1

Ida Musiałkowska, Magdalena Sapała,

Department of European Studies, Poznań University of Economics, Poland
m.sapala@ue.poznan.pl; i.musialkowska@ue.poznan.pl

POLICY NETWORK AND INSTITUTIONAL GAPS IN EUROPEAN

UNION STRUCTURAL FUNDS MANAGEMENT IN POLAND

1. Introduction
This article is an attempt to relate the problems encountered in implementing
structural funds in Poland to the theoretical concept of policy network and the phenomenon of
institutional and organizational gap.1 The basic principles and provisions concerning the
implementation of structural funds in Member States are defined in EU regulations,
particularly in the Council Regulation (EC) 1083/2006.2 These provisions, coupled with many
years of experience in managing structural funds in the EU, enjoin the creation of cooperation
networks at each level of implementation, based on the principle of partnership. Member
States are thus obliged to create suitable conditions for the development of the so-called
network cooperation, in which mutually dependent members act jointly in order to achieve a
common goal.
With the onset of development co-financing from EU means, the legal, institutional
and organizational structures in Poland were faced with new, particular requirements in the
form of provisions contained in structural funds regulations. The general results and data
reporting implementation are positive. However, the practice of two years of utilizing EU
funds demonstrates also some crucial shortcomings abounding within the Polish institutional
and organizational structures in relation to the above requirements, as well as the absorption
problems resulting from them. A risk of failure to use the funds in due time is potentially
looming. By observing this phenomenon using practical examples one can postulate the
existence of an institutional and organizational gap between the requirements set forth by EU
regulations and the structures emerging around the implementation of funds in Poland. This
article illustrates this gap with numerous examples of problems identified during the two
years of implementing funds in Poland, especially in the area of public-private partnerships
and clusters. The article might be a contribution to extended studies on institutional adaptation
and the aligning of Polish structures to EU requirements in the so-called europeization
process.

2. Policy network and institutional gap

Regional policy and its financial instruments is one of the most important undertakings
focused on economic and social development within the European Union. There are,
however, controversies regarding the actual influence and economic effects of the means
expended from the European Union budget in order to accelerate the convergence of different
European regions. According to one opinion it is not possible to accurately determine and
isolate the influence of this policy of regional development; the EU funds contribution is too
small to actually have an influence on decreasing the disparities between regions. At the same
time, however, regional policy is demonstrated to have another, less controversial, kind of
influence on the functioning of regions. It is often emphasized that the EU regional policy
precipitates numerous changes in the manner of functioning of national institutions and

1
The notion “policy network” is used in the article to describe the theoretical concept, and “network
cooperation” - relation between actors. There is also interchangeable use of “institutional gap” and “institutional
misfit”.
2
For the financial perspective 2000-2006 it was Council Regulation 1260/99
 2

entities, especially those on the regional and local level, related to regional development. It is
thought that the rules of the fund management and implementation system, especially the
principles of programming and partnership, are a strong impulse for change and adjustment in
the area of relationships between national, regional an local entities, both public and private.
It is demonstrated that, owing to the structure and principles of regional policy, these entities
have been mobilized to increase their activity to extraordinary levels. Both public and private
entities such as government bodies, enterprises, non-governmental organisations, universities,
interest groups etc. are important members of established cooperation networks in the process
of preparing and implementing both the development strategy and specific projects co-
financed from EU resources. As a result, instruments and principles of EU regional policy are
an important stimulus in developing new forms of network and multi-level governance, both
Europe-wide and in individual member states. Network cooperation between these entities is
one of the added values resulting from the functioning of EU regional policy3.
The results of studies on this aspect of regional policy influences have been
formulated in the literature in the form of the following theoretical concepts: MLG (multi-
level governance), policy network and institutional gap (Rhodes at al, 1996; Sapała, 2006, pp.
16-24). The concept of policy network is often associated with the multi-level governance
model. It assumes that European integration has caused singular authority and decision
competency shifts between the supranational, national and sub-central levels of governance.
The MLG model describes the dispersion of decision authority among bodies at different
territorial levels. One of the main premises of this model is that decision-making
competencies are divided between actors at different levels, rather than monopolized by state
authorities (Marks, 1996; Risse-Kappen, 1996). The foundation on which the MLG model
rests is policy network, based on mutual dependence on resources and characterized by
weakly hierarchical relations. In these networks, mutual dependence on resources urges
participants to exchange them in order to achieve common goals. The resources are, among
others: information, skills, competencies, constitutional rights, financial resources etc.
On the other hand, the concept of policy network is a tool describing relationships
between the participants of the MLG model, or the various actors at supranational, national
and sub-central levels. These actors are very varied, and include public and private; national,
supranational and sub-central; and political and administrative entities (Bomberg, Peterson,
1999, p. 80)4. This concept allows a better understanding of their behavior as participants of
the decision-making process and their mutual dependencies. The actors in policy network
exchange resources (information, skills, competencies, constitutional authority, finances,
etc.). Thus, the notion of policy network can be defined as the cooperation of a group of
actors, each of which has its own particular interest or stake in EU policy and can affect the
success or failure of the cooperation. Network structures are established when, in particular
circumstances, these formally independent actors start to notice their mutual dependencies
and decide to pursue cooperation. In other words, they recognize their partners as
participating in a game in a particular EU policy area, and acknowledge that cooperation may
the best means of achieving an optimal advantage. This concept helps to analyse and

3
The role of policy network in the achievement of regional policy goals has been described by, among
others, Conzelmann (1995), Rhodes et al. (1996). This issue forms part of a wider discussion on the
europeisation of national decision-making and organizational systems. For more on europeisation, see Bache,
Marshall, 2004.
4
According to other definitions, policy network can be defined as the “non-hierarchical, decentralized
and mainly informal interactions between actors (both individual and organized), created in order to solve
common problems” (Risse-Kappen, 1996, p. 60), or as the “mechanisms of mobilizing political resources in
circumstances where the capabilities of decision shaping, program formulating and implementation are widely
dispersed or divided among public and private actors” (Conzelmann, 1995, p. 139).
 3

understand the policy-making in the EU and interdependence between actors (Rhodes et al.,
1996, p. 368)5.

