Procurement guidance 'fell seriously short' in Blackrock contract

The European Commission’s (EC) guidelines on dealing with conflicts of interest in public procurement “fell seriously short” in a controversial contract award, according to a watchdog.

European ombudsman Emily O’Reilly has called on the EC to strengthen its guidance on assessing bidders for contracts and for it to consider bolstering the law in this area following an investigation.

O’Reilly’s inquiry concerned the award of a contract to Blackrock Investment Management to produce a study on integrating environmental, social and governance (ESG) objectives into EU banking rules.

Two MEPs and a civil society group lodged complaints with the ombudsman, who in her judgement said changes to the EU’s ESG regulatory framework were likely to affect the ability of investors to achieve returns and this “could impact on the core business of companies such as Blackrock Investment Management”.

“The company might furthermore benefit from insights gained into the EU regulatory system and from increasing its network of contacts that such a study would help to facilitate,” O’Reilly said.

She added: “The ombudsman also notes that the company in question has tried to influence policy-making and regulatory processes in the area of environmental, social and governance objectives for banks.”

O’Reilly said Blackrock “appeared to commit high quality and expensive resources to the bid” but its price was “just over half of the initial estimated maximum value of the contract”.

Nine tenders were received but Blackrock was the only large investment manager in the pool of bidders. It was awarded the contract in March 2020.

However, while the ombudsman said the EC “could have done more to verify if the company should not be awarded the contract”, she found no maladministration and “took the view that the underlying problem is with the current EU rules on public procurement”.

O’Reilly said: “Questions should have been asked about motivation, pricing strategy and whether internal measures taken by the company to prevent conflicts of interest were really adequate.

“The EU is set for unprecedented levels of spending and investment in the coming years with significant links to the private sector – citizens need to be sure that contracts involving EU funds are awarded only after a strong vetting process. The current rules fall short of providing this guarantee.”

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