Dutch central government cuts strategy and management consulting spend

17 July 2017 Consultancy.uk

The Dutch central government spent around €1.3 billion on external support last year, considerably more than the year previous, Consultancy.uk analysis has revealed. Around 8% of the central governmental spend on externals meanwhile went to professional services firms, with strategy and management consulting firms seeing a combined €39 million flow their way.

An analysis of data released by the Dutch government shows that the use of external hiring by the central government – consisting of eleven ministries and around thirty institutions – has been fluctuating in the past few years. In 2009, the government paid out nearly €1.3 billion to external firms, including temporary staff agencies, IT companies and consultants. By 2011, expenditure had fallen by around €400 million to approximately €900 million. The huge drop in expenses (-32%) was due to the austerity measures the government put in place as part of the package to deal with the country’s economic challenges at the time. In recent years the central government has gradually increased its spending on external consultants and temporary staff, and according to the latest figures, the central government has broken the €1.3 billion barrier for the first time in eight years.

Spending on the Dutch central government on professional services

Around 8% of this is spent on external professional service expertise. This segment of the central government’s spend was particularly hard hit by the global recession, and continued to decline throughout the ensuing years, receiving over €83 million less now than the 2010 rate of €189 million. Despite a recovery from the rock-bottom of 2013’s €88 million fee, professional services have seen the bounce to €118 million since stall, entering another period of decline over the following two years to €105 million in 2016. While the sector’s largest beneficiary remained accounting and finance support, as it has been for six of the past seven years, of this spend, a total of 21% went to external strategy advisors, and 16% to management consultants.

Strategy and management both saw dramatic declines following the crisis, with a continued fall in central government spending on the areas lasting until 2014, when both segments saw increase in publicly funded contracts, with strategy consulting bringing in €12.8 million and management consulting seeing €26.4 million respectively. Typically strategy consulting had been by far the larger sector, even post crisis, however from 2010 – when it saw income from central government spending of €47.6 million – to 2013, the segment saw that figure decrease by more than three quarters.

Over the following two years, spending in both sectors increased, however strategy consulting only began receiving a greater deal of business from the government in 2016, as their total spend on management consulting fell by over 8%. While this combined sector of governmental spending on external support has decreased however, with the two’s total sitting 7% lower in 2016 than the year preceding, governmental spending on professional services has increased overall.

Among the firms that are a preferred supplier to the Dutch central government for management consultancy are Atos Consulting, Capgemini Consulting, Deloitte Consulting, as well as range of local players. Strategy work is more often tendered on a case by case basis, with a survey among managers in the country released last year finding that all the large global strategy consultancies and the strategy wings of the Big Four are top of mind for strategic work.

Dutch central government spending on strategy and management consulting

Global trend

Government spending on consulting has recently come under fire in the Netherlands, after figures including both central and decentralised governmental organs, like municipal councils and water companies, among others, were released. Including estimates of decentralised governmental organs sees the total public sector spending on external firms rise by just over €1 billion to a total of nearly €2.4 billion. This figure is almost a fifth higher compared to the bill for hiring externals two years ago, a figure which Zakaria Boufangacha – a representative of FNV, the Netherlands’ biggest trade union federation of over 1.2 million affiliates – called “disappointing and worrying.” The total represents around 13% of all staffing budgets, which surpasses ministerial norms set by the government, which aims at seeing less than 10% of such costs incurred by external agencies, consultants and independents.

The increase in the Netherlands’ state spending on consulting is part of a global trend, which has seen rising investment in external support being hired to cover depleted civil services in the face of austerity cuts. According to the most recent National Audit Office (NAO) data, UK government spending on private consultants and temporary staff had risen by between £400 and £600 million since 2013. The NAO found that yearly governmental spending on consultants had reached £1.3 billion, with the largest suppliers being the Big Four firms PwC, DeloitteKPMG and EY, as well as UK headquartered PA Consulting Group and American strategy giants McKinsey & Company and The Boston Consulting Group.

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