The British consultancy firm was put in the spotlight by Finance Minister Simeon Dyankov’s decision to declassify two of its contracts

The Sofia Echo, 27th of November 2009
By Petar Kostadinov

Finance Minister Simeon Dyankov's decision to make public contracts signed by his predecessors caused an uproar in Bulgarian media, that got a rare chance to see what Bulgaria's previous state officials had been up to when signing contracts and deals worth millions of leva. Much of the attention was aimed at the first two contracts signed between the Finance Ministry and UK consultancy firm Crown Agents which has been working with the ministry, Customs Agency and the National Revenue Agency (NRA) for the past seven years.

Since 2001, the CA has signed four contracts with Bulgaria, the most recent signed in January 2009 under the previous government, by Dyankov's predecessor Plamen Oresharski, with a timeframe of one and-a-half years.

Dyankov declassified the first two contracts between the Finance Ministry and Crown Agents. Both contracts have run their course. The moment the two document were made live on the ministry's website, Bulgarian media were full with headlines such as “Contracts with Crown Agents full of humiliating clauses”, “Half of the money paid went for Crown Agents' salaries”. Inevitably, there was a negative public reaction against Crown Agents and the money they were getting from the state. When this negative reaction was mixed with the low public assessment of the work of customs and NRA, whose work Crown Agents was hired to improve by offering recommendations, the British company became an easy target.

A bit of background

Crown Agents' presence in Bulgaria has long been treated with misgivings by the media and, by extension, the public. The reason was simple. Right from the start, almost all details about what the company was hired to do were kept secret. Part of the contracts were declared classified by then finance minister Milen Velchev, who signed the first contract in 2001, and by his successor Oresharski. This was why, despite Crown Agents having given a number of interviews over the years, some matters were “out of  the question” simply because the contracts said so. This led to doubt and suspicion about what it was that Crown Agents was doing, other than improving the work of customs, and most importantly, what price Bulgarian taxpayers were paying for its services. The latter became the focus of attention when Dyankov made public the first two contracts with the consultancy firm, signed in 2001 and 2004 by Velchev. The price of the first one was 10 830 006 pounds sterling and the second one 10 795 500 pounds. Under the first 36-month-long contract, for example, salaries varied from 16 683 pounds a month for CA's top position in Bulgaria, to 7500 pounds a month for mobile team leaders. The total share of remuneration under the first contract was 7 560 555 pounds, of the total cost of 10 830 006 pounds. Given the low level of average incomes in Bulgaria, these sums were the reason why most questions were about what Crown Agents has done over the past seven years to improve the work of customs.

The contracts

In all the comments and reports on the Crown Agents issue, there was one thing missing; Crown Agents’ position on Dyankov making their contracts public.

Dyankov's reasoning was extensively reported. He decided to declassified the contracts as part of his efforts to achieve transparency in the work of his ministry, and the Crown Agents contracts were simply part of a number of documents which were made public, with many more to come.

“You know, until now there was only one media that actually called us for a comment on the issue,” John Brown, Crown Agents’ team leader in Bulgaria, told The Sofia Echo.

“I read a comment in Bulgarian newspapers that the type of contract Crown Agents has with Bulgaria is unique to Bulgaria. Yes, it is unique by the fact that it is tailored to meet Bulgaria's needs, but the hiring of private companies by revenue authorities and governments is normal throughout the European Union. Back when I was working for British customs, we had private companies hired, and it was much easier to hire people over a short period of time, implement it and let them go out,” he said.

This view is shared by Crown Agents programme manager David Smith. “This reaction is normal when you put it into the overall economic context in the country. But if you think about this a bit more, then it might not look so negative. Let me ask a very simple question – Would anyone be happier if the advisers were paid less for their job and the rest of the money was used to form company profit?. We brought to Bulgaria some of our best experts, investing a large portion of our revenue in high-quality people, in order to provide maximum results. Let me remind you that at the time we came to work in Bulgaria the country was facing some very big challenges and was still on its way to EU membership. This required very high quality advisory service”.

