Governments want to cut wasteful spending on consultants. We agree.

Governments want to cut wasteful spending on consultants. We agree.

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IN BRIEF
Belts are tightening
The pressure on governments to do more (and spend more) means they need to be efficient in their activities. Accordingly, there is understandable scrutiny of commissioning of consulting services (more than $1 billion by the Australian Government in 2020-21 ) and government action to reduce the overall expenditure.
Meeting key needs
One reason governments have relied on consultants in recent years is that the consulting model works. By design, it deploys highly capable and experienced staff onto projects with a clear scope and delivers rapid outcomes. We know that consultants add value when public sector clients have at least one of three needs: independence, capability or capacity.
Maximising value
From thousands of projects with hundreds of government clients across 23 years, we have seen what works – and what doesn’t – for clients getting the most value out of their use of consultants. We have distilled three strategies for maximising value from consultants: Use procurement panels, share knowledge and transfer skills.

By Lauren Ware Morand and Ned Lis-Clarke

Citizens rightly expect a lot from their government – now more than ever. Even as the shadow of COVID-19 recedes, the challenges of rising costs of living, a less predictable security environment, an ageing population and an acute climate crisis continue.

The pressure on governments to do more (and spend more) means they need to be efficient in their activities. Accordingly, there is understandable scrutiny of commissioning of consulting services (more than $1 billion by the Australian Government in 2020-21[1]) and government action to reduce the overall expenditure. For example, the Australian Government recently committed to reducing reliance on external consultants and develop an in-house consulting service for the Australian Public Service (APS).[2]

You might think that as a management consultancy that proudly works with government agencies across Australia as well as Canada and the United Kingdom, we would be critical of this shift. The reality is quite the opposite – at Nous, we think it is welcome news. Here’s why.

The consulting model works

One reason governments have relied heavily on consultants in recent years is that the consulting model works.

By design, it deploys highly capable and experienced staff onto projects with a clear scope and objectives and delivers rapid outcomes. Further, it does all this without reducing program areas’ FTE (full-time equivalent) staff count or distracting staff from their core business.

Through our conversations with our clients, we know that consultants add value when public sector clients have at least one of three key needs: independence, capability or capacity.

Independence

Many public servants have significant subject-matter expertise and deeply understand policy priorities, parameters and implementation requirements, as well as stakeholder interests. But they need to operate within boundaries, given that their words and actions reflect directly on the government and are therefore subject to intense scrutiny.

In some parts of public service, the independence consultants provide can be invaluable – and even essential. Consider the evaluation of a government program, where, by definition, an agency cannot independently assess its own work. Or consider engagement with stakeholders who may be reluctant to state their true views to a department that funds them but will speak freely to an independent third party. Alternatively, think of analysis of a policy a government took to an election, which may reveal some uncomfortable truths.

Consultants can be honest brokers when engaging stakeholders on politicised or controversial issues, and can understand, explore and balance competing views and experiences. They can also assess or evaluate the suitability and effectiveness of government activity or investment and can provide frank advice on improvement opportunities.

To deliver value, consultants need to demonstrate rigorous research and use analytical methods to deliver defensible findings that hold up to scrutiny.

For example, we saw the benefits of independence recently in work we did with the Department of Health and Aged Care, when we evaluated national psychosocial support programs for people living with severe mental illness. Our evaluation involved interviews and focus groups with around 800 stakeholders – some of whom would likely be reluctant to speak directly to the department.

Unfortunately, not all consultants operate with the independence required; some are used as mouthpieces to mechanically endorse a pre-determined policy position for the agency that hired them. If that is how a consultant is used, it is clearly a waste of time, money and effort.

Capability

Public servants require a wide range of skills, expertise and experience to do the core work of government. But they cannot do everything – nor should they seek to.