Summarizing, it may be said that the notion of policy network may be used (Rhodes et
al., 1996):
 as a metaphor describing all situations in which interactions between several actors or
institutions appear,
 in relation to personal relationships and contacts between decision makers,
 in relation to contacts between public organizations, and between public and private
organizations, initiated in order to implement a policy,
 in relation to a set of organizations which are mutually dependent on each other due to
resources.

As can be seen from the above, networks are recognized to be a remarkably

advantageous means of achieving goals. Without doubt, taking into account the importance of
networks in modern European integration processes it may be said that we are witnessing a
network-led integration. The European Union incubates the development of both formal and
informal networks. The networks are usually centered around specifics sectors, policies, and
problems. The notion of “network” has become a key word characterizing the EU decision
process, in particular the process of implementing numerous EU policies, including regional
policy.
There are several circumstances that determine the development of networks. The
probability of a network arising grows with increasing plurality of the political and
institutional structure and more distinct separation of public and private actors. Networks are
more easily formed around complicated policies, whose implementation requires the use of
many rare resources, not exclusively owned by national authorities. If the resources are
concentrated in the hands of national authorities, networks will probably not arise. Networks
arise when it is necessary to add up different, scattered interests, because they help to
organize them. Also, network development is best in sectors in which the role of the European
Commission is greater, the activities are routine and belong to the category of so-called
operational decisions, and are not politicized to a high degree. It is also thought that mere
coordination of joint actions and short-lasting cooperation do not yet indicate the creation of a
network organization. In order to create a stable network it is important for the relationship
between participants to be directed at the achieving of long-term goals. It is this long-term
perspective that differentiates network relations from other short-lasting interactions.
Relating the above thoughts on networks to the principles of conducting EU regional
policy it may be said that, according to the principle of partnership, this form of cooperation
and achieving goals should be developed as both horizontal and vertical structures. Vertical
structures here signify the relationships between different levels of authorities, while
horizontal structures are the relationships between social and private entities. In order for
networks and network cooperation to appear during the implementation of regional policy
goals and in the process of utilizing structural funds, appropriate organizational and
institutional conditions must first be met in the member state. These conditions are not always
present, however, and if they do appear, they may lack sufficient force.

5
Given the above, the dependencies arising in the EU between different levels of authorities may be
compared to those in a company where network (system) elements cooperate to achieve a specific goal. In the
theory of management, the notion of “network” may be used interchangeably with ”system”, and means a set of
functions or activities (subprocesses, stages - called elements below) in the company which act jointly to achieve
company goals (Blackwell, Grisby, 1985, pp. 1-4).
 4

This situation was observed and described in 1999 by T. A. Börzel in one of her
6
articles . Basing on the observations of Spain's comunidades autónomas and Germany's
Länder she constructed a model of intranational institutional adaptation influenced by
europeanization. She studied the intranational shifts in relationships between central and
sub-central authorities. She stated that European integration influences the internal structures
of all states in the same manner, but may lead to different outcomes. The direction of
situational development is dependent on many conditions related to both the requirements and
possibilities created by legislative authorities and community institutions, as well as internal
factors, such as the national constitution, relations with the central government, legitimacy of
authority, social capital and entrepreneurship (Börzel, 1999)7.
In consequence of the above, following T. A. Börzel one can state that authorities of
different levels should engage in network cooperation with each other because of the
existence of the above-mentioned mutual dependence on resources. This cooperation is,
however, hindered because of a lack of compatibility between the community principles and
regulations on one hand and the institutional structures in member states on the other. As a
result, the institutional and organizational gap appears, which necessitates adaptation to new
conditions (see draft 1).8
Thus defined, an institutional and organizational gap can be observed in various
member states, both old and new, and in various areas of functioning of these states in the
European integration environment. Poland is not an isolated case on the European scene 9. The
concept of policy network and the problem of the institutional and organizational gap
expressly relate to the conditions and environment of UE assistance funds implementation in
the country. The road to policy network is still filled with numerous hindrances. Networks
created in this process are still weak, acting more under pressure than out of actual necessity
and consciousness of the entities involved. The organizational and legal environment in which
various regional development entities operate is still far removed from the ideal sketched in
the community principles of structural funds management. It may be stated that there exists a
considerable gap between the requirements set forth in community regulations and the actual
organizational and institutional structure in Poland. This statement will be further illustrated
with examples relating to the implementation of regional policy, and in particular the
implementation of structural funds. This is because in that area the organizational and
institutional gap is the most apparent, and in consequence impacts the degree to which
community funds may be utilized in Poland.

