Public sector: Getting the House in order

Consultants in the public sector are feeling pretty bullish according to the Management Consultancies Association’s latest quarterly survey of members. “The public sector is one of the few areas where member firms think the market will improve over the next quarter,” says MCA deputy director Will White.

The sector is not to be sniffed at, representing around 11 percent of the total consulting market in terms of fees. In 1997 around 10 consulting firms earned UK and European fee income of approximately #306m from central government projects, and #128m from local government. Central government spend increased by 29 percent in 1997, while local government spend rose 21 percent. Firms were predicting 1998 fees to show a rise of 14 percent for central government, and 12 percent for local government. However, overall industry growth was expected to be 21 percent, suggesting that the public sector, while healthy, is somewhat sluggish. That said, PricewaterhouseCoopers has certainly achieved impressive fee-generation from the public sector.

Prior to the merger, in 1997, Coopers alone scooped up around 18 percent of European and UK fees generated by public sector consulting (excluding local government and NHS work), equivalent to around #56m. Capita headed the list for local government and NHS fees, with an estimated 32 percent of the market in 1997.

The range of government initiatives on the go at the moment, including Public Private Partnerships, Action Zones, the Better Government white paper and Labour’s interest in “citizencentric” services, joined-up government and electronic delivery means there is plenty of potential. Roger Usher, partner responsible for the government consulting practice at PwC, believes all these issues imply a real, practical change in the way government does business. “There are a huge number of opportunities, but opportunities of a different kind,” he says. “Consultants have got to get their heads round issues they haven’t had to think about before.” For example, many firms have solid experience of the Private Finance Initiative, but creating systems to foster a truly citizencentric approach, where the public has a single point of interface with integrated government services, is another matter. There are a host of issues raised by such a concept, defining departmental accountability for one. “I don’t think any firm has joined-up government on the stocks yet,” says Usher.

One feature of the current market is the size of some of the projects coming out of the public sector, such as Project Quantum, the Prison service’s giant IT project. “If you want to provide a consulting service you have to be big enough to bid as a prime contractor or align yourself with someone,” says David Dixson, a director of Cornwell Associates. “That represents a change in the market since the early ’90s.” Peter Allred, lead partner for the public sector practice at Deloitte Consulting, also notes that it is now common for consultancy firms to team up in consortia, giving as an example the firm’s link with PwC on the Ministry of Defence’s Capital project (see case study). “Resource accounting and budgeting for the MoD is an enormous task,” he says.

Firms also seem to be specialising more. “Ten years ago the major consultancy firms would all have a presence everywhere,” says Bill Cook, head of government services at Ernst & Young. “Now all of us are somewhere, but we are not all everywhere. It’s important to really understand the part of the marketplace you are dealing with.” That need for specialist understanding allows a space for niche consultancies, but pressure on fees may be another reason that smaller firms are appealing to public sector procurers. “For the really big firms, the public sector becomes increasingly unattractive,” says Dixson. “The rates they can command are much lower than the rates they can get in the private sector.” There has been growth in the numbers of small and medium-sized firms in the market. “There are people like me forming much more specialised niche-based organisations,” says Dixson, who headed up the public sector group at Deloitte & Touche Consulting until last October. “We don’t have the overheads the big firms have, but we have the competence because we have been trained by them.” Tim O’Leary, a managing partner with French Thornton, agrees. “There has been a move in recent years to use independent contractors at relatively low rates,” he says. “So a large organisation has to sell itself on value-added and scale.”

The large players, however, don’t appear overly concerned. “The myth about the cost base is a little overplayed,” chuckles Richard Goodwin, principal consultant in government consulting at KPMG. “At the end of the day every public procurement is done on the basis of value for money.”

The public sector practice is growing at KPMG, Goodwin confirms, arguing that the skills, resources, knowledge base and infrastructure of firms such as his “come into their own” on projects which require a combination of skills – linking IT and health sector expertise, for example.

Handling the procurement process efficiently is a challenge for all consultancies.

“Bidding for work through the Official Journal is a bit of a waste of time,” says Ed Haysler, a partner with French Thornton. “Although we have won work through it, my general rule is that if you don’t hear about it until it appears in the Journal, forget it.” Other people who do know about it will be ahead of the game. “We have noticed that the market is more sophisticated each year,” says David Hills, partner with Hornagold & Hills. “The public sector has fragmented over the last few years and there are more departments and subdivisions of departments responsible for their own procurement. They are a lot more choosy as to how they get their value for money. They know the market well now. It’s good for competition, but it’s often more difficult to secure the work.”

Despite the challenges, it’s worth persisting. “It’s a good market.

