Seven ways to harness consultants to improve public sector policy capability

**This post is written by Professor Catherine Althaus at UNSW Canberra and ANZSOG. **

• The problem: People are questioning government use of consultants in a binary way – consultants are either seen as great or terrible.
• Why it matters: Capability and democracy issues are implicated by government use of consultants.
• The solution: Use consultants in creative and careful ways to boost capability rather than see them as a one-way drain of talent and democracy away from government.

For better or for worse, contractors and management consultants now play a key role in advising governments across the globe in policy and public sector delivery. Their use has risen dramatically since the 1980s with jurisdictions such as Australia now featuring mature consultancy markets, ranked amongst the highest income generating per GDP in the world. The proliferation of public sector activity has been particularly occupied by Tier 2 consultancy firms, often referenced as the ‘big four’ here in Australia (Deloitte, EY, PwC and KPMG) but Tier 1 activity is also significant and strategic from firms such as McKinsey, BCG, PiP, Bain, and EY-Parthenon. A host of smaller consultancies also abound, ranging in size and scope of activity. Many of these groups include staff with significant public sector experience.

Consultancy dominance hasn’t gone unnoticed or uncriticised. Various reports and reviews of public sectors across Australia have called out the use of consultants on grounds that they are costly, curtail democratic accountability and corporate memory, and hollow out public service capability.

Injecting skills back into the public sector

However, an interesting experiment by the Queensland Treasury Corporation (QTC), evaluated by the Australia and New Zealand School of Government (ANZSOG), has sought to harness the strategic deployment of Tier 1 consultants to help boost capability improvement and skills development back into the public sector. Careful and deliberate attention to the way that consultants are commissioned may well prove a helpful way for public sectors to rebuild or inject policy capacity back into their policy systems.

In Australia, QTC is the central financing authority of the Queensland Government. It generated a competitive market using a unique financing model between Tier 1 companies by inviting their partnership with core government agencies and QTC staff to tackle defined projects with specific performance targets, skills upgrade opportunities and positive budgetary outcomes. For QTC, skills transfer had to feature as a deliberate component of the project to leverage consultancy expertise across relevant areas such as commercial and contracting management, data and supply chain analysis and to enable skills learning and transfer back into the public sector. In this way, consultants were viewed as sources of skills development or upgrading, rather than policymaking thieves. The projects spanned a wide array of portfolios including health, justice and social housing.

A recent analysis of the QTC case by ANZSOG’s Althaus, Carson and Smith in Policy Sciences found that the initiative generated several key benefits at multiple levels - the individual, organisational and systemic levels. Analytical capability and tacit knowledge were improved (especially for QTC), as was tangible savings, combined with better service delivery outcomes, and the generation of economies of scale.

Rather than hitting a binary brick wall about whether to use consultants or not, the QTC case suggests there are clever ways to harness what consultants can contribute.

Some key lessons were observed that the public sector can enact to make the most of commissioning consultants. Most briefly, these revolve around the need to:

1. Define and determine commissioning capability: By identifying and building actionable consensus around what the clear purpose is for engaging external consultants. How best to engage is contingent on nuanced understandings of the particular environment and reputable levels of trust.

2. Pay attention to authorisation, governance, and political nous: For example, for QTC, the authorising environment wasn’t always as clear as it needed to be to get broad buy-in into the project. While a clear role existed for QTC to commission consultants, the authorisation for this and taking ideas or recommendations coming out of each project process to political decision-makers was a matter for the members of the project-specific governance group. Thus, being politically astute and having the right authorisation and governance environment is key to ensuring successful implementation.

3. Clarify scope and invest in preparation: The nature of Tier 1 ‘sprints’ necessitates significant preliminary baseline work by the public service, including production and access to relevant materials and data, and a willingness for all stakeholders to work in a fast-paced and continuously engaged way.

4. Strengthen knowledge and skill transfer processes: Clear expectations need to be established from the outset about the degree of anticipated skills transfer which needs to be carefully considered and agreed upon by all parties and reflected upon throughout.

5. Pay attention to implementation from final report to delivery: The extent to which and how agencies implement the final recommendations from Tier 1 consultancy-related projects is a critical phase when it comes to realising value, one that can be facilitated by follow-up at key points, rather than a definitive and single endpoint.

6. Widen evaluation to include broad conceptions of success: There’s often a need to look beyond what might be specific project aims, to broader conceptions of success that may be tangible or intangible such as opening up new ways of thinking, collaborative pathways, and creating concerted efforts around particular issues.

7. Define acceptable risks: Careful consideration at the outset and at all stages is needed about the risks to realising the benefits of using Tier 1 consultants. Some of these risks may be around the authorising environment, managing relationships over the longer term, maintaining confidentiality, and demonstrating value for money in the overall project outcomes.

Rather than hitting a binary brick wall about whether to use consultants or not, the QTC case suggests there are clever ways to harness what consultants can contribute. In many ways, ‘brain-drain’ can occur back into the public sector rather than the other way around. The innovation here was to adopt a strengths-based approach about what consultants can bring into the public sector and by doing so, contribute to recalibrating the expertise that public sectors can bring to policy, with the ultimate aim of better outcomes for citizens.

More information about the commissioning model and its practical and theoretical implications can be found here: Catherine Althaus, Lisa Carson & Ken Smith. (2021). Rethinking the commissioning of consultants for enhancing government policy capacity.

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