One might wonder why as a consultant for over a decade, I would write a column about overpriced consultants. Being in this industry, I often hear stories of the high costs incurred in securing consulting services and they are widespread and frequent.
Indeed, it is surprising how many consultants are so sensitive to this issue, that they actually make a point of declaring in their advertising material that “we’re not going to charge you outrageous fees.” Much of the adverse newspaper commentary in relation to the cost of consultants to government is exaggerated.
First, the rates charged by consultants vary widely. Some consultants may charge as little as $500 to $1,000 per day. On the other hand, a highly specialized internationally recognized consultant may charge 10 or 20 times this amount.
On a large project, such as retaining a consultancy firm to assist in the restructuring of staff and salaries following an amalgamation of three cities, the consultancy costs could be well over $1,000,000. It would be hard to describe the first consultant cost as “outrageous” by any standard. Whether or not the second might seem high, would depend upon the range of services rendered.
Second, although consulting fees are relatively high compared to prevailing hourly rates for general labour, this is not a fair comparator to use when considering such rates. The high prices that consultants are alleged to charge need to be considered from the proper perspective. No consultant takes home anywhere close to the hourly rate that he or she is likely to bill. A senior consultant with a PhD level qualification in a scientific field, and who is recognized as a leading authority within his or her province of residence, is a highly qualified professional with a great deal of specialist knowledge.
At the very least, he or she might reasonably expect to earn an income at least on a par with a senior lawyer in government practice. Even so, there is no doubt a good deal of legitimacy in the widely expressed belief that payments to consultants seem more than occasionally to be very high.
Too often, the buyer responsible for a consultancy contract simply processes invoices as they are submitted, applying no further test than whether the work claimed appears to be within the scope of the contract. The review of billings (and the underlying work) needs to be more rigorous than this. Ideally, the payment process should involve an assessment by the ordering department and the purchasing department as to whether the municipality is receiving value for money.
At one time, consultants were retained only to provide highly specialized services. In the age of widespread downsizing, consultants are now employed to deliver many services that the municipality previously obtained on an in-house basis. Sadly, the elimination of internal expertise does not remove the need for the expertise.
It is unwise to cap rates at unrealistic (i.e., below market) levels. Generally, consultancy costs reflect market conditions. Rates of several hundreds of dollars an hour are now quite common in Ontario for consultants of all kinds. These rates should not be compared to the salary of in-house staff.
They also include the office costs, secretarial costs, telephone and office equipment-related costs and many other costs that the consultancy firm must pay. Major consulting firms almost always operate out of class “A” office accommodation, which costs far more than the type of office facilities generally provided to the public service.
Another option which municipalities may wish to consider is creating a cooperative consultancy firm of some kind, owned and operated by a number of municipalities on a collective basis, to carry out work that is beyond the normal expertise of in-house professionals, but which could be delivered through some sort of controlled arrangement across a number of municipalities.
Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.
Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.
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