commission occupy in Brussels?

Brussels became the seat of the Council, the Commission, the Economic and Social Committee and the Committee of the Regions under the Treaty of Amsterdam (1997) and is now second among "diplomatic" cities. The European quarter is now the city's most important service district with ± 3.4 million square metres of office space, more than half of which is occupied by the EU and associated bodies.

Successive enlargements have increased the area occupied by the European institutions in the Quartier Leopold. We have grown from six Member States to 27 as of 1 January 2007. For the European Commission this has meant a change in scale for its buildings policy. From a handful of buildings in 1957, we now occupy 61, or about 800 000 m² of office space spread over 51 buildings plus conference facilities, logistics buildings, three nurseries and two central childcare facilities, making a total of 865 000 m². The Commission occupies these buildings as owner, holder of rights in rem[1] (usufruct[2] or emphyteusis[3]) or as a tenant.
The list of buildings can be consulted on:

http://ec.europa.eu/oib/building_en.cfm

What is the Commission's annual expenditure on buildings?

The Commission's buildings expenditure for 2007 is EUR 207.49 million. This is made up of expenditure on rent (including rental emphyteusis, usufruct and ordinary tenancy) totalling EUR 78.1 million and property (property and emphyteusis with the option to buy) totalling EUR 129.8 million.

Who manages the Commission's buildings policy in Brussels?

The Directorate-General for Personnel and Administration is responsible for defining buildings policy and monitoring its implementation. Implementation of the policy has been delegated to the Office for infrastructure and logistics in Brussels (OIB), an administrative office set up on 1 January 2003 and answerable to DG Personnel and Administration, itself subject to the authority of the Commissioner responsible for administration, Siim Kallas. The OIB is thus responsible for purchasing and renting buildings and for their operational maintenance (technical maintenance, improvements, removals, cleaning and waste management)[4].

What taxes does the Commission pay on these buildings?

In general, Belgian legislation provides for three types of tax on buildings: property tax, regional tax and local authority tax. The Commission is exempt from all direct and indirect taxation, including property tax, regional tax and local tax, under the Protocol on the Privileges and Immunities of the European Communities of 8 April 1965[5] (Articles 13 and 14). However, where taxes are payable by the owners, the contracts generally provide for their reimbursement to the landlord by the tenant. In 2006 the Commission paid EUR 3.6 million in such taxes, chiefly under this kind of contract clause.

What are the Commission's buildings requirements for the coming years?

The accession of 10 new Member States in 2004 and of Romania and Bulgaria at the beginning of this year mean that a total of 3 350[6] additional officials require home and office accommodation in Brussels, as well as nursery and childcare facilities. The additional office requirements between now and 2010 are estimated at 35 000 m².

What is the Commission's strategy for selecting new sites in Brussels?

The main criteria are good public transport connections with the European quarter, good architectural and technical qualities in the buildings, good integration in the urban environment, a retail presence and, of course, good value for money. The Commission also aims to acquire new buildings of sufficient size to allow its departments to be grouped in buildings better adapted to their needs. At present many departments are dispersed over several buildings.

What is the main thrust of the Commission's buildings policy? Buying or renting?

The European Commission's policy is to buy buildings with a view to settling in them for the long term, in accordance with the decisions of the European Council and the decision taken to choose Brussels as one of the three seats of the European institutions. The Commission chooses to buy rather than rent wherever this is possible and appropriate. However, even now rent, for standard tenancy, usufruct or rental emphyteusis, accounts for 37% of buildings expenditure and 319 000 m². The Commission is increasingly opting for the usufruct arrangement. It is as flexible as a standard tenancy and also allows the Commission to benefit from the provisions of the Protocol on privileges and immunities.

European quarter or external sites?

So far the European Commission is the only European institution to have decentralised some of its departments to other areas such as Beaulieu and rue de Genève in Evere.

This policy, established in 2003[7], takes account of the fact that concentrating the institutions' buildings in the European quarter contributes to price increases by increasing the demand for buildings and reducing the available space in the area, particularly since the Commission moved into the Berlaymont. Although the policy of partial decentralisation in Brussels adopted by the Commission in 2003 has put a brake on price increases in the European quarter, the area is still one of the most expensive in the city. In 2007 prime rent reached EUR 295 per square metre, compared to an average rent of EUR 196 per square metre.

The Court of Auditors has recently criticised the European institutions for very frequently using negotiated procedures rather than competitive bidding, which, the Court says, has meant that it has not been possible to guarantee best prices. What is the Commission's position on this?
The Commission strictly applies the Financial Regulation as regards taking up occupation of existing buildings (purchase or rent). Article 91 of the Financial Regulation (FR)[8] and Article 126(h) of its implementing rules[9] provide for use of the negotiated procedure.

It is worth noting that the prices negotiated by the Commission over the last two years were 32% lower than those in the period 1999-2004.

Why has the Commission so far used only the negotiated procedure to purchase or rent existing buildings?

It is the procedure provided for by the Financial Regulation that makes sense for occupying existing buildings (buying or renting). In respect of buildings contracts, Directive 2004/18/EC of the European Parliament and of the Council[10] states that: "In the context of services, contracts for the acquisition or rental of immovable property or rights to such property have particular characteristics which make the application of public procurement rules inappropriate."

