Wonderful, wonderful Copenhagen… and more on procurement of consulting services

I presented today at the Federation of Danish Knowledge Advisers annual meeting and conference in Copenhagen. The big issue – much as in many European countries – is the decline in public sector work as Governments face difficult economic times and budget deficits.

I spoke about the importance in that environment of buyers really understanding what it is they want from external advisory support (an issue Fiona Czerniaswka and I covered extensively in our book), and how contracting for outcomes, deliverables and outputs, and risk sharing mechanisms can help assure that providers deliver real value.

Before the formal proceedings, one of my hosts asked me whether I thought Government spend on consulting was going to get 'back to normal' soon. Not back to where it was a couple of years ago, I replied, because it had really got out of hand. But I said that it will grow again, and I gave three reasons (which I added to my speech as I felt they might stimulate some controversy!)

  1. As public sector employees are going to reduce in numbers, and many will be fearful for their own futures, it will be difficult for internal staff in many organisations to really focus on change, new initiatives and developments that politicians and top management will still no doubt want to see happen.
  2. There are still capability gaps – both in terms of breadth and depth – in many areas within the public sector.
  3. The public sector in my experience consistently under-estimates the cost of employing staff. As this is only likely to increase (for instance, greater pension costs), using external resource will become more attractive.

What do you think? Are they fair comments? Even if they are, is consulting going to grow again in the public sector? Or will the years up to 2009 be seen as a golden age, never to return for public sector consulting firms?

As well as my musings, Robert Gibbs of Accenture spoke in a pretty balanced way about value-based pricing. In one example, they took full risk on a cost reduction programme, then took 10% of the savings up to a capped maximum. Having a cap of course means the consultant is not incentivised to go beyond that; a reducing but uncapped % gain share for the provider is usually a better approach.

I fully support this type of mechanism as a concept. However, Robert pointed out that you can only apply it where you can asses the value added with some certainty, which means you need a clear and agreed baseline, and the ability to measure change from that baseline; and of course the value must be clearly associated with the provider's effort rather than just being a random event!

Copenhagen is pretty wonderful actually; we like it a lot, but it does seem very expensive now, particularly for food and drink, with 8 Krona to the pound rather than the 10 we got last time we were here. But I could quite happily move into the Brewpub permanently; wonderful beer brewed on the premises and excellent food as well!

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