6
The issue of the organizational and institutional gap, also called the “policy gap“, was also discussed
by: Wallace H., Young A. R. (1996), The single market: a new approach to policy, [in:] Policy-Making in the
European Union, Wallace H., Wallace W., (ed.), Oxford University Press, Oxford
7
Similar opinions can be found in: Bache, Marshall (2004), Ward, Williams (1997) and Conzelmann
(1995)
8
Continuing her thoughts, the author describes the methods of the adaptation, which depend on the
degree of control exercised by national authorities and the institutional culture prevailing in a particular state
(including the informal sense of appropriate/inappropriate behaviour in a particular formal structure). In the
behavior of regional and local authorities one can distinguish cooperation and confrontation strategies. Cf.:
Börzel T. A. (1999)
9
In the UK, for example, EU regional policy necessitated a change in the approach of regional and local
authorities to partnership cooperation with other social and economic entities (Martin, 1997, p. 59). A similar
phenomenon has been observed in Sweden (Six years..., 2001).
 5

Graph 1. Institutional and organisational gap.

EU legislation and
recommendations
(e.g. partnership principle)

Institutional and
organisational gap

Organisation, institutions
and legislation of a state
(e.g. PPP, clusters)

Source: Own drawing based on Börzel T. A. (1999)

3. The state of structural funds use in Poland and related problems at the beginning of
2006
From the moment of accession to the European Union Poland can take advantage of
the structural policy instruments. Within four structural funds and the cohesion fund, 11.368
mln € have been reserved for Poland from 2004 to 2006. According to the subsidiarity
principle, these funds were supplemented with the national contribution, leaving for disposal a
total amount of 14.891 mln €. One of the basic principles of structural funds use is the
programming principle, which states that resources from structural funds may be used only to
finance activities contained in long-term development programs. This involves the obligation
to prepare appropriate documents (the so-called programming documents) in the form of
development programs or plans. These documents set forth the goals and main directions of
fund disbursement on the basis of analyzing the current situation of particular areas or sectors
and their development trends, the criteria and means of conducting specific projects, persons
and institutions responsible for performing specific tasks, and the estimated amount and
detailed breakdown of funds, including co-financing from all available budget sources. These
documents include the National Development Plan (NDP), the Community System
Framework (CSF), operational programmes (OP) and their addenda (Musiałkowska, Sapała,
2005, pp. 285-286).
The initial requirement gaps were related to a not rapid enough process of preparing
programming documents. Institutions responsible for preparing the documents failed to
accurately assess the length of the national legislative process and negotiations with
community institutions (mainly the European Commission). In 2004, when the majority of
documents should have been ready, negotiations were still underway and decisions pending.
The most important documents from the point of view of project initiators (beneficiaries), i.e.
the operating programmes addenda, constantly changed, which hindered the preparation of
any projects whatsoever. The process of efficient preparation of legal document drafts was
further hampered by the lack of appropriately trained personnel in the institutions engaged in
the process of managing and implementing activities co-financed from structural funds. The
 6

majority of institutions managing structural funds resources did not make use of the
experience acquired in the use of pre-accession funds10.
The above-mentioned delays in performing the process that appeared immediately
from its start began to cause increasing fears concerning the degree of the utilization of
assistance funds. In spite of considerable activity of certain groups of beneficiaries, including
in particular local government bodies and enterprises, the funds are increasingly demonstrated
to be acquired in a not efficient enough manner. The fears stem primarily from the analysis of
contracted and actual payments from UE funds. As of the end of January 2006 - the last year
in which, according to the N+2 principle, co-financing agreements may be signed for various
projects - the situation was assessed as very unsatisfactory. The total sum of expenditures
from structural funds reached 2.706 bln PLN, which constitutes 8.2% of the allocation granted
for the years 2004-2006. The situation in particular operational programmes varied (according
to data provided by the Ministry of Regional Development in 2006).
Within the Sectoral Operational Programme Improvement of the Competitiveness of
Enterprises (SOP ICE) the total value of signed co-financing agreements for the EU part was
2.7 bln PLN, which constitutes 56% of the allocation for years 2004-200611. The energetic
activity of beneficiaries is evidenced by the value of submitted co-financing applications
(those judged to be formally correct), which totalled 10.9 bln PLN and reached 227.4% of the
allocation for the years 2004-2006. Since the accession to the EU, the SOP ICE funds have
been used by 4700 small and medium enterprises, with co-financing applications submitted
by over 25000 businesses, or five times as many12. In January 2006 the institutional system of
the SOP ICE was significantly modified. Under the amended regulations, formal and legal
changes have been introduced which, while designed to increase the effectiveness of the
resource management process, initially stalled the flow of resources and documents.
The area assessed by the European Commission as the worst is the implementation of
the Sectoral Operational Programme Transport. Even though the value of assistance applied
for in projects formally reviewed since the start of the programme was 137.7% in comparison
to the total allocation, due to changes in the programme implementation system only 1.9 mln
PLN have been paid out of the programme account, including 1.3 mln PLN in technical
assistance projects. One of the causes of such an outcome are personnel shortages in the
Ministry of Transport, which has had its European department dissolved; a large rotation of
employees and lack of qualified persons which could assume responsibility for the utilization
of funds.

Within the Sectoral Operational Programme Human Resource Development (SPO HRD) the
total value of applications submitted since the start of the programme totalled over 6.88 bln
PLN and exceeded the 2004-2006 allocation by 22.08%. As of the end of January 2006, the
value of signed agreements and decisions totalled over 3.5 bln PLN (an increase of 96 mln
PLN compared to December 2005), which constitutes 62.3% of the 2004-2006 programme
allocation. Due to the scope of co-financed projects, significant interest on the part of non-
governmental organizations was expected. However, internal obstacles, and especially the

