PART 2: CONSULTING AND GOVERNMENT - BUILDING UNDERSTANDING

Big consulting appears to be in what technology firm Gartner calls a ‘trough of disillusionment’. A bubble of inflated expectations and over-use is bursting, and a recalibration is coming - maybe.

 Many think a recalibration is well overdue. They argue that a radical re-engineering is needed to wean organisations off using consultants and rebuild lost internal capability. Rosie Collington and Mariana Mazzucato argue that global consulting is nothing less than a ‘big con’.

 No one is seriously suggesting consultants have no place in our future. Even Collington and Mazzucato see a role. They also promote alternatives to big consulting firms, such as greater use of academic institutes (like, conveniently enough, the one they belong to). Consultants are needed, just better ones doing fewer things.

 The consulting debate extends beyond Australia’s shores and beyond government. But government is where disillusionment seems deepest. In response, government has two potential roles – as a regulator and as a client. It is government’s role as client that is currently receiving most focus.

 In Australia, and particularly in Canberra, the debate has additional frisson. Global consultant PwC has used confidential government information in the possibly unlawful and definitely unethical pursuit of profit. Pandora’s box has opened. It remains to be seen if the ‘earthly paradise’ consulting has enjoyed will end.

 The frisson in Canberra has a second cause. A window for change has been created by the shift from a government ideologically disposed towards the private sector to one disposed towards the public service. Wise heads argue that this window will close as other problems of state come to the fore. Like Goose and Maverick in Top Gun, they feel the need for speed.

 This creates a problem. Any sensible recalibration requires time for analysis, planning, capability building, execution and adjustment through learning by doing. Political pressures demands this be squeezed into an electoral window designed for another purpose. In government, political pressures usually win.

 Bent Flyvbjerg would sigh. Flyvbjerg has spent a career ‘getting big things done’. He argues that jumping to solutions almost guarantees failure. To act fast, people must think slow. Step one involves building understanding. Once this has been done well-considered objectives can be set, and delivery options considered.

 In considering whether and how to recalibrate government use of consulting, four areas of understanding seem especially important.

 Government’s use of consultants

 Getting a handle on government’s use of consultants is difficult. For one thing, there is no externally agreed definition of consulting for government to use. The boundaries of consulting are malleable and bleed into areas like contracting and outsourcing. As a consequence, ANAO analysis reveals a picture that is more Jackson Pollock than Edward Hopper in clarity.

 Procurement contracts ‘flagged’ as consultancies were worth $0.9 billion in 2021-22. Annual growth for the decade was about 11 per cent, a bit faster than for procurement overall (8 per cent) and roughly double growth in total government spending. Spending on consultancies was a 1.2 per cent of total procurement.

 These figures do not reveal a major cause for concern. Spending on consultancies is not surprisingly high and spending growth (while high) was not out of step with procurement overall. So, why all the fuss?

 Two procurement categories associated with a broad definition of consulting – management advisory services and temporary personnel services – reveal a different picture. Spending on each topped $3 billion in 2021-22. This is more than the departmental resources allocated to the Health and Ageing portfolio, double that for the Agriculture portfolio, and five times that for Social Services.

 Growth is also telling. For the decade, temporary personnel services grew by a staggering 34 per cent a year. Annual growth in management advisory services was 18 per cent for the decade but was 30 per cent from 2016-17. This is almost four times the (8 per cent) target growth rate for the National Disability Insurance Scheme.

 Other data add to the picture. In its last year, the previous government apparently employed 54000(FTE) external workers at a cost of $20b. This means that around one-third of workers supporting government were not covered by the Public Service Act. Not all of these are consultants, most would be contractors and employees of outsourced providers. Even so.

 Anecdotal evidence is that consultants were increasingly used in policy development and the delivery of new initiatives over this period. It seems that consultants (broadly conceived) have changed role from extra to lead actor on the government stage.

