Utilising Professional Interims to Help Reduce the Budget Deficit – Removing Catch 22?

English: Francis Maude MP, Minister for the Ca...

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This week I am giving over my weekly blog to the publication of a White Paper that I wrote in April after consultation with colleagues.

This White Paper has been used by a number of Professional Interims in meetings with their Members of Parliament. The White Paper has been forwarded to Francis Maude, Minister for the Cabinet Office.

For the readers convenience, I am restating the underlying problem below:

PROBLEM STATEMENT

The Government is asking the Public Sector (both Central and Local Government) to cut costs significantly to substantially reduce the budget deficit before the next election. Secondly, the Government has an ambitious Reform Agenda that will probably impact every Government department and local authority.

Effective reform normally requires vision, political will, public support, leadership and effective transformation – with sustained momentum and huge intensification of effort. With Public Sector organizations likely to be weakened by the cuts, there is a very high risk that they will struggle with the transformation programmes required to deliver the Reform Agenda.

In the past, the Public Sector would have turned to consultants, contractors and professional interims to augment their own resources to help implement major transformation programs.

As part of its austerity measures to cut costs, the Cabinet Office introduced blanket controls on all consultants, contractors and professional interims. These controls require a valid business case, plus ministerial and Cabinet Office approval. In the short-term, these controls have been effective in reducing costs. Within the Professional Interim (“PI”)  industry, these controls have become known as the “Catch 22 controls” (“Catch 22”) because a PI or consultant is often required to help draft the business case.

The Public Sector will need to turn to the major outsourced services providers and big consultancies to deliver the programs to deliver the Reform Agenda. Despite protracted procurement and contract negotiation processes, these large firms will be ultimately be motivated to look after their own commercial interests. Unfortunately, as many National Audit Office publications show, there is a poor record of major technology and transformation programmes in the Public Sector – indeed that record was established in more normal times, rather than exceptional times.

This White Paper argues that the selective removal of the Cabinet Office’s Catch 22 controls, and the limited deployment of PIs, working client-side alongside Public Sector managers, would be in the national interest. It will also support the Government’s Small Business and Enterprise agenda.

18 responses

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    • David,

      Thanks for taking the time to read the blog and respond. I fear that what might have worked four years ago is probably no longer necessarily relevent to the political, economic & social challenges of the next twelve months. Do you have any other recommendations that you might want to share?

      Alf

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  10. Alf ,
    It wasn’t just the case of blaming the civil servants but as a group of people it would be difficult to argue that they were either in touch or understood business and commerce.
    Their record on saving money and reducing deficits has been appalling although no-one in my view has done more to reduce this country to penury than Gordon Brown who was a useless Prime Minister and is now on the lecture circuit pocketing huge fees for addressing hedge fund manager in Las Vegas during his latest assignment.

    The politicians have tried as best they can to understand how ordinary people think and live and to some extent the lower grade civil servants do understand, however the senior ones do not.
    This lack of understanding means they cannot judge the effects of their policies in terms of how ordinary people will react to them either through attempts to circumvent tax raising or by pricing themselves into benefits.

    In Singapore this understanding exists, so by decision treeing every policy they can get most of them right, make the population more prosperous and improve the tax take whilst providing better public services.

    The point is very simple:

    There is going to be an election in 2015 at the latest and the deficit has to be eliminated within 4 years.

    Big 4 consultants have been advising successive Governments on policy for years and have never reduced a deficit, civil servants have been in post for centuries and have never reduced a deficit, the politicians only talk and create deficits so who is left to reduce the deficit or tell the civil servants what needs to be done?

    Interims are the only people in the country capable of doing this job or of being streetwise enough to understand how ordinary people think and live and unless they are put to work soon, this government will fail to tackle the deficit in time unless it fails earlier.

    As it is people like Rowan Williams the so called Archbishop of Canterbury and sometime proponent of Sharia law, the medical profession and the public sector unions like Unison, the GMB and the RMT, are in common with the BBC, and other bloated organisations, ready to oppose these deficit reduction attempts from the sidelines.

    This to be fair is not made easier by the squandering of money in Afghanistan and Libya or by the insistence of David Cameron on the continuance of foreign aid, bailouts to the Greeks and bigger EC budget contributions.

