Is it wise to subject public sector consultancy services to competitive bidding?

Minister for the Environment and Food of Denmark, Esben Lunde Larsen, has decided that all the ministry’s contracts with universities offering research-based public sector consultancy must be subjected to competitive bidding. Is this a wise move or is he selling off the family silver?

2017.08.16 | Rektor Brian Bech Nielsen, ST-dekan Niels Chr. Nielsen, ST-prodekan Kurt Nielsen

For every krone received by researchers via government contracts, Aarhus University currently generates approximately DKK 1.50. Aarhus University thereby provides society with research and consultancy in the fields of the environment and food amounting to more than DKK 1 billion every single year. Photo: Anders Trærup

One thing should be made perfectly clear – Aarhus University is used to competing for funds. Our researchers do this every day – and they are good at it. We are also happy to bid for the ministry’s consultancy tasks, but if so, it should be fair competition.

Unfair competitive conditions

The government contract funds cover not only consultancy tasks for the ministry. Approximately half of the contract funds are used to ensure the very basis for research that supports the public sector. We call this part of the contract funds ‘basic funds’ because they play exactly the same role for research-based consultancy as basic funds from the Ministry of Higher Education and Science do for the research-based degree programmes. Both types of basic funds cover the cost of rent and building operations, and expenses involved in running experimental facilities and maintaining research equipment. In addition, the funds are partly used to cover salary expenses for the researchers and to co-finance projects related to external grants.

The minister’s decision means that all the government contract funds will be subjected to competitive bidding – including the basic funds. And this means that Aarhus University’s researchers in the fields of the environment, agriculture and food will be unable to compete on price. They have to include these basic funds in their contract bids to ensure the research base and infrastructure necessary to solve consultancy tasks and collaboration with industry. A different starting point will apply for a number of our competitors. They will be able to submit cheaper offers because they can benefit to a considerable extent from an existing research base and infrastructure, where the expenses are already covered by basic funds not subjected to competitive bidding. In other words, this is unfair competition.

If the proposed competitive bidding is adopted, Aarhus University’s competitive situation could thus be compared with a football team that is expected to win the world championships without football boots.

Providing consultancy services in the fields of the environment, agriculture and food requires significant infrastructures, broad academic scope, and not least long-term research efforts. It has taken many years to build all this up at Aarhus University. One would think this was a crucial competitive advantage, but the minister has decided as part of the competitive bidding that Danish universities can enter into collaboration with research institutions abroad and thereby purchase the expertise and infrastructures they might be lacking themselves as new players. This might sound harmless because the universities are naturally used to collaborating and competing internationally. However, it means in practice that public Danish funds can be used to strengthen competing foreign institutions that, in addition, collaborate closely with their own national business sectors in the fields of the environment, agriculture and food.

Does it make sense for public Danish funds to be used to strengthen foreign research institutions and companies?

 

Many years of accumulated knowledge can be lost

For decades, Danish politicians have had a tradition of using knowledge and consultancy from the country’s strong research environments prior to processing and adopting new legislation regarding food production, the environment, and other issues of great importance for our society. At the same time, the Ministry of Environment and Food of Denmark and its predecessors have invested wisely in research that provides the public sector with long-term support. This has made it possible to establish a high level of knowledge and maintain very productive collaboration between ministries, universities, farmers, food companies and other important players.

The research-based public sector consultancy was originally carried out by sector research institutions such as the former Danish Institute of Agricultural Sciences (DJF) and Denmark’s National Environmental Research Institute (NERI). These institutions were financed via contracts with their respective ministries and competitive external funds. The contract funds covered both consultancy tasks and the basis for research that supported the public sector (basic funds).

In 2007, most of the sector research institutions amalgamated with universities. DJF and NERI became part of Aarhus University, and this meant that the university thereby acquired a large group of staff with very strong expertise in the fields of environmental, agricultural and food-related research. The contracts with the ministries were transferred to the university along with the obligation to provide consultancy and research that supports the public sector. We have subsequently complied with this obligation, and on several occasions – including as recently as a meeting last week – the ministry expressed satisfaction with the quality of Aarhus University’s contribution.

But this has not been without challenges. The university’s contract funds have been regularly reduced by DKK 120 million since 2009 to the current level of DKK 384 million. Our skilled researchers have managed to counteract this reduction in grants by acquiring more funds in external competition. For every krone received by researchers via government contracts, Aarhus University currently generates approximately DKK 1.50. Aarhus University thereby provides society with research and consultancy in the fields of the environment and food amounting to more than DKK 1 billion every single year.

During the course of many years, the university has built up a strong Danish research environment of high international quality with unique infrastructures. This is a research environment that we can rightly regard as our family silver, and it consists of about 1,000 members of staff located in Foulum, Flakkebjerg, Roskilde, Kalø, Silkeborg and Årslev. However, the existence of these environments depends on basic contract funds in order to continue contributing. It is surprising that the minister is now creating uncertainty regarding the future of these efficient environments.

What is the future for public sector consultancy?

The fact that a small country like Denmark has been able to establish its environmental and food research in the international elite is partly due to long-term political agreements and contracts, enabling investments in strong research groups and expensive facilities that also benefit the business sector. This kind of investment will become considerably more risky for the individual universities if they can only plan their budgets to the end of the four-year contract. In other words:

Do we as a university dare to invest in new infrastructures if the ministry no longer dares to invest in us?

We will do our best at Aarhus University to secure the contracts and thereby the activities. We believe that the fields of the environment, agriculture and food are crucially important for Denmark. It concerns a national position of strength that plays a very key role in sustainable development and support for a knowledge-based business sector. We have just invested in an interdisciplinary centre for circular bioeconomy with a starting point in our activities in Foulum. Three new centres are on the way, and they are very relevant regarding the area of public sector consultancy. In the near future, we will be ready to take the first step towards a new Department of Food Science at the Agro Food Park in Skejby. The aim is to strengthen collaboration between agriculture and the food industry. It is this kind of initiative that Denmark needs.

Is it wise?

We naturally respect the right and duty of a government to prioritise public funds. In this case, gambling on competitive bidding runs the risk of undermining a Danish position of strength in which far-sightedness, infrastructures and a high level of knowledge are crucial. Is this really wise?

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