 Role of ideology

 The recent rise in government’s use of management advisory and labour hire services raises an obvious question – why? An obvious response involves the ideology of the previous government and the views of one Prime Minister especially – Scott Morrison. It is a fair point. Ideologically driven caps on recruitment, in particular, have driven desperate departments into the waiting arms of consultants and labour hire firms.

 The current government brings a different ideology. This is shifting the balance of forces and has been backed with investments in public sector capability. It is worth remembering that use of consultants has been rising globally since the 1980s despite many shifts in government ideology.

 Value added

 The biggest value consulting firms bring government is not their expertise, but their speed and flexibility. Consulting firms put project capability together quickly and efficiently. Effective delegation arrangements and well-structured operating models increase the ability of consultants to get things done quickly and well. Having senior people spread their time efficiently across projects also helps.

 The public service can also be quick and flexible. Agility through the pandemic was clearly present and rightly lauded. This flexibility, however, was created by dumping ongoing priorities and, as audits are finding, ignoring procedures. It is not a sustainable model.  

 Three limitations (at least) hinder the public service from replicating consulting speed and flexibility. First, agencies have on-going policy, delivery and accountability responsibilities which need to be met. Second, delivery expectations for new activities often ignore the time needed for planning and capability building (Flyvbjerg is sighing again). Third, flexibility requires reserve capacity which can be spun-up and down. Just as nature abhors a vacuum, the public abhors an under-utilised public servant.

 Consultants also bring expertise and reach. Big consulting firms retain large reservoirs of expertise, data and contacts. Speed is again key. The public service is perfectly capable of creating high-quality information and analysis. It is just done more slowly, with less polish and more layers of (often) stifling control.

 Communication is a third area of value. Collington and Mazzucato deride consultants as being ‘slick’. The inference is that presentational elegance hides poor content, which is sometimes true. But good content has little value if the audience cannot understand it or won’t engage with it. Ministers and senior officials regularly bemoan the presentational quality of material they receive from public servants, and (believe it or not) from academics. The same is rarely said of work from consultants.

 The fact that a gap exists in communication and presentation quality is a concern. There is no obvious reason why consultants should have an advantage in this space. Better public service and academic training is needed.

 A final area of value is independence. Using a knowledgeable ‘critical friend’ can provide a valuable check on proposed decisions or in making difficult assessments. External thinking can also unlock options and issues not apparent within government. Problems come, however, when this becomes a low-value consultant ‘smiley stamp’ for what the client wants.

 The role of relationships

 David Shaw argues that value relies on client and consultant creating a partnership. The quality of the relationship created, as much as the technical competency offered, matters. It is an important point.

 Default procurement processes see each engagement with a consultant as a separate, unique transaction. Aberrations are viewed with suspicion. This approach is designed to create transparency and competition on both price and quality. But it can miss value which comes from client and consultant having an ongoing relationship which is built on a deep understanding of each other’s context and capabilities.

 For the client, a good ongoing relationship reduces transaction costs and increases confidence in the services provided. Managed judiciously, it also allows the client to make better decisions on when and how to use a particular consultant. For the consulting firm, it allows better tailoring of services. It is one reason why organisations often come back to the same consultant for new work.

 These benefits comes with risks. Potential exists for relationships to breed unhealthy comfort and nepotism. They can also result in client organisations failing to invest in internal capability leaving them too dependent on consultants (known as infantilisation). These risks are not a reason to avoid long-term relationships. But they do emphasise importance of clients being judicious in the selection and use of consultants.

 Looking forward

 The size and recent growth in government’s use of management advice and temporary personnel services is extraordinary. It is seeing a different public service emerge, one which is arguably ‘infantilised’. A recalibration, possibly even a big one, is needed.

The wrong answer is to colour consulting ideologically as either good or bad. Consulting is inherently neither but can be both. The task is to develop a considered view on how consultants should be used by government into the future and how best to make this happen.

 Disclosure: Damala St Consulting is a sole trader which has worked with government agencies, hopefully delivering genuine public value.

First published in The Mandarin