27 September 2023

Curtailing the great consultancy con

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Somdeep Sen says multinational consultancies claim to offer the public sector expertise that cannot be found internally, but often it’s a confidence trick. Then taxpayers become victims.

A quick search on YouTube or TikTok and it would not be difficult to find videos parodying consultants.

The running joke is that no one really knows what consultants do. Yet they are slick, have an air of reckless confidence, use generic terms like ‘streamline’ and ‘synergy’ — and whatever they say and do is ‘billable’.

What is not a joke, however, is that the consultancy brand of ‘expert knowledge’ has found global appeal.

This appeal is not limited to the private sector as consultancy firms now guide the workings and policies of a wide range of public sector institutions.

The problem is that these firms have become a financial burden, gutting institutional budgets as they are able to charge premium compensation for the lure of the knowledge they supposedly provide, even if it is flawed and misguided.

Michael Heseltine, who served as Minister for the Environment and for Defence under United Kingdom Prime Minister, Margaret Thatcher, famously said this:

“The management ethos must run right through our national life — private and public companies, Civil Service, nationalised industries, Local Government, the National Health Service.”

More than four decades later, the UK has outsourced a significant portion of public services to consultancy firms.

In 2016, the public sector awarded consulting contracts worth £700 million ($A1.3 billion). The value of these contracts increased to £2.6 billion ($A4.9 billion) by 2022.

Consultancy firms have staged a similar takeover of public services in France.

The trend began in 2007 when Nicolas Sarkozy became president and promised to “make the French State cost-efficient”.

Under the leadership of Emmanuel Macron, consultancy firms have received €2.4 billion ($A3.8 billion) in Government contracts that included France’s COVID-19 vaccine rollout program and controversial pension reforms.

In Canada, there has been a similar spike in contracts being awarded to management consultancies. McKinsey has received $C66 million ($A74 million) in Federal contracts since Justin Trudeau took office in 2015.

So what are contracts so appealing?

Bottom of Form

At its core, this is about a belief that public institutions, organisations and services can only be efficient when they are modelled after the private sector.

Efficiency, according to this ethos, is not achieved through better policy or structural change pertaining to a specific problem, but through private sector management practices.

These are presumed to be universally applicable, irrespective of the specificity of the problem at hand.

There are other factors at play.

In their book The Big Con, economists Mariana Mazzucato and Rosie Collington rightly point out that consultancies perform a ‘confidence trick’ where they may not have ownership of any scarce, expert knowledge.

They ‘create an impression of value’ that in turn allows them to demand compensation far in excess of the actual value of the knowledge they bring to the table.

Cracks have begun to appear in this edifice. UK officials face criticism for their dependence on management consultants for the Government’s failed track-and-trace program during the pandemic.

A report by the Committee of Public Accounts concluded that the program failed to achieve “its main objective to help break chains of COVID-19 transmission and enable people to return towards a more normal way of life”.

The program hired more than 73 consultancy firms.

In Germany, President of the European Union, Ursula von der Leyen faced questions about lucrative contracts that went to private consultants when she was Germany’s Minister of Defence.

Consulting giants have had to own up to wrongdoing.

In 2021, McKinsey paid close to $US600 million ($A899 million) as a settlement for its role in “helping turbocharge opioid sales” in the United States.

In 2018, head of McKinsey, Kevin Sneader publicly apologised for over-charging when it was hired to save South Africa’s State-owned electricity company, Eskom from insolvency.

Despite all this, the consultancy habit is difficult to kick.

At universities like mine, the irony is not lost on faculty members when we have to sit through presentations by highly-paid, suited consultants who drone on about the varied ways in which we could better manage our time and excel as teachers and researchers.

All as the higher education sector faces yet another financial crisis.

University leaders, though, do not see the irony and consider this to be a reasonable use of the university’s supposedly dwindling budget.

The UK government tried to establish an in-house consultancy arm, unofficially called Crown Consultancy, with the hope of reducing its dependence on private firms.

However, after two years the project was scrapped as Government Departments preferred to use private consultants.

Yet the solution does not lie here. What we need is a radical rethinking of how public institutions can and should work.

Rather than functioning in a manner reminiscent of the private sector, the primary goal of public Agencies is to provide goods and services.

That is their mandate and responsibility.

Cost-efficiency makes sense as a primary performance criterion only in the private sector where the main goal is profit maximisation.

The public sector succeeds when it makes the life of citizens better. There, consultancies have no expertise.

*Somdeep Sen is Associate Professor of International Development Studies at Roskilde University in Denmark.

This article first appeared on the Al Jazeera website.

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