McKinsey & Company helped Cabinet Office find £800 million in savings

30 April 2018 Authored by Consultancy.uk

Global consulting firm McKinsey & Company is said to have helped the UK Government identify £813 million worth of savings in its procurement spending. According to a Freedom of Information request, the leading consultancy was paid £10 million for the cost-cutting advisory services provided to the Crown Commercial Service.

The Crown Commercial Service (CCS) is an executive agency and trading fund of the British Government’s Cabinet Office. It possesses an expanded remit to save money for the taxpayer and maximise savings in the procurement of commercial services for the public sector.

According to Spend Matters, an online platform launched by strategic marketing consultancy Azul Partners in 2010 to provides in-depth analysis of the procurement and supply chain sector, the Cabinet Office confirmed that consulting firm McKinsey & Company had been paid almost £10 million in the three financial years from 2014/2015 to 2016/2017 under the auspices of the Commercial Accelerator Programme (CAP). The admission came in response to a Freedom of Information (FOI) request submitted to gain more insight into McKinsey’s partnership with the CCS, specifically under the ConsultancyOne agreement.

ConsultancyOne was the predecessor to the Government’s new £2 billion management consultancy framework. Management Consultancy Framework 2 (MCF2) oversees a lucrative pool of business, procurement, supply chain and commercial consultancy contracts which are now up for grabs. Serious spending will take place, with the strategy consulting lot carrying an estimated value of £500 million. Business consultancy services are projected to cost the Crown £800 million, and complex and transformation consultancy services £750 million. 

McKinsey & Company helped Cabinet Office find £800 million in savings

The global management consultancy was reportedly hired on a performance-related pay contract, rather than charging a fixed fee. In return for roughly £9.8 million the Cabinet Office response indicates that McKinsey contributed to the identification of £813 million worth of potential procurement savings.

The headline figure reflects the total commercial savings identified by the CAP. McKinsey’s impact was felt in both directly identifying savings and also advising civil servants on how to develop their own CAP-based procurement saving initiatives. In the 2015/2016 financial year the potential savings identified by CAP were £282 million in central government, and £101 million in the NHS. In 2016/2017 total savings were restricted to central government spending and amounted to £430 million.

Ministers will expect consultants to provide ample justification for their expense. Opposition politicians, pressure groups, journalists, and the public at large will expect ministers to provide detailed accounts of the net benefits gained by hiring large consultancies. The government has faced a steadily rising tide of criticism for its alleged over-reliance on consultancies, while it cuts back on civil service personnel and public spending.

McKinsey has been at the centre of the storm, recently being awarded a £1.9 million consulting contract to help the British government implement some 800 Brexit-related plans. Deloitte came under heavy fire after a leaked memo castigating the government’s Brexit strategy came to light, forcing the consultancy firm to make a rare public apology.

Yet if the information provided by the Cabinet Office holds true and McKinsey helped identify £813 million worth of savings — whilst charging £10 million for their trouble — then it provides support to the notion that consultants ultimately help governments streamline their expenses.

Related: Higher consulting spending makes NHS trusts less efficient, study suggests.

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