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Germany

Labor Office Chief Under Renewed Fire for Consulting Contracts

A growing scandal over consulting contracts awarded without the required public bidding processes by Germany’s Federal Labor Office is putting the future of the agency’s head, Florian Gerster, into question.

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Under the glare of the camera: Florian Gerster

On Wednesday, two major German dailies – the business paper Handelsblatt and Munich's Süddeutsche Zeitung – reported that Federal Labor Office auditors had uncovered three potentially illegal consulting contracts that had not been put through a bidding process as required by law.

They included contracts totaling €1.66 million with IBM and prominent Munich-based business consultant Roland Berger, who was a member of the government commission which came up with the idea for the recent reorganization of the employment agency, the reports stated.

Though the federal government has thus far stood behind Gerster, the newspapers cited officials that his resignation would likely be demanded if an internal audit confirmed wrong doing in the issuance of the lucrative contracts.

Labor Office auditors told the newspapers that the three contracts were extensions of previously awarded business. The question of whether their awarding was legal, is part of an internal audit that could be concluded as early as this week.

It is not the first time Gerster has come in for criticism. Recently he hit the headlines for failing to advertise the contract for a planned image campaign estimated at over €1.32 million

Arbeitsamt in Berlin, thumbnail

A local job office.

($1.53 million). The campaign was designed to overhaul the labor office’s image following a major reform that transformed its local job offices into more aggressive job placement agencies responsible for finding work for the country's more than four million unemployed.

Crisis meetings

But this week, information emerged suggesting the contracts scandal could be bigger than earlier believed.

Tuesday night, the administrative board of the Federal Labor Office met to discuss the contested consulting contracts, and a second crisis meeting is planned for Sunday. So far, the board has made no public statements about the outcome of its deliberations, said Ursula Engelen-Kefer, the board’s chairwoman.

Peter Clever, of the German Employers’ Association and Engelen-Kefer’s deputy on the board, also refused to comment. But Clever clearly distanced himself from Gerster, saying he was "astounded" that Gerster spoke of having the government’s trust but not of having trusting relations with the administrative board.

Flagging support

Responding to the latest developments, Economy Minister Wolfgang Clement refused to speculate about Gerster’s future. "There are few people who are as good as Mr. Gerster," he said. Nonetheless, the economics minister conceded that it was no longer possible to rule out the possibility that a mistake had been made. Last year’s restructuring of the Federal Labor Office, Clement said, happened under "enormous time pressure."

However, the Social Democratic chairman of the Economic Committee in Germany’s parliament, Rainer Wend, told the Financial Times Deutschland Newspaper that Gerster didn’t have "unlimited backing." If other contracts exist that violate public procurement law, then Gerster "lied" to the Economic Committee and "must answer to that."

The head of the German Employers’ Association, Dieter Hundt, also distanced himself from Gerster, saying the labor office boss had said everything was in order. "If that's not the case, then there must be personnel consequences," Hundt told the mass-circulation Bild newspaper.

Germany’s leading political opposition party, the Christian Democratic Union, is already calling for Gerster’s removal. "Clement must fire him," said CDU General-Secretary Laurenz Meyer. CDU labor market expert Karl-Josef Laumann also called for the immediate dismissal of Gerster if the charges prove true.

But on Tuesday, Gerster defended himself against calls for his resignation. "I will stay on board as long as I have the trust of the government," he said, dismissing the charge that he awarded illegal consulting contracts as politically motivated "bogus allegations."

He said he hoped the results of the internal audit would be released by the end of the week.

( Editorial disclosure: Deutsche Welle is currently broadcasting a documentary series produced in conjunction with Roland Berger.)

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