The issue of how governments use consultants is now centre-stage, thanks to Pierre Poilievre and the National Post deciding to go full Maude Barlow on the issue of federal government contracts with McKinsey & Company.  Chatter on twitter suggests that left and right are able to come together around two key issues: first, that having consultants do work means that government is somehow no longer accountable to the public  and second, plaintively asking “why do we need consultants, when public servants should be able to do that on their own?”

Regular readers will know I don’t have a lot of time for Big Consulting, let alone McKinsey (see here and here) or, God Forbid, Deloitte.  But most of what is being peddled about public sector consulting right now is just nonsense.  And since I’m a consultant and this blog is at least in part about public policy, I thought it would be useful to spend some time discussing what role consultants do and should play in government policy-making, at least federally.

So, the first thing to understand is that the term “consulting” covers a wide variety of services.  For instance, one of the biggest items that gets labelled consulting is IT consulting, in particular the development and maintenance of vast IT systems that control and manage things like payroll, pensions, Employment Insurance, etc.  Because the government has such large info-tech needs, and because provision of IT expertise is not seen as a core function of the public service, a lot of this work gets outsourced.  Obviously, outsourcing is no guarantee of quality, as anyone even vaguely aware of the Phoenix fiasco can tell you.  But the alternative to this kind of work isn’t all that obvious.  Government can’t create its own internal version of Accenture or Wipro; the best one can hope for is that it learns how to better manage contracts with external suppliers. 

Then there is what I call “strategy consulting”.  This is where the Big Four consulting groups tend to come in: when a Minister or the Prime Minister needs someone who can do a “big think” paper that re-orders some large aspect of policy, or (perhaps more at the provincial level than the federal one) when a government is intent on big “savings” and needs/wants a third party to identify them for political cover.  These kinds of contracts only go to big consulting firms, usually but not always from the Big Four because strategy changes require nice slide decks, or something.  These contracts are big – sometimes really big as recent stories about McKinsey suggest – but there aren’t all that many of them, numerically speaking.

With respect to basic policy analysis, policy research and evaluation, the government relies not so much on big consulting companies as it does on hundreds of small-to-medium sized consultancies like the ones here at HESA Towers.  Now, a lot of this kind of work could be done by public servants, theoretically.  There are loads of people talented enough to do the work.  But the basic problem is that among the staff with the social science/policy chops to do the work, pretty much every single incentive in the system works against them developing the subject-matter expertise required to detailed public policy work. 

This goes back a few decades, to the Mulroney era or maybe even Trudeau I.  Back then, central agencies (in particular the Department of Finance, the Prime Minister’s Office and the Privy Council Office) were struggling to stay on top of a bureaucracy that had sprawled since the 1960s.  It was hard to standardize policy across ministries, line departments sometimes seemed like they were busier defending their own turf than acting in the wider interests of government, and so on.  One of the reasons for this, it was surmised, was the fact that public servants tended to stay put in one department and hence identified with it more than with the government as a whole.  Enforcing career mobility and making people move around between departments became a way of creating greater loyalty to the broader government entity.

Some chunks of the civil service were spared this routine: scientists in places like Health and Natural Resources were too specialized to move, the Foreign Service was basically exempt from the policy, and Finance and Stascan have always had a pretty high share of lifers.  But among policy and program management types, mobility across departments became the norm.  The goal was that the policy elite should not actually get too devoted to any specific area of policy: rather, they should become experts in the management of the policy process, no matter the subject.  The government succeeded in creating a large body of employees who could manage diverse programs and policy processes, but in return it lost most people who really understood the context of specific programs.  And this is where small consultancies staffed by precisely those people with domain-level expertise come in handy.

Just to give you an example from my own experience: about fifteen years ago, the department that is now ESDC that runs the Canada Student Financial Aid Program (quite efficiently IMHO) paid my company to explain how various student support programs – federal student aid, provincial student aid and various tax credits – interacted at various levels of family income.  That is to say, they paid us to tell them how their own policy actually worked because while they ran a program efficiently, they weren’t especially knowledgeable about the wider context in which the program operated. 

This is, as they say, a feature of the modern public service rather than a bug.  You might think that people in charge of major files in line departments in Ottawa have deep contacts with counterparts in other countries with whom they could trade notes/ideas or keep up with the academic literature on the subjects they are meant to be masters of, but on the whole you’d be wrong.  No doubt there are a few who do, but because they move from department to department and file to file so frequently, there aren’t a lot of incentives to get into this material in any depth.  Hence the need for consultants in the policy process.  Over the past four decades, the federal government traded policy content expertise for policy process expertise, but the need for that expertise didn’t disappear; instead, it just re-located outside the public sector and got purchased and consumed and integrated into policy-making in a different way.

You are, of course, free to think that this shift was a Bad Thing.  But two things need to be recognized here.  First, this new situation does not imply any loss of accountability for the public sector as a whole.  What advice a department chooses to seek and act upon remains the responsibility of the Minister and their deputy, whether that advice comes from a consultant or a public servant.  And second, there is neither a quick nor costless way to eliminate a dependence on consulting.  Yes, there is enough talent in the public service to take over many functions currently outsourced to consultants.  But one would need to drastically change the career and incentive structure for public servants to have the time and space needed to acquire the contextual knowledge required to do away with consultants.  And you might lose the process knowledge to boot (although, if you’re like Paul Wells, you might argue this knowledge isn’t worth much these days).