Disrupting the consulting industry: a playbook
With significant pressure on Jim Chalmers to deliver for Australians who are doing it tough, the APS has been doing some clever work on achieving its promised $3bn consultancy spend cut. Alongside their vision for restoring the public service as a great place to work, Australian governments have an opportunity to design the consultancy market they need.
The disruptive shift in a change of government in 2022 has heralded new thinking around the APS capability and consultancy landscape. Disruption has been the name of the game since the start of the pandemic, and while the public service has pivoted to respond it has identified some significant gaps in delivery of services that challenge the new Labor government.
Katy Gallaghers’ focus in restoring the public service has resulted in some interesting impacts to the current procurement landscape. It’s no secret that in the last decade, Australian governments have entrusted some of their most critical work to the big five consultancies - Deloitte, EY, KPMG, PwC, and Accenture. According to a 2020 report by the Australian National Audit Office, in the 2018-19 financial year these same consultancies were awarded contracts worth over $1.2 billion.
These consultancies have played an important role in providing critical services to our government and met the needs of the government market for a number of years. However it’s notoriously hard to understand the global structures of multinational enterprises so it’s easy to be skeptical about whether profits are returned to the Australian market.
“It’s a real challenge to see how we are investing in our local communities and small businesses; the transparency to the general public is somewhat lacking” says Georgina Legoe, co-founder of Australian women-owned consultancy firm Iceni.
It’s about more than government procurement
While it's important for governments to scrutinise their own systems and processes to address the issue of excessive reliance on consultancies, it's equally crucial to recognise there are other actors in the picture.
“These larger consultancies have played a crucial role in leading restructures, outsourcing, business case design, procurement process design, and advising on tender processes. It's worth noting that part of the capability uplift in the SES has included a stint in consulting, which is a testament to the expertise and value that these consultancies can provide in building industry knowledge and also commercial nous. I know that senior executives work hard to ensure they are managing the perception of bias and influence in government business from their previous consulting backgrounds” says Georgina.
Consultancy firms across the board have been operating in a challenging economic environment with governments tightening their belts. The challenge is that while the big five consultancies have developed effective strategies to adapt to this changing landscape, there are risks that the government’s new approach may lose the smaller players who are Australian owned and focused on building local capability.
“One of the more recent successes in retaining Australian investment of public monies has been the creation of the need to support First Nations businesses as part of the procurement process. At Iceni, we believe that there is room for a more diverse range of consulting firms to participate in government projects. It’s imperative to open up the procurement process to a wider range of players. By focusing on sovereignty and supporting diversity, we can foster greater innovation and creativity in the industry which then flows back to our local communities” Georgina says.
To reduce consultancy spending while simultaneously improving public sector capability and capacity, it's essential for the government to establish a clear vision and specific goals for the future of the consultancy market.
We need a playbook for a new consulting market
Georgina Legoe’s view is that the Australian government needs a comprehensive playbook for creating a new consulting market. “We need to create a positive strategy for lasting change, as well as safeguarding public funds and the public interest. A playbook can proactively tackle the role that every actor has in this problem – and that includes consultants themselves” she says.
Here’s a sneak peek at Iceni’s advice for what the playbook should cover.
Clarify a vision for the consultancy market. Set a clear vision for the Australian government consultancy market and the economic outcomes it creates and be prescriptive about the type of consultancies that the government wants to see thriving in it.
Coordinate the mission across state and federal governments. Work across all levels of government to coordinate realisation of the market vision, and deliver swift, decisive, and coordinated action.
Set and monitor targets. Set targets for agencies to buy from consultancies that deliver against the government’s vision which could be set against the 17 Sustainable Development Goals. We also propose that the government starts by clarifying and dismantling the barriers that small and micro, pro-social, and women-owned businesses face to working with the government.
Increase contract entry requirements. Require greater transparency from consultancies of their clients and projects, which is both easier for smaller, local consultancies to provide, and for government agencies to identify potential conflicts of interest.
Increase oversight. Expand the data gathered on consultancy contracts to measure and report the value being delivered, rather than focusing on deliverable, financial and duration, so that the impact of government buying on the consultancy market can be monitored.
Disrupt the procurement lifecycle. Rethink procurement processes to allow market response at the problem identification stage, rather than to solutions generated and carved up by agencies. This will go a long way to more equal sharing of risk between agencies and consultants.
“It takes determination and courage for change. Like any disruption, there’s a lot at stake for all the actors involved, and governments need to hold strong as the market shakes out while ensuring they don’t lose the smaller Australian players during the disruption” says Georgina.
Creating a comprehensive playbook will support the government to proactively guide the industry towards greater efficiency, innovation, and diversity. It will offer certainty to the Australian consulting industry while supporting the creation of a more competitive marketplace that encourages a wider range of firms to participate in government projects. By focusing on Australian economic and community prosperity the new government will achieve better outcomes for taxpayers and greater value for public money.