It’s a tough market,” says Allred. “Consultancy firms have to be prepared to invest long and hard. A lot of bids can take six to eight months to come to fruition, but the rewards are there in long-term contracts which can span four to 10 years.” Nice work if you can get it.

Frustrations and rewards

“Most of the public sector partners smoke,” says Cook, head of government services at Ernst & Young, as he tries to light a match one-handed. The statement, a response to a query about what it’s really like to be a public sector specialist, says much about the frustrations involved in his field.

But if bureaucratic annoyances can occur on a grand scale in the public sector, so can the personal achievements and rewards.

As far as frustrations go, the public sector has some fairly obvious ones and not every consultant, whether nicotine-assisted or not, can cope with them. Michael Walsh, consulting director at Sema Group Consulting, says he can look at a consultant and know if he or she won’t enjoy working in the public sector. “That is usually because they would get intensely frustrated by the way decisions are taken and the time things take to happen,” he says. Walsh, a former civil servant now with 15 years’ consultancy experience, should know.

The procurement process is one of the first frustrations encountered.

“Often one ends up being on a tender list of 30,” says Goodwin, principal consultant in government consulting at KPMG. “You wouldn’t have that many in the private sector because you know you wouldn’t get a decent quality response and you wouldn’t want to waste your own time. In some cases it happens because of a misinterpretation of the rules. It’s very difficult to get through the fog sometimes.”

Consultants who want to improve their firm’s chances of winning work need to keep their ears to the ground and stay in touch with contacts, not just in procurement departments but in the management teams who actually use their services. “You have to know who is likely to be doing something and talk to them before they do it,” says Ed Haysler, a partner with French Thornton. “It’s about networking. We focus on a few organisations where we have a good level of communication.”

Once working on a project, consultants have to be prepared to play by the book. For example, Dixson, a director of Cornwell Associates, points out that when making recommendations consultants must report and document clearly the process by which those recommendations were reached. “The audit trail from consideration through to recommendation needs to be there,” he says. “It goes on the public record.” Any weakness in the process will be picked on.

A certain sensitivity is clearly required to work in this field. “You have to understand the client’s business, plus the political nature of what you are doing,” says Clack, associate partner with Hornagold & Hills.

“You have to understand the vested interests and then work round them.

You have to work with the client’s staff and make sure they are kept informed.”

However, these qualities of political awareness and patience aren’t reserved exclusively for public sector projects. Haysler points out that red tape exists in private companies too and that there are often good reasons for a “rule-bound” approach by government departments.

“You have to be understanding in that kind of environment,” he says.

“People feel accountable for what they do and are not likely to make decisions on a whim. They have rules and procedures. You have to involve people from all sorts of different departments. If you try to go around that, you can bring down the wrath of the organisation. If someone is being difficult you have got to try to understand why they are doing things.

They have to do things the proper way. But you can still be challenging, energetic and so on.”

As long as a consultant can cope with the particular requirements of the environment, then skills are pretty transferable between public and private sectors. “If you are any good at consulting you are pretty good at consulting anywhere,” says Cook, with one slight qualification. In the private sector the emphasis is on profit, with clients looking for advice on the dual issues of increasing income and reducing expenditure.

“In government we still have expenditure and people are interested in reducing the cost of delivery,” Cook says. “But income is much more difficult to define. The equation changes from ‘income minus expenditure equals profit’ to ‘output minus expenditure equals value’. It can take private sector consultants a bit of time to adjust.”

Those who can accept the frustrations of the sector and understand its subtleties should find the work highly rewarding. First there is the variety. “The one thing I never really realised when I was working in the public sector was how different one department is from another,” says Walsh. “Every time you go to a different department you have to retune your cultural antennae.” Secondly, a particular bonus of the public sector environment comes from the scale of many projects. “The work itself, when you get through the procurement process, is rewarding because the problems are big and complex,” says Dixson. The solutions can be big and complex too giving consultants the feeling that they can have an impact, something particularly rewarding for people who started out working in the field, in the NHS perhaps, before turning to consulting. “You are still wedded to making a difference, but not from a front-line route,” says Goodwin. “I think some people are motivated politically with a very small p. The sort of work we often do is the setting of policy, helping governments set new agendas. It’s a constant challenge to think the unthinkable.

And we are often dealing with the whole organisation rather than focusing on one area of a transaction. We are talking about quite large scale changes these days.”

Allred, lead partner for the public sector practice at Deloitte Consulting, also believes that many of his colleagues feel they can make a difference to people’s lives through consulting. “The people I know working in the public sector really feel a vocation about working in it,” he says. “They do believe they can make an impact on people’s lives. I term it consulting with a heart.”

