NAO urges government to end reliance on large consultancies

​A new report from the National Audit Office has urged government departments to improve competition for public sector consultancy work and to engage greater numbers of smaller consultancy firms.

The six largest consultancy firms win three quarters of work procured through Crown Commercial Service agreements and 28% of all government consultancy work.  Small and medium-size consultancies won a meagre 5% of all consultancy work in 2014/15.

This has led the NAO to conclude that government departments “need to avoid single-tender actions, encourage strong competition and use fixed-price or incentive-based agreements where appropriate”.

Of 60 consultancy assignments commissioned by government departments between April and October 2015, almost half were awarded with little or no competition (18% were single-tender actions and 25% involved the extension of contracts without competition).

Where consultancy assignments were let competitively, only 40% of tenders attracted the target of five bids.  This was a result of the short timescales involved and the added cost of participating in the more bureaucratic public sector tender process.

The NAO also noted the potential long-term cost to the taxpayer of government departments accepting pro bono advice from large consultancies.  One large consultancy gave 18 days’ free advice to the Home Office in 2015, a practice which the NAO believes can provide “a foot in the door for future work, resulting in poorer value for money in the long term through reduced competition”.

Alan Leaman, Chief Executive of the Management Consultancies Association, has urged the government and the public sector generally to “open its doors to more quality consulting firms so that it can benefit from the full diversity of specialist skills within the industry”.