The public sector and consultancy firms : a vicious circle ?

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In 2021, the French government spent over 1 billion euros on intellectual services provided by consultancies. This represents a record amount, yet these services do not meet with unanimous approval among the public bodies that deal with them. As Marc, an ex-consultant for the public sector points out, “it’s even more decried because, in theory, the state has expertise through its general inspectorates and corps of civil servants” who are trained via the state schools: INSP (ex-ENA) and IRA. This observation raises questions about the legitimacy and real impact of these firms in the public sphere.

The influence of consulting firms reaches the most strategic levels but this still needs to be qualified

According to the report by the French Senate in 2023, use of consultancy firms has become systematic in government departments, including at a very strategic level: “consultants were involved in most of the major reforms of the [first Macron] quinquennium”. Part of the management of the Covid crisis – which could be considered a matter of “national sovereignty” – was supported by consulting firms. In particular, McKinsey helped to design the French vaccination campaign, leading to “McKinsey gate”. For Marc, who has also worked in the state administration, while consulting firms can “prescribe solutions” to public administrations, their influence still needs to be qualified due to the idea of a shared “ideological base”. It could be said that the current French government and major consulting firms share similar neo-liberal orientations, which may reinforce each other in a loop effect. It also seems that consultancies (promise to) provide answers and solutions to the “contradictory injunctions” that face the public administration: improve public services, with limited resources. Large consulting firms are precisely favored for their flexibility, as well as their ability to respond to large markets. However, the latter raises another critical issue, as dealing with a limited number of large firms can reduce the public administration’s bargaining power.

The negative impacts of civil servants and the organization of public administration

It should be noted that several types of consultancies coexist in the public sector market, working at different administrative levels, in different fields and for different durations, which complexify the question of their impact on the public sector. At the governmental level, use of consulting services despite in-house expertise could suggest, for Marc, a lack of trust in the administration’s skills. This could have an impact on the motivation of civil servants, who may feel an omnipresence of consultants in their workplace. As reported in the Senate report, employees of the public agency “Santé publique France” sometimes resented the presence of McKinsey’s consultants during the Covid crisis in 2020. Yet the studies produced by consulting firms largely rely on civil servants’ knowledge of public policy. 

Consultancies have the capability to reshape and project civil servants’ knowledge into a strategic view, or to “cannibalize” it, in the words of Marc. According to M. Mazzucato and R. Collington in The Big Con, use of consultants in the public sector can “directly erode existing in-house knowledge and institutional memory: the less an organization does something, the less it knows how to do it”. This drain on knowledge and skills can increase the dependency on consulting firms, which is most likely – and already – the case with information system services. The report from the French Court of Audit in 2023 revealed that three quarters of services outsourced to consulting firms in 2021 were in the IT field.

More generally, one might well ask whether the high level of expenditure involved in hiring consulting firms could have been better invested in recruiting new talent.

What impact will this have on the delivery of public services? For citizens?

It is difficult to accurately measure the impact on daily users, but we can nevertheless draw on the example of the public healthcare sector. A study published in 2023 in Le Monde highlighted the inefficiency of using consulting firms in English hospitals, concluding that “the more a hospital relies on consultants, the less efficient it becomes”. In France, hospitals have been engaging consulting firms to improve strategic aspects of their management since the 1990s. On this matter, the Court of Audit concluded in 2018 that “poorly managed” reliance on consultants results in “a loss of competence within teams”. However, according to Marc, this case is somewhat isolated in the French public sector, assuming that most of public services with which the population interact directly do not rely on consulting firms (police, justice system). Nevertheless, one domain remains particularly affected by consulting firms: computer science. According to The Big Con, in the 2000s, many back-office tasks, especially data management, were seen as more efficient when outsourced to the private sector. By consistently delegating these tasks to external entities, the public sector lost essential expertise and created structural dependency. The Big Con revealed that in 2017, the Danish government had to acknowledge that transferring responsibilities for computer science to private consultants inevitably affected its ability to govern in line with political changes.

Avenues of reflection and solutions

Faced with these dependency issues, Marc believes that the most crucial aspect is for government agencies to regain enough expertise to challenge consulting firms. This hinges on recruiting, training, and retaining young talent within the public sector. Unfortunately, the attraction between young graduates and the public service is on the decline. Elsa Pilichowski, Director of Public Governance at the OECD, stated that, “between 1997 and 2018, the number of applicants for state civil service entrance examinations fell from 650,000 to 228,000. The civil service no longer attracts young people and is also finding it difficult to attract engineers for the jobs of the future, related to information technology, data, etc.” The future of public administration thus relies on young talent interested in public service, who must make a personal choice between becoming a civil servant or a consultant.

This article was written by Clara Fernez and Victor Le Vély, students at the MSc Business Strategy & Consulting.