10
Pre-accession funds resources were granted to countries aspiring to become EU members. Poland has
utilized resources from the SAPARD and ISPA funds and is finalizing the signing of agreements related to the
PHARE fund.
11
The value of co-financing applications and of signed agreements was calculated taking into account the
corrections applied by the managing authority; the degree of utilization of allocated UE funds was calculated
using a conversion rate of 1 € = 3.8365 PLN
12
Data provided by the Polish Confederation of Private Employers “Lewiatan” www.prywatni.pl
 7

lack of qualified personnel and financial barriers, prevented many but the largest
organizations from applying for the funds. There are no equivocal data regarding the
percentage of organizations which are implementing projects co-financed from the entire
European Social Fund. For the activities which fall within the domain of the Ministry of
Labor and Social Policy it was decided to promote newly created non-governmental
organizations by providing them with helpful guidelines. The Ministry also attempted to
ensure that the value of projects and related automatic financial management did not exceed
the capabilities of these entities13. In other activities, however, even large organizations may
struggle to overcome problems related to excessive requirements regarding security, which
have caused some of them to abandon the implementation of projects.
The quoted examples and reports of the Ministry of Regional Development, prepared
after almost two years of EU membership, demonstrate that the value of agreements signed up
to January 2006 fall within 50-60% of funds available to Poland. The causes of this state of
affairs are believed to be rooted in problems resulting from the process of learning and
creating a new management system in the public sphere. In this sphere, a new approach to
management is forced by the requirements of granting and accounting for funds from the EU
budget. The gap and the lack of adequate preparation of the national institutional and
organizational system for those requirements is related to two categories of problems, which
will be described later in this article14. These problems appear, first, at the funding application
stage and, second, at the project implementation stage.

13
For example, in the Guidelines for Beneficiaries for activities 1.1, 1.5 or 1.6 of the SPO RZL the
maximum project value for newly created entities has been set to ca. 80.000 PLN.
14
One may notice a feedback between the institutional gap, which causes several problems, such as lack
of personnel hindering the co-financing application review process, and the fact that problems with applying for
projects or implementing them tend to increase the gap.
 8

4. The problems of structural funds implementation in Poland

The two groups of problems mentioned above relate to the already discussed concepts
of policy network and institutional and organizational gap. They demonstrate the necessity of
taking these issues into account by regional and local authorities and other public and private
entities in the process of funds management.

a) Problems at the stage of applying for resources from structural funds

The obstacles related to applying for funds that influence the rate of resource
utilization and the quality of the way in which this process is handled are found both with the
institutional and legal structure and with the applicants themselves. The first group of
obstacles includes in particular15:
 frequent changes in legislation (or lack thereof) related to applying for the resources,
 lack of conformance of national documents provisions to the European law, the
National Development Plan, regulations and acts16
 a plethora of interpretations of legal practices applied in uncertain situations,
 delayed answers of implementing institutions, resulting from lack of legal basis and
differing interpretations of law,
 onerous competition procedures and unwarranted formalism, as well as creating
additional guidelines for the applicants. One of the main barriers is the competition
entry form itself; it is too long, and the filling guidelines are incomprehensible. The
application review has had a negative reception as well. Most enterprises cannot
understand the grounds for the rejection of their projects, often bureaucratic (for
example lack of initials on one of the pages) and not relating to the essence of the
application,
 changing technical application rules. The constantly changing software used to fill
applications (the so-called application generator) was also an obstacle.
 delays in reviewing applications in the case of open competitions caused by
insufficient numbers of employees in a given institution and the Project Review
Commission, coupled with a very large number of submitted applications.

The project initiators themselves did not always manage to prepare the application forms
correctly. The most often encountered errors were the following:
 failure to use the correct form (version of the application generator),
 failure to properly certify a document to be a true copy of the original,
 failure to attach required exhibits,
 calculation errors,
 failure to take horizontal principles (equal opportunities, sustained development) into
account,
 overextending the budget (overvaluing the amounts of specific estimate items),
 failure to take into account barriers encountered by project participants/recipients, and
to demonstrate that the project is a positive reaction to the problem,
 failure to react to amendments and change directions suggested by implementing
authorities during consultations.

15
On the basis of press information from the Polish Press Agency, January-March 2006
16
For example, in tax law several issues regarding the VAT, PIT and CIT taxes have not been settled.
Another example is the issue of providing ESF scholarships to pupils from schools subject to the Ministry of
Culture and National Heritage. Currently, legal provisions prevent a lower level unit, in this case a marshall
office, from providing financial resources to a higher level unit, in this case a ministry.
 9

The above-mentioned problems result partly from the ignorance of the project
background, integration process and wider goals set by the European Commission, as well as
from trouble with proper planning and application of the project management methodology
required by the European Commission17. Furthermore, applicants very often fail to fulfill
essential requirements set by the European Commission, such as using innovation in Polish
enterprises operating in traditional and less technologically advanced industries.
Unfortunately, the needs of applying entities are too rarely connected with the issue of
increasing the level of technological development and degree of innovation. Their investment
needs are usually of a more basic character. Thus, the existence of a gap may be postulated
that results from an inaccurate identification of needs and potential, including enterprise
financial potential, by the decision makers. The above is also an example of a gap existing
between the goals of operational programmes and community requirements, and conditions
prevailing in states undergoing political transformation,

