Consultancy spending set to fall

Plans by the Labour and Conservative parties to cut government spending on management consultants may be tricky to enforce and cause staffing headaches for senior public managers. In local government, however, senior managers are finding alternative to expensive consultancy on strategy and organisational shake-ups, by setting up their own consultancy departments, or by training graduates. Budget shuffle Over the past decade management consultancies have extended their tentacles into almost every aspect of public services, advising on everything from IT, finance, procurement and outsourcing. An official report published by the Office of Government Commerce (OGC) on the day of the Budget in March, said that government departments and quangos spent around £1.5bn on professional consultancy in 2008-09. In the Budget, the Treasury revealed plans for government departments and quangos to halve spending on management consultants and PRs as part of a £650m cost-cutting drive. The Conservative manifesto says that a Tory government would reduce spending on government consultants in order to help pay for a two-year freeze on council tax. Interim managers Cutting the amount spent on consultancy is relatively uncontroversial and will help reduce the £167bn national debt. But weaning the public sector off consultancy may be tricky after years of reliance on sharp-suited consultants. In addition, there is also the potential to disguise consultancy spending by including it under other budgets. Alan Leaman, chief executive of the Management Consultants Association, whose members comprise around 70% of the UK consulting industry, says: "If people [in the public sector] re-badge consultancy spend as some other type of expenditure, such as temporary staff or covering for vacancies then it looks like consultancy spend is going down." Another potentially large grey area is the use of interim managers , who are becoming increasingly common in the public sector often as an alternative to management consultants. Are interim managers classed as consultants? That is not clear. The OGC has published guidance notes for government departments and agencies on the procurement of consultancy services. It defines consultancy services as the provision to management of "objective advice relating to strategy, structure, management or objectives of an organisation in pursuit of its purposes and objectives." DIY consultancy In local government, some councils are already reducing their reliance on consultants. Birmingham city council, for example, has developed its own consultancy service , to help manage a £450m programme to revamp back office functions including IT, finance and procurement. The council reckons that its internal consultancy service saved it £2m in consultancy fees in 2009. The councils use 12 consultants who are assigned to specific projects, such as reducing the organisation's carbon footprint, or helping to design mobile technology for housing staff. The consultants have been recruited from all parts of the council and from all levels of seniority. They are given training and seconded full-time to the projects they are working on. The scheme may be extended. Birmingham council says it is in discussions with other councils about setting up a regional "talent pool" of in-house consultants, which it says would be charged at a significantly lower rate than external consultants. Joan Munro, national advisor workforce strategy, strategy division of the Improvement and Development Agency (IDeA) for local government, says: "It's much easier to institute the cultural change programmes and make them work well if they are seen as something that has been developed within the local authority rather than something from smart and expensive consultants telling you what to do." Another benefit of the in-house approach is that public bodies retain more skills and experience when the project is finished, leaving managers better equipped to tackle future challenges. However, consultants can still play a role in local government, Munro adds, particularly in helping organisations plan change. Meanwhile, more than 100 councils have used graduates supplied by the National Graduate Development Programme (NGDP), which is part of the IDeA, for various work, including consultancy. Malcolm Craig, NGDP manager, says that charges for the graduates, who work on the two-year programmes, are about half the cost or less of using consultants from the big consultancies, although he stresses that the NGDP scheme is not intended to source management consultants for local government. Consultants and interim managers are a useful resource for public managers, plugging skill gaps and offering a fresh perspective on difficult decisions. After the election, however, public managers are set to face increased pressure to cut spending on consultants. There may be enough wriggle room to allow consultancy spend to be shifted into other budgets, but some councils are already showing that building in-house consultancy is a smarter move.