The European Commission is considering strengthening its rules to avoid conflicts of interest in contracts with consultancies, following complaints from the European Parliament and recommendations made by the European ombudsman.
The Commission said earlier this month that it is considering the option of forcing external contractors to disclose potential conflicts of interest and providing further guidance to EU officials on cases of conflicts of interest.
But MEPs were unhappy with the proposals suggested and said the EU executive should go further.
“The definition of conflict of interests must be changed” and consultants should not be involved in policy-making, the co-president of the Greens group in the European Parliament, Philippe Lamberts, told EURACTIV on Wednesday (28 April).
The European Commission spent more than €462 million between 2016 and 2019 in contracts with the ‘Big Four’ consultancy firms, according to estimates made by EURACTIV based on official documents.
Contracts signed by the Commission with consultancy firms have increased in recent years. Between 2016 and 2019 alone, PwC, EY, KPMG, and Deloitte, known as the ‘Big Four’ won tenders worth more than €462 million, as Euractiv revealed in March.
Some of these contracts signed with contractors raised issues of conflict of interests. For example, McKinsey was hired to provide policy recommendations on artificial intelligence, one of the business areas covered by the firm.
Furthermore, the Commission hired last year BlackRock, the world’s largest asset manager, to carry out a study on integrating environmental, social and governance (ESG) objectives into EU banking rules.
Following complaints from MEPs and civil society organisations about the BlackRock case, the European Ombudsman, Emily O’Reilly, concluded in November that there were “legitimate concerns around the risk of conflicts of interest”.
As a result, she recommended that the Commission provide “clearer guidelines” on possible conflicts of interest to staff handling public procurement contracts for policy-related service.
In addition, she invited the Commission to consider whether its financial regulation rules should be “strengthen” to avoid conflicts of interest.
In a letter sent to the Commission following EURACTIV’s story in March, a total of 73 MEPs pressed the Commission further on what measures it intended to take to ensure a rigorous vetting process to avoid conflicts of interest.
A group of 73 MEPs have sent a letter to the European Commission expressing concerns about hundreds of millions of euros spent on consultancy firms and their involvement in policymaking in the wake of an exclusive report by EURACTIV.com.
In response to the European ombudsman’s recommendations published on 12 April, the Commission said it is currently reflecting on whether it is necessary to propose amendments to the Financial Regulation, for example, to oblige tenderers to disclose conflicting interests.
“In order to take an informed decision in this respect, it [the Commission] aims to include the matter in a targeted public consultation on the upcoming revision of the Financial Regulation, which it plans to initiate shortly,” the reply said.
According to the Financial Regulation, the exclusion of external contractors from tenders because of their business in those markets of the tender “has to be based on objective criteria and facts that establish the existence of professional conflicting interest”.
In addition, the Commission is currently reflecting on providing additional guidance to staff on what represents a “professional conflict of interests” and “conflicting interest of the operator”.
The Commission noted that the assessment of conflicts of interest requires “a certain margin of discretion” for EU officials evaluating contractors in a tender.
“Therefore, any additional guidance would need to strike the right balance between allowing efficiency in the application of these notions as well as proportionality and objectivity in the assessment of exclusion of such conflicts,” the Commission said in its reply to the EU ombudsman.
As part of the guidance to staff, the Commission could provide a “non-exhaustive list of relevant examples” of professional conflicts of interest.
The “constructive response” given by the Commission was welcomed by the European ombudsman.
The proposals suggested by the EU executive are “in line with what the ombudsman has suggested” and the ombudsman “will continue to monitor this area and the proposed steps for change”, O’Reilly’s office wrote in a statement.
The European Parliament will examine the European Commission’s sizeable expenditure on big consultancy firms, recently revealed by EURACTIV.com, and propose a different approach to limit their influence in structural reforms, the chair of the Parliament’s budgetary control committee has said.
But these legal tweaks still fell short of the demands made by MEPs. “If the legal definition of conflict of interest allowed the BlackRock contract to be signed, there is something wrong with that definition,” the Greens’s co-president Lamberts said.
“The definition of conflict of interests must be changed,” he added.
Lamberts said the Commission should not consider changes “with a legalistic approach but a political one”.
He stressed that consultants could be involved to provide expertise, “but writing legislation, no way”. “This work has to be done by civil servants”.
In addition, BlackRock “was making recommendations that will impact its whole global business”, he argued.
Damien Careme, one of the MEPs who submitted a complaint to the ombudsman over the BlackRock contract, told Reuters the Commission should go further and exclude companies from tenders if the interests of their projects, or those of their clients, conflict with that of the field concerned by the tender.
The European Court of Auditors is examining almost half a billion euro worth of contracts the European Commission has concluded with external consultants to assess whether there is fair value for money in the contracts, a spokesperson of the institution told EURACTIV on Thursday (18 March).
[Edited by Zoran Radosavljevic]