EUROFER position paper on necessary improvements of the Communities' R&D Policies

Energy intensive industries, and especially the steel industry, provide the material basis of the society. The significant innovative potential of these industries can be a driver of furthur development. In this respect, research and development is an important and necessary facilitator. The actual access of energy intensive industries, and especially the steel industy, to these framework programmes is insufficient in relation to the expected benefits. Against this background Eurofer proposes measures to increase successful participation of energy industries in the Framework Programmes.
The objectives of the Communities' R&D policies are impaired by eccessive administration. Also in this respect Eurofer proposes measures for improvement.

Introduction and background

The importance of the metals industries was recently emphasized by the European Commission (Communication from the European Commission to the Council and the European Parliament on ”The Competitiveness of the Metals Industries, Brussels, 22.2 2008).They play a key role in the industrial structure of most developed economies and in many strongly growing new economies.

Today, metals industries industries and the steel industry in particular have important challenges to meet: CO2 emissions and environment more generally, energy savings, competitiveness in manufacturing green products.

The European steel industry is an indispensable part of the European value chain, developing and manufacturing in Europe thousands of different types of new steel grades and offering a lot of steel solutions for many applications. The steel industry’s output provides the foundation for innovation, durability and energy savings in applications as varied and vital as automotive, construction, medical devices, white goods and energy production including new renewables. Steel is 100% recyclable and therefore a modern material which contributes significantly to the long-term conservation of fundamental resources for future generations.

Steel industry has been widely contributing over the past decades, for example by directly reducing the CO2 emissions and energy consumption linked to upstream processes but also indirectly by providing advanced lighter materials. To further reduce CO2 emissions or save energy in the production processes (= the „upstream“) breakthrough technologies have to be explored and developed as traditional technologies are close to their thermodynamic limits.


Suggestions for structural improvements of the Community's R&D policies

The R&D programmes are very much focused on long term concepts. While such a strategy is absolutely necessary to support the long term strategies of the Community this is currently accompanied by a negligence of the importance of improvements of the existing technologies and processes. Since long term visions will by definition need a long period of time to implement there is absolute need to invest in improvement of the existing production base.

Today, the European economy has first to maintain its leadership on traditional markets such as engineering, transportation and construction, all of which rely on high performance materials like steel. Evidently, it is important that programmes are strongly geared towards final products and their characteristics and performance. Unfortunately today it is not taken into account to the necessary extent that as a condition for the eventual widespread use of such products and materials also respective production processes must be developed. Additionally, existing processes, which form the current backbone of the economy, must be improved.

Against this background, EUROFER strongly recommends to

  • provide for improved and direct access of energy intensive industry (part of which is the steel industry) to relevant Boards and Programme Committees. Important examples are the “Factories of the Future” program of the R&D PPP initiatives of the Recovery Plan, the “Energy Efficient Buildings” program of the R&D PPP initiatives of the Recovery Plan and the “Green Cars” program of the R&D PPP initiatives of the Recovery Plan,
  • increase the openness of the Working Programmes under the Framework Programmesfor industrial demonstration projects.

Currently, the interaction between the Commission and the Technology Platforms to produce programmes and calls is insufficient. The concepts and issues of the 34 existing and active Technology Platforms are not taken all into consideration and it is not easy to discern by which decision process and overall guiding principles the individual platform contributions to programmes and calls have been chosen. The large number of Technology Platforms and the wide variety of themes they are covering off course make full integration of all these aspects into programs and calls impossible. Against this background, the steel sector is expecting a new approach in the next FP8 programme and a new structure.

  • The starting point should be a strategy, which should be based on the results of an analysis of the questions “What are European challenges of the future?” and “What do we need to reinforce our competitiveness?”. Respective answers should be laid down in a strategy expressed in targets.
  • The contents of programs and calls should be developed by well defined process of comparing these targeted strategies with the Technology Platform research agendas.
  • In this context also the possible benefits of the use of open calls by a bottom up approach should be investigated.
  • This process should include the stakeholders and must be clearly structured.
  • The publication of draft Working Programmes would increase transparency and support stakeholder engagement. Also a positive effect on administrability can be expected (see below).

The steel industry has access to a separate Programme, the Research Fund for Coal and Steel (RFCS). Whilst this program can support the industry especially in very steel specific areas it is not able to substitute inclusion of the steel industry into the more general R&D streams of the Framework Programmes. Tendencies to exclude steel industry from Framework Programmes with reference to the RFCS are entirely unacceptable.

  • An example is the call NMP-2009-4.0-4 in which it was stated that “the chemical, petrochemical and/or iron and steel sectors are not addressed specifically to avoid overlaps with running activities covered by specific calls”. Effectively, these sectors had been excluded from the call. This exclusion is especially strange in light of the call's focus on CO2, because the steel industry with roughly 30 % has the largest share on the overall CO2 emissions of the manufacturing sectors (pulp& paper ~ 4%, glass ~ 2 %, ceramics ~ 2%, cement ~ 24%, refineries ~ 18%).


