By: Risto Karajkov, European Voice, Brussels, Belgium, May 8, 2008

What follows is a true story.

A European Union consultancy wins a contract in the western Balkans. It is stipulated that a specialized engineer with at least 15 years’ experience must be one of the key senior experts for the entire duration of the project, of around 80 days.

The consultancy receives for this expert’s services around 800 euros ($1,235) per day, lump. “Lump” means all expenses (accommodation, food, etc.) are included. It is administratively convenient, but also widely (ab)used to maximize profits–flying low-cost and budgeting full-fare and so on.

Since the consultancy cannot itself identify this key expert, such people being in short supply, it subcontracts another consultancy, from the same European Union country, to provide the person–for 300 euros ($463) a day.

But the second contractor is also unable to find the required expert, and hires a consultancy from a Balkan capital to hire the person–this time for 100 euros ($154) a day. The local firm does so, and the project is successfully implemented.

Here’s a bonus question: How much was the engineer actually paid?

In actuality, that matters only to him or her. The entire amount will be put down as European Union aid to the Balkan country in question, however little it sees of it.

There is nothing illicit or corrupt here. Everything has gone perfectly by the book and any bitter taste such everyday practices leave behind are rarely discussed; it is not smart to bite the hand that feeds you.

A couple of months ago the European Court of Auditors presented its evaluation of CARDS (Community Assistance for Reconstruction, Development, and Stabilization), the European Union’s aid package for the Balkans, worth more than 5 billion euros ($7.7 billion) in 2000-06.

The report echoed the “good in parts” language of the 2004 midterm evaluation of CARDS conducted by a consortium of consultancies. There was the routine criticism of bureaucracy, delays, over-centralization, lack of strategic guidance, all no doubt fair.

But the court also showed a degree of acerbity, pinpointing examples of money being spent in ways that had little or nothing to do with the supposed objectives. In 2003, for example, 2.8 million euros ($4.3 million) was allocated to strengthening border protection in Macedonia. It was supposed to pay for training of officials, improving recruitment, and buying sophisticated equipment for checking documents. All of it, in fact, was spent on buying vehicles.

Yet the report is silent about the elephants in the room, the overpriced Western consultancies that can eat up a few million euros quite quickly.

The system’s defenders say that only a small proportion of foreign assistance is spent in this way. But anyone involved knows there are good reasons why there has not been the–plainly overdue–thorough chicken count. They know too why there is resistance to making the whole aid business fairer and more transparent.

Hotshot international experts cost a lot. But should they be permitted to charge more in Sarajevo than they can reasonably charge in London?

And should a Harvard-educated local get so much less than an expatriate, including one who is not Harvard-educated?

The rules tend to reflect income disparities between the Balkans and the West. But the disparity between Skopje and Brussels is not 12-15 times, which can easily be the difference between local and expatriate consultant fees.

And while we are on the subject of hotshot consultants, is there really a need for quite so many of them at all? Such work, like any other type of aid delivery, should be driven by demand not supply. Some donor countries have acted on this in recent times and reduced drastically the amounts of aid spent in this way.

That consultants enrich themselves from the generosity of donor nations undermines the whole point of foreign aid. It spreads cynicism among those in the field providing aid and among donor nations.

Perhaps worst of all is the corrosive effect on citizens of the failed states that are the subject of so much generosity.

From European Voice.