b) Problems at the stage of project implementation

It can often be heard that acquiring assistance funds is only the beginning of a long
road. The most important goal is conducting the project itself, or achieving the set project
goals, and accounting for it. In this sequence, system barriers are the most often indicated
obstacles, including in particular18:
 an ineffective system of financial accounting within projects. Payment applications
match competition applications in complexity. They are also minutely analyzed by officials,
which causes significant delays in financial flows.
 lack of unequivocal interpretation allowing one to classify certain expenses, such as
the VAT tax,
 system overregulation and lack of flexibility. The introduction of simplifications and
amendments in, for example, a co-financing agreement requires time-consuming
amendments of legal documents,
 overly restrictive legal provisions, such as those of the Public Procurement Act,
hindering efficient performance of projects. Many problems faced by entrepreneurs arise
from the collision of the structural funds logic, where effectiveness is measured by utilizing
the funds for good projects (understood in the context of generating financial and social
profits), with the logic of government officials, focused on following procedures which are
meant to be a safeguard against all irregularities. On the other hand, non-governmental
organizations often cannot afford the cost of expensive proceedings, which may impact the
performance of the whole project,
 problems with buying land property and preparing the environmental impact
assessment of the investment, evident especially in large (infrastructural) projects. National
requirements in this respect are often more stringent than community requirements, and
consequently more expensive. They influence the dates and correctness of prepared financial
documents necessary to account for the projects,
 quality of the information,
 internal potential of project initiators.

The two last issues also relate to the group of problems discussed above, and to all
stages of funds implementation. They should be particularly attended to, because of the

17
This methodology is called PCM (Project Cycle Management).
18
www.prywatni.pl, 18.01.2006
 10

significant influence they have on the actualization of the partnership principle and policy
network. Another cause of obstacles in implementing community resources is the lack of
reliable information. Even though this may seem strange in the age of information society,
there are studies showing that many beneficiaries in Poland did not hear at all about the
possibility of using community resources. This applies mainly to smaller towns and rural
areas. Thus local government units often did not know the entire scope of activities that could
be co-financed. This problem applied mainly to the human resources development area 19. In
the opinion of many entities, the quality of information was highly unsatisfactory. A system
of counselling for beneficiaries is especially lacking. Certainly one of the causes of such a
state of affairs can be traced to personnel shortages in implementing institutions. Often, these
institutions simply lack well-prepared personnel that could solve specific problems of
beneficiaries. In these circumstances, the quality of cooperation between beneficiaries and
officials depends on the individual bias and knowledge of the latter.
Studies conducted among regional and local authorities unveil another unsettling
picture. As it appears, many local government units, despite being informed about the
necessity of facing the challenges resulting from the Polish integration with the European
Union, failed to prepare their employees in advance to deal with tasks related to the
acquisition of funds from the EU budget. The results of studies conducted in voivodship
marshall offices in 2002 - two years before joining the EU - demonstrate that only a handful
of authorities engaged in coordinated and planned preparatory and educational activities.
Most of them still acted chaotically, waiting for the course of events to unfold and, in all
likelihood, for the requirements to be imposed by central authorities (Sapała, 2005, pp. 104-
113).
Moreover, the information is often dispersed over different levels of the
implementation system and is not always consistent. This is sometimes evident in setting
additional requirements for beneficiaries, not covered by the provisions of project agreements
(www.prywatni.pl, 09.01.2006). An exceptionally favorable system solution as regards
information access can be found in the network of guidance and training centers at the
national (European Social Fund National Training Centre) and regional (European Social
Fund Regional Training Centres) levels, which provide ESF-related information and training
to potential beneficiaries. The coaches and advisors found at these centers provide training
and guidance free of charge, from the preparation of the project until its conclusion. Another
good method of coping with insufficient information could be the adoption of a so-called
project qualifying test and a list of most common errors by certain implementing institutions
(for example the Polish Agency for Enterprise Development). Using these tools, a project
initiator can verify whether its idea can be financed from a given fund.
The second barrier in the proper implementation of funds are the internal problems of
beneficiaries, which are most conspicuous in projects conducted with the assistance of the
ESF. Social-biased projects are largely directed towards non-governmental organizations,
which know best the needs of individual social groups. In Poland, however, such
organizations are rather marginal and often institutionally weak. Also, they do not dispose of
a qualified and sufficient personnel. The majority of people employed by those organizations
are volunteers, which makes them easy prey to frequent rotation and loss of know-how. Such
organizations do not have the necessary budget to reach for community funds. During the
application process the financial situation of project initiators is assessed by institutions
implementing operational programmes; low turnover is perceived as an institutional inability
to handle the project and obtain appropriate project performance guarantees. The Ministry of

19
On the basis of data contained in the results of a study conducted by Pentor: The degree of society
familiarity with the possibilities of using structural funds, Research International, Pentor, November 2005
 11

Labor and Social Policy is an exception in promoting non-governmental organizations,

including newly established ones. Nationwide, it is assessed that the utilization of structural
funds resources by non-governmental organization does not exceed 2,3% of all available
funds. This comprises as little as 5,6% of funds available for the third sector, understood here
as the non-governmental organizations sector20. In acquiring grants most activity was shown
by foundations (119 projects) and societies (98 projects), which utilized 77% of the total
amount disbursed to all non-governmental organizations. The organizations used mainly the
grants of the Equal Community Initiative, Integrated Regional Operational Programme and
the Sectoral Operational Programme Human Resource Development. Organizations from the
Mazovia, Great Poland and Lublin voivodships were the most successful in obtaining
structural funds. In the two first voivodships, the total value of projects conducted was the
highest, while the highest numer of projects was conducted in the Lublin voivodship.
Organizations in the Świętokrzyskie, Cuiavian-Pomeranian and Podlachian voivodships fared
the worst. In each of those voivodships the lowest amount (less than 1%) of all funds granted
to organizations nationwide was utilized21.
With respect to the problems delineated above the use of the following remedies is
postulated. The remedies are most often aimed at the facilitation of applying and accounting
for EU funds, primarily the abolishing of unnecessary formalities and bureaucracy and
amendment of overly restrictive provisions of the law. Among other solutions, simplifying
reporting and documentation obligations of enterprises conducting projects financed from EU
funds would improve the utilization of community grants. This means, for example,
abolishing the obligation to document all expenditures using invoices and introducing a
possibility to account for a part of the expenses sustained (for example administration costs)
using a lump sum, as well as prolonging the reporting periods. Currently, some (especially
small) entities shifted the focus of their activity to technicalities related to the handling of
projects, which weakens their grip on essential actions. Their development and effectiveness
is thus negatively impacted. The rationalization and systematization of cooperation between
beneficiaries and implementing authorities is also postulated. This applies in particular to
essential assistance on each project conduct stage and instant reaction to problems which
arise, and to the providing of precise and clear information concerning procedural and
financial requirements for the implementation of projects co-financed from structural funds.
These postulates were partly taken into account by the Ministry of Regional
Development in its “Corrective actions programme to increase the absorption of structural
funds within the 2004-2006 National Development Plan”22, effective with respect to certain
operational programmes23 since the beginning of 2006. In preparing the corrective actions
programme it was emphasized that Poland is the only UE country to prescribe the rules
concerning the use of community funds in an overly complicated manner, i.e. through

