The European Commission has been asked to improve its guidelines for assessing applicants for public policy-related contracts following its decision to appoint BlackRock for an environmental, social and governance study.
The request was made by the European ombudsman following an inquiry into the commission's decision to hire BlackRock's financial markets advisory unit to develop tools and mechanisms to integrate ESG factors into the European Union's prudential rules framework for banking. The contract was awarded in March following a competitive tender process.
The ombudsman, Emily O'Reilly, also asked the commission to consider strengthening the conflict-of-interest provisions in EU law that govern how public procurement procedures financed using the EU budget are conducted.
"An application by a company to carry out a study meant to feed into policy that will regulate that company's business interests should have resulted in significantly more critical scrutiny by the commission," the ombudsman said in a news release.
The inquiry looked at how the commission evaluated BlackRock's application in the context of the call for RFPs to carry out the study.
"The Ombudsman found that the company's offer gave rise to concerns," said a document outlining the ombudsman's decision. "First, if a bidder has a direct or indirect financial interest in developments in a market, because it invests in that market, or manages investments in that market, there is a clear risk that those interests may influence the outcome of its work in its own favour. This applies to the company in question."
The decision also said the low price that BlackRock offered "optimised its chances of securing the contract" because of the weighting the commission applied to cost in its evaluation. "Winning the contract may enable the company to gain insights and assert influence over a growing investment area of major and increasing relevance to its clients and therefore to the company itself," the decision said.
Ms. O'Reilly added in the release: "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."
Despite the ombudsman's observation that the commission could have done more to verify whether BlackRock should not be awarded the contract due to a possible conflict of interest, she concluded that the underlying problem is with EU rules on procurement. The matter will be brought to the attention of EU lawmakers.
"The risk of conflicts of interest when it comes to awarding contracts related to EU policy needs to be considered much more robustly both in EU law and among officials who take these decisions," Ms. O'Reilly said in the release. "One cannot adopt a tick box approach to the awarding of certain contracts. Treating contract bidders equally is important, but not taking other critical factors appropriately into account when assessing bids does not ultimately serve the public interest."
Following the decision to award the contract to BlackRock, the ombudsman received three complaints — two from members of the European Parliament and one from a civil society group, the release said.
A BlackRock statement said the firm's financial markets advisory unit "seeks to provide the highest quality and best value service to all its clients around the world. The European Commission has already publicly stated that the technical quality of FMA's proposal was the basis for their decision in awarding the mandate. FMA has taken a wide-ranging and inclusive approach, including academia, civil society, banks, supervisors and market practitioners, and looks forward to completing its work and delivering its final report to the commission."