It’s no secret that the ‘big four’ providers of services to the govtech sector have come under scrutiny since the collapse of Carillion in January 2018, which reportedly cost UK taxpayers £148 million, according to the National Audit Office.
More focus has been placed on the ‘big boys’ and how the public sector awards contracts, following the collapse of the construction firm, after it built up unsustainable debts and a large pension deficit.
Head of the National Audit Office, Amyas Morse, said in June that the government needed to better ‘understand the financial health and sustainability of its major suppliers’ before engaging in contracts, in order to protect the public interest. Carillion held around 420 public sector contracts at the time of its collapse.
However, the big four continue to dominate when it comes to public sector contracts – picking up the majority of deals. In 2018, according to Tussell, which compiles data on public procurement. PwC were top with 73 awarded contracts, Deloitte second with 66, KPMG received 51, and EY got 43 contracts, joint fourth with Mott Macdonald.
With massive challenges facing the public sector, like cutting costs while still meeting citizens’ needs, updating technology, cyber security and closing the skills gap, transformation needs to be delivered. And while the big four may hold a large chunk of public sector contracts, are they really driving the best transformation in the public sector? And if not, then who can deliver this change?
“Deloitte and PwC are major thought leaders and are driving research and influencing debate,” says Richard Kelly, author of Constructing Leadership 4.0, which looks at how businesses should be adapting their leadership structures in light of the digital economy and collaborative workplace.
Kelly suggests that Deloitte, in particular, is “contributing the most to organisational transformation as it relates to the fourth industrial revolution”, or Industry 4.0, an era of business characterised by the merge in physical, digital and biological spheres.
Early this year, Deloitte released research that looked at the four leadership personas succeeding in this new era of business.
It found that many executives expressed a genuine commitment to improving the world, however some are struggling to develop effective strategies to do this in rapidly changing markets. The research also revealed leaders were focusing on using advanced technologies to protect their positions ‘rather than make bold investments to drive disruption’.
In a survey by Deloitte last year, 86% of leaders thought their organisations were doing enough to create a workforce for Industry 4.0, however this year the number was only 47%, which Deloitte attributes to a recognition of the growing skills gap.
PwC also marked the new year with a public survey release. Its Global CEO Survey called on CEOs to harness technology and upskill their workforce to meet the needs of people and their communities moving forward.
“Focusing on AI, mobile, digitisation and big data, we explore the ways in which government can draw on these new technologies to improve public service and give Britain a fairer future,” says Daniel Burke, strategy and public sector partner at PwC.
“This might mean helping the government think through how a new technology like blockchain can be used to help make the UK a great place to trade with and trade to while keeping us safe at the same time.”
PwC’s Perfect Ward app, for example, is having a ‘big impact’ on the quality of care and patient experience, according to the firm. The online inspection app hopes to make quality inspections easier, so healthcare professionals can spend more time caring for patients than doing admin.
“A number of NHS Trusts are already reporting that Perfect Ward has been key to changing behaviours and has revolutionised their care audits,” says Burke.
KPMG and EY also claim to bring international experience, sustainable solutions and drive transformation in the public sector. EY, for example, has worked with the City of Edinburgh Council to introduce intelligent automation in various areas of the council’s work, including landlord registration, social housing repairs process and social work scheduling.
However, Kelly suggests that despite a couple of the big four being ‘major thought leaders’ in transformation, they have not been fully able to deliver this within organisations. “At present I don’t think they’re making practical progress or change within organisations. This is because organisations themselves have not woken up to the profound implications that fourth industrial revolution and ‘Industry 4.0’ will have on organisational structure and mindsets,” says Kelly.
“What is the public sector doing in all of this? Practically nothing, in my view. They are steeped in ego structures and mindsets,” says Kelly. “Their attempts to build digital networks is not so much to create collaborative transformation, but as a communication tool.”
He says the public sector could learn a lot from companies like Spotify and Daimler, who have transformed their organisational structures using the swarm theory, replacing the conventional management hierarchy with self-organising teams that collectively innovate and make decisions.
“The swarm organisation is a direct response to the challenges of the fourth industrial revolution and one I think will have future potential,” continues Kelly.
Big vs small
Often the big four secure contracts due to their economies of scale, global appeal and their experience. However, Siobhan Farlow, consultant at Odgers Interim’s Government Practice, says that is not the case anymore.
Farlow suggests that the expertise the public sector requires can now be found in smaller firms and individuals, and that often the big four will not provide the best value of money, despite economies of scale and the experience they bring to projects.
‘Migrating IT services to a new system, moving office locations or implementing new models of service delivery are prime examples of where the ‘big boys’ create reverse economies of scale by over resourcing and over costing simple projects,’ says Farlow.
‘It’s becoming increasingly unnecessary for government departments to bring in the heavy hitters for medium-sized projects. In-house management consultancy skills are now much more advanced across the public sector and if external support is required, they can simply be augmented with one or two professionals, as opposed to entire teams of analysts so often supplied by the big four.’
In September, Brightman released a white paper arguing that SMEs hold the key to the digitisation of the public sector. The report said: “SMEs often have the most cost-effective and innovative approaches to solving problems, and because they aren’t burdened with layers of bureaucracy, they are generally more agile.”
It claimed this agile and nimble nature of SMEs would mean they could be more adaptive to change and new technologies, which will ultimately help the digitisation of the public sector and will improve the delivery and lower the cost of public services.
It suggested 10 recommendations to the government to make procurement fairer and include more SMEs, including introducing fairer terms of business for businesses of all sizes, to try and prevent larger firms using their size to negotiate better payment terms.
Companies with a social conscience
Alongside bureaucracy and lack of agility, Richard Skellett, founder of global technology solutions and services company Allied Worldwide, says the big four also have the wrong motives to undertake public sector contracts.
“My belief is that the government should be buying services from social enterprise companies,” says Skellett, rather than earnings per share companies.
“When you run an earning per share company, the job of the board is all about benefitting the shareholder. If you run a social enterprise, there is no shareholder. So, your instruction is about supporting the people and local communities,” he says.
Skellett launched a social enterprise called Digital Anthropology at the end of 2018, to try and raise awareness of the impact of new technologies on individuals and communities.
He says the public sector needs to look at the displacement of people within the digital revolution and should focus on the creation of jobs alongside the development of technology. If not, he says, it’s ‘a bit like self-harming’ – automating jobs, but not creating other jobs for those workers to do.
“Government has got to get more aware of what the real issues are,” Skellett says. “Which means we need to be looking at getting different opinions from experts who want to make a social impact and who are not just trying to go off and make some money.
“I question very much the value that the big four bring,” he says. “If you’re going to go off and have impartial advice, and you’re spending public money, that advice is aimed at supporting services, it’s wholly inappropriate to spend it with an earning per share outsourced consulting company. It should be spent with a social enterprise company who is going to reinvest those profits back into the business and go off and help the communities that will be affected by the disruptions that are going on.”
At a time when transformation is essential across the public sector, the debate about the big four and their impact on the public sector is a far-reaching and much-discussed one that’s unlikely to go away soon. We’ll continue to listen with interest!