Over the past months, three consulting firms, Oliver Wyman, Deloitte and Mazars, bid against each other to win a major bank stress testing project for the Bulgarian central bank. Oliver Wyman’s proposal came out as the clear technical winner, yet it was, according to Bulgarian documents, more than twenty times the price of Deloitte Bulgaria’s bid. As a result, the central bank opted for Deloitte.
The Bulgarian National Bank (BNB) wants to evaluate the asset quality of local financial institutions, in line with European stress test compliance requirements. To find the right firm to execute the project, the bank ran a tender valued at €870,000. Several firms submitted a proposal, and after a number of bidding rounds, three firms reached the final stage: Oliver Wyman, Deloitte Bulgaria and Mazars.
The three final contenders for the BNB contract were reduced to two, following the bank finding irregularities in the documentation submitted by French contender Mazars. The assessment of the technical bids saw Oliver Wyman open up a convincing advantage, receiving 68 of the maximum 70 points against only 44 for Deloitte Bulgaria. The bid by the US-based Oliver Wyman was, however, more than 20 times higher than that proposed by Deloitte – respectively €16.72 million excluding sales taxes versus €800,000 excluding sales taxes. Because of the high cost of Oliver Wyman’s proposition, the firm's proposal received 2.27 points against the maximum of 30 for financial attractiveness, while Deloitte scored considerably higher. The resulting cost/benefit analysis saw the Big Four giant, even with its less proficient offering, win out.
Oliver Wyman complaint
Oliver Wyman has been active within the space of stress testing European banks for some time. One of the largest projects within the space in Europe, for which the firm worked with Roland Berger, was to help Spain identify its capital shortfall during the country's 2012 banking crisis – for which the consultancies charged more than €30 million in fees.
In 2013, the ECB further hired Oliver Wyman to stress test 130 banks across Europe. Given its long track record and expertise, the advisory firm filled an official complaint against the BNB following being passed over, arguing that its offering was materially better than that of its competition. However, less than a week later, before the Commission for Protection of Competition (CPC) opened proceedings on the matter, the complaint was withdrawn. The reasons for the US headquartered consultancy to withdraw its complaint have not been specified.
The BNB has now given Deloitte's Bulgarian organisation green light to execute the contract. The consulting firm will, in accordance to regulation, explore the need to restructure the banks to meet compliance requirements by August 31, 2016.