Sarah Perrin is a freelance journalist

ES case study

The Employment Service started a new advertising campaign on daytime television in January. It was promoting a new telephone-based service for job seekers – Employment Service Direct. The launch marked the culmination of a project begun last October involving teams from Ernst & Young, who focused on project management, and EDS on the technology side.

The problem facing the Employment Service was that it had a lot of vacancies – too much stock. “We needed to work with them on how to convert that stock into sales, placing the unemployed people in those vacancies,” says Bill Cook, E&Y’s head of government services. “People were typically talking to the Employment Service once a fortnight. When they did, they got good advice and often got work, but it was only once a fortnight. We thought we would like them to talk to the Service every couple of days.” Since people would be more likely to do that by phone, the proposed solution was to set up a distributed call centre which could recognise the location of callers and direct enquiries to appropriate Employment Service offices.

The firm pulled in members of its customer connection team to work with EDS. “We knew we had to do this fast – vacancies don’t sit there for ever,” says Cook. “It took roughly two months to set up the network, implement it, train people and get it going.” The network went live on 5 January and was soon receiving 9,000 calls a day. “From those 9,000 calls you would expect to make 7,500 to 8,000 submissions (people registering with the service),” says Cook. “You would expect one in 15 of those to convert into jobs.”

Home Office case study

The Home Office’s need for advice on the procurement of electronic monitoring services (“tagging”) has initiated one of the more sensitive consultancy projects. Deloitte Consulting started work at the Home Office in January 1998. The firm provided a wide range of services – advising on the development of a planning and risk management process, stimulation of market interest and the evaluation of expressions of interest in providing the services, worth over #100m to the private sector. The firm also advised on the bidding process, including the service specification, pricing mechanism, incentives, performance measures, risk transfer and contract conditions.

The Deloitte team also got involved in developing the technical specification for the equipment and testing during implementation prior to the service going live at the end of January.

The project was a challenging one. “We were on a very tight timescale and it was a new service,” says project manager Jo Mann. The Home Office had only 14 months for procurement and implementation of the service.

Given that the tagging service is designed to allow offenders to be released from prison early, system failures would be disastrous. “It really can’t go wrong. It’s the kind of thing the public feels very strongly about,” says Mann. “We had to get it right, and quickly.” But involvement in the project also proved highly satisfying. “You build a very enjoyable team ethos,” Mann says. “We are all very committed to it, and watching it happen is very exciting. We are all stakeholders – we have an interest.”

NHS case study

Greenwich Healthcare NHS Trust needed a project director to handle its PFI procurement of new hospital facilities with construction costs of around #92m, excluding finance costs. The project director was also required to lead a department dealing with change management within the hospital. Andrew Newland, a partner at Hornagold & Hills, stepped into the role in November 1995. The task was a challenging one as this was still in the early days of PFI. “We were making up PFI as we went along,” he says. “And while consultancy is about management of change a lot of times, in this project you had fundamental change on every front.” The project involved the reorganisation of healthcare services and business processes, conducting best practice comparisons and bringing in third party suppliers with associated TUPE issues. Newland also had to assist with the negotiation on Greenwich’s behalf of a three-way contract for the sale of land to J Sainsbury. Other interested parties included the NHS Private Finance Unit, HM Treasury, the Government Office for London, the NHS Executive and the Ministry of Defence. (The site was a former military hospital.) And all this was going on amid a changing political climate. “You have to be aware of the nuances,” says Newland.

The experience was rewarding. “It was a very big deal and we simply got it done,” Newland says. “There was very good esprit de corps.” Financial close was achieved last summer, the first PFI deal completed in London.

MoD case study

The Ministry of Defence’s Capital programme is the largest financial management and systems project in Europe. It covers financial accounting, planning and budgeting, stock and contract accounting. While a response to the government’s Resource Accounting and Budgeting initiative, it is also being used to re-focus the department’s management on outputs rather than inputs and improve the quality of departmental expenditure and resource allocation. As such it involves both systems integration and change management.

In 1996 an accounting system integrator (ASI) was appointed, a consortium led by PwC MCS, to design and implement the systems, redesign the financial processes and train staff. The task is huge and complex. For example, the processing of accounting transactions is devolved to over 100 entities, each with its own suite of accounting ledgers. “At any time there are about 100 projects running in the programme,” says Richard Jones, ASI project director at PwC.

Despite the challenge, the project has been running on time and to budget.

A major milestone was achieved last September with the implementation of a department-wide resource-based accounting system. Jones attributes the project’s good time-keeping to a teamwork approach with the client.

“We are incentivised to help them work it,” he says. “We get lump sums by demonstrating that they are able to operate the system – we are paid to care whether the system works. Our staff are burning the midnight oil to make sure it does.”

Related reading

Life Belt with Computer Folders
HMRC banknotes