Increasing dependence by public bodies on consultants raises questions about where the buck really stops.

Are you sitting comfortably?  Since January 2015 Exeter City Council has spent £9.4 million on services described as “Consultants Fees”.  Over half of this – £4.8 million – has gone on consultancy work related to the bus station site redevelopment [1] – even though we haven’t seen a new brick yet – but the Council buys in consultancy for a range of other services: the new housing development companies, work at the Museum and public relations advice all figure [2].

Consultants have their uses.  They offer most benefit in providing, on a short-term basis, skills and knowledge that the local authority doesn’t have, ideally transferring those skills to council staff during the project.  They are also used to make up shortfalls in permanent staff numbers, though this raises – or should raise – value for money questions.  Less laudably, big name consultancies can be engaged as a means of shifting blame from the council to its contractors for the inevitable cock-up or failure to meet deadlines or budgets, a point I return to later.

Consultants are not cheap.  When I freelanced some years ago, my daily rate varied between £400 and £600.  You wouldn’t get even a fresh-out-of-university junior consultant for twice that from any of the big generalist or strategy consulting firms, not least because they have expensive overheads, including partners’ profits at levels unimaginable in the public service.  Consultancy UK publish a useful overview of fees.  To be fair to Exeter City Council, they don’t use the Big Four for consultancy services and not all the fees are at eye-catching levels.  But it’s all a transfer of money from the public sector to private interests.

So do we get a Rolls-Royce – or, as the consultants would say, world-class – service for our money?   Always difficult to tell, because not all consultancy outputs for the Council are made public.  Occasionally, something erupts into public view, as when shortly after announcing that the bus station site redevelopment project would be further delayed because the construction tenders submitted well exceeded the budgetary advice provided, the Council abruptly dispensed with the services of one of the consultancy firms working on the project team.  Still, the firm received over £400,000 of public money for its contribution.

Then, less dramatic but no less problematic, there is the  business case for the city’s new leisure centre, now known as St Sidwell’s Point.  On the basis of a business case drawn up by consultants in secret during 2015 the Council resolved to go ahead with the project, despite the construction costs being underestimated.  The whole show collapsed in late 2017 when the developers for the private sector element of the site pulled out, followed in very rapid succession by the contractors eventually lined up to build the leisure centre and bus station.  The business case was then rewritten during 2018, by a different consultancy firm, incorporating several Council requirements that had not been identified in the first business case, including pricing stipulations, free swimming for children, creche facilities, staff employment conditions and free car parking.  In addition, the revised business case contained a competition analysis and a “latent demand for fitness” report.  Not surprisingly, the assumptions on operating profits were revised – downwards [3].

One conclusion to be drawn from this is that if the contractors had not pulled the plug in 2017 the Council would have gone ahead with the project on the basis of what we now know was a business case which failed to incorporate key user requirements.  The most basic project management text book will tell you that among the common causes of project failure is not getting the user requirements right.  This is often because users themselves don’t know, but it’s the job of the consultants managing the project to tease this information out from them.  So who would have been accountable for any failure arising from going ahead using the first business case?  The lawyers’ fees in sorting that one out would doubtless pay for several chief executives

There may have been other deficiencies in the first business case but because the Council refused my request to publish it even in a redacted form (a request upheld by the Information Commissioner) there was no independent review of the case [4].  Encouragingly, the Council have been a bit more open with the revised business case and published a redacted summary version of it.

And here we come to the crunch issue in this consultant-led world.  Why did no one spot the problems with the first business case?  As central government puts more pressure on local authorities while reducing their funding, councillors and senior officers lack either the experience or the time or both to second-guess the consultants.  The first business case was at least 250 pages long.  Such quality assurance as there is comes from within the project team, itself managed by a consultant so embedded into the Council’s structure that he was able to call the shots at my final meeting with Council officers to seek to settle my complaint to the Information Commissioner.

Now a bit of culture.  The Roman writer Juvenal is little read these days.  In his sixth Satire, written around 115 CE, he ridiculed the institution of marriage because of the way in which greed, selfishness and corruption in Roman society had debased it.  In recognising that moral behaviour cannot be upheld when those charged with upholding it are themselves corrupt, Juvenal comments – in a line probably better known to posterity than anything else he wrote – sed quis custodiet ipsos custodes?  In English, literally “but who guards the guards?”

It is an age-old question that occurs throughout the conduct of public business (though hopefully without the greed, selfishness and corruption).  Checks and balance are woven into our structures: some are often effective (Parliamentary select committees), others are usually more feeble (local authority scrutiny committees).  But the complexity of modern major projects is overwhelming the current processes.  If you pay a consultant not just to provide information and analysis but also options and a preferred way forward, and the work looks solid enough, what else do you do but accept it?  Consultants are experts at blinding non-experts with reams of tables and figures derived from “accepted” methodologies.  Councillors and officers, as already noted, can’t challenge from a level playing field.

So, quis custodiet ipsos consultores?

Not the external auditors, for sure, who are many cases one of the big audit firms whose real money comes from consultancy.  Their idea of a value-for-money study is checking to see whether the local authority followed the procedures correctly.

What about review by another consultancy?  Apart from the extra cost, there can be hidden influences.  Are the two firms competitors, in which case the reviewing firm has an interest in finding fault.  Or do they collaborate on projects, in which case the reviewing firm has an incentive in presenting their collaborator in the best possible light?

There is an approach which could work, and at low cost.  Central government runs a Gateway review system for major programmes and projects.  The system as I knew it was run by an arm of the Treasury, and it used a mix of external freelance consultants (often ex-civil servants) and serving civil servants with relevant experience borrowed from Departments for the duration of a one-week review (I was regularly one of these towards the end of my Whitehall career).  Essentially, major programmes and projects were required to call in a Gateway review team at various stages of the project, and the team ploughed through key documents and grilled project staff and stakeholders about progress.  The team then reported to the senior official in overall charge of the project, traffic-lighting progress as red, amber or green.  It was – and hopefully still is – a cheap and effective check on what was going on.  It would certainly have identified gaps such as the absence of user requirements.

For local government, the Local Government Association would be the obvious driver for a Gateway scheme, much as it manages the Corporate Peer Challenge scheme.  A mix of serving officers and genuinely independent freelance consultants would be the ideal resource.

There are doubtless other options.  But business-as-usual is looking increasingly high risk.

 

NOTES:

[1]  For those unfamiliar with the bus station site redevelopment proposals, see my blog post at  https://agreeninexeter.com/2016/04/28/off-the-buses/ which takes the story up to 2016.  The City Council website provides updates at https://exeter.gov.uk/people-and-communities/major-projects/st-sidwells-point/

[2]  Source:  Exeter City Council spending data available at https://exeter.gov.uk/council-and-democracy/council-information/council-data/council-spending/

[3]  The Council minutes and papers are at agenda item 11 at  http://committees.exeter.gov.uk/ieListDocuments.aspx?CId=608&MId=6167&Ver=4  This also includes the redacted business case referred to later on.

[4]  See https://agreeninexeter.com/2018/07/26/leisure-centre-business-case-stays-secret/