# CE2004084EN.01000601.xml

| 3.4.2004 | EN | Official Journal of the European Union | CE 84/6 |
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3.4.2004

EN

Official Journal of the European Union

CE 84/6

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(2004/C 84 E/0007)

WRITTEN QUESTION E-0844/03

by Herbert Bösch (PSE) to the Commission

(18 March 2003)

Subject:   Contracts with management consultants

Subject:

Management consultants such as Andersen Consulting or Ernst & Young have hit the headlines recently for allegedly inadequate advisory services. Andersen came in for criticism over the Enron scandal and Ernst & Young is now faced with a demand for CHF 3 billion following more serious allegations of unsatisfactory work for the Cantonal Bank of Geneva.

These incidents give rise to the following questions:

| — | How many contracts were concluded in 2002 between the Commission and management consultants and what is their total value? |
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How many contracts were concluded in 2002 between the Commission and management consultants and what is their total value?

| — | Has the Commission ever become aware of consultancy work being carried out unsatisfactorily? What criteria does the Commission apply when assessing advisory services? |
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Has the Commission ever become aware of consultancy work being carried out unsatisfactorily? What criteria does the Commission apply when assessing advisory services?

| — | Has a consultancy contract ever proved damaging to the Commission? |
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Has a consultancy contract ever proved damaging to the Commission?

| — | If so, to what extent and was compensation demanded? If not, why not? |
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If so, to what extent and was compensation demanded? If not, why not?

| — | Why are management consultants and not Commission officials called on to carry out certain tasks? |
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Why are management consultants and not Commission officials called on to carry out certain tasks?

Supplementary answer given by Mrs Schreyer on behalf of the Commission

(3 February 2004)

(3 February 2004)

| 1. | The model of the service contract currently used by the Commission refers in more than ten articles to the assessment and quality control of advisory services. The most important clause is related to the definition of the subject of the contract and thereby referring to the technical specifications in the invitation to tender as well as to the tender itself. The contractor is obliged to perform his obligations with the highest professional standards. In order to enforce these major obligations the clause establishes a schedule for interim reports and audits. Consequently the provisions on interim and final payments are on condition that technical reports are submitted and approved.
  Failure to fulfil obligations by the contractor leads to a reduction of payments, application of sanctions, and eventually to the termination of the contract. The contractor is not permitted to subcontract without prior consent, has to replace any personnel that does not comply with the obligation to deliver services of highest professional standards, and has to respect full confidentiality as well as to participate in checks and audits to be performed by the Commission, the European Court of Auditors and the European Anti-Fraud Office. |
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1.

The model of the service contract currently used by the Commission refers in more than ten articles to the assessment and quality control of advisory services. The most important clause is related to the definition of the subject of the contract and thereby referring to the technical specifications in the invitation to tender as well as to the tender itself. The contractor is obliged to perform his obligations with the highest professional standards. In order to enforce these major obligations the clause establishes a schedule for interim reports and audits. Consequently the provisions on interim and final payments are on condition that technical reports are submitted and approved.

Failure to fulfil obligations by the contractor leads to a reduction of payments, application of sanctions, and eventually to the termination of the contract. The contractor is not permitted to subcontract without prior consent, has to replace any personnel that does not comply with the obligation to deliver services of highest professional standards, and has to respect full confidentiality as well as to participate in checks and audits to be performed by the Commission, the European Court of Auditors and the European Anti-Fraud Office.

| 2. | Management of contracts is the responsibility of the local contract managers within each Directorate General (DG). The decentralised organisation of the contract management has proved to be the most efficient approach as local managers have the information on requirements and conditions at govern the execution of individual contracts.
  As the Honourable Member may already be aware, the Prodi Commission decided to develop a central contracts and contractors database Interactive Contracts Network Database (ICON-DB). The work is progressing well. This will provide central statistics. Pursuant to action 74 of the Commission White Paper ‘Reforming the Commission’ (1), the database will also contain details of candidates and tenderers who are in one of the situations described in Articles 93 and 94 of the Financial Regulation. Centralised and consolidated statistics, broken down by Commission department, will thus be available in due course more rapidly.
  The Commission can however provide central statistics from an analysis of the accounts. The payments made to the five principal international consultancy firms for services (including, but not exclusively, management consultancy) supplied to the Commission amount to around EUR 31 million for 2002.
  Two tables showing the payments made for all the services provided by the five principal consultancy firms to the Commission are being sent direct to the Honourable Member and Parliament's Secretariat. |
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2.

