Money No Object! UK Government Invites Proposals from Consulting Firms

(I asked CCS if they wanted to comment on this article and they said no).

The Crown Commercial Service (CCS) is the central buying organisation for the UK government – particularly used by central departments, although any other public body (councils, hospitals, universities etc.) can use their contracts and frameworks too. It does some good work and employs a lot of hard working, smart procurement people. But sometimes it gets it badly wrong, as it has with the new management consulting procurement process.

Bids from potential suppliers are now in for the latest iteration of their Management Consultancy Framework, MCF3 as it is known. It is split into 10 Lots, ranging through general “business”, functional areas including procurement, and high-level topics such as “strategy”. Suppliers can bid for all or any of the Lots.

I have looked at the way the Lots and evaluation process are structured, and the way it is designed looks at first sight very strange. However, if you believe that it is aimed at meeting four key objectives, then it is quite sensible. Those objectives do not, unfortunately, include “delivering value for the taxpayer”.

Instead, they appear to be:

Make sure the big firms (McKinsey, Deloitte, BCG, PWC etc) win a place on the more “strategic” Lots 2, 3 and 4 for strategy, finance and transformation work. Why is it essential that these firms are successful? Simply because Ministers and senior civil servants want to use those firms, and CCS itself relies on the commission it gets from sales through its frameworks to fund itself. If they weren’t available via CCS, budget holders would find another way to engage those firms and CCS would lose revenue.
Make sure those firms get onto the framework without having to offer particularly competitive prices, so they will be happy to put senior people onto government work without worrying about the rates.
Ensure that there are a large number of “SMEs” (smaller firms) who win a place on the MCF. Ministers can then supposedly support the small business agenda and announce that “over 50% of the firms selected are small firms”.
But also make sure there is no need for any government department to actually use any of these small, lower cost firms.

So if these are indeed the objectives, how has CCS given itself the best chance of achieving this?

A Dodgy Price Evaluation

The way price is evaluated is a major factor here. So Lot 1 is general “business”, and up to 75 suppliers will be appointed to this Lot. Here, when the bidders “price” is evaluated, it is weighted at 90% of the total marks available. But the other 10% is just a tick box to say you will deliver the services (which is odd in itself – why would I be bidding otherwise?)

Price is calculated as the median of the prices offered for the 6 grades, from junior consultant up to Partner level. So basically, this is purely a price selection. The cheapest firms, which will be small firms that few of us will have ever heard of, will win a place. And because no-one has heard of them, and (in some cases at least) they are not very good, which is why they are cheap, they won’t be used much. But CCS and Ministers will have lots of SMEs on the list to boast about.

So then how does CCS make sure that the big firms succeed? For Lots 2, 3 and 4, price is only weighted at 10% of the total marks. The rest come from essay-type questions in which the firms have to show extensive capability. There is plenty of scope for some flexibility in the marking too, and given the low weighting, price barely matters. I would bet my mortgage that the “usual suspects” will all win places here.

But just to make sure that those firms don’t have to worry about not making enough money, the price on which marking is based is not calculated as the average (the mean) of the 6 grades, which would seem to be a logical approach, or a weighted average rate based on likely frequency of use of each grade. Instead, it is the average of just two grades, the two “middle” ones (senior consultant and principal consultant / associate director). Actually, that would seem to be the same as the “median” price which is how Lot 1 is defined – it is not clear why different terminology is used.

So that means you don’t have to worry much about the price you put in for Partner. There is one more constraint in that for each grade, the price must be between 10 and 50% lower than the grade above. But that isn’t too much of a hardship – for instance, you could put in this bid:

FIRM A

Partner £6000 a day

Director £3000

Principal consultant £1500

Senior consultant £1300

Consultant £1150

Analyst £1000

Your score would be based on the average of £1300 and £1500, so that is £1400, which is probably not too out of line with many bids. But once you win a contract, you can legitimately put your Partners in at £6K a day!

This is an “Illegal” Evaluation Methodology

There is also a technical/legal issue here, in that your evaluation score could be the same as another bid that puts in much lower rates for the top two grades (or indeed the lowest two), as long as you offer the same rates for those two in the middle. That seems to break fundamental rules of public procurement, that you have to make “value” your selection factor and you have to show you have a “fair” process. So Firm B (below) scores fewer points in the evaluation than firm A, even though their pricing is much better value overall!

FIRM B

Partner £2000 a day

Director £1750

Principal consultant £1500

Senior consultant £1320

Consultant £900

Analyst £600

I can think of no reason why the average of the 6 grades has not been used – other than to help the big firms charge a fortune for their Partners. Unless I’ve missed something here, it feels like either a real error or there is something odd going on. I’m not a conspiracy theorist, but you do sometimes wonder if there is some sort of plan for certain firms to suck as much money as possible out of the public purse at the moment?

This is the Argos Catalogue, not a “Framework”

Finally, there is another somewhat technical issue, in that users of the framework who want to choose a supplier for an individual project should (to be legally compliant) in most cases invite all the suppliers listed in the Lot to bid. But if you have to ask 75 firms (Lot 1) or even 30 firms (Lots 2 to 6 ) to put in proposals, that is quite a workload to manage and evaluate.

So I suspect CCS assumes that many users will just choose their favourites from the list, even if this technically breaks the regulations. We’re going back to the old days when I worked in government in the 1990s and that was how frameworks were generally used. Budget holders just picked their favourites from a preferred supplier list. The approach didn’t deliver value for money for the taxpayer then, and it doesn’t now.

But again, having such extensive lists of suppliers ensures that there is plenty of choice on the framework for users, so CCS maximises its own revenues. I’m afraid that looks like a major driver here, along with keeping Ministers, budget holders and the big firms happy.

What Does the Lord Think?

I do also wonder what Lord Agnew, the Cabinet Office Minister, thinks of this, or if he is even aware of what is going on. It was Agnew who wrote to senior civil servants last September telling them to “rein in spending on consultants” and that Whitehall was being “infantilised” by their over-use.

But when you see headlines in a year or two about “firms charging £6K a day for consultants”, you know why. Basically, the government, through Crown Commercial Service, has designed its procurement process to allow that. This is all very disappointing, given the undoubted talent of the people in CCS involved in this exercise.

PS Buying consulting services based on a “day rate” model is almost always the wrong way to do it, anyway. More on that another day.

PPS There is no mention of “social value” in the tender either.