Parliamentary questions on McKinsey in Luxemburg

07 April 2014 Consultancy.uk

In Luxembourg political uproar has emerged because of the hiring of McKinsey & Company by the Ministry of Finance. Critics are angry because the global strategy consulting organization was hired without the use of a public tendering process. Instead it was hired for a fee of almost 450,000 ton for 6 weeks of work. During a parliamentary debate the Luxembourg government has struck back hard, highlighting that the award of the contract followed all legal guidelines. In addition, the costs paid to McKinsey fade into nothingness compared to the mega savings  the public reformations want to realize (€1,5 billion), according to the Minister of Finance.

In preparation for the 2015 budgets the government of Luxembourg early this year decided to hire McKinsey & Company to support the process. Cause: the Ministry of Finance has reformed the way it budgets across the state ministries and administrations. As a result, it decided to bring external expertise on board.  Under Pierre Gramegna, the minister of finance, the renowned McKinsey was chosen, and even though a public procedure was not erected, the government’s tender commission approved hiring this organization.

Mckinsey Luxemburg

Over a period of 6 weeks, McKinsey thoroughly inspected the 2015 budgeting proces which has to realize €1,5 billion in savings compared to the year 2014. The most important assignment:  improve the way in which budgets are allocated, assigned and monitored. In addition, changes to the ministry’s approach meant that new definitions and processes needed to be developed. In this area McKinsey provided benchmarks and detailed lessons learned from other countries.

Parliamentary questions

After opposing parties found out that the consultants were paid €441.600 for their advice, several parliamentary questions were asked. First of all, some members of parliament pointed out that there may have been a conflict of interest, arguably because the daughter of finance minister Gramegna was an employee at McKinsey. She was employed at McKinsey when it was hired by the government. Gramegna rebuffed the accusation, stating that she had worked there between January 2012 and January 2014. Yet not during the time when the assignment was executed.

Xavier Bettel - Pierre Gramegna

Secondly, debate arose about the fact that McKinsey was hired without the use of public tendering process, which is a standard procedure for such large projects. “We have used the services of McKinsey before for various studies” said Gramegna, hinting at the fact that they were satisfied and did not need to look further. “Above all, the government kept itself to all regulations and the tender has been approved by the tender commission”. For the next two phases of the project – the initiatives and implementation phases – the ministry will organize a public bidding, he added.

To the question if  4,5 hundred thousands euro’s for six weeks of work – what comes down to €75.000 a week – is not a little bit to much, the minister answered the following: ''McKinsey delivered in line with our expectations and under a very tight schedule''. Above all, Gramegna emphasized that the costs paid to McKinsey fade into nothingness compared to the mega savings the public reform is trying to realize (€1,5 billion). After Luxembourg's Prime Minister Xavier Bettel defended Gramegna in the matter, the case was closed.

Expensive consultants

Uproar about expensive consultants is common recurring  phenomenon in media and politics. As for recently there was a major uproar in Ireland (see ‘Irish are grouching over gigantic consultancy expenses’) and in the United Kingdom (see ‘ICT consultant earns £55.000 a month extra at the defense’.

Uproar about expensive consultants is common recurring  phenomenon in media and politics. As for recently there was a major uproar in Ireland (see ‘Irish are grouching over gigantic consultancy expenses’) and in the United Kingdom (see ‘ICT consultant earns £55.000 a month extra at the defense’.

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