That said, the question remains. What have Crown Agents achieved, especially after some media comments suggested that the contracts were too vague in terms of concrete goals, other than just improving the work of customs and increasing tax collection?

“I would strongly object to that,” Smith said. “The payment does depend on the results achieved but, of course, the ones which are within Crown Agents’ authority and obligations. As with every advisory contract, the advisor’s fee depends on the quality of the service provided. Our job is to analyse the systems and procedures, to propose ways for their improvement and to assist with the implementation of our recommendations. But, for example, how could any advisor be held responsible for the level of state revenue, provided that more than 200 of the recommendations made have not been implemented?”

Smith was referring to statements on September 16 2009, when Prime Minister Boiko Borissov and Dyankov had their first meeting with Crown Agents after taking office in July, when both Borissov and Dyankov expressed their support for Crown Agents work. At the meeting, it was announced that the former management of the Finance Ministry had failed to implement 263 recommendations by Crown Agents. Further, communication by the ministry had been poor and for a long time there had been no meetings between the finance minister and Crown Agents. “And even if all the recommendations had been implemented how would anyone distinguish the external economic factors from the internal ones? That is why the best measure to audit any advisor’s work is to check the quality of the advice provided in the first place.  Their net effect depends on a number of other factors which should also be addressed if possible,” Smith said.

In the end, it all comes down to the company's obligations under the contract, Brown said.
“I have no executive authority, I do not have the power to order people to implement. It is not our job to actually oversee implementation. We do check and ask as to what stage the implementation process is, but I don't have resources to go and check if what I was told is correct or not,” he said.

“Look, I report to the Minister of Finance. We are hired to review specific areas. We have given a detailed list of what we intend to do and that was agreed by the previous minister and we are now set about to achieve that,” Brown said.
Still, many Bulgarians would argue that little has changed in customs efficiency and tax collection over the past seven years, and that the challenges these agencies were facing then are still here today. “Changing things takes time, but I am not an apologist, I cannot physically make people do things. I can only say: here is the report, this is what's happening, this is what I think you  should do and this will be the result.  It's your job to make it happen and I will do my best to help you,” Brown said. “Remember that with each change of government here usually this brings a change of administration which doesn't help either,” he said.

For example, there is the issue of a lack of proper communication between Bulgaria's law enforcement agencies, a problem which Dyankov, Crown Agents and Customs' head Vanyo Tonov believe should be fixed as a matter of priority.
“We have been pushing these principles all the time we have been here. If the agencies, for whatever reason, do not talk to each other, I am sorry, that's not Crown Agents’ problem. We are trying our best to resolve these things but do not blame us for that,” Brown said.

He said that there was still a lot of resistance to what Crown Agents wanted to see improved, because “information is power”.

“You know that the initial resistance against the reforms assisted by Crown Agents was enormous and there even was a bomb blast under the flat windows of one of our advisers,” Smith said.

Easy target

“We know that there always will be people who like Crown Agents and those who don’t. But judging by my personal contacts with lots of Bulgarian people, colleagues and counterparts, I feel that our work here is appreciated,” Smith said. “It is easy to blame Crown Agents. We are foreigners and Bulgaria is paying us an ‘extortionate’ amount of money. But you will not get experienced consultants going to any country unless you pay the going rate. Before I came to Bulgaria, I was looking at other jobs. I could easily have said no and gone somewhere else,” Brown said.

“Crown Agents is committed to maximum transparency in terms of the work we do in Bulgaria and if Dyankov's decision to make the two contracts public serves to increase transparency, then I believe it is in everyone’s interest,” Smith said. “The Ministry of Finance did come to us in advance to discuss the issue and we supported the principle of the decision to disclose. But you should also note that this step is part of a process and is not related to Crown Agents only, the declassification started with another document and, as you know, continued with a number of other Ministry of Finance contracts,” he said.
“As you know, the classification of the contracts was a decision of the Bulgarian government at the time. We cannot comment on the reasons for that, because we do respect institutions and their decisions on what is considered to be in public interest. But I would like to underline that we have nothing to hide. We have explicit requirements for confidentiality regarding only a few clauses which are related to normal commercial life and the security of our experts,” Smith said.