Hayek Consulting deals examined - updated

Updated: September 21, 2010, 11:00AM. Please see the last paragraph for an update.

Updated: September 21, 2010, 11:00AM. Please see the last paragraph for an update.

MARTIN Chren, a nominee of Freedom and Solidarity party as the State Secretary of the Ministry of Economy and Ivan Švejna, a nominee of Most-Híd party as the State Secretary of the Transport Ministry, are both making media headlines. But it is not because of any reform initiative undertaken during their time in government service. Rather, the two state secretaries who were previously co-owners of the Hayek Consulting firm have come under media attention for state contracts that were awarded to their consulting firm by both the current government and its predecessor.

Prime Minister Iveta Radičová has pressed SaS and Most-Híd to take a clear stand about their nominees and has said that she thinks the most current contract raises a concern about conflict of interests. But thus far both SaS and Most-Hid are backing their nominees to the state posts.

Hayek Consulting signed a €8,100 contract with the National Agency for Small and Medium-Sized Businesses, which is a part of the Ministry of Economy, only a few days after both individuals were appointed to their government positions. In mid-August, local media reported that Chren and Švejna had terminated the contract on behalf of the consulting firm. Hayek Consulting is affiliated with the Hayek Foundation, a right-wing think tank that had been critical of certain policies of the previous government.

The opposition Smer party called on Radičová and Speaker of Parliament Richard Sulík, the chairman of SaS, to take action against Chren and Švejna over what Smer called a “scandalous state commission” given to Hayek Consulting.

The Hayek Foundation responded that it has become target of a purpose-driven political campaign and that this has been damaging its reputation. The Sme daily reported that the board of the foundation has said it will take legal steps because of what it called purposeful editing of information and unwillingness on the part of the media to present objective information.

Sulík of SaS said that the €8,100 contract should not have been signed in the first place but that “as soon as Martin Chren found out about it, he cancelled it”. Sulík said Chren behaved honestly and he does not see any reason for Chren’s dismissal from the state post. Sulík added that it is logical for the Hayek Foundation, which provides analyses of the business environment, to try to obtain government contracts.

“I see nothing wrong about it,” Sulík said, as quoted by the TASR newswire. “The only problem could be if those commissions were overpriced, obtained by bribery, or were in violation of the law, and in these terms I say everything was okay.”

Former prime minister Robert Fico, head of Smer party, disagreed and called on the government to take action.

“This is an unprecedented conflict of interest, as the minister passed business to his state secretary and political party colleague,” said Fico, as quoted by TASR.

Chren has rejected the accusations and said that the charges of scandalous behaviour were being built to discredit him. He said that after he took the government position he ended his affiliation with Hayek Consulting and the Hayek Foundation.

“During my tenure at the post of state secretary, no financial fulfilment [of a contract] between Hayek Consulting and any institution under the Economy Ministry has ever taken place,” Chren said as quoted by Sme.

Chren rejected any suggestion that Hayek Consulting had participated in anything like a ‘bulletin-board tender’ reacting to a previous scandalous tender in Slovakia that had only been published on an internal ministry bulletin board. Chren said Hayek Consulting had won a number of tenders but none of those had been published solely on a bulletin board, the TASR newswire wrote.

“All of the public tenders went in accordance with the laws of this country, being published even beyond the extent specified by law,” Chren said.

Radičová is also reviewing state contracts worth about €1.5 million that had been awarded to Hayek Consulting in 2007 and 2008 by the Finance Ministry under former minister Ján Počiatek, a nominee of Smer. Three of the four contracts concluded between the ministry and Hayek Consulting were made without a public tender, Sme wrote.

Hayek Consulting commented that it had won the main contract from the Finance Ministry in a regular tender and that the three smaller deals were subsequently awarded in accordance with the public procurement law. Two other firms which had bid on the main contract were excluded from the tender but neither contested that decision. Hayek Consulting later hired the head of one of those firms to work on part of the project, Sme reported.

The contracts were for development of a model of effective budgeting for local governments and then the initiation of pilot projects with 30 local governments. The main project, including the pilot projects, was worth €1.4 million and the three other contracts had a value of €90,000, according to the Trend weekly which broke the story. Trend reported that the other bidders did not fully meet the criteria for the tender but that subsequently some individuals from those companies became affiliated with Hayek Consulting.

On September 21, Sme published a list of issues that appear problematic about the Hayek Consulting contracts. First, the company had competed for several ministry contracts together with firms that Sme reported were friendly with Hayek Consulting and on one of the tenders at the Economy Ministry Hayek Consulting competed against Veri Consulting company which is owned by Matúš Pošvanc who is also associated with Hayek Consulting. The second issue noted by Sme was that Hayek was awarded one of the economy ministry contracts after Chren and Švejna had already been installed in their posts as state secretaries but were still co-owners of the firm. Sme added that Hayek Consulting kept winning tenders because it always submitted the best price offer but also noted that the consulting firm had received a contract from the Finance Ministry while Ján Počiatek was minister without any direct competition, Sme wrote.

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