Consultancies are an easy target, but more cost-effective than maintaining bloated public service

In its election costings, the Opposition has identified that it would cut expenditure on consultancies as part of a cost-cutting drive to pay for its election commitments (see Qld Labor reveals election costings). As a consultant I’m obviously biased, but I’ve always seen consultancies as a cost-effective way for a government to bring in the skills it needs when it needs them, rather than maintaining a large, under-utilised public service which is not making the best use of its professional staff.

If the Opposition gets into power, instead of focussing on consultancies, which typically respond to urgent, well-identified needs set out in clear terms of reference, it should forensically review the still over-sized public service, particularly “policy officer” jobs. I suspect that the efficiency targets that would be set by the Opposition if it wins government wouldn’t be strong enough, and hence a forensic review is needed.

Finally, as Professor Tony Makin and I pointed out at a Griffith University-Economic Society of Australia (Qld) event on Wednesday night, there is considerable scope for budget cuts in industry assistance, a frequent call I make on this blog:

 QCA issues paper shows large potential savings in industry assistance

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6 Responses to Consultancies are an easy target, but more cost-effective than maintaining bloated public service

  1. KT says:

    well said – the bloated public service is expensive to maintain.

  2. Jim says:

    Gene

    Absolutely agree on both points.

    There are massive savings to be had by winding back industry assistance and focussing on addressing market failures instead.

    With respect to the public service, I think you are also on the money. Too many policy roles simply manage the process of policy development (the easy bit), while the actual analysis (the hard bit) is often done by the consultants. This has been going on for years and has, unfortunately, resulted in many public servants losing their applied skills. So you have to ask who would so the analysis and how would you maintain the quality of the analysis in the absence of consultants and contractors?

    Usual admission that I am a consultant that occasionally works for the State government apply…., so there is a bit of bias in my comments as well.

    • Gene Tunny says:

      Great points, Jim. The decline in internal public service capability is a concern. There’s a risk that some public servants may not be able to formulate the right questions to ask consultants. So you need to invest in public service capability as well as hiring the consultants I suppose. This doesn’t mean you need the army of policy officers you have now, but you need to ensure the ones you do have are highly skilled.

  3. Chris says:

    Hi Gene.

    In terms of your comments on consultants I say the following:
    The key issue around government’s use of consultants is around efficiency. It may be efficient to employ consultants if they are employed in a manner as you have alluded to above, for infrequent/one-off/highly specialised matters. However, I believe it is inefficient and counter-productive to employ consultants to undertake regular tasks/business of government, which is something that I have experienced in some agencies, This latter example has two impacts, (1) consultants usually cost quite a bit more than agency staff (some have daily rates equivalent to the weekly or fortnightly salary of a reasonably senior policy officer), and (2) that investing in consultants to do regular/frequent work of the government makes them more employable (and potentially more expensive as they become more skilled/expert in the area) while simultaneously reducing the skill base of public servants that could have otherwise undertaken the work.

    How can this problem be addressed?

    Detailed business planning to identify the skills required to undertake the important/core functions of government and employing appropriately skilled staff to undertake this work and employing consultants to fill the skill gaps on work that requires a specific skill set not present and where time urgency is a factor or where the work could not be undertaken as effectively internally.

    This approach would need to be regularly reviewed as an agency’s business needs change to ensure that it continues to retain the appropriate skills needed to perform effectively and efficiently.

    Kind regards,
    Chris

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