Friday, December 15, 2006

Springtime For Consultants

We've blogged it many times before (eg see here and here), but the NAO's report on the Public Sector's use of consultants is an instant classic. They may well have drawn on Plundering the Public Sector by David Craig and Richard Brooks (on Tyler's Xmas list), but they've had the extra advantage of direct access to the officials involved.

So we now have the definitive facts, helpfully summarised by the NAO in two pages of charts (you can see bigger pix by clicking on them):

Total public sector spend is now running at nearly £3bn pa, an increase of one-third in two years, largely driven by the NHS. The biggest spender is not as you might have imagined, the Department of Health, but the Department for International Development- an extraordinary commentary on how our aid bureaucrats see fit to "help" the world's poor (see this blog).

With such a cash gusher, all the usual suspect consultancies are in the money, but with 20% of the total spend going on IT, it's not surprising that the biggest winners are IBM on £275m and LogicaCMG on £175m. And note that Accenture- of Pat Hewitt and walking away from the NHS Supercomputer fame- also got £130m.

So... ahem... do we taxpayers get any sort of value out of this?

As the NAO points out, consultancy is a magical business where that sort of question is virtually impossible to answer. It's project based work where the responsibility for success lies not with the consultant, but remains at all times with the client:

"Clients find it hard to assess whether they are getting value for money. The range of consulting activity makes it difficult to identify meaningful metrics... it is not always easy to attribute cause and effect, even where performance has improved. As a result, almost half of all organisations do not attempt to quantify the return on investment from using consultants."

Sweet as a nut.

For the consultants, anyway.

Of course, successful private sector businesses have now discovered all about this, and have become much more circumspect about hiring consultants unless they can be pinned down with clearly definable and measurable responsibilities. With fees tied to delivery.

But do you think our bumbling Simple Shopper is capable of that? A cloistered Whitehall semi-mandarin under pressure to tick the "well, we've hired consultants to look at it" box, against a sharp suited globe-trotting meat-eating... you reckon that's a fair fight?

And even when they've been told how they could stand a better chance, they're not capable of following the advice. The Report identifies 12 previous recommendations from NAO and PAC reports and looks to see how well they've been followed subsequently. Shockingly, NONE has been fully implemented across all five major departments studied (figure 2).

Unsurprising then that "the average central government organisation, when compared to our private sector comparators spends more on consultants per employee (£10,000 compared to £2,000) and as a proportion of operating costs (11 per cent compared to four per cent)" (para 2.5).

And as the chart above shows, the growth of consultants' business with the public sector is now vastly outstripping the private sector.

Springtime, Happy Time... call it what you like. We taxpayers are paying for an awful lot of Porsches.

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