Under the Liberals, the cost of consulting firms has mushroomed from $8.4B in 2015 to an estimated $21.4B this year
By David Macdonald
and Jon Milton
There’s a hidden gem in the recent federal budget: the federal government is finally placing some limits on high-priced consulting firms. The feds aim to cut $7.1 billion from outsourcing and travel expenses, focusing on “management consultants” like McKinsey.
It’s about time the feds drew a line against the McKinseys of the world – the hidden hand behind the destruction of public services.
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It could have gone a different way. In the 2021 budget, the feds promised a “strategic policy review” to cut $6 billion in spending. In the past, such reviews have encouraged and implemented significant staffing and service cuts. This time, they’re going after consulting firms.
The cost of consulting firms has mushroomed over the past years – from $8.4 billion when the Liberals were first elected in 2015 to an estimated $21.4 billion this year. Those consulting firms represent a shadow public service – vampire consulting, one might say.
The feds’ reliance on consulting firms is rotting away government capacity. The more governments rely on consulting firms to implement big-picture strategic direction, the less capacity the public sector has to do so itself.
That downward spiral of capacity loss and reliance on consulting firms doesn’t just impact the budget – it also impacts the aspirations for public services. For consulting firms, that aspiration focuses on the increased use of other private consulting firms to solve problems instead of relying on the workers the federal government already employs to do just that.
Since the 1980s, the use of consulting firms expanded as the federal and provincial governments implemented a program of austerity and restructuring. They hired consulting firms to advise on program reviews, cost-cutting measures, and privatization initiatives. This trend continues as the federal and many provincial governments have embarked on significant austerity measures and privatization.
During those heady days of selloffs, tax cuts, and austerity measures, consulting firms acted as the central planners for this economic restructuring. They were often hired to advise which Crown corporations and government-owned assets should be sold off, how to structure the deals, and how to market the assets to potential buyers. The firms would also provide advice on how to restructure the remaining government-owned assets to cut costs by reducing service quality. They call these cuts “efficient” and “competitive.”
Since then, consulting firms have become even more embedded in Canadian policy-making. Consulting firms now advise on a wide range of policy issues, including health care, energy, environment, and national security. They have their hands in the procurement of goods and services, as well as in project management and implementation.
Today, these consulting firms continue to produce fiascos – the most recent of which was McKinsey contracts with the federal government being reviewed by the auditor general. In the U.S., the firm has paid out over half a billion in lawsuits for “turbocharging” the opioid epidemic. The Phoenix pay scandal – in which tens of thousands of federal workers are struggling to get their own paycheques that they work for – was the result of disastrous IT outsourcing.
Like a vampire, consulting firms are suave and sophisticated actors who aim to gain the trust of their targets. They convince government managers that public services are inefficient and that only consulting firms have the cure – for a sizable fee. They convince governments to give up their assets and resources to private actors, draining the lifeblood of public services and turning those that remain into versions of themselves.
It’s more important than ever that we understand just how deeply consulting firms have captured policy-makers at every level. Vampires, as we know, hate the daylight.
David Macdonald is a senior economist and Jon Milton is a senior communications specialist with the Canadian Centre for Policy Alternatives.
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