Management of contracts is the responsibility of the local contract managers within each Directorate General (DG). The decentralised organisation of the contract management has proved to be the most efficient approach as local managers have the information on requirements and conditions at govern the execution of individual contracts.

As the Honourable Member may already be aware, the Prodi Commission decided to develop a central contracts and contractors database Interactive Contracts Network Database (ICON-DB). The work is progressing well. This will provide central statistics. Pursuant to action 74 of the Commission White Paper ‘Reforming the Commission’ (1), the database will also contain details of candidates and tenderers who are in one of the situations described in Articles 93 and 94 of the Financial Regulation. Centralised and consolidated statistics, broken down by Commission department, will thus be available in due course more rapidly.

1

The Commission can however provide central statistics from an analysis of the accounts. The payments made to the five principal international consultancy firms for services (including, but not exclusively, management consultancy) supplied to the Commission amount to around EUR 31 million for 2002.

Two tables showing the payments made for all the services provided by the five principal consultancy firms to the Commission are being sent direct to the Honourable Member and Parliament's Secretariat.

| 3. | Unsatisfactory work is a ‘serious breach of contract’ and therefore an exclusion reason stipulated in Article 93(f) of the financial regulation represents a feature that will be stored in the operational applications of ICON-DB. None of the five firms is mentioned in the Commission's present Early Warning System. |
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3.

Unsatisfactory work is a ‘serious breach of contract’ and therefore an exclusion reason stipulated in Article 93(f) of the financial regulation represents a feature that will be stored in the operational applications of ICON-DB. None of the five firms is mentioned in the Commission's present Early Warning System.

| 4. | A recovery order means that an authorising department has discovered the existence of a claim against one of the Commission's debtors that is certain, of a fixed amount and due. The recovery order does not necessarily mean the contract was performed unsatisfactorily by the debtor. It may, for example, relate to the recovery of an advance (pre-financing) paid for a service that was originally planned but ultimately abandoned.
  Recovery orders have been issued against:






  — | Coopers and Lybrand (United Kingdom) for EUR 43 892,66, which was paid by offsetting the amount against other claims (order 3240014022 of 1997, offset in 1999); |
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4.

A recovery order means that an authorising department has discovered the existence of a claim against one of the Commission's debtors that is certain, of a fixed amount and due. The recovery order does not necessarily mean the contract was performed unsatisfactorily by the debtor. It may, for example, relate to the recovery of an advance (pre-financing) paid for a service that was originally planned but ultimately abandoned.

Recovery orders have been issued against:

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Coopers and Lybrand (United Kingdom) for EUR 43 892,66, which was paid by offsetting the amount against other claims (order 3240014022 of 1997, offset in 1999);

| — | Deloitte and Touche (Greece) for EUR 26 145,53 (order 3240402821 of 2003), which will be offset; |
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Deloitte and Touche (Greece) for EUR 26 145,53 (order 3240402821 of 2003), which will be offset;

| — | Ernst and Young (United Kingdom) for EUR 103 346,41 (order 3240016239 of 1999), which has been paid. |
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Ernst and Young (United Kingdom) for EUR 103 346,41 (order 3240016239 of 1999), which has been paid.

| 5. | The use of selected management consultants is a way of enlisting the services of specialists who have in-depth expertise and have also probably performed comparable tasks in similar public or private organisations. Their combination of skills enables them to contribute a new and different perspective, which is both useful and necessary for dealing with specific dossiers.
  As a Member of the Budgetary Control Committee of the Parliament, the Honourable Member may be also aware of the tight staffing situation in the Commission. |
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5.

The use of selected management consultants is a way of enlisting the services of specialists who have in-depth expertise and have also probably performed comparable tasks in similar public or private organisations. Their combination of skills enables them to contribute a new and different perspective, which is both useful and necessary for dealing with specific dossiers.

As a Member of the Budgetary Control Committee of the Parliament, the Honourable Member may be also aware of the tight staffing situation in the Commission.

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(1)  According to the terms of the White Paper (Action 74 Contracts Database) [Part II, cf. COM(2000) 200 final, volume II]: ‘A central database will bring together all contracts and financing agreements concluded by the Commission. It will be a precondition of any proposal to undertake financial commitments that the data related to the envisaged contractor have been entered in the database. The database will contain all relevant information on the object of the contract, the contractor, the beneficiaries (including major indirect beneficiaries) and implementation’.

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