20
Until the end of 2005 non-governmental organizations conducted 280 projects financed from structural
funds, to the total amount of more than 750 mln PLN, which constitutes the 5,6% of all funds mentioned above,
earmarked as grants to the third sector. The average value of agreements signed by these organizations was 2.8
mln PLN. It is assessed that until the end of 2006 non-governmental organizations will have signed additional
agreements to the amount of 158 mln PLN. The majority of applications (over 85%) concerned employment.
Projects proposed by non-governmental organizations are usually of a training and advisory nature.
21
On the basis of an analysis "NGO financing streams. Structural funds", prepared by the Social and
Economic Initiatives Bank as part of the “In the search of a Polish social economy model” project, financed from
the funds of Equal Community Initiative, 2006
22
This document has been approved by the Council of Ministers of the Republic of Poland on Dec 6,
2005.
23
Particular attention was paid to the SOP ICE, SOP Transport, and the Interreg Community Initiative.
 12

numerous regulations. As it turns out, however, such complication is a convenient situation

for government officials. This went so far as to make the Minister of Regional Development
Grażyna Gęsicka admit that proposals to abrogate the National Development Plan regulations
have met with resistance on the part of the administration, because the regulations allowed it
to (in a way) seek protection behind the rules and thus shrug off responsibility (PAP, Jan 18,
2006). The corrective actions programme also formulates recommendations for certain
institutions implementing operational programmes. As the use of funds within the Transport
Sectoral Operating Programme and the Interreg Initiative raises the most problems, taking
decisive steps by all institutions engaged in their implementation is postulated, in order to
hasten the completion of the projects and consequently an increase in payments24. Because of
the small number of signed agreements and insignificant payments, special corrective
guidelines have also been addressed to the Ministry of Education and Science (concerning
activity 1.4: Strengthening cooperation between the research and development sphere and the
economy in the SOP HRD), the Ministry of Labor and Social Policy (concerning activity 1.6:
Vocational integration and reintegration of women in the SOP HRD), and the Ministry of
Environment (concerning activity 2.4: Support for undertakings aiming to ensure enterprise
compliance with environment protection requirements in the SOP ICE) (Ministry of
Economic Development, 2006).
The effects of above mentioned corrective programme have been seen one year later.
During first months of 2007 utilization of the Structural Funds in Poland was the following:
contracts are signed for almost 90% of total amount; while payments are at the level of 34%
of all available funds.

5. The institutional and organizational gap and policy network as exemplified by public-
private partnerships and clusters
As has been mentioned in the first part of this article, one of the basic principles of the
regional policy is the partnership principle. Basing cooperation on this principle is required,
and on the same time promoted, by the European Union. Most often, two types of partnership
are distinguished: vertical and horizontal. In the first type, cooperation between institutions at
each national and community government level is assumed. The second type is based on
cooperation between particular groups of entities at the same level, for example local
government units, enterprises, non-governmental organizations, interest groups, social
dialogue institutions. Both types of partnership are important for the conduct of regional
policy. Vertical partnership is important for the proper process of document and legal acts
creation (i.e. the so-called programming), while horizontal partnership, through the
cooperation of numerous entities serving different functions, allows wider conduct of
activities which take into account the interests of different entities and increasingly contribute
to social and economic development of a particular territory.

24
It is postulated especially to distinguish a separate organizational structure within the Ministry of
Transport and Construction to perform the tasks of a mediating institution for the Transport Operational
Programme, and to settle the issue of guaranteeing national co-financing for the largest project, Modernization of
the Warszawa – Łódź Fabryczna railway line. Stage 1 – the Skierniewice – Łódź Widzew section. As for the
Interreg Initiative, an intergovernmental agreement should be signed with the Lithuanian partner, and appropriate
steps taken to discipline institutions responsible for the implementation of the Poland–Saxony programme on the
Polish side, i.e. the Lower Silesian Voivodship and Marshall Offices. See: Corrective action programme to
increase the absorption of structural funds within the 2004-2006 National Development Plan”, Council of
Ministers of the Republic of Poland, Dec 6. 2005
 13

