Having worked as a purchasing consultant for many years, I have some interest in this topic.
The use of a consultant has many perceived benefits, but the reliance placed on them is nevertheless troubling in today’s economy.
In studies I have seen over the years, the general consensus is that one third of all consultant’s assignments were awarded outside the normal competitive bidding process.
Similar studies of other government departments at all levels suggest this figure is typical.
If the extensive reliance on sole sourcing is worrying, the troubling aspects of consultancy become especially pronounced, where the consultant is being asked to provide the very advice that members of the municipal administration were hired to provide in the first place.
The recent growth in the use of hiring consultants is something that needs to be managed carefully if municipal, or even private sector costs are to be contained.
The purchasing department should play a meaningful role in that process by assisting divisional and section managers (and their supervisors) to decide whether retaining a consultant is the correct way to proceed on a case by case evaluation.
In an age when municipal funding is in short supply, the starting presumption ought to be there is no justification in going to an outsider.
The fact is consultants are invariably expensive and there is perhaps no other area of a municipal budget in which a cost overrun is more likely then with respect to consulting contracts.
As should be clear, if a consultant costs $50,000 a month (as many do) the annual cost is $600,000 for the year. If a municipality spends $600,000, it would need to save at least that much just to break even on the project. Anyone who proposes hiring a consultant ought to be required to make a strong business case.
However, one must be realistic in assessing internal capacity to handle work demands.
Accordingly, a critical review of the internal strengths and weaknesses of the municipality should also be undertaken.
Questions that must be addressed in this regard include:
What is the time allowed to review options, source supply and implement the proposed new initiative?
Does the municipality have sufficient current internal expertise?
In what way can working arrangements with internal staff be set up to minimize the cost impact of hiring a consultant, if one is necessary?
Will the responsibilities of the consultant be clearly defined and limited to what is essential?
Is the proposed process for retaining a consultant sufficiently competitive to make sure that the best consultant is retained for the work? For instance, will potential consultants be brought in for an interview so that they can make a presentation to those in the position of hiring them as to the process that they will follow on the assigned project?
What will the reporting lines be if a consultant is hired? Who will monitor the quality and quantity of work that is to be done by the consultant? What method of verification is in place?
In many (perhaps most) cases, the purchasing department will not have the internal expertise to answer these questions itself. However, it is the ideal control body within the municipality to make sure these questions are asked and properly answered, and it can be used to block the hiring of a consultant where this is not done.
As should be clear from the above, contracts to retain consultants present several special problems for those involved in procurement management.
Frequently, the kind of services that each offers are so sufficiently unique that they must be retained on a single source basis.
As a result, the competitive bidding aspect of procurement that is so common in other areas of municipal materials management is frequently absent in consulting contracts.
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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