MOD paying over £5,000 a day (plus VAT) for consultants – we have the evidence

At a time when public sector budgets are stretched, and the MOD has announced huge cuts in manpower, they are paying a US consulting firm over £5000 per consultant per day  (plus VAT and expenses) - on a project aimed at saving the MOD money.

We have featured our investigation into the UK Ministry of Defence's consulting contract with Alix Partners several times over the months. You may remember, we got the contract through an FOI request (see here for details), but the consultant day-rate was "redacted" i.e. kept secret. We complained about this, and last week we had a nice letter from the MOD's Head of Corporate Information, Katie de Bourcier, saying that "the arguments for disclosure outweigh those in favour of release". Thank you, Katie.

So we have what is virtually the whole contract now. The names of the consultants cannot be released - which is fine, we don't give a damn frankly who they are. But we do care about the rates, which are now public.

The contract lists two Managing Directors and six Directors of Alix Partners who have been engaged by MOD, all at the same day rate, which is £3950.

(It's curious that two different levels of consultant are charged at the same rate, but that's a minor point).

They are contracted for between 132 and 396 days each, giving 2,354 days in total and a total cost of £9,298,300.

Plus we have the the 30% "success fee" on top of this, which takes those rates up to £5,135 per day, plus VAT, which makes it £6,162 a day.  Then we have expenses, such as mileage and the consultants' lunch allowance of £10. No, really, they can claim that on top of the six grand - see our previous post for the expenses discussion.

OK, let's take out VAT, as at least that stays within the public purse. But that's still over £5,000.  Per person. Per day.

Now, even if this contract had been awarded through a full and open competition, we would have severe doubts. But this was awarded, in our opinion (see here), illegally in terms of EU regulations - without open competition or a full procurement process.  (We've found no evidence of any fraud or corruption in the process, we should stress).

However great a job Alix Partners are doing - ironically, their role is to help MOD negotiate with suppliers to get better deals - this level of fees is ridiculous and way above market prices, we would suggest. And all at a time when the Forces are struggling to meet the demands of several wars, and a recent announcement outlined that a further 7,000 MOD civilian jobs would go. We don't really go for hyperbole here, so we use the word with some hesitation, but these rates are obscene, and the lack of proper competition is disgraceful.

We wrote to Ursula Brennan, the Permanent Secretary at MOD, a month ago, asking her to cancel the contract - we're still waiting for a reply to that. We'll let you know. But we did get a comment from the Efficiency and Reform Group in Cabinet Office.

For some reason this contract between MoD and Alix partners fell outside of the normal Cabinet Office - ERG approvals process, where all such consultancy engagements , likely to be over 9 months in duration, require Minister for the Cabinet Office and Chief Procurement Officer review and approval. Given the timeframes, MoD Commercial colleagues will be asked to present their case from a value for money perspective over the next few weeks.

Interesting - do you get the feeling Cabinet Office are not very happy with MOD? Although they have known about this for months, so getting MOD to present their case "over the next few weeks" is hardly a rapid response. And here is the MOD press office comment.

“Alix Partners is providing specialist assistance in negotiations with industrial suppliers to deliver significant savings across defence within very tight timescales and overall is expected to save hundreds of millions of pounds. Overall the MoD has delivered dramatic savings to its consultancy expenditure and it is now a tenth of what it was five years ago.”

We'll come back and analyse the MOD's comment shortly. Anyone doing Critical Thinking A level out there? Can you spot the two logical flaws in the MOD argument?

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Voices (11)

  1. Final Furlong:

    It does amplify one thing: that ERG still doesn’t have any real teeth. Present a business case? And guess which consultancy will write that business case.

    And if he’s not happy with that ‘value for money’ business case, will Collington stop it? Of course not. It would put him in the firing line of the ‘top gun’ at the MOD…

  2. Alan Cooley:

    It is great to see that taxpayer’s money is spent in such a profligate way. If the project needs doing let us do it with teams who really understand Strategic Sourcing, Relationship Management, and Negotiation in complex supply situations, and who really deliver mind changing situations. Therefore a small group of people who are not part of the “MOD system” but who can have perhaps one person in the team who understands the pitfalls would seem right. Paying bonuses for doing a job well seems crazy, especially if the team is already receiving a full fee. In my experience paying bonuses to consultants creates the wrong behaviour internally and externally– a sensible fee with clear deliverables is more appropriate. I would expect to be able to field quickly a senior level team with industrial experience of up to 12 people for a maximum of half the price they are paying (i.e. £ 16,000 per day and NOT £ 32,000 per day) and with NO bonus. A team as outlined above would really understand relationship and negotiation dynamics and has excellent references from very satisfied clients. One of our team has Military experience in the Marines at a senior level and understands the frustrations that operational staffs feel at such wasteful spending. He would probably lead such a team, (he is now an experienced VP level sales person so would help to understand how the sellers will react to any given negotiation situation and can thus input to the negotiation preparation, planning and execution process adding huge value).

  3. anon:

    Thats just the tip of the iceberg, you should delve deeper, it’s abhorrent how much they spend and don’t actually know, remember the Sun article light bulb 23p or so and £2.30ish to fit it…………. there are many other consultants being paid over £500 per day.

  4. Nigel Robson:

    Another triumph of hope over experience? Suspect procurement processes apart (I always understood that the “unforeseen” circumstances for Urgency to be invoked amounted pretty much to the sky falling in), as Dan says, they at least have one demonstrable and outstanding skill. I’ve had occasion to gravely wag a finger and say “no” when consultants even dared suggest a success fee, on the grounds that “We would be paying your fee to be successful anyway, because it was what you claimed you could deliver. Perhaps you might like to work at risk until you submit sufficient agreed and independently substantiated hard cash savings to justify funding your activities in the first place?”

  5. Dan:

    By getting those rates out of the MOD, they at least prove they not half bad at negotiating…

  6. Jason Busch:

    Alix Partners has no international reputation as a leading sourcing and cost reduction firm. In the states, it is playing second fiddle to Alvarez & Marsal in the biggest workout/advisory deals, even in its core turn around business. If you’re going to pay a premium for a service and the assurance they will achieve their objectives, best to go with a leader, not an unknown. At these rates, MOD should have gone with a proven firm with a long, global track record of A&D (private and public) cost reduction. I could name half a dozen firms to shortlist …

  7. bitter and twisted:

    Peter: yes, 10 mil chucked at four pairs of ****s looks dodgy, but its chicken**** compared to the aircraft carrier fiasco.

  8. Jaye Cook:

    Hi Peter,

    Some pretty significant figures there, and I don’t doubt any of your points. The article doesn’t however outline the ROI, which is clearly the key statistic – Would a consultant at 50% of the cost deliver the same returns, and if not, which solution is the most appropriate?

    I look forward to your comments….

    Jaye Cook (a much more realistically-priced consultant!)

  9. Watcher of the Skies:

    Uh oh….

    Don’t walk down any dark alleys in the near future.

    Nice work Peter.

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