The experience of two years of structural funds implementation in Poland shows that
vertical partnerships slowly start to work, even though lower level institutions point out that
jointly determined agreement provisions are often struck out of the final versions of the
documents. Regional and local authorities advocate decentralization of the decision-making
process and organizing the competencies25. On the other hand, the second type of partnership
(horizontal) is still implemented very sparingly. It is thought that one of the main obstacles
preventing the creation of effective partnership cooperation groups is the lack of the definition
of the term „consortium” in Polish law. This inconvenience forces each group of entities
which want to cooperate with one another to determine their own principles of cooperation
and, at the same time, find an answer to their legal and financial problems26. Thus, creating
groups in which problems with accounting for resources and division of responsibility appear
can hardly be advocated.
In the European Union, creating the so-called public-private partnerships (PPP) is
widely used to support the creation of consortia and stimulate wider utilization of community
funds27. Partnership between the public and private sector is a form of cooperation in which
private financial resources and expertise help and are aimed at the provision of public
services. The partnership is based on the division of labor and risk between partners. Each
partner does what it can do best. PPP helps conduct large undertakings, following the “value
for money” principle and engaging private resources, while at the same time disciplining
public entities to expend these resources in a rational manner. What encourages private
entities to participate in a PPP is achieving profit through new commissions made as part of
large and long-term undertakings. An important condition for the private entity activities,
however, is achieving goals set by public entities, which entails the knowledge of local,
national and community policies. Activities within PPPs are usually carried out by a single
so-called special purpose entity, comprised of public and private partners. The specific form
of this entity is regulated by national provisions. Community-wide, one of the advantages of
PPP is the diversity of solutions depending on social and economic circumstances of the
project and the will of the partners bound by the contract (agreement).
An example of using PPP may be the solutions in the area of telecommunications and
post infrastructure. A public partner (for example a commune) which is the owner or joint
owner of the infrastructure entrusts the provision of services to the private partner. The
private partner builds or modernizes the infrastructure, which is later passed to the public
partner. Both partners thus invest jointly and divide their tasks within the project. It should be
remembered that the European Commission, while making it possible to use this form of
investment, nevertheless strictly supervises actions carried out within PPP. According to the
Commission, safeguarding the transparency of public procurement procedures and abstaining
from violations of unrestricted competition, one of the pillars of the Common Market, is
extremely important. It is also important to ensure equal access to the proceedings for
tenderers from all Member States, and to avoid any form of discrimination.(Commission

25
Discussion comments made at conferences summarizing the utilization of funds in each operational
programme (2005-2006)
26
Because of the lack of a single entity (a consortium) each of the partners is treated independently. So
far, the manner of treating cash flows between the partners remains undetermined. It was determined that each
partner is separately responsible for their accounting to the implementing authority, while if the so-called re-
invoicing occurs, structural funds resources would be additionally taxable. Such provisions discouraged many
entities from initiating cooperation.
27
The principles of cooperation within PPP were regulated by the European Commission in the
”Guidelines for a successful public-private partnership”, Regional Policy DG, CE, January 2003
 14

2004). The interest the European Commission takes in the operation of partnerships is
justified by the co-financing of tasks within PPPs from structural funds or the Cohesion Fund.
This solution, applied with rather significant success in many member states (such as
the UK, Ireland, the Netherlands, or even Greece), was finally regulated in Polish law with
the Public-Private Partnership Act of October 2005. The act thus appeared relatively late (as
compared with the availability of structural funds since 2004), and moreover was widely
criticized from the start28. The act allows creation of public-private partnerships for the
following purposes: design or construction (extension, reconstruction), including exploitation,
maintenance or administration of the constructed asset; or the provision of public services
based on the constructed assets and the provision of public services together with the
exploitation, maintenance or administration of an existing (not constructed under a PPP
agreement) asset. The act was designed primarily to speed up the development of national
infrastructure, including motorways, whose construction is to be financed from the Cohesion
Fund29.
The PPP Act is not error-free, and already some serious faults have been indicated that
may again hinder the development of this form of cooperation. The most important errors
include the following (Creation... 2004, p. 47-65):

 lack of precision in wording and some not quite thoroughly thought-out definitions
(article 4 of the Act),

 narrowed possibilities of PPP agreements,

 lack of clarity in stating whether the undertaking is an obligation of the private partner
only (article 2 section 1 of the Act), or whether it may be a joint task (article 15
section 1 point 1), and whether the private partner has the obligation or possibility of
financing the infrastructure. The act determines in article 9 section 1 (sale under a
reserved right of redemption) and article 25 that the private partner may not continue
to own the asset being the subject of the PPP agreement following the expiry of its
effective period.

 limiting the forms of cooperation, as out of the many solutions regulating trade
relations, provided for by the Commercial Companies Code, the Act allows only a
single one - establishing a stock company, whose object and activities are further
restricted to the extent set forth in the PPP agreement (article 19 of the Act). The Act
makes it impossible to conduct the following operations provided for by the CCC:
merging and division of companies, creation of business groups, privatisations of
companies through the sale of shares or stock, privatisations of companies through
increasing equity capital and taking up of the shares by the private partner, agreements
between companies if one of them is a public entity30.

28
The largest number of objections was raised by the enterpreneurs, who were concerned about the
limited number of forms of activity (types of companies), and the threat arising from the non-transparency of
public procurement proceedings in Poland. The objections and postulates have been gathered by the Polish
Confederation of Private Employers “Lewiatan”.
29
As mentioned previously, of all operational programs it is the Transport SOP that is conducted in the
worst manner, with problems arising from the lack of a PPP act serving as an additional difficulty.
30
Moreover, a company owned by the state or local government cannot be a party to a PPP agreement
(article 4 section 3 of the act). The act also contains no provisions for the creation of the so-called asset
companies, public entities who are simultaneously the owners of infrastuctural assets and a party to the PPP
 15