    All this, just as the going gets tough, and just as the public start to vacillate having agreed, after the election in poll after poll that the deficit needed to be cut.

    • John,

      As always your comments are welcome and I thank you for your time.

      Whilst I recognise your individual points, I rather disagree with your overall conclusions.

      Personally I prefer a more collaborative/collegiate approach which is less confrontational. I am a great fan of Action Research as an effective approach to explore the way forward in a political minefield.

      I have just finished watching the Andrew Marr show and am really proud of Britain’s role on overseas aid, especially as it is going into vaccination programmes that save millions of lives in the World’s poorest communities. I think the Government were right to ring fence overseas aid. As for other foreign interventions, each needs to be judged on its merits and taking full account of the context – overall, I do not have any major problems with the UK foreign/development policy being followed by the current Coalition Government.

      My strongest disagreement is with regard to the position that you take in connection with Senior Civil Servants. My own experience of Senior Civil Servants is that they are very capable and are restrained by the “constant meddling of politicians”. A good example comes from this week’s Daily Telegraph story of the leaked diaries of Ed Balls. In terms of fiscal policy, the Treasury apparently took a very strong stand but was overruled by the Labour Government, especially the former Prime Minister, George Brown, when he was Chancellor. We live in one of the most respected democracies and it right and proper that the politicians in government have the final say.

      With respect, citing Singapore is not a good benchmark, in my view. Also the political, contextual and social challenges in Singapore are very different to the UK.

      However, I do agree with you that Senior Civil Servants are by and large generalists and need expert input, either in terms of subject matter expertise, or in specialized skills like delivering transformation. I support your view that consultants are not necessarily the right solution and have a poor record of providing value-for-money according to independent reviews of the National Audit Office.

      I also support your argument that Professional Interims are potentially the right solution for the Coalition Government to start to get some serious deliverables in their reform/transformation agendas. Unfortunately, natural selection process for both professional interims and consultants is currently apparently being curtailed by red-tape/Catch 22 rules in the Cabinet Office.

      Kind regards

      Alf

  11. Hi Patrick,

    Many thanks for your support & interesting comment.

    In my view, the purchasing officer in the NHS body paying a 1/3 agency fee should be named, shamed & probably fired!

    There has been enormous downward pressure on margins in interim management/temporary recruitment sector – large numbers of consultants have lost their jobs in the last two years. Framework agreements in the Public Sector & with major high street banks have often driven margins down to 5%-10% – and some desparate agencies, I am advised, are being encouraged to sign up to performance fees, as well.

    There are other quirks as a result of Cabinet Office Catch 22 controls. Previously, Public Sector organizations were going direct to approved agencies – now the same work is bundled up into “consulting” – the consultancies are often recruiting the same contractors – consequence – agencies and consultancies taking margin but end-contractor being squeezed on rates because of inefficient procurement in Public Sector. Francis Maude & Cabinet Office are to be congratulated on actioning Lord Green’s centralization of procurement initiative (announced last week).

    Kind regards

    Alf

  12. Hi Patrick,

    Thanks very much for your support and interesting comment..

    I must say that I’m very surprised by the the 1/3 agency fee that you quote. This type of mark-up was available to the top-end interim executive firms in the heady growth period of the 1990s but I suspect that by and large that it is a thing of the past – although I do know of exceptions, of course.

    Framework agreements in the Public Sector & big banks have driven down margins very aggressively in the last few years. Margins of 5%-10% are very common – some low-end margins also have performance criteria. Vast numbers of consultants in the interim management/recruitment sectors have lost their jobs in the last two years.

    In summary, paying agencies a 1/3 agency fee in the current economic & political climate is a disgrace and the NHS procurement manager should be named & shamed, in my view!

    Kind regards

    Alf

  13. This blog needs to be looked at in the context of Francis Maude’s letter and in the light of the Government’s wish to reduce the deficit and use existing civil servants to do most of the work.

    The record of civil servants when it comes to reducing the cost of anything, particularly their expenses, is abysmal.

    We are 17th in the world when it comes to delivering value for money for taxpayers, with countries like Singapore, delivering triple the value per taxpayer pound or dollar.

    Why?

