One of the problems that we all face in the area of consultancy is that of divided loyalty and conflict of interest. A common type of conflict of interest (condemned inter alia by the federal auditor general) involves the use of a consultant to draw up specifications for a contract, or to design a bidding process for a contract. When the RFP or tender goes out to market, the same consultant is then allowed to bid for the contract.
The obvious risk in such a case is that the consultant’s report concerning the terms of the specifications, or the method of bidding, will both favour the consultant. Even if the consultant is able to do the work well, the government still loses from lack of competition.
Very often, the conflicts may be below the surface and difficult to detect and thus avoid. Some suppliers (particularly in the IT area) have taken up the practice of salting the market with former employees, who act as "independent" consultants.
Such consultants retain strong ties with those suppliers, and as a result tend to recommend the supplier’s whether or not they are necessarily best suited to the needs of the customer. Unfortunately, this is but the tip of a very large iceberg. Consultants who practice entirely in one field may have developed a very cozy relationship with the contractor and suppliers who work in that field. Joint work on other projects, a practice of cross-referring business, etc., may cloud professional judgment.
Such relationships are very difficult to detect, but they present obvious risk to the organization which is carrying out the project. Businesses that hire consultants need to make sure that the consultant whom they have hired is working for them. It is always worthwhile to remember that consultants and contractors are likely to work together all the time. In contrast, they hardly know you.
A captive consultant (at least as I use the term here) is any consultant or consulting firm who appears to be separate at arm’s length to a supplier, but who in fact is at non-arm’s length to that supplier.
The problem of such a relationship raises problems at any time but is particularly serious when dealing with a consultant who is providing supposedly independent scientific or other highly technical advice, particularly in association with some regulatory process. Conflict of interest problems also arise where the consultant has an interest in the outcome of the study that the consultant is hired to conduct, or where the consultant’s prospect of further employment is likely to be influenced by the advice given.
You need to remember that the use of consultants raises a host of potential conflict problems, if not done correctly. For instance, some consulting firms have hidden links to suppliers and will attempt to use their influence over sourcing to direct contracts to them.
Subtle steering may involve raising the specters of "incompatibility" with existing equipment or software, the possibility of increasing "training costs" if new technologies are adopted and sundry other "risks" associated with a competitor’s products.
Captive consultants have also convinced public employees to sole-source a contract to their affiliated supplier, so as to bypass any formal tender or RFP by exaggerating the unique attributes of a particular supplier’s product or service. Common sense is enough to justify the belief that consultant conflict of interest is as much a concern as conflict of interest involving an employee or elected official, because the work of a consultant (even if only advisory) is as likely to effect the actual decision-making of the municipality to the same extent as is the work of any employee or elected official.
It is important to reference check the firm before hiring them to work for the municipality to avoid any issues.
Stephen Bauld is a government procurement expert and can be reached at email@example.com.
Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.