Want Some Cheap Consulting? How the Big Firms Game the Supplier Selection Processs
Psssttt! Wanna buy a cheap consultant? Top quality, only £20 a day. Or, tell you what, you can have some for a tenner if you like. Yeah. Just £10 a day!
The UK’s central government procurement arm, Crown Commercial Services, has various frameworks in place that enable users to select and engage from a list of management consulting firms. So how was it that the rate card for the different levels of consultants on certain “lots” includes the bargain rate of £10 a day for a junior consultant from one of the world’s very biggest and most highly regarded strategic consulting firms? Or how about the same rate for a junior and only £30 a day for a senior consultant from one of the big four audit / consulting giants?
What’s going on here? Well, it is almost certainly related to how the firms “gamed” the evaluation process in order to win a place on the framework list of approved suppliers. CCS has had some unhappy experiences with consulting frameworks, including having to pull an entire exercise in 2017 when it became clear that the big firms weren’t going to make it onto the list!
Generally, when price is evaluated in the tender (along with quality and other service factors), the buyer asks for day rates for the different levels of consultant – perhaps junior, senior, manager, director, partner. Then there is some sort of adding up process, maybe weighted to reflect different likely use of the different levels, to arrive at an overall cost.
So let’s suppose your rates are something like this,
Let’s also suppose that the buyer is weighting each at 20% to arrive at a composite average rate – in our case here, that would be £1560 per day.
I might worry as a bidding firm that such a number could be on the high side. So how can I adjust that, without actually reducing my profit margins (and hitting my £600K a year partner’s salary)? Well, we are unlikely to be putting many Partner level people into these projects, particularly for government work. So we can take a bit of a hit on that rate. And as for juniors – well, let’s just work on the basis that when the Department for Internal Affairs comes looking for a proposal, we’ll say we haven’t got any available. Let’s face it, clients don’t really want the graduate trainees who can barely run a spreadsheet anyway.
But we might want to up the middle levels a bit to recover the lost margin on Partners, as that is where we really will be supplying people. So how about this?
Junior £0 (free!!)
Our average rate now is £1320. That’s a 15% improvement in overall pricing and a lot more marks when it comes to the evaluation. And in reality, the likely revenues if anything might be a touch higher.
So why did CCS allow this to happen in this particular case? Well, it might have been difficult to stop – you can reject “unfeasibly low” bids under EU procurement regulations but the overall prices aren’t unfeasible. And of course CCS desperately wanted these firms on their list, so users will access the contract and CCS will make their margin, which funds the organisation.
Maybe all this doesn’t really matter, but it is worth remembering the lengths and the creativity that the partners in these firms will go to in order to protect their £500,000 – £1 million+ annual salaries. But do think carefully about your evaluation process if you want to avoid this sort of game-playing.
Finally, if you want to hear more interesting stories about buying professional services, positive and negative, I’m a keynote speaker at a (free) virtual conference on that topic organised by Matrix MM on Tuesday next week, 21st July. More details here!
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