What is McKinsey about

Consultant affairHow McKinsey earned millions in the Bundeswehr

In December 2017, just under a year before the affair over external advisors in the Ministry of Defense broke out, Ursula von der Leyen's arms experts wrote a guide. Title of the document, which the officers and soldiers of the Bundeswehr can access on the intranet: "Effective and efficient use of consultants in projects - brief information for official project teams". The most important questions are clarified in Powerpoint style - on the left the plus points, on the right minus.

Right at the beginning there is the fundamental question: "What do I need consultants for?" At the top under the plus sign: "The solution to the problem is relevant for the management of the BMVg" - that is, for the head of the department and the minister herself. This is followed by points such as " Open-ended development of possible solutions ”,“ neutral assessment expertise ”or“ project management in complex constructs ”.

For what the officials should not get consultants: for "strategically subordinate problems" from the point of view of the house management, for "implementing a prefabricated, no longer questionable solution" - or also for "submitting unpleasant tasks".

The so-called consultant affair has been shaking the Ministry of Defense for more than a year. Under the former minister von der Leyen, who wanted to modernize the troops that had been saved up with the help of the consultants, the ministry seems to have developed into a gold mine for consultants with daily rates of sometimes more than 2,000 euros. The companies had "excepted the Bundeswehr like a Christmas goose," says an official. The Bundestag's investigative committee, which is supposed to clarify how the consultancy could become independent, whether nepotism was involved in the award of contracts to certain consulting firms, is on the home stretch of its work. In mid-February, von der Leyen, today's EU Commission President, will testify as a witness in the committee of inquiry. Her former Secretary of State for Armaments, Katrin Suder, has been summoned for this Thursday.

The guidelines for the use of external consultants from the Armaments Strategic Control Office, which Capital has received, reads today like an attempt to get a system under control that has got completely out of hand. At the end of 2017, the Federal Audit Office was already interested in the contracts with consulting firms that have been involved in the armed forces for a three-digit million amount since von der Leyens took office in 2013. Individual officials within the ministry also sounded the alarm. In autumn 2018, several reports by the auditors brought the shortcomings to light: For years, multi-million dollar contracts had been awarded without first checking the profitability - in some cases without a tender or with the help of other tricks to override the procurement law.

Piggyback "Meckies"

McKinsey was also one of the beneficiaries of the consultant offensive - although orders to this company were considered particularly delicate after von der Leyen made McKinsey partner Suder State Secretary for Armaments Affairs in mid-2014. Even in response to persistent inquiries from MPs, the ministry had only disclosed a handful of surcharges to McKinsey by the time the consultant affair became known. According to research by Capital, the company, for which two von der Leyens' children also worked for a while, was involved in significantly more projects with the Bundeswehr than the military department reported to the outside world. Some events give the impression that the Ministry has also resorted to tricks here.

An important hinge for McKinsey's commitment during the tenure of Suder and von der Leyen was a service provider who is never far away when it comes to armaments projects: the industrial plant operating company, IABG for short. The company from Ottobrunn, founded in 1961 as a federal company and later privatized, regularly provides technical studies and cost analyzes - especially for air force projects such as fighter jets and helicopters, but also for tanks. In the industry, the company is seen as a kind of outsourced engineering department of the Bundeswehr. It happens that the IABG invites other companies from the industry to information events about armaments projects under the letterhead of the ministry.

For some time now, IABG has also had good contacts with McKinsey. A consultant from another consulting firm speaks of a "triumvirate" from the Department of Defense, IABG and McKinsey. In fact, there have been several projects in the Bundeswehr since 2014 in which both companies were involved in various forms.

At the request of Capital, McKinsey confirmed four specific projects. In 2016, IABG hired McKinsey as a subcontractor for the planned European drone and a helicopter project. In one of several consulting projects for the new combat ship MKS 180, for which McKinsey won a public tender, IABG was named as a subcontractor in the process - but was then not required. In another, previously unknown case in the Navy, a McKinsey subsidiary received the order - and then brought its own parent company and IABG into the project.

The advantage of such subcontracts: Because private companies do business with each other, public procurement law does not apply. The desired service providers can be engaged in a targeted and discreet manner, without any time-consuming tenders. The Ministry and IABG did not respond to questions about the projects mentioned or the order volumes, with reference to confidentiality obligations.

The article first appeared in Capital 04/2019.