• Tue. Aug 9th, 2022

EU auditors warn of risks from Commission spending on external consultants – EURACTIV.com

ByChad J. Johnson

Jun 30, 2022

The European Commission lacks comprehensive guidelines on the use of external consultants, according to EU auditors, who have warned of risks of conflict of interest and overreliance on a small number of consulting firms.

A new report by the European Court of Auditors (ECA) published on Thursday 30 June showed that between 2017 and 2020, the European Commission used external consultants for services worth 3.7 billion euros.

“Outsourcing certain tasks, I must stress, can be useful and sometimes necessary, but the European Commission should ensure that by doing so it maximizes the value obtained for the amount of money dispersed,” said François Roger -Cazala, member of the ECA. .

In their research, the EU auditors found that the use of external consultants funded by the EU budget does not fully guarantee value for money.

In recent years, the Commission has increasingly outsourced tasks – ranging from advisory work to studies, evaluations and research activities – to external agents. The value of contracts signed with consulting firms increased from €799 million in 2017 to €971 million in 2020.

According to the report, the EU executive is increasingly relying on these services, as they offer a wide range of skills and expertise and are a cheaper alternative to on-site staff.

The report follows criticism last year over the Commission’s use of services provided by the so-called ‘big four’ consultancies: PwC, EY, KPMG and Deloitte.

Concentration risk

Although the study does not name specific contractors, it demonstrates that there is a significant risk of concentration and over-reliance on a small number of consultancies.

Of the 2,769 consultants hired between 2017 and 2019, the top 10 firms alone represent 22% (around 600 million euros) of the total.

Within the Directorate-General for EU Neighborhood and Enlargement Policies (DG NEAR), the top 10 consultancies accounted for less than 3% of the total number of suppliers, but accounted for 41% (277 million euros) of the contractual amounts.

“Some Commission departments rely heavily on a relatively small number of contractors. It is not uncommon for the same supplier to win successive contracts over several years even though open tenders are organized regularly,” the report states.

The auditors said this concentration could lead to a competitive advantage for companies with extensive experience working for the Commission, while warning of possible conflicts of interest.

Conflicts of interest

Roger-Cazala said that although no conflict of interest was found during the audit, the CEC only reviewed 20 of the 8,009 consultancy contracts signed during the audited period.

“But our conclusion is that these risks of conflicts of interest and overreliance are not properly addressed,” he said.

According to Nicholas Aiossa, deputy director of Transparency International EU, there must be “due diligence”.

“The more the Commission relies on these consultancy contracts, the more work it has to do to ensure there are no conflicts of interest,” he told EURACTIV.

If all the contracts included a declaration denying the conflicts of interest, it is mainly a question of “formal checks which cannot on their own ensure the management of the risks of conflicts of interest”, according to the auditors.

“Self-declarations are not enough,” Aiossa said, adding that “we have seen with deputies’ declarations, there must be several additional steps to ensure that the information provided by a third party is accurate.”

No guidelines

The Commission has drawn up guidelines on the tasks which can only be outsourced for studies and evaluations.

“We found no similar guidance for consulting and research services, which accounted for 78% of total spending on external consultants during the audit period,” the report said.

Moreover, there is no regular analysis to assess whether to hire external consultants or rely on internal staff and the contracts rarely envisage the transfer of knowledge from one to the other, despite the benefits this could bring to the Commission.

Roger-Cazala said the transfer of skills could mean that “work done by the consultant could be done by internal staff in the future”, although he added that this is unlikely to happen.

More importantly, he says, “you will have in your organization, in your institution, people trained to monitor and control the work [done by consultants].”

Evaluation and transparency

EU auditors have found “significant shortcomings” in the way the Commission assesses the work of consultants and their added value, increasing the risk of rehiring poor performers.

While the Commission verifies that consultants provide quality services before payments are made, “lessons learned exercises or ex post cost-benefit assessments are only carried out by certain Directorates-General”, the report says. .

Given the Commission’s growing expenditure on consultancy, Roger-Cazala urged the executive to improve its management of their use, “to fully preserve the interest of European taxpayers”.

“Consulting services are something that needs to be managed, like any other service delivery. This is not a one-off exercise,” he said, recommending that the Commission use them “more wisely” by improving transparency and reporting.

The Commission accepted all of the report’s recommendations, the auditor said.

[Edited by Nathalie Weatherald]