    Whereas our civil servants tend to prepare three scenarios and miss out the costs, which a five-year old could see would arise as a consequence of proposed legislation, the Singaporeans decision tree everything to the n’th degree until the understand the whole cost picture.

    Only then do they enact legislation.

    An example of our approach is the Transport budget and the A14.

    For years sensible people including Jonathan Djanogly, the MP for Huntingdon, have been arguing for the A14 to be widened.

    Bearing in mind that 50% of this country’s physical imports and exports go into and out of the Port of Felixstowe, in Suffolk, at the southern end of this road. One can see that if one is £3 trillion GBP in debt, as we are as a country, any delay in getting goods (from what little manufacturing base we have left) to the Port of Felixstowe and waiting ships, is going to affect our balance of payments to the point where that port is the most critical terrorist target in the country – outside of the City of London.

    The response of the Treasury and it’s razor sharp brained civil servants?

    You guessed it – it was to block the widening of the A14.

    Then there is BT, supposedly a private company, but one which does things that the Government wants, such as buying up foreign telephone companies and building shareholdings in them.

    Currently we have 14.80 million people, who are either out of work, incapacitated, are NEETS, economically inactive, or forced off the unemployment register.

    At the same time, we have a broadband infrastructure which is in the dark ages and far behind those of South Korea, Sweden, Germany, France, Finland, the USA and many of our major competitors.

    With 1.4% GDP growth on average since 1946, we no longer have the means to employ these people (you need 3% growth for full employment), and therefore need high speed broadband now to enable these people to work for themselves.

    What is the Government’s response?

    To leave it to BT to engage in foreign military adventures, where we have no business whatsoever, to give overseas aid and to allow civil servants in the MOD and the Home Office to squander taxpayers money.

    Civil servants, with this little knowledge of how the world works, and the dire state of the country, are never going to effect meaningful change or cut the deficit because they are out of touch and were educated and trained to waste taxpayers money and justify their existence in a world of their imaginations which passed away in 1885 when the British Empire was at it’s height.

    Certainly they will not change fast enough to reduce the deficit by the next General Election, so if Francis Maude wants to be re-elected along with his colleagues, he needs to start using professional interims now. The civil servants won’t help him and the “Big 4” will not deliver because it is in their interests for this Government to fail, so that the “Big Spenders” (represented by the Labour party and the “Guardianista sandal wearing factions”) can come back and waste more taxpayers money on consultancy solutions, which are little more than a circuitous way to plunder the taxpayer and enrich themselves.

    • John,

      Many thanks for sharing your views on this post.

      I am not sure that I would necessarily agree with you on blaming the civil servants.

      I have worked with many civil servants at all levels from Permanent Secretary downwards and individually they often compare well, in my view, to their opposite numbers in the Private Sector.

      I would argue that inefficiency and ineffectiveness arises as a result of the culture, processes, meddling of politicians and absence of cohesive business strategy. Whether at national or local level, it is very hard for the politicians to be “hands-off” – there is probably an opportunity for more effective governance, with external board members and less intervention in “administration” by the “politicians”.

      I accept that there is an opportunity for the culture and processes to be more customer oriented, rather than pandering to powerful stakeholders. Most of all, there would appear to be a need for a cohesive business strategy. On Friday, Francis Maude proudly announced that procurement would be centralized saving billions of pounds – this is just one back-office process – what about finance, HR, property, facilities etc. – what about standardized and best practice processes (just like any multi-national)? With the Cabinet Office’s White Paper being delayed six months, there is probably a vacuum and a period of indecision and inaction etc. Personally, I am far from convinced that localization and mutuals will provide lowest cost nor most effective customer service.

      In my judgement, the Coalition Government, just like the Labour Government, will seriously struggle to deliver effective transformation. They will probably rely upon outsourcing (similar to the privatisations in Margaret Thatcher’s Government) or deploy the big consulting firms. I agree that the Government is missing an opportunity to deploy “professional interims” – the UK probably has the most developed professional interim market in the world – a real competitive advantage which is being eroded as a result of the Cabinet Office’s Catch 22 controls. In my view, the Coalition Government is just not doing enough for small businesses – with so much emphasis on outsourcing and off-shoring in the FTSE100/250, it’s the SMEs that will probably create the jobs.

      Alf

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