British Government consultancy spend jumps from £0.7bn in 2016 to £2.5bn in 2021

Derek du Preez Profile picture for user ddpreez February 17, 2022 Audio mode
The combination of Brexit and COVID-19 created the perfect storm for consultancy to win big across public sector contracts.

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(Image by 3D Animation Production Company from Pixabay )

The British Government's reliance on consultancy firms has increased substantially over the past five years, whilst its spend with SMEs has either shrunk or remained stagnant. This is according to the latest market data from analyst firm Tussell, which says that "opportunities are rife" for consultancy suppliers. 

The figures - although perhaps not surprising - will be noted with interest by many in government digital circles. Approximately a decade ago the British Government started the process of reducing its reliance on consultants, building up in-house capability, following years of failed projects, billions of pounds lost, and some truly shocking headlines. 

This period saw the creation of the Government Digital Service (GDS) and the introduction of spend controls, as well as new SME-focused frameworks emerged - such as the G-Cloud. Some truly forward thinking strategies were introduced too, such as Government-as-a-Platform. 

And whilst there has been some Whitehall drama along the way, there's no doubt that there have been a number of successes. Government departments do indeed have much more in-house digital capability now, there is a deeper understanding of user-centered design and there are examples of excellent digital public services that have been created. 

However, it's also true that the momentum that was gained in the early days of GDS has been lost and there is increased concern that buyers in government are reverting back to the status quo of outsourcing risk, taking a hands off approach to technology projects.

Yesterday, for example, it emerged that GDS itself has taken on Deloitte to help it develop a mobile app for digital identity checks for government services. The project aims to create a ‘one stop' app for users - and the news sparked some very raised eyebrows on Twitter amongst digital government observers. 

It's this context that makes the Tussell data particularly interesting. The figures clearly indicate that consultancy spend is increasing in the public sector and that some consulting suppliers in particular are winning big. 

The data

Tussell highlights that in 2016 the value of consultancy contracts awardees was just £0.7 billion. This has risen steadily over the past five years and in 2021 the total value of consultancy contracts awarded was £2.5 billion. 

diginomica has written previously about how the combination of Brexit and the COVID-19 pandemic in the UK has created a perfect storm for buyers in government to revert back to old habits. Both resulted in complicated problems that needed rapid solutions - with departments seemingly hoping that large consultancy firms may have the answers. 

The concern is that over the long term this attitude will stick, where buyers continue the procurement practices seen over the past few years and the cycle of Deloitte and PwC consultants continues to march through Whitehall - backtracking on some of the excellent internal capability and behaviours many of us thought had started to sink in. 

Adding to this concern is that the number of SME suppliers to government has also shrunk slightly since 2016. According to Tussell, SME suppliers made up 21% of public sector market share, but this has not dropped to 19%. Given the progress that had been made in opening up procurement to SMEs, and the government's own aggressive spend targets for smaller businesses, this isn't particularly positive news. 

See the chart below for how things have panned out over the last five years: 

Image of a chart of Tussell Group consultancy spend
(Image sourced via Tussell) (Image sourced via Tussell Group)

Interestingly, the consulting firms that are receiving procurement money from the public sector - and the amount they are receiving - is also changing in nature. Take a look at the chart below: 

A chart of consultants getting work in government
(Image sourced via Tussell)

As you can see, in 2016 McKinsey & Company was the top consultancy supplier, bringing in £109 million. The top supplier now is Deloitte, which has jumped up from fifth place, and in 2021 won a whopping £505 million. In fact, every single consultancy firm in the top five in 2021 received more money than McKinsey did in 2016. 

This provides a perfect illustration of how much things are changing and the scale of consultancy investment across Whitehall - those winning contracts are receiving much more spend than they were five years ago. 

My take

It would be a bit simple to say that all consultancy in government equals bad approach to public sector technology. There have been examples of where consultancy firms have been brought into Whitehall departments to work alongside in-house capability and fill in gaps that are more commodity-based, rather than value-add, for instance. However, I think the long-term trend here is somewhat concerning. I don't believe that all of a sudden the lessons learned over the past 10 years have disappeared - far from it. But I do think those lessons learned are still fresh and competing against the old approach that presided over government for decades. It would be a great shame if those in leadership positions in government saw outsourced risk as advantageous when compared with the opportunity in-house capability and working with smaller suppliers can bring. Brexit and COVID-19 will continue to bring in a new wave of projects over the coming years and we will be watching closely to see how the British Government handles the opportunity. 

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