Saturday, April 08, 2006

Labour Have Spent £70bn On Consultants

Labour's cumulative spending on consultants (see many previous blogs starting here) has now reached £70bn. The figure comes from David Craig, a management consultant himself, who has written a book on the subject- Plundering the Public Sector- which sounds like a must-read.

After combing through a raft of accounts and NAO reports, Craig says so-far Labour's bill for management consultants is £20bn, with another £50bn for IT consultants. And with the former now billing us at £2.5bn pa, and all those mega-IT projects, the clock is speeding up.

He naturally highlights Connecting for Health, the NHS IT madness that's rumoured to be costing us up to £50bn (see previous blogs). But he also picks out the Customs and Excise for its £100m e-VAT system- so hopeless it's used by less than 1% of traders- and its PFI contract with Fujitsu where costs doubled to nearly £1bn.

He gives us an eye-popping insight into current charging practices among consultants:

"We can take somebody straight off the street, teach them a few simple tricks in a couple of hours and easily charge them out to our clients for more than £7,000 per week, while we probably pay them around £700 per week. If a new consultant has any kind of reasonable education, yet no business or working experience whatsoever, they’ll fetch at least £8,000 per week. And if they have also worked for a few years in what we call “a proper job” before becoming a consultant, anywhere from £10,000 to £25,000 per week is normal.

Most consultancies have different weekly billing rates depending on the seniority or experience of the consultant. For example, a simple consultant may cost a client a mere £5,000 or so a week, a project manager £7,000 to £10,000 and a partner or vice-president £15,000 to £20,000 a week. On the grounds that some consultants might be promoted during a project, the consultancy decides to charge out their services at one grade above their actual level for the whole period of the project."

You can't blame the consultants- they have to earn a crust after all.

No, if they're doing this it's because the client is letting them.

And right now, the biggest consulting client in Britain- probably the world- is our hopeless, high spending government.

Why should they worry? It's not their money.

PS Just out of interest, I took a look at Accenture's latest Annual Report. As we know, they are one of the government's major consultancy suppliers. In the 12 months to last August, their operating income (ie profit) was $2.1bn, up 20% on the previous 12 months. Most of their top-line growth comes from the EMEA region- ie us- where revenues have been growing at around 20% pa since 2003. EMEA now comprises 50% of their total $15.5bn global revenues.

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