It is not economical for government agencies to keep some specialised capabilities in-house when they are only needed occasionally. Imagine the talent that would be wasted were a strategy specialist to be employed by a security agency that only drew on her expertise once every five years, or where a human-centred design specialist called on only occasionally to develop a new service delivery process. In the current labour market where specialist skills come at a premium, the cost saving of using consultants to fill capability gaps is all the more apparent.

Used well, consultants can provide rigour and niche capability to inform government decisions or activities. They can also draw on national and global networks to bring a wide range of best-practice experiences from across different agencies and different jurisdictions, which would otherwise be beyond the reach of an individual agency.

Good consultants will find ways to build on the skills in the client organisation, using arrangements such as hybrid client-consultant team to actively transfer capabilities back in-house. Done well, this means the client will gain new skills, retain important corporate knowledge and avoid learned helplessness.

For example, we recently partnered with Victoria’s Department of Education and Training to develop Child Link, a web-based register that enables quick and effective collaboration among practitioners working with vulnerable children. We brought specialist skills to lead the design research with end-users to understand their current experience and to re-imagine the future.  At the same time, we worked to transfer skills, knowledge and stakeholder relationships back into the department.

When consultants are used poorly, on the other hand, they can bamboozle clients with bewildering and irrelevant advice that delivers no value and transfer no skills (“dynamic synergies”, anyone?). Why bother?

Capacity

Demands on the public service vary over time due to shifting ministerial priorities, crisis management or emerging global challenges. This means public institutions need to be nimble and flexible so they can adapt to emerging issues and anticipate future needs.

But the inherent uncertainty of the future means the public service will often need additional capacity that can be deployed quickly to solve problems at pace. This is a situation in which consultants can offer value.

Used well, consultants can bolster or release capacity so government activities can have greatest impact. They also selectively take on projects such as strategy work or policy refreshes where this support can free up limited public servant resources to work in spaces that better use their unique skills, experiences and access to privileged information.

One illustrative experience was in the United Kingdom, where we worked with a government department in the throes of the pandemic. While the department committed its resources to managing the immediate crisis, we worked with them to think about the medium and long-term implications. Given the scale of the challenge, it would have been impossible for the agency to do all this on its own.

It would be foolhardy for departments to seek a permanent staffing solution to a temporary surge in demand. The long-term cost of idle capacity in a department would likely far outweigh the cost of temporary assistance.

On the other hand, care must be taken to ensure consultants are not used inappropriately and serve as an eternal (and expensive) stopgap to a sustained and predictable workload – this is the exact circumstance in which consultants do not represent good value for money.

Clients should have strategies to maximise value from consultants

From thousands of projects with hundreds of government clients across 23 years, we have seen what works – and what doesn’t – for clients getting the most value out of their use of consultants. Government clients quite rightly are seeking to reduce risk of wasteful spending and declining capabilities.

We have distilled three strategies for maximising value from consultants:

At Nous we have deep experience working with government agencies across many jurisdictions. From this work we have seen many clients who apply these three strategies and get maximum benefit, as well as other clients who have good intentions but do not have necessary systems in place. As a purpose-driven firm, we are not interested in making a quick buck without leaving a lasting impact, so every time we engage with a client, we think about how we can make them more sustainably effective.

A strong public service benefits us all, and far-sighted consultants ought be committed to being part of the solution. Used well, consultants can deliver great value for taxpayers and build the strengths of the public sector. But get it wrong and it will cost a fortune and erode capabilities.

 

Get in touch to discuss how we can support you to get positive impact from consultants.

Connect with Lauren Ware Morand and Ned Lis-Clarke on LinkedIn.

Prepared with input from Tanya Smith and Penny Gregory.

Published on 31 January 2023. An edited version of this article was first published in The Canberra Times.

 

[1] The Australia Institute, $1 Billion Spent on Secret Consultancies Equates to over 12,000 Jobs, 4 October 2021

[2] Department of the Prime Minister and Cabinet, Albanese Government’s APS Reform agenda, 13 October 2022

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