Taking into account the above considerations, it may be stated that the influence of
this act on the creation of PPPs, including PPPs established to utilize structural funds, is
dubious. Despite this, Polish entities are already cooperating on a PPP basis even though
special facilities and legal structures are lacking. An example of a peculiar public-private
partnership are the consortia conducting the following investments:

 of an infrastructural nature - a sewage treatment plant in Gdańsk, since 1992 (based on

a joint venture between a privatized Gdańsk company and a French company SAUR
as a stakeholder), the construction of the A2 and A4 roads - BOT authorizations
(1997/2000), a system of street lightning in Cracow (1998), the development strategy
of Płock, Warsaw metro.

 of a social nature - projects within the social partnership of the Municipal Office in
Poznan (for example aiming to help the unemployed)31.
The consortia are, however, few in number, and consortia members themselves emphasize
organizational problems with conducted projects. Conflicts arise both because of legal
loopholes and the organization culture of different entities coupled with the lack of
cooperation traditions in Poland. Existing legal deficiencies and the failure to propagate and
provide information about this model of collaboration may become a threat to this mode of
cooperation. Until the act is amended, statutory definitions and conflicting provisions are to
be treated in a manner that gives the greatest freedom to all parties willing to pursue effective
infrastructural projects based on the PPP concept.
Another form of collaboration and policy network popular in the EU is the creation of
clusters. The foundation of a knowledge-based economy are the state-of-the-art technological
solutions, whose implementation by enterprises contributes to an increase in product
competitiveness and economic growth. The quintessence of clusters is the cooperation
between research and development units, universities, enterprises and training institutions or
local government units. These entities create knowledge, which thanks to its concentration in
one location may be used faster and at a lower cost by enterprises from a particular industry
or branch. These enterprises also have the opportunity to increase their competitiveness and
the volume of sales (thanks in part to exporting their products).
Even though clusters need not be created solely from public funds32, the European Union pays
increasing attention to establishing such organizational forms. The focus on scientific research
that serves economy is the result of a peculiar “race” between the European Union and the
United States. The race was put into legal terms through the provisions of the Lisbon strategy
and derivative legal documents. Also, a larger resource pool is being earmarked to be utilized
within structural funds, and provisions of development strategies and operational programmes
are formulated so as to actualize the Lisbon Strategy. It can thus be granted that these
provisions and available financial resources enjoin, so to speak, this form of cooperation.
The rudiments of clusters in Poland can be found in scientific and technological parks,
excellence centers or business incubators, whose creation became possible thanks to SOP ICE

agreement. Because of statutory limitations, it should be assumed that all national PPP agreements which exceed
the scope of the act are based on general provisions of European and Polish law, especially civil law and the law
of companies (Dziarski, 2005).
31
The data are extracted from information provided by the Ministry of Infrastructure in December 2005
www.mi.gov.pl, and talks with the officials at the Poznań Municipal Office in January 2006.
32
With clusters established in the United States being an example.
 16

and the Integrated Regional Operational Programme. The majority of solutions of this type
has been established around large administrative and scientific centers, such as Wrocław, the
Tri-City area, Cracow, Warsaw and Poznań33. A large interest on the part of private project
initiators should be noted. Some public entities experience problems when creating parks or
incubators because of the lack of a local zoning plan or unresolved ownership issues. Also,
the role of public administration in promoting this type of solutions, which have the greatest
impact on the increase of regional competitiveness, seems to be insufficient. This may be a
result of low consciousness of and familiarity with the principles of modern economy in
Poland, as well as the unwillingness to compete on the European or global scale. In already
established centers, the entrepreneurs themselves showed an initial unwillingness and
apprehension concerning cooperation with competing entities. Also, some entrepreneurs have
shown little inclination to attend external missions or fairs organized by projects initiators
establishing clusters. The source of these problems might be found in the lack of previous
experience in applying this type of solutions, the lack of extensive skills of Polish public and
private entities related to engaging in cooperation, as well as the constantly overlapping
problems of political transformation.
Both forms of partnership cooperation described above – public-private partnerships
and clusters – seem to indicate a certain direction of development that should be pursued.
They allow greater leveraging of capabilities and obtaining the effect of synergy through
cooperation. In order to be effective, however, they need the adjustment of the law and the
introduction of relatively simple procedures that will not become a hindrance, as was the case
with the process of utilizing of structural funds between 2004 and 2006.

CONCLUSIONS
The problems raised in this article form part of a wider issue of adapting a member
state to the requirements set forth in UE regulations and principles, usually denoted by the
term „europeanization”. This article sketched theoretical and practical aspects of the problem
of an institutional and organizational gap in Polish structures within network and partnership
cooperation in the implementation of EU structural funds. Analysing problems appearing
during the implementation of EU funds in Poland shows that national relations, structures and
styles of cooperation were not ready for action in compliance with requirements of UE
regulations at the onset of proceedings, and often still fail to do so. Poland still lacks
appropriate provisions facilitating the creation of public-private partnerships, while the
activity of the non-governmental sector, private sector and the lowest level of local
government units leaves much to be desired and prevents appropriate and effective absorption
of community resources.
Undoubtedly, developments in this area should be monitored, in order to find an
answer to various questions which arise, such as: How will local entities behave when
prompted to cooperate by legal provisions prescribing the utilization of funds? How will the
legal structure of cooperation on the national level be built? In other words, whether and how
the institutional gap described in this article will be bridged? Finally, what kind of
relationship will prevail between entities of different levels in the process of changing and
adjusting national law, structures and systems concerning the implementation of funds –
cooperation or confrontation?

33
Data gathered from the reports and information provided by the Ministry of Economy and the Ministry
of Regional Development in 2005 and 2006 (www.funduszestrukturalne.gov.pl and www.mrr.gov.pl )
 17

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