Use of management consultants by the public sector - safeguarding value for money
There has been recently quite some noise in France about the intensity of the use of management consulting firms by its public sector. Questions have been raised not only by the Canard enchaîné, Consultor, Mediapart, le Monde, Politico, but also by some Parliamentarians. Just as the commissioning of such private firms by Ministries and other public entities is not a new phenomenon, it has been already questioned in the past, including by la Cour des comptes. The findings of its November 2014 report entitled Le recours par l’Etat aux conseils extérieurs prepared at the request of the Senate’s Budget Committee, indicate that they identified serious deviations from good practice principles in public procurement. Summarizing, this public watchdog concluded in the above report the following:
- there are gaps in the monitoring of expenditures for external advisory services;
- there is heavy concentration of service providers (outsourcing to relatively few firms);
- justification of the duties is not always evident (sometimes seemingly aimed at diluting the responsibility of the public party as regards decision making);
- there tends to be underutilization of internal capacities and capabilities;
- there is lack of professionalism as regards the outsourcing of services (tendering process not always in line with procurement rules and procedures; vague terms of reference including unclear objectives and non-precise performance indicators; weaknesses in internal management of external consultants);
- there is room for improvement in steps to minimize the risk of conflict of interest;
- there are deficiencies in the ex-post evaluation of the results, their use and the wider impact of the interventions of the work of external consultants hired (exacerbated whenever no performance targets have been set ex ante).
A more recent illustration of questioning of public sector behaviour with respect to procurement of external advice concerns a Note (April 2018) of the same Cour des comptes addressed to the then Minister in charge of Health, based on an analysis of the range of external advisory support mobilized by public health entities. In this document questions are raised on issues such as: the quality of the results (referring to gaps as regards the depth of the analyses and to the limited value added of conclusions); procedural problems regarding procurement; the underutilization of internal expertise including missed opportunities for mobilizing existing public entities). These observations were made within the spirit of a concern about the evolution of expenditures (deficits) of public health institutions.
The current questioning of the relationship between large management consulting firms and its public clients is therefore somehow déjà vu, as it echoes earlier alerts of the Cour des comptes. As the public sector reportedly engages management consultants at a growing rhythm for its tasks, it is appropriate to wonder what happened with earlier observations emanating from the same public sector on the procurement of (pricey) consultants in times that call for serious public savings. Did procurement practices - reported to be substandard by the Cour des comptes - improve in the meantime?
Evidently, outsourcing of tasks by public entities for, e.g., diagnostic work, strategic planning, or the development of roadmaps to address organizational challenges can be justified and justifiable for different reasons, such as lack of in-house resources (time/staff) to deal with specific tasks, need for an outsider view or for an independent assessment of a critical management issue. The nature of the mission determines the type and size of expected external inputs required (consultants’ days) and, correspondingly, what would be a reasonable price tag for the work at hand and its results, in order for the client to get value for money.
The 2014 findings of the Cour des comptes are important, as they reflect good practice in public procurement to ensure that OPM (Other People’s Money = taxpayers’ money) is spent as if it would be one’s own money. It calls for, in particular:
- detailed terms of reference (ToR): these specify the nature of the mission, its intended objectives, expected results, milestones, performance indicators, expert profiles and eligibility criteria;
- full transparency in the procurement process (public announcement of the ToR including eligibility criteria for bidding, review of the bids; ultimate selection of the firm/experts; contract negotiation);
- rigorous in-house piloting of contracts, covering, e.g., progress monitoring against milestones and end-of-assignment evaluation to measure results and impact against pre-defined performance indicators.
In the light of the above, let us look at the case of McKinsey, one of the management consulting firms that seemingly sit on the front row when the public sector needs strategic advice and support. As an ordinary citizen, one does not have access to the ToR that guide the firm’s ongoing contract with the Ministry in charge of Health, or to information on the procurement process. One can simply deduct that that Ministry of Health, in consultation with relevant bodies such as la Haute Autorité de Santé and regional health agencies, felt more than overwhelmed by its Covid-19 related tasks and decided to call upon outside support to design and implement the vaccination strategy of France. For that reason, external advisers, among which McKinsey, have been hired to advise on the vaccination strategy, how to deal with its logistics and how to handle “the third wave”. One assumes this outsourcing involves close cooperation between the staff of the above public entities mandated to deal with public health and vaccination policy and the external consultants brought on board. Also, there is expected to be an in-house task force that measures progress during implementation of the work, and assesses, at the end, overall performance against indicators supposedly defined and specified in the framework contracts. Phenomenal budgets are released to outsource the above duties and the evaluation of the results against performance indicators will determine if the client will have gotten value for the money spent.
McKinsey was also among the winners of recent contracts awarded by the Ministry of Economic Affairs and Finance (Bercy) in its effort to stimulate economic recovery and to put public finances back in order. Together with Accenture, the firm has been retained to conceive a plan aimed at generating € 1 billion of savings in public spending by 2022. As in the case of the Ministry of Health (see above), one deducts that Bercy decided it lacked in-house resources to bring about cuts in public spending. It is thus dishing out significant amounts of money, tasking outsiders (that become quasi-insiders) to come up with a guillotine-type method to cut public expenditures. Again, without the ToR, it is difficult to assess if such outsourcing is likely to generate value for money and only those overseeing this process can know if the procurement rules were followed to the letter.
As an outsider, some issues come into one’s mind, based on public reporting announcing Bercy’s € 1 billion budget cut intention. Firstly, it is not clear if the purpose is to merely introduce cuts in the purchase of goods and services by public entities, targeting both their day-to-day operations and their investments. Or is the rationale more comprehensive, seeking to increase both the quality and efficiency of public services (“better for less where possible”), implying that some services could be reduced or even cancelled whereas others could be reinforced? If emphasis is “only” on cutting the purchase of inputs, the exercise loses the opportunity to cautiously rationalize and improve public service delivery. Secondly, if the contracts include a fixed and variable part, as announced, the success fee principle reflected in the variable part of the remuneration could open a can of worms if not clearly defined. It could result in selecting low-hanging fruits as candidates for budget cuts that, if implemented, could negatively affect the quality of service delivery. There could also be possible cases of conflict of interest underlying suggestions what to cut and what not. Thirdly, an external consultant can only make suggestions and cannot decide where to cut what. One wonders about the mechanism put in place to validate and implement proposals. Budget cuts are likely to be a delicate matter and will probably generate objections. Adequate buy-in of the targeted public entities thus seems crucial. In this regard one cannot help wondering why they are not requested directly to come up with a cost reduction plan - rather than calling upon outsiders that anyway have no decision-making power on cuts in expenditures. Why cannot steps towards more efficiency and rationality come from within? Why should change agents be outsiders that are expected to become insiders?
To conclude, while outsourcing of public management tasks to external consultants is not chocking as such, the recent questioning of trends in this regard justifies better understanding not to say transparency of what is going on. There remain multiple questions around the opacity of the bonding between the public sector and the Big Boys in management consulting. Free service offerings should not be an acceptable modus operandi and the playing field should be levelled. How can consulting firms legally established in France and complying with the country’s sizeable weight of taxation compete for procurement of advisory services with firms that are headquartered in tax havens? It seems it is time for the Cour des comptes to repeat the exercise that led to its 2014 report and see to it that its recommendations are heard and applied ex ante rather than flagging non-adherence to good practice principles ex-post.
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