WILLEMSTAD - The Rhuggenaath government has based its setting of new consultancy rates on incorrect data and incorrect assumptions. This is according to management consultant Michiel van der Veur.
"The advice to the Council of Ministers was careless and incomplete."
The reason for this measure is the conditions set by the Netherlands for the payment of the second tranche liquidity support in the context of the corona crisis.
“The decision of the Council of Ministers is wrong and, if not corrected, will have major consequences for both consultancy firms and independent consultants,” says Van der Veur.
According to the management consultant, the government's decision assumes an unrealistic number of working days and working hours. International standards and customary holidays and compulsory days off have not been considered.
“The advice is also incomplete because it makes no distinction between short-term projects or a long-term interim assignment. Moreover, it does not put an end to the inadequate compliance with existing rules and standards for rates and tendering,” says Van der Veur.
The decision of the Rhuggenaath government is based on the 130 percent standard based on the salary of the Prime Minister. Including all allowances, such as the holiday allowance, an allowance for car, representation and telephone and the employer's portion for social security contributions and pension, this amounts to 335,577 guilders.
To calculate the daily rate, the annual salary has been divided by 264 days. The 264 days have been multiplied with eight to calculate the hourly rate. After which the annual salary was divided by the total hours worked of 2,112 hours. This results in an hourly rate of 158.89 guilders.
Unfortunately, according to Van der Veur, the numbers do not correspond to the internationally accepted standards and no account is taken of holidays and compulsory days off.
“According to the international standard, a year has 52 weeks and each week has five working days. This means that there are 260 working days in a year. Assuming a working day of eight hours, the international standard amounts to a maximum of 2,080 hours per year to work.”
In the Curaçao situation, an average of 20 vacation days and 12 compulsory days off are deducted from this. “In accordance with the international, by default, the prime minister is expected to work 228 days a year for his salary, which equates to 1,824 hours,” said Van der Veur.
It is not clear to Van der Veur why the advice to the Rhuggenaath government deviates from the international standard. "These come close to the average in 2019 for the Netherlands of 1,836 total hours per year."
The reality for a consultant is that he can never be billable for all these hours because not all work can be charged to the customer. “Think of acquiring new assignments, writing quotations, doing the administration, following training courses and waiting for work (because there are no assignments or because the customer has not yet given feedback)."
According to Van der Veur, this is why many consultancy firms assume an average of 1,300 billable hours per year. The unreasonable deviations from international standards have major effects.
“If international standards had been adhered to, and the annual salary had been divided by 2,080 hours, the hourly rate would have been 161.34 guilders. When the annual salary was divided by 1,824 hours - the number of hours for which the Prime Minister is paid - the hourly rate was 183.98 guilders. If the annual salary had been divided by 1,300 - the average number of billable hours - the hourly rate would even have amounted to 258.14 guilders,” says Van der Veur.
According to the management consultant, it is an open secret that there are consultants with very lucrative contracts without having gone through the procedures. "These contracts have been awarded despite the fact that Curaçao has had a consultancy policy since 1997, which includes maximum rates and rules for tendering."
The problem with this, as so often, lies not in the lack of rules and standards, but in the lack of compliance with existing rules. “The current decision lowers consultants' rates by nearly 40 percent! This percentage contrasts sharply with the cuts on the salaries of (semi-) civil servants of 12.5% and on the salaries of politicians and directors of public companies of 25%.”
With this cut, according to Van der Veur, not only has the rate adjustment from 2016 been reversed, but the rate has even dropped below the rate of 168.75 guilders, which was set in 1997 when the consultancy policy was introduced.
Michiel van der Veur states that the government now has extensive experience in taking recovery decisions. "The government would be pleased if this decision was also revised and the new rate is based on 1,824 hours, the number of hours on which the government salaries are also based."
To add to this that if the rates are re-examined, the government will immediately start complying with the existing rules for rates and tendering.
“This may anticipate the adjustment of the consultancy policy that was promised in 2016 but has still not been implemented. It is that it creates a conflict of interest, otherwise you would almost suggest hiring a consultant for this.”
Photo credit: Persbureau
Michiel van der Veur contributes as an independent management consultant to the development of organizations and society. He likes to solve complex (social) issues through a thorough analysis based on facts. Before starting as an independent consultant 13 years ago, he worked in Curaçao for the government, a large consultancy firm and an internal auditor.