At the height of the covid-19 pandemic in 2020, the UK government and NHS signed off on a number of contracts with large management consultancy firms without going through the usual competitive tender process. KPMG were hired to build seven temporary Nightingale hospitals to cope with an anticipated influx of patients needing critical care. Deloitte were recruited to help create a network of up to 50 testing facilities around the UK, while McKinsey were given the job of advising on strategic alternatives to Public Health England. These contracts did not go unnoticed. Indeed, the Financial Times remarked that the “string of complaints from health officials and industry figures over the services provided have raised concerns at the rapid outsourcing of consultants during the pandemic.” [1] In total, just over £500 million was spent on covid-19 contracts awarded to 35 consulting firms, the majority (95%) being fast tracked or agreed through previous framework agreements. [2] Such figures highlight what The BMA described as a “Covid-19 windfall for private providers.” [3]
However, although spending has grown recently, we should not forget that the NHS has a long history of using management consultants. [4] Given the size and complexity of the NHS—as the fourth largest employer in the world—this is perhaps not surprising. Management consultants, as external experts who are willing and able to provide advice and resources at short notice, can be very effective for the right task and client. But their use also brings controversy, especially when public money is at stake. A key question is whether consultancy delivers improvements such as increased efficiency or enhanced service quality? If not, how can we explain its huge success?
Our ongoing research has sought to address these questions. Three years ago, we published an article which showed for the first time that, all other things being equal, using consultancy was associated with subsequent inefficiency. [5] Across a sample of 120 English NHS Trusts, using two standard sector measures of efficiency, we found the exact opposite of what might be expected. Each year between 2008 and 2013, these trusts spent on average £1.2 million on consultants with only a minority seeing any improved efficiency as a result.
In our latest research, we show that a key predictor of consultancy expenditure is previous hiring. In other words, high levels of use of consulting services in the past are linked to greater use in the future. [6] This suggests that demand is being inflated even when the use of consultants is undermining efficiency. And perhaps more alarmingly, our new research suggests that reforms such as outsourcing and private financing of hospital buildings had worse efficiency outcomes when carried out with the help of consultants’ advice.
It is important to note that it was not generally the case that poor efficiency in individual trusts led to subsequent use of consultancy. Rather, the opposite was true: using consultants generated the inefficiency. Nor was it the case that the use of external consultants resulted from a shortage of managers. On the contrary, we found that the biggest users of consultants were those trusts that employed relatively more managers.
Clearly more work is needed to unpack these findings and explore the reasons why many management consultancy projects appear to fail. However, it is hard to avoid the conclusion that NHS organisations and politicians have become increasingly committed, if not addicted, to using external consultancy, even when these services appear not to add value.
This raises concerns about the effectiveness of NHS procurement in controlling expenditure on management consultants. It also begs a wider question: is the continued and unregulated use of consultancy services in the public interest? Our own research has noted the limited contribution management consultants appear to make to improving health services. [5,6] However, this may only be the tip of the iceberg. Others have cast doubt on the ethical conduct of some consulting firms and their willingness (or not) to regulate practice [7]. Most recently, McKinsey – the world’s most prestigious firm – paid a $600 million settlement in the US for advising big Pharma clients to boost the opioid content of prescription drugs. [8]
Such concerns, of course, are unlikely to be enough to halt the use of consultants in the NHS. It is notable that McKinsey was hired recently to review NHS technology services, despite its settlement in the US. [9]. In April, NHS England also proposed a revision to its “oversight framework,” effectively removing constraints on how much top trusts spend on consultants [10]. Of course, not all of this spending is problematic. There are many cases of important and useful work carried out by external consulting firms, large and small. However, the almost complete lack of effective governance or regulation or even basic information, suggests that some form of independent intervention is needed. [11] This could mean licensing or other ways of protecting clients, such as an ombudsman. Most likely, the large consulting firms will argue that such intervention is unnecessary and probably counter-productive. But is this the case, or has the time now come when the benefits of regulation outweigh the risks?
Ian Kirkpatrick, professor, University of York
Andrew Sturdy, professor University of Bristol
Competing interests: none declared.
References:
[1] Financial Times (2020) ‘Consultants in line of fire over projects to tackle coronavirus’,
[2] The Citizens (2020) https://twitter.com/allthecitizens/status/1367175544014528515?s=11
[4] Kirkpatrick, I, Lonsdale, C. and Neogy, I. (2016) ‘Management consulting in health care’, in Ferlie, E., Montgomery, K. and Reff Pedersen, A. (Eds.) Oxford Handbook of Health care Management, Oxford: OUP.
[5] Kirkpatrick, I., Sturdy, A., Reguera, N. and Blanco-Oliver, A. and Veronesi, G., (2019) ‘The impact of management consultants on public service efficiency’, Policy and Politics, 47, 1, 77-95.
[6] Sturdy, A., Kirkpatrick, I., Reguera, N., Blanco-Oliver, A. and Veronesi, G. (2021) ‘The management consultancy effect: demand inflation and its consequences in the sourcing of external advice’, Public Administration – https://onlinelibrary.wiley.com/doi/10.1111/padm.12712.
[7] Craig, D., and C. Brooks (2006) Plundering the public sector. London: Constable.
[8] Financial Times (2021) ‘It needs to change its culture’: is McKinsey losing its mystique?’
[9] Consultancy UK.Co. (2020) https://www.consultancy.uk/news/26105/mckinsey-company-hired-to-review-nhs-technology-services
[10] Brenan, S. (2021) Top trusts granted unlimited consultancy spend under new NHS England rules, Health Services Journal, 8 April.
[11] Can management consultancy be regulated? | PolicyBristol | University of Bristol