Over-Reliance on Consultancies in Public Sector

Case Study: BSNL and BCG

In May 2024, BSNL enlisted the American consultancy group, Boston Consulting Group (BCG), to aid in its revival strategy. BSNL paid BCG ₹132 crore for their services, which included recommendations like reducing the workforce.

Global Trend in Consultancy Dependency

• France spent over €1 billion on consultancy services in 2021.
• The Australian government expended A$21 billion on external labor in 2021-2022.

Critique of Consultancy Dependence

• Lack of Accountability: Consultants face no repercussions if recommendations fail.
• Misalignment of Incentives: Consultants are rewarded regardless of outcomes, burdening taxpayers with failures.
• Eroded State Capacity: Over-reliance inhibits innovation and capacity building within state enterprises.
• Loss of Institutional Knowledge: Reliance leads to a negative feedback loop where public employees lose critical skills.

Impact on Public Sector Governance

• Consultancy firms can create conflicts of interest due to overlapping client relationships.
• There is a risk of consultancy advice being profit-centric, conflicting with public sector mandates.

BSNL's Public Service Role

BSNL plays a crucial role in bridging the digital divide in rural areas. Aggressive cost-cutting strategies could impair service quality in these regions.

Proposed Alternatives

• Internal Capacity Building: Investing in strengthening public sector institutions by recruiting talent and fostering innovation.
• Empowering employees to take strategic ownership aligns with long-term goals and public service mandates.

Overall, this case highlights the need for governments to reconsider the governance model that heavily relies on external consultancies. Building internal expertise can help organizations reclaim strategic autonomy and better serve their public mandates.