Procurement Perspectives: The use of consultants for government contracts

Municipalities frequently hire consultants to advise with respect to their needs and to assist them in mapping out future strategic initiatives.

The use of consultants has many perceived benefits, but the reliance placed on them is nonetheless troubling.

It is a well-known fact one third of all consultant assignments are awarded outside the normal competitive bidding process. Several 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 growth in the use of consultants is something that needs to be managed carefully if municipal costs are to be contained.

The purchasing department will play a meaningful role in this process by assisting divisional and section managers to decide whether retaining a consultant would truly be advantageous.

When use of an outside consultant is proposed, there are many factors that should be considered.

These include:

• Can the work be undertaken by municipal staff? If not, why? In some cases, lack of staff time can be remedied merely by redeploying internal resources.
• Will an outside consultant (particularly one whose work has focused on private sector) genuinely have sufficient experience and knowledge of municipal affairs and the particular needs of public-sector organizations, to be able to provide meaningful advice?
• What are the cost implications of retaining the consultant and can the expected benefits of such a retainer be quantified?
• If so, how does the cost and benefit compare?
• Are possible consultants likely to be independent or is there a likelihood they will be biased in favour of or against a particular solution.

In an age when municipal funding is in short supply, the starting presumption ought to be that there is no justification in going to an outsider.

Consultants are expensive and there is perhaps no other area of a municipal budget in which a cost overrun is more likely than with respect to consulting contracts.

As should be fairly 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 will need to save at least that much just to break even. Anyone who proposes hiring a consultant ought to be required to make a strong business case for so doing.

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 so as 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 cases, the purchasing department will not have the internal expertise to answer these questions itself.

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.