Tuesday, February 14, 2023

More on management consultants in government

I look forward to reading Mariana Mazzucato's just to be released critique of the work of consultants in public sector. FT has an interview here

From my own experience of watching consultants in several departments for nearly 25 years, I cannot but very strongly agree with her central premise that management consultants have "no expertise in the areas they're advising" and their role has weakened governments. I have blogged here, herehere, here, here and here about the problems with the use of consultants by governments, and co-written in the latest book State Capability in India

As a phenomenon, the use of management consultants by governments is a culmination of a long period of application of theories of public choice and new public management, coupled with value for money and other costs-benefits assessments of government interventions which have been spearheaded by economists. The role of consultants can be described as that of evangelising and diffusing these ideas within governments. 

I can think of some reasons why the now pervasive use of consultants by government agencies is detrimental to public good. (As a disclaimer, none of this should be seen as an argument that government knows best and consultants are always bad. Instead, these should be seen as generally observed problems with the role of consultants in governments. The objective is to drive home a point that goes against prevailing conventional wisdom.). 

1. Simplifies responses to complex challenges and detracts from serious introspection and engagement within governments. Their engagements has also contributed to simplification of public debates on these issues. 

Politicians, bureaucrats, and public want neat and elegant solutions to problems. But, as H L Mencken said, for every complex problem there is an answer that is clear, simple, and wrong. And consultants, by nature of their expertise and business models, are primed to provide such clear and simple solutions. 

This is especially so, but not only, in social sector areas like education, health, agriculture, and skilling. I cannot imagine how management consultants can help with persistent and complex development challenges like improving learning outcomes, poor sanitation and nutrition, low agricultural productivity, and pool quality of technical skills. Especially since the solution to none of these problems lies primarily in technical fixes and involves areas like state capacity improvements, account-based accountability, behavioural changes, social mobilisation, community engagement etc. 

The most famous examples of such "cons" are the vision 20X0 documents, Dashboards, War Rooms, Delivery Units, Data Analytics Units etc. I have come across several of these and have not found even a single one of them which have "delivered" anything even remotely close to their big promises and large costs. In fact, someone should do an objective assessment of all such projects (in say, India) that evaluates the achievements against the promises. In terms of value generation promised against actual achievement, I'm sure all these would count among the biggest failures in any sector. But the myth endures with same intensity. These ideas and their peddlers appear teflon coated. 

Even on areas like public private partnerships in infrastructure or outsourcing of public services delivery, or the use of technology in addressing chronic problems like low property tax demand or high electricity distribution losses or reducing traffic congestion, consultants have been central in simplifying the issues and considerably reducing the effectiveness of these ideas in implementation. In all these cases, the shiny solution seriously detracts attention from also attending to basic governance failures which are critical for any meaningful attempts to address these problems. 

An area where consultants exercise complete control is with industrial policy formulation across state governments in India. Consultants are a very important contributor to locking state governments into a very expensive race to the bottom with fiscal concessions, input subsidies, and marketing and branding. None of these have any evidence basis either from developed or developing countries. Amidst all this, the real issues of handholding and facilitation over the long-term to create genuinely hassle-free business environment gets overlooked. Even the Ease of Doing Business (EoDB) engagements have been reduced to an exercise in documentation, branding, and self-perpetuation. 

2. Enfeebles governments by taking over their core-functions and making them dependent on such consultants. It's increasingly the case that all thinking and analysis within the government is being outsourced to consultants. Consultants frame agendas, steer important policy making activities, moderate decision making, prepare important documents like file notings, Government Orders, and Cabinet Notes. 

So much so that it has become common for political and senior bureaucratic leaders to instinctively dismiss ideas and documents from subordinate officials with derision. The impact on morale within the bureaucracy has been devastating. This is despite the presence of at least a handful of officials in most Departments with the kind of expertise which even the best consultant can match.

The result is that the skill of preparing good GOs, Policy Briefs, Cabinet Notes etc has almost disappeared from several Departments. The reliance on consultants for performing core function of the government is near complete in these Departments.   

The most disturbing trend is in engineering departments, which not so long ago prided themselves in their  technical expertise. Such expertise has been rapidly disappearing, as engineering departments have progressively outsourced their design, project report making, estimates preparation, bid process management, contracting, and even work monitoring roles to consultants. The reality of a State Public Works Department without the expertise to even prepare an estimate or undertake execution management for reasonably large projects is not too far ahead in future.

