KPMG – the final word on consulting for nothing

We raved on last week about KPMG (and others) working for nothing on Government contracts. I asked a few people / organizations what they thought and here are the responses - some more interesting than others.

Alan Leaman, the CEO of the Management Consultancies Association who represent the large firms gave an interesting repsonse although I think he ducks the central issue somewhat!

“There is currently a major review underway of why and how central government uses and buys consultancy, lead by the new Efficiency and Reform Group.....We are discussing with the ERG how to ensure that all firms of real quality – large and small - have access to this market and the need to move relatively quickly to provide the necessary reassurance.  During this period, it is natural and right that different consulting firms will pursue their interests in their own way. They will  balance the need to sustain their own businesses while also maintaining capabilities and expertise that will be needed by the public sector in future, bearing in mind their responsibilities to clients, their own employees and the future of their firm.

The key for the future will be to ensure that the public sector recognises and acknowledges the real benefits of using consultancy and buys it in a way that is efficient and is driven by a desire to obtain the best value and benefit.”

I was more surprised at the similarly cautious response from the  Institute of Business Consulting,  who represent smaller consultancies, potentially squeezed out by KPMG et al.  I suppose they have to tread a little carefully;

"We ...are in continuing dialogue with them (Cabinet Office) to see how we can ensure that there is the fairest possible playing field when it comes to the award of any public sector consultancy work ..  We do of course recognise that there will be particular projects better suited to the largest practices and we are currently seeking reassurance from the Cabinet Office that it is only these types of projects which are attracting the sort of ‘generosity’ you highlighted.  We will be continuing to represent our members as effectively as possible in trying to ensure supplier selection decisions are fair".

The Cabinet Office gave us a masterpiece of Yes Minister-ese, avoiding any comment at all on the issue really:

It would be inappropriate to go into any detail of confidential contractual arrangements with suppliers. Government is committed to removing barriers many small businesses face in the procurement process and eliminate complexities and waste to meet the aspiration of 25% of Government contracts going to small and medium enterprises. Small businesses and social enterprises have a vital role to play in the growth of the UK economy and often they will be the most flexible, the quickest to respond and the most imaginative. That is why we are committed to making it easier for these organisations to compete for Government business.

Two interesting comments came firstly from Fiona Czerniawska, my co-author, and director of Source for Consulting. (I've linked to the report Fiona mentions below).

I think this is something consulting firms have to be very careful about, partly because of the reaction you’ve outlined which it’s likely to trigger among clients, but also this implies that public sector clients will want to buy conventional consulting services in the future in the same way that they have in past – and that’s an interesting question.  We did some research in November which suggests that particularly in central government, the public sector is looking for different types of relationships with the private sector.

And finally, I didn't get any official response from KPMG.  But I swapped emails with an old acquaintance who I shall call  the "Shadow", who works for KPMG.  The Shadow argued that actually smaller firms have more chance now given the focus on cost and that 'we have to adapt quickly to survive the clampdown on spend".  (He or she then returned to his or her life of crime-fighting...)

A different view on matters certainly - and that did suggest one factor which hadn't occurred to me before.  It is probably better in the long run for a KPMG to work for nothing for a while than to cut their prices significantly.  If they started offering their manager-grade staff for £600 rather than £1600, then they are setting new price expectations in the market, and a benchmark that may be difficult to move away from.  £0 a day is clearly a short-term 'special deal' and therefore less threatening to long term profitability perhaps.

And I still wait to hear from all our private sector readers who are clients of KPMG in terms of how the negotiations around "working for nothing" are going!

Voices (3)

  1. Peter Smith:

    Robert
    That’s it exactly! Your example is perfect – the dangers of setting price expectations…
    It’s a really interesting point- when is it better to give something free rather than at a discount? Actually feels like a topic for a 3 year PhD project or maybe a Harvard Business Review article!

  2. Robert Taylor:

    Regarding your comment the benefits of KPMG working for nothing as a short term incentive rather than starting to discount their services – I had an experience with a consultancy offering Value Analysis services that may have benefited from thinking this through.

    After building a relationship with the consultancy in other areas, we discussed having them carry out a few Value Analysis case studies on key sub-assemblies to “suck it and see” whether any savings could be identified and delivered. After some negotiation, we were offered a significantly discounted service for the first two activities carried out. Both activities were reviewed favourably, but when it came to engaging them on any further activity we had their discounted price firmly in mind as our expectation on what to pay.

    Unfortunately we have not used them since, but I wonder if they had offered a free demonstration first with clear communication on what the costs would be afterwards whether we would still be using them…

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