The Court's comment on the use of negotiated procedures refers to the construction and renovation of buildings. For such works contracts (governed in the Member States by Directive 2004/18/EC), the Commission does issue invitations to tender if it owns the land. It should be stressed that so far the Commission has not engaged in any construction of buildings and its renovation works have all been carried out under contracts concluded in accordance with the relevant Directives on public procurement.

What is the new methodology defined by the Commission Communication for increasing transparency and thus competition in procedures for renting and purchasing buildings in accordance with the Court of Auditors' wishes?

The Commission is improving existing procedures firstly by including systematic market prospecting through publication of calls for proposals and secondly by structuring and clarifying the Commission's internal procedures. The new methodology sets out the phases of the procedure for prospecting the buildings market and negotiating for buildings. It is based on: 1. informing the market better by annual publication of an estimate of the Commission's needs for the current year and the next four years. 2. increasing competition among market players by systematically publishing[11] the specific requirements for any new real estate project and by introducing the concept of systematic negotiation of financial conditions with several tenderers in parallel; 3. increasing the transparency of the procedure, in particular by systematically publishing the essential components of each project; and 4. increasing cooperation between the relevant Commission departments by setting up a multi-disciplinary Buildings Committee.

Does this mean that the Commission will no longer use the negotiated procedure?

The Commission retains the right to decide to apply the negotiated procedure, in part or in whole. Using the procedure might be justified, for example, if a building has to be occupied as a matter of urgency, if an existing lease is to be extended, or in order to take up occupation of a specific building immediately adjacent to a building already occupied by the Commission. In such cases the Commission might decide to start negotiations on the basis of a negotiated procedure.

Do the various European institutions coordinate their buildings policy in order to plan their requirements? What examples are there of this?

In Brussels and Luxembourg, cooperation in areas relating to buildings policy takes place in the context of specific working parties. Their main objective is to coordinate the action of the institutions with seats in these cities to achieve economies of scale where possible. Their role is also to coordinate the approach of the institutions in their dealings with the national authorities. In this context they provide an opportunity for the exchange of information on the objectives of each institution in terms of buildings, making it possible to stay ahead of market movements. They are responsible for the development of policy proposals presented to the Interinstitutional Group of Secretaries General.

The Commission promotes interinstitutional cooperation, and in its decision establishing the OIB and OIL Offices, it expressly stated its wish to develop them into interinstitutional structures.

The Court of Auditors considered that there was insufficient cooperation between the European institutions. Why? What do you intend to do to put this right?

The Court of Auditors advocates more upstream cooperation, particularly in the interests of economies of scale. So far the European institutions have expressed the desire to remain entirely free in their buildings decisions in view of their different sizes and requirements. However, the Commission is already supplying services to the other institutions, who are mostly satisfied with them. The Commission remains open to discussion of potential avenues of cooperation, in a context in which the roles, responsibilities and advantages for each institution can be clearly defined.

What is the framework for relations with the Belgian authorities on buildings issues?

An EU-Belgium Task Force was set up in September 2005 to discuss all subjects of common interest to the Belgian authorities and the European Commission. It is chaired by a member of the cabinet of the Vice-President responsible for administration, works in close cooperation with the President's cabinet and meets regularly. Belgium is represented at federal level by a representative appointed by the Prime Minister, as well as by a representative appointed by the President of the Brussels-Capital Region.

What impact does Belgian legislation have on the Commission buildings policy?

It has a great impact. Any building bought or rented by the Commission is the subject of a building permit issued in due form. The Commission fully complies with Belgian legislation and does not benefit from any derogations. The Commission is, for example, fully subject to the provisions of Belgian law on the ratio of m² of offices/parking places, and on ambient air quality.


[1] Rights in rem: right (sale, usufruct, emphyteusis) over an immovable thing (building or land). Note that a lease is not considered a right in rem but a service. Many real estate taxes (property tax, regional taxes) are levied on the holder of the right in rem rather than the owner.

[2] Usufruct: the right to use a building (in this case) without modifying its substance and to enjoy its "fruits" (i.e. rent it). The user (usufructer) has more rights than a lessee and concomitantly more obligations when it comes to repair works.

[3] Emphyteusis: the right to enjoy a land or a building in exchange for rent for a fixed amount of time (under Belgian law, for no less than 27 years and a maximum of 99 years). The owner has virtually no obligation to repair or maintain the building. This right may be complemented with a purchase option, which, when exercised, will give full property (emphyteusis with the option to buy).

[4] The OIB is also responsible for the management of social infrastructure as well as reproduction, mail, transport and mobility services.

[5] Official Journal L 152 of 13.7.1967.

[6] 850 of these being for Romania and Bulgaria.

[7] COM(2003)755.

[8] Council Regulation (EC, Euratom) No 1995/2006 of 13 December 2006 (OJ L 390, 30.12.2006).

[9] Commission Regulation (EC, Euratom) No 478/2007 of 23 April 2007 (OJ L 111, 28.04.2007).

[10] Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ L 134, 30.4.2004).

[11] in the OJ and on the relevant Commission websites.


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