The most pernicious forms of consultant engagements with governments is the use of the now common Program Monitoring Units (PMUs). These PMUs are the proverbial thin end of the wedge entry points for consultants in embedding themselves within governments long-term. It's not uncommon for the same consultant, including the same individuals, remain on the project for years, with the contract itself getting extended almost interminably. The PMU becomes the extended arm of the government. In reality, all it does is record minutes, prepare briefs and shiny presentations which keeps the show going (for the higher officials) while little happens on the field. 

These PMUs are now like the relationship between companies and their auditors. However, while corporate governance laws globally now mandate auditors have to be changed every five years, no such laws exist for consultants in governments. 

3. Is a very important entry point for regulatory and bureaucratic capture by commercial interests and fuels corruption. In commercially driven sectors like infrastructure, IT, urban development etc, consultants serve two roles. 

One, at best, they are the market makers for technology solutions, business solutions, new kinds of products etc. In the guise of thought leadership, the McKinsey knowledge insights about areas like smart cities, transportation, artificial intelligence, construction etc are good examples of sophisticated corporate lobbying to evangelise shiny  ideas with questionable value (for their contexts) and catalyse markets. Two, at worst, they are the backdoor for original equipment manufacturers (OEMs), contractors, and solutions providers to push through specifications and standards which favour certain vendors over others. 

In large PPP and other projects, consultants are also entry points for financial market intermediaries. There are informal relationships between consultants and the financial institutions which drive such engagements. All such engagements invariably distorts incentives within the bureaucracy and breeds corrupt practices.

In general, consultants have been the most important reason for transforming infrastructure projects and public procurements in general from being need-based and context-specific to being supply-based and vendor driven. 

4. Infuses a transactional and free-market ideology which elevates efficiency, value for money, and revenues maximisation over all else. In the process, other important considerations like social capital, local contextual factors, public demand, aspirational considerations, fairness, equity, and so on are marginalised. Most importantly, the work of consultants shrinks the space available for public debates that reflect political choices and factors. 

So, for example, investments in schooling or health care get evaluated based on narrow evidence frameworks of costs-benefits or value for money assessments. A school building or teachers may not translate into student learning outcomes, but schooling cannot happen without a school building or adequate teachers. Similarly road and electricity connectivity may not yield immediate outcomes, but no development can happen without road and electricity.

Or smart city projects becomes reduced to the implementation of a set of smart technology solutions with limited attention paid to smart community adoption, smart individual engagement, smart market integration, and smart policy alignment of the elements of these projects. These are value-free technical projects foisted on complex values-based communities and systems. Failure is baked ab-initio into the design. 

5. Provides the cover for promotion of questionable interests within governments. Apart from their own agendas, consultants also provide the cover for questionable policies and decisions which the executive wants to implement. Their reports are used by these governments to push through their own questionable agendas in project selection, financing models, land and resource allotments, and procurements. 

Consultants prepare conveniently framed project reports and financial viability models on projects which have limited public good basis or are poor value for money. Governments turn around and justify these projects citing the reports/models as having been prepared by a reputable consulting firm.

In fact, it may not be incorrect to describe crony capitalism as the relationship between politicians and bureaucrats on one side and contractors/vendors and financiers on the other side, mid-wifed by management consultants. 

6. Lack of any performance accountability. It should count as the biggest irony that the biggest proponents of the new public management theories refuse to hold their own work accountable to the principles of the same theories. Have you ever heard of an outcomes-based consulting contract? 

Consultants argue that they are only advisors, and are not in control over the implementation of their advice and plans. Never mind, if you propose unimplementable solutions, they'll never get implemented. And if you have not implemented what's been proposed, how can you be held accountable?

As I wrote earlier, "In a fair world, if these consultants are held to account for the value for money from their such advice to governments, then it will most likely figure among the greatest value destruction ideas in the history of development."

Update 1 (08.05.2023)

See this and this on the work of management consultants in India. 


Anonymous said...

As a long time management consultant who has worked on govt projects, I concur whole heartedly with the author's views.

Samarth Pathak said...

I agree with your views. Indeed, thought-provoking insights.