Suggestions for administrative improvements of the Framework Programmes

An issue of highest concern is the ever increasing aspect of administrative procedures and rules in the programmes. Participation and access rules to the FP7 should be simplified and less bureaucratic to decrease the cost of proposals preparation and then encourage the participation of industry (both small and large enterprises). The current situation is extremely wasteful in all its aspects, especially in project eligibility procedures, financial supervision and auditing.

In its administrative approach the Commission is not taking into account that research is exploring unknown grounds and that we may expect an outcome but that that outcome remains uncertain. If the outcome was uncertain it is no loner research! In the fight against misuse and fraud, the Commission not only asks for justification of the budget spent, but asks also justification for budget not spent. Herewith it is interfering with the management of the project that should be the sole task of the consortium. The Commission should only evaluate whether the money spent delivers results and not be asking whether money not spent is a reason for questioning the results of the project.

It should also not be underestimated that the micromanagement approach of the Commission also contains a psychologically irritating element of incapacitation, because although the Commission contributes to the project, the majority of the costs are still paid by the participants.

The negative aspects of the excessive administration have now reached an extent which is threatening the very fundamental objectives of the Communities R&D policies. Relevant symptoms are seemingly not confined to the Framework Programmes but constitute horizontal problem for all R&D policies of the Community (see Annex). The paragraphs below address several aspects of this issue and provide suggestions for improvement.

  • EUROFER invites decision makers to evaluate the possible use of the RFCS programme as a pilot in implementing such solutions.

Procedures for identifying eligible proposals in the Framework Programmes are too rigid and costly. The dismal statistics show that only around 15% (there are differences by theme and call) of all submitted proposals are deemed eligible for funding. If it is taken into account that the preparation of a proposal at least costs 300 000 Euro the inefficiency becomes evident.

  • One measure to improve the procedure is to introduce a less cost-intensive screening phase. Whilst this measure will not increase the success rate (it will even decrease it, because more proposals will be submitted) it will significantly lower the frustrated efforts.
  • Another positive impact can be expected from an increase of response time. Calls issued end of July 2009 need to be answered end of the respective year. On average, this is way too short a period to compile a sufficiently substantiated proposal. On a more detailed level deadlines around holidays should be avoided. Also the possibility for proposers to have access to advance draft versions of Work Programmes by official means would be beneficial.

The financial administration becomes ever more stringent and effectively is suffocating research activities. Especially the Commission's demand to provide for “actual costs” with the meaning of the real personal costs for each person contributing to a project. Whereas the use of hourly average rates on the basis of cost enters was permitted for project accounting in the 5th and the FP it is no longer allowed for the 7th. This is not aligned with the usual accounting practices based on cost centres and results in the need to operate for accounting as well as controlling two systems in parallel. The financial management is thereby complicated to an extent which makes compliance difficult for large companies and nearly impossible for SMEs.

  • As one starting point for improvement the stipulation of “usual management principles and accounting principles” (Art. II14.d ECGA) shall be clearly identified as covering the use of average costs.
  • EUROFER suggests establishing a reform process, which evaluates improvement options. In doing so the benefits of using “lump sums”, restrictions of the applicability of financial regulations on R&D expenditure and auditing rules should be investigated.
  • Especially the link to the financial regulations must be scrutinised. The financial regulations are based on a definition and use of risk, which does not fit to the fundamental character of research. The consequences are overly rigid administrative procedures introduced by the Commission. A good example is the current operational instruction to reject extensions is not within the legal framework and discourages risky and innovative project proposals.
  • If auditing is required the Commission should accept audit reports as final. The Commission should not initiate audits by themselves or external contracted, unless there are real signs of fraud or something is wrong with audit certificate.
  • As a more strategic approach the Commission could investigate the possible improvements to be achieved by creating agencies based on thematic issues which organise and administrate independently. We are aware that this approach is least promising as can be seen by the rather heavy management needs for JTIs. However, an investigation of the corresponding potentials could provide additional improvement aspects.
  • Subcontracting should be simplified e.g. by confining its scope and/or by introducing a de-minimis threshold.

There is no other appeal against decisions of the Commission than to go to the Court of Justice. From the legal viewpoint this is an extreme measure and time-consuming.

  • In most countries there is a possibility of a quick administrative appeal before going to court. The Commission should consider such an appeal procedure possibly by means of the Ombudsman.

There is a growing tendency to export the procedures and rules of the Framework Programmes. This is of special concern for the RFCS Programme. The RFCS Programme is designed to fit to the industrial character of the R&D and provide support for relatively small scale initiatives. This is in contrast to the large structures of the Framework Programs and therefore the procedures of the Framework Program are characterised by a significant inertia, which applied to the RFCS scale has a retarding effect and thus a significant negative influence to the efficiency of the RFCS Programme. Any alignment of RFCS with FP shall be confined to the extend it does not impair the functioning of RFCS.

