Is Outsourcing Governance to Consulting Firms a Good Idea?

Government Ministries Consult ‘Big Five’ Firms

Newsreel Asia Insight #39
Nov. 9, 2023

An investigation by The Indian Express has unveiled a narrative that seems more akin to corporate boardrooms than government departments. Using the Right to Information Act, the report reveals that over five years, 16 government ministries disbursed 5 billion rupees to five multinational consulting firms.

From April 2017 to June 2022, the ministries assigned 308 consultancy tasks to Pricewater-houseCoopers (PwC), Deloitte Touche Tohmatsu Limited, Ernst & Young Global Limited, KPMG International Limited, and McKinsey & Co – including projects related to NITI Aayog and Aadhaar.

This revelation may stir your curiosity about the nature of these assignments. According to the Express, they range from financial audits to strategic advisories, from technical consultations to the evaluation of e-governance awards.

The outsourcing of assignments to multinational consultancies prompts us to ponder whether this reliance on external expertise undermines or enhances our governance structures. For the ordinary citizen, it’s a matter of understanding how these decisions, made in conference rooms and offices, trickle down to the everyday reality of life in India.

For its investigation, the Express had to file 60 RTI applications and a dozen appeals, in addition to reminders that met with varied responses. Some departments claimed to have “nil” information, others denied requests citing exemptions, and some remained silent.

The figures are not just numbers on a spreadsheet; they may represent significant policy decisions affecting us. Therefore, it’s a matter of concern for all citizens.

Beyond questions of the government’s capacity and capabilities, there are at least three fundamental issues with the outsourcing of governance.

One, consultancy firms operate on commercial principles and their primary allegiance is to their shareholders, not to the citizens of the country.

Two, outsourcing to global firms can also raise questions about national sovereignty. Key policy decisions may be influenced by international entities that are not necessarily aligned with the country’s interests or values, potentially undermining the government’s mandate.

Three, there is a risk that the profit motive of private firms could conflict with the public interest. Decisions that are crucial to the welfare of the citizens might be made with a focus on efficiency and profitability rather than on social equity or justice.

There are several instances where governments have faced criticism for outsourcing key responsibilities to global consultancy firms, leading to controversies.

The U.K. government faced criticism for outsourcing parts of its COVID-19 response, including the test and trace system, to various private companies and consultancy firms. The system faced numerous issues, including delays in contacting people and technical glitches, leading to questions about the effectiveness of private sector involvement in public health crises.

South African power utility Eskom entered into contracts with global consulting firm McKinsey, which later became embroiled in a scandal involving allegations of corruption and state capture. McKinsey agreed to pay back fees to settle the claims, but the incident raised serious questions about the oversight of consultants and their influence on state-owned enterprises.

The Australian government’s “Robodebt” welfare recovery scheme, which involved outsourcing to private firms, was heavily criticised for wrongly issuing debt notices to welfare recipients based on flawed income assessments. The government eventually scrapped the program and agreed to repay hundreds of millions of dollars.

It’s not just about the outsourcing of government functions but also about the transparency and accountability of such decisions. It’s about ensuring that the common citizen understands where and how public funds are utilised. After all, every rupee spent by the government is a rupee earned by us, and all decisions made by the government affect us.

The obstacles encountered by the Express in collecting information for this story suggest that the government’s perspective could be misguided.