Supervision of the Netherlands food and consumer product safety authority following the merger
The Netherlands Food and Consumer Product Safety Authority (NVWA) was created on 1 January 2012 through the merger of three inspectorates: the General Inspectorate (AID), the Netherlands Plant Health Authority (PD) and the ‘original’ Food and Product Safety Authority (VWA). We audited whether the merger and the new supervision methods developed by the NVWA in anticipation of it had produced the efficiency gains that the government expected. Have the anticipated savings actually been made?
The merger of the VWA, the AID and the PD has not yet produced the desired efficiency gains. The government had foreseen two opportunities to make savings.
- The three merger partners' development and introduction of new supervision methods was looked upon as a potential source of cost savings. By using risk-based working methods and giving more responsibility to the private sector, the NVWA would need fewer people.
- As inspections, knowledge development, personnel and premises/operational management could be combined following the merger, economies of scale were expected.
Our audit found that the government had failed to make a thorough analysis of the pros and cons of the merger before it decided to merge the inspectorates in 2007. It based its decision on general considerations and assumptions about potential efficiency gains. The conditions under which new supervision methods could cut expenditure, how much money would be saved and over what time period had not been studied in advance. Inability to apply the new methods of supervision across the board meant the foreseen major savings were not realised in recent years. The new supervision methods are also unlikely to produce significant savings in the next four years because they will first require the investment of time and money. The economies of scale expected from the merger also proved to be more optimistic than envisaged. Foreseeable risks, for example in the field of IT, were not taken fully into account. Furthermore, the overlap between the three organisations was never quantified: in so far as it can be reconstructed in hindsight, it was never greater than 13%. The considerable savings expected of the merger have so far failed to materialise.
There are inevitable consequences for the feasibility of the planned savings. The intended structural saving of €50 million as from 2012 has not been achieved. The target of a further saving of €31.6 million as from 2018 was lowered by €11.8 million in 2013. It is unlikely, however, that even this lower savings target will be achieved.
We recommended that the House of Representatives:
- in future, ensure that an independent study is carried out in advance of both the potential advantages and disadvantages of mergers and their long and short-term development;
- during the merger process, critically analyse whether the advantages still outweigh the disadvantages;
- ensure that the intended benefits of planned mergers are written down in precise and auditable terms, with reasoned explanations of how and when the advantages will be achieved.
We recommended that the responsible ministers and state secretaries at Economic Affairs (EZ) and Health, Welfare and Sport (VWS):
- incorporate a study of the impact of supervision methods on compliance into the NVWA's tasks;
- base decisions on further changes in the NVWA's tasks and budget on a thorough analysis of the social risks in the NVWA's work and the related tasks and human resources;
- make realistic allowances in the budget for the incidents that continually arise in the NVWA's work and make considerable demands on the capacity available to it;
- ensure there is a clear understanding of the NVWA's organisational budget and the savings targets, and periodically monitor their achievement.
Response of the state secretary for economic affairs
The State Secretary for EZ agreed with our recommendation to study the impact of supervision methods on compliance. She announced that she would prepare an action plan with the Minister of VWS to strengthen the NVWA's supervision. She also wrote that she had already started to implement our recommendation to analyse social risks, related tasks and human resources before taking a decision on further changes in the NVWA's tasks and budget. The state secretary did not respond to our recommendation to monitor the achievement of savings. We would again encourage her to provide a clear overview of the initial budget, the savings targets and the price level in which the budget and savings are set, for example in the annual budget and accounts.