22 October 2020
Government Consultancy Contracts
Win Win for a cosy cartel.
By Mike Hampson
Over the last week we have had a number of revelations about the use of consultants in the development of the yet to be effective Test, Track and Trace system. These have included the use of hundreds of consultants from one global consultancy with rates as high as £3,200 per day, another consulting firm charging as much as £7,000 per day and the overall cost to the tax payer for the whole system running into billions of pounds. We have also had the revelation that thousands of cases went unreported due to ‘a spreadsheet error’ which could well have been a component in one of these consulting firms’ solutions, but we do not know that. Yesterday we had the head of one of the management consulting firms’ industry bodies defending the use of consultants but for me this does not ring true. While I could accept the employment of key expertise in the field, I do not believe that the firms in question have the unique expertise in this area to make them appropriate to use. So why is the government throwing money at these firms in this way? I have a few thoughts on this.
- Procurement in government and most large corporations require that suppliers be on a so called ‘preferred supplier list’ or PSL, and when purchasing services it is often very hard to go outside of that list, even if it is clear that another supplier not on the list has the best expertise in a particular field. Procurement functions pride themselves on keeping to these PSL’s and also keeping them as small as possible, as a result they tend to end up consisting of the large global firms and squeeze out the smaller suppliers. These large consultancies do indeed have smart people working for them, but they are generalists not necessarily specialists. So when a big problem comes up that needs to be dealt with quickly it is only those on the PSL that get a chance, and money is thrown at the problem and hence at the suppler.
- The big consultancies actively cultivate their ‘Alumni’, i.e. those individuals who have worked for them and then moved onto into other jobs either in industry or government or elsewhere. These Alumni are often the biggest buyers of consulting services and will often as not buy from their previous employer. A quick look at the cabinet will show that many have worked in consulting and indeed the minister responsible for Test, Track and Trace is herself an ex-consultant whose old firm has been involved in advising on the new structure for Public Health England. We talk about the need for diversity in organisations but there is another type of group think that comes from a group of ex-consultants trying to solve a problem.
- Consultancies are commercial businesses, and hence they are always looking for ways to grow their revenues. Once in place they employ a ‘land and expand’ approach to business development, i.e. looking for ways to add more consultants to a piece of client work, the more people filing the better.
- When large teams are needed for low skilled, repetitive jobs, like a track and trace call centre perhaps, it is often not the employed consultants that are used but temporary teams brought and managed by a small number of full time consultants. These temporary teams are often paid agency rates but charged to the client at the consulting firm’s rate card with a typical mark up being 100% or more.
It may seem strange that the owner of a consulting firm would raise these concerns but it does damage to the industry for large firms to exploit the current pandemic and also fail the country so spectacularly. Lessons that I would like to see learnt (but almost certainly will not be) include:
– Give managers and department heads more freedom to bring in specialist firms for specialist tasks.
– For government and public contracts insist on publication of the profitability of an engagement to limit profiteering.
– Ministers and department heads should be prohibited from using their old employers (at least for tax payer funded work).
– Make the tender and decision process for public contracts public record so we can see who made the decision to award a contract and why.
– Make it easier for small companies to bid for government contracts.
As the current situation shows no sign of improving any time soon the public needs to have faith that their taxes are being spent effectively.
