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Why is the Government still fixated on day-rates for consultants?

Alan Leaman, MCA

London: The results of the first phase of the new ConsultancyONE framework have now been released. The biggest difference with previous government frameworks is the most obvious — there are many more firms for buyers in the public sector to choose from.

This is a welcome step forward. Previous framework lots have been drawn narrowly, giving buyers only a limited choice and excluding many quality firms from the process. Opening up this framework has particularly increased the number of SME firms who are likely to be successful — though this now needs to be reflected in the business that goes through the framework and not just by their appearance on a list.

One factor in the approach of the Government Procurement Service (GPS), however, continues to puzzle me and — I know — frustrates everyone who wants to see the best results for the taxpayer.

This is the continuing emphasis that GPS, and government ministers, place on the famous 'consulting day rate'. The press release that accompanied the announcement on ConsultancyONE crows about its success in bringing day rates down. Why this fixation?

Two points occur to me.

The first is that the day rates set out in the framework may never actually be used for any specific piece of work. They are notional — at best, a guide to prices in the market. Often they are the so-called 'blended' rate that calculates how many consultants of each level of seniority will be used on a typical project and averages out what would be charged if they were all commissioned to work for a day.

In practice, each consulting project needs a specific team and the price should reflect the nature of the consultancy tasks involved. Government buyers of consultancy should be able to test the market each time that they engage with it.

If a firm can deliver results in a shorter timescale because they are better at the job, but will charge a higher day-rate for doing so, why should they be penalised?

And, second, why on earth are we still 'banging on' about day rates at all? We should be promoting payment by results, sharing of risk and fees that are contingent on success — all models which more effectively align the interests of consultancies and their clients.

I've sat in many meetings with senior government officials and ministers when they have complained about the consulting industry's day-rate model. They argue that it encourages the wrong behaviours. 'Let's hear no more about it', they like to say. Yet, here they are, actively promoting it.

All, presumably, because they want a good headline about bringing down prices when the real job in hand is to deliver an increase in value for the public.

Two cheers for ConsultancyONE — but we should still try and do better.

Alan Leaman's views first appeared here.

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