EU auditors: Is the Commission overdependent on external consultants?

EU auditors: Is the Commission overdependent on external consultants?
Credit: ECA

The way the European Commission hires and uses external consultants does not fully ensure that it maximizes value for money, according to an audit report published last week by the European Court of Auditors (ECA).

As previously reported, the Commission is increasingly relying on external consultants. During the period 2017 – 2020, the total contracted value was ca €3,7 billion. The auditors noted that the amount increased from €799 million in 2017 to €971 in 2020 but did not analyze the reasons. The increase varies by policy area and might also be due to to additional policy responsibilities.

In the report, ECA warned against potential risks related to the concentration of service providers, overdependence on a limited number of providers and conflicts of interests that are not even covered in the Commission’s guidelines and not sufficiently monitored.

The money on external consultants is spent on a wide range of advisory and support services that are roughly, but not always correctly, classified as consultancy work, studies, evaluations and research activities. The largest amounts relate to services registered as ‘consultancy’ (72%). DG NEAR and DG Devco were in the top with €660 million respectively €564 million during the 2017 – 2019 period.

IT-services represent a specific type of consultancy work and was not included in the scope of the audit. Usually included in framework contracts, it is difficult in most cases to distinguish them in the financial data, the audit team told The Brussels times. ECA may consider addressing IT-services in the future.

The top 10 suppliers account for 22 % (€600.1 million) of the total contracted amount but in some directorates-general they represent a small percentage of the total number of suppliers and accounted for the bulk of contracted amounts.

It is not rare for a single supplier to win successive contracts over several years even though open tender procedures are organized regularly. This concentration creates a risk of overdependence on certain contractors, according to the auditors.

The audit team carried out interviews, desk reviews and an analysis of 20 contracts selected from the four directorates-general which had contracted the largest amounts. They found gaps in the framework governing the engagement of external consultants and missing guidance about the extent to which tasks can be outsourced and which capabilities and capacities should be kept in-house.

Did ECA find tasks which should not have been contracted to external consultants but rather carried out by Commission staff?

“We checked the system in place and in particular if the framework governing the use of external consultants,” François-Roger Cazala, the ECA member responsible for the audit, replied in an email interview.

“Such a framework is important, particularly if these services are used to support recurrent activities. We found that the Commission’s framework had significant gaps for consultancy and research. It did not contain guidance about the extent to which tasks could be outsourced, how external consultants’ services are defined, and which capabilities and capacities should be kept in-house.”

Different procurement procedures are used, including the negotiated procedure where the consultant is selected without a competitive tender or previous framework contracting (10 % of total amounts). Did you examine if it was justified?

“We found that the responsible directorates-general conducted the tender procedures in line with the applicable rules. In all procurement procedures reviewed, the Commission used appropriate award criteria (including a price/quality ratio) to consider value for money and to select the winning tenders.”

The purpose of the audit was to contribute to more transparency.The report looked at the top 10 service suppliers by contract amounts but without identifying them. Can you disclose them?

"The primary objective of this audit was to check to what extent some risks were addressed or not by the Commission. There is no reason to name the companies concerned as they have not done anything wrong - which might be the impression if their names were disclosed. Including names would also require a heavy clearing process as we have to respect the rights of entities.”

“The question is rather why the Commission contracted the amounts concerned to those companies. The Commission may be invited to publish this information based on fully accurate data and taking into account the affiliations which may exist between the different companies.”

Tasks to external consultants are normally contracted for a limited period of time but with the option of renewal of the contract for another period. Was this applied correctly?

“Normally the contracts for external consultants are limited in time. When this time has passed, a new tender procedure is launched and former contractors can indeed participate. In our report we state that the procurement procedures were complied with. We noted however a risk of competitive advantage.”

“When external consultants are used heavily by various Commission departments, they gain experience. This can be an advantage in winning future contracts. In one case, a supplier had been awarded a contract for drawing up tender documents in connection with a works contract (€1.1 million). In the following year, the same supplier was awarded another contract for supervising the same works (€3 million).”

The report mentions that there are conflicts of interest which are not covered by the Commission's guidelines. Did you find suspected cases of such or other conflicts of interest?

“We found that the Commission followed the formal requirements concerning the checks on conflict of interest.”

“But these checks are very formal and largely based on self-declarations. They cannot alone ensure that all possible conflicts of interests are dealt with. For example, the Commission’s guidance does not cover the risk of activities of the external consultant and their affiliates that could conflict with their contract with the Commission.”

Given the scale of the use of external consultants, the EU auditors call on the European Commission to improve how it manages their use. They also call on the Commission to increase transparency by reporting regularly and accurately on its use of external consultancy services. The Commission accepted all recommendations.

Do you think that the Commission should try to reduce the use of external consultants?

“It is very difficult to answer this question,” ECA member François-Roger Cazala replied.

“This is the reason why we say that, to maximize value for money, the Commission should better define the different forms of support that external consultants can provide and carry out needs assessments, including methods, e.g. cost-benefit analysis, to assess the need to outsource work instead of using internal staff."

“This could indeed lead to a more focused or sober recourse to external consultants,” he concluded. “It should also provide criteria applicable to activities and processes that should remain within the Commission and not to be outsourced.”

Brian Gray, a former Director-General and head of the internal audit (IAS) at the European Commission, set up the Financial Transparency system in around 2007. He told The Brussels Times that he is pleased to read that it still meets its objective of providing the general public, and journalists, with reliable information on who received how much for consultancy appointments.

“Transparency provides a good safeguard against abuse. The Commission’s procurement procedures are very solid, as are the procedures for verifying the sufficiency of the services provided, and they are not criticised by the ECA.”

He explained that over-dependence happens often because certain consultants have departments which specialise in meeting the Commission’s needs and in complying with the complex procurement procedures. “Those who fail to do so drop out of the EU public sector market. Competition between the more successful consultants can be fierce, so ensuring a competitive price.”

He admits that value for money is harder to assess. “It is best evaluated in the context of the achievement of the results expected when allocating the budgetary resources before the tendering procedure is approved.”

As regards transfer of knowledge from consultants to Commission staff, he thinks that the number of staff in the Commission is far too small to undertake all the work performed by consultants, and to attain and update the range of skills and knowledge required to implement the many policies. The ECA’s recommendations are helpful, so far as they do not add further layers of administrative burden.

M. Apelblat

The Brussels Times

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