The Commission's officers find themselves hard pressed to comply with ever increasing provisions for avoiding conflict of interest and again the special character of R&D is not taken into account. The fundamental workings of science forge scientists into one single and heavily interacting society. At the same time this special character of R&D makes scrutiny the most important tool for scientific progress (by a more general point of view this is effectively a consequence of the falsification principle identified by Karl Popper as the fundamental character of science).

If the currently pursued path -which neglects this fundamental character of scientific work- is continued, eventually there are no experts left to evaluate proposals because they are under conflict of interest simply by merit of their expertise. The development is exacerbated by the ever increasing market consolidation and globalisation of industries.

  • EUROFER suggests to lay down as a guidance appropriate rules on how to interpret “conflict of interest”.
  • EUROFER deems the following direct criterion as a good starting point: Conflict of interest is defined as being potentially not impartial due to being directly employed by the potential beneficiary.
  • Indirect criteria to define conflict of interest are not executable in the long term. Examples are “collaborations in the last 3 or 5 years”, “publications in the past” or “membership of organisations”.



Source: “Towards a world class Frontier Research Organisation” - Review of the European Research Council’s Structures and Mechanisms Following the Commission’s decision of 11 March 2009 (C(2009) 1871) to create “a panel of independent experts for the review of the structures and mechanisms of the ERC”, 23 July 2009

  • “The panel also found fundamental problems related to rules and practices regarding the governance, administration and operations of the ERC that are not adapted to the nature of modern “frontier” science management.”
  • “At the most fundamental level there is an incompatibility between the current governance philosophy, administrative rules and practices and the stated goals of the ERC.”
  • “Four ingredients are critical to success: [...]The belief in adapting rules and regulations to the mission and not the other way around.”
  • “The shared objective of building up a world class institution is not best served by imposing undue cumbersome regulations, checks and controls. Fraud and mismanagement have to be prevented and strongly censured but excessively bureaucratic procedures should not detract from the mission. The panel calls for putting in place a new set of rules based on trust and not suspicion and mistrust. We strongly underline that the administrative and financial consequences of the present approach impede the full realisation of the dream shared by so many Europeans in the academic and policy world as well as in political milieus. The panel urges the Commission to take every possible measure (legal, financial, procedural and administrative) to adapt its rules and procedures to the unique nature of the ERC mission. The reported signs of frustration and dissatisfaction with existing rules and practices among scientific council members and scientific reviewers at large are a worrying indication of the fragility of the present equilibrium.”
  • “It was also pointed out that some of the irritants relating to the financial management arise not from the grant instrument itself but from the broader accounting and auditing requirements applying to the Community budget. This means that there has to be evidence of what the ERC funds are spent on to a degree of detail that is inappropriate to the administration of research projects.”
  • “The Panel noted that there seemed to be a fundamental misalignment between administrative policies and mission and delivery of frontier research. As underlined in the written and oral evidence gathered by the Review Panel, there is a culture of mistrust and inappropriate financial management procedures.”
  • “The funding of research proposals should be made in the form of lump sums.”


Source: Interview with Ernst-Ludwig Winnacker, Die Zeit, 03.September 2009

  • “Das Problem der europäischen Forschungsförderung ist eine Kultur des Misstrauens, auf die man auch noch stolz ist, die aber jeden Bewilligungsempfänger unter einen Generalverdacht stellt und daher entsprechend aufwändige Kontrollen vorsieht. Natürlich muss die Verwendung öffentlicher Gelder kontrolliert werden. Aber der Aufwand hierzu muss zum denkbaren Missbrauch in einem vertretbaren Verhältnis stehen.”


Source: RESOLUTION OF THE EUROPEAN PARLIAMENT of 23 April 2009 with observations forming an integral part of the Decisions on discharge in respect of the implementation of the European Union general budget for the financial year 2007, Section III — Commission and executive agencies – OJEU – L 255/36 – 26.09.2009

117. Is concerned about Seventh Framework Programme rules which deviate from the common nationally and internationally acknowledged and certified accounting and calculation methods and which do not accept the results of the national audit authorities concerning the nationally certified average hourly rates per cost centre; regards the Seventh Framework Programme rules as clearly contradicting the modern accounting and calculation standards of European industry in asking for individual costs of persons actively involved in a specific research programme; asks the Commission to start a procedure making Seventh Framework Programme rules compatible with general business practices that allow for calculation and charging of average hourly rates per cost centre and do not ask for individual costs of persons actively involved in a specific research programme;

118. As regards the certificates on the methodology (CoM and CoMAv), is concerned at as yet unapproved certificates and urges the Commission to establish the necessary comprehensible criteria for approving certificates on the methodology for both personnel and indirect costs; believes that beneficiaries should be allowed to use average personnel costs and to apply an established methodology for calculating the indirect cost; calls for a timely start to the process of approving (or rejecting) the certificates to make sure that the funds earmarked for research can be used; asks the Commission to accept such average hourly rates per cost centre without a certification as regards the methodology at least if they are audited and certified by a national authority;

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