Alastair Flanagan’s journey to work takes him from a rambling farmhouse near the Chiltern Hills to a state-of-the-art office block overlooking a garden square in London’s Marylebone.
The striking building is UK headquarters of the Boston Consulting Group, one of the world’s most prestigious — not to mention expensive — management consultancy firms. Flanagan is among its most senior partners.
A floppy-haired 60-year-old, originally from southern Africa, he joined the swashbuckling company in 1987 and rose through its besuited ranks to achieve considerable prosperity.
This year, Boston Consulting Group signed a £10 million deal to help the Government set up and run its Covid test-and-trace system. Under that deal, the firm agreed to provide 40 consultants to work on the project
Home is a Grade II-listed house in unspoilt countryside near the commuter town of Thame, which he bought for £2.1 million in 2010. It has walled gardens, a tennis court, stables and a competition-size equestrian arena.
His wife, Kate, farms sheep on their rolling acres and is a big cheese in the South Oxfordshire Hunt’s pony club. Various family members — they have four privately educated children aged between 22 and 27 — ski, shoot, row, collect vintage cars, play polo and compete at dressage and showjumping.
Financing expensive hobbies is a perk of the job when you are a Master of the Universe. And Boston Consulting, or BCG, employs some of the fattest cats in corporate Britain.
Accounts filed at Companies House show that its 966 UK employees earned more than £110 million in the year to March, equating to an average salary of £114,237. Each of its 75 partners trousered £943,687.
Those top earners include the Oxford-educated Flanagan, who according to his CV is an expert in ‘strategy’ and ‘transformation’. And from BCG’s point of view, he does plenty to justify his exorbitant remuneration. Clients pay the firm up to about £10,000 a day to secure his services on a project.
But who are these deep-pocketed clients? And what persuades them to pay such very high fees?
Well, recently, the people paying for Alastair Flanagan’s expertise have included… me and you.
A floppy-haired 60-year-old, originally from southern Africa, he joined the swashbuckling company in 1987 and rose through its besuited ranks to achieve considerable prosperity
This year, Boston Consulting Group signed a £10 million deal to help the Government set up and run its Covid test-and-trace system. Under that deal, the firm agreed to provide 40 consultants to work on the project.
Documents outlining the arrangement (which initially ran from the end of April to late August but has since been extended, at extra cost) were obtained by Sky News last week. And they make staggering reading.
It has emerged that the initial £10 million fee was determined by the so-called ‘day rates’ of the BCG staff who worked on it. The firm quoted from £2,400 a day for each of its junior staff to £7,360 a day for their senior colleagues.
This was, it has been claimed with a straight face, a generous ‘discount’ from their normal fees, in recognition of the fact that the taxpayer was footing the bill.
Even so, one five-man team working on a specific area of the system has been earning £25,000 a day. Two members of that unit commanded the top day rates of £7,360, while the remaining three received a comparatively modest £4,160.
To put that in context, you could buy and import a ton of PPE for roughly the amount this one small BCG team was billing the Governnment every 48 hours.
I gather that several of Boston Consulting’s key individuals were named on paperwork outlining the ‘operating model’ of the project. They include Flanagan, who is head of the firm’s London ‘public sector practice’.
His exact cost is unclear. But the £7,360 day rate that applied to Flanagan and his senior peers was then reduced by a further proportion, believed to be between 10 and 15 per cent, under an extra ‘Covid discount’ agreed with the Department of Health and Social Care before bills were sent out.
Even so, taxpayers have effectively been obliged to pay more than £30,000 a week for these elite management consutants.
That is the equivalent to an annual salary of more than £1.5 million. In other words, hiring the likes of Alastair Flanagan has cost the British public about ten times the annual salary of the Prime Minister and 50 times that of many healthcare workers, to contribute to our coronavirus response.
No wonder a host of MPs have been kicking up a fuss.
