Context: This article is based on an Editorial “Work of consultancy firms with government must be regulated” which was published in the Hindu. Recently, it has been in the news that the ministries of the Union government have paid around Rs 5,000 million in fees to global consulting firms in the last five years.

High Use of Consulting Firms by the Government

• The Union Government has recently engaged a global consulting firm to prepare a foundational Vision 2047 document for identifying the country’s strategic priorities. 
• Most of the government projects are usually executed by consulting support, such as cleaning the river Ganga, the Swachh Bharat and Jal Jeevan Missions, corporatizing the Ordnance Factory Board, or assisting Uttar Pradesh in its aspiration of growing the state’s economy to $1 trillion. 

Continue Reading: Government Preparing To Release Vision India 2047 

Why does the government hire consulting firms?

• The increasing complexity of effective programme formulation and service delivery. 
• The increase in digitization of public service delivery demands specialized technical expertise.
• It adds to the quality and effectiveness of public service delivery.

What services do consulting firms provide to the Indian government?

• Strategy and Policy Formulation: Global firms like McKinsey, BCG, and Bain advise on high-level policy decisions, identify strategic priorities, and develop long-term plans.
  • Assistance in the Swachh Bharat Mission and advising on river Ganga clean-up policies.
• Programme Execution and Management: Big 4 firms (EY, PwC, KPMG, Deloitte) provide technical expertise, manage project implementation, and monitor progress.
  • Setting up Programme Management Units for the Jal Jeevan Mission and supporting the corporatization of the Ordnance Factory Board.
• Digitization and Technology Implementation: Consultants help in designing and implementing digital solutions for public service delivery.
  • Providing technical support for Aadhaar rollout and designing mobile apps.
• Capacity Building and Training: Consulting firms with expertise in public administration and training assist government officials in skill development and knowledge transfer.
  • Conducting training workshops and developing capacity-building programs.
• Research and Data Analysis: Consultants help in research to inform policy decisions, and analyze data to improve program effectiveness.
  • Providing insights on poverty reduction strategies based on data analysis, and conducting feasibility studies for infrastructure projects.

What are the Challenges posed by the Consulting Firms?

• Increase in Government Expenditure: A very high amount is spent on consulting firms, which can fund additional infrastructure projects or social welfare programs.
• Lack of Accountability and Transparency: The government struggled to hold them accountable due to vague contract terms.
• High Dependency: Over-reliance on consultants weakens the capabilities of government departments. This led to a scramble to hire internal staff once the project ended.
• Conflict of Interest: There are always concerns about potential bias and conflicts of interest.
• Job Displacement: High dependency on consulting firms impacting the jobs of IT employees of Public Sectors.
• Cultural Differences: If a foreign consulting firm is hired to advise on rural development projects in India, it would be ineffective in addressing the needs of the local community.
• Damage to Reputation: If a hired consulting firms’ project gets a data breach and exposes sensitive information, then it will damage the government’s reputation and erode public trust.

Conclusion:

The era of consulting firms assisting in public policy formulation and implementation is here to stay and it is required too. However, to counter its adverse impacts, there is a need for a comprehensive regulatory ecosystem, encompassing aspects like fairness and transparency, reasonable disclosure of the value that consultants add as well as clear protocols for knowledge transfer to government and internal capacity building.