‘Truly shocking’ was the verdict of Shadow Health Secretary Jonathan Ashworth. ‘Shambolic,’ added Labour MP Toby Perkins, who raised the payments to BCG in a Commons debate.
‘Just imagine how far that money would go if it were given to local authorities,’ commented Munira Wilson, for the Lib Dems. ‘They are paying these consultants the weekly equivalent of what a nurse earns in a year.’
It should be emphasised that the cash being shelled out under this particular deal did not flow directly from public coffers into the well-tailored pockets of Flanagan and his 39 or so colleagues. It was instead paid to BCG, which has operating costs and other overheads to meet before it can turn its annual profit of £97 million.
Flanagan’s personal involvement in the project is understood to have been limited to a few days, not the entire eight weeks.
Be that as it may, the amount being splurged on this one management consulting contract lays bare a wider controversy.
For behind the scenes, the coronavirus crisis has led to unprecedented amounts of taxpayers’ cash being funnelled to blue-chip firms and their well-heeled partners.
Take the test-and-trace system. BCG is not the only company cashing in. In recent months, Deloitte — one of the ‘Big Four’ professional services firms (the others are KPMG, PwC and Ernst & Young or EY) — has had as many as 1,114 of its consultants working on the system at any one time. Each has been receiving a reported day rate of up to £2,360.
Another firm, McKinsey, which once employed Dido Harding, the Tory peer in charge of test-and-trace, was given £560,000 to design the ‘vision, purpose and narrative’ of the system. Ernst & Young nabbed two £400,000 contracts to manage publicity around it.
Meanwhile, staff manning call centres and testing facilities are being supplied by the likes of Mitie, G4S and Serco, another raft of private firms whose lucrative contracts are pushing the overall cost of test-and-trace up to £12 billion.
For that sort of money, we surely have a right to expect it to be, as Boris Johnson promised in May, ‘world-beating’. In fact, the opposite seems to be true.
Last week, the Government’s own scientific advisers said the system was having only a ‘marginal impact’ on reducing the spread of Covid, with ‘relatively low levels of engagement’, ‘testing delays’ and ‘poor rates of adherence with self-isolation’.
It emerged on Thursday that just 15 per cent of people are getting test results back within 24 hours, while fewer than six in ten of those who test positive for Covid-19 are being reached by tracers — well below the 80 per cent target.
Another firm, McKinsey, which once employed Dido Harding, the Tory peer in charge of test-and-trace, above, was given £560,000 to design the ‘vision, purpose and narrative’ of the system. Ernst & Young nabbed two £400,000 contracts to manage publicity around it
The Prime Minister confessed that ‘we do need to improve’ the system. Labour branded it a ‘dangerous failure’.
This month, it emerged that 16,000 Covid cases had vanished from test-and-trace because of a ‘technical error’ caused by part of the system being run on an antiquated version of Microsoft Excel.
It did not escape critics that this shambles was something the consultants failed to deal with.
‘I would like to know what these consultants are doing all day and why we are paying them,’ says Labour’s Toby Perkins.
‘If the system they created can be brought to its knees by an Excel spreadsheet reaching the end of its capacity, then it doesn’t look like the people earning such huge amounts have created something very sophisticated.’
The Mail would also like to know what tangible benefit the £7,350-a-day consultants have brought the taxpayer. So we asked the Deparment of Health. They had yet to formally respond by last night.
Test-and-trace is not the only area in which gargantuan sums are being funnelled to highly paid consultants. Figures compiled by Tussell, a research group that monitors public contracts, show that since the start of the crisis, the Government has awarded at least 202 consulting contracts, worth almost £204 million in total.
Some might regard this as a clattering gravy train. And that figure is likely to grow substantially in the coming months: although the law states that details of all contracts must be made public within 30 days, many are not being announced for months.
For example, it was only revealed this week that in April and June, the Department of Health and Social Care signed two deals with the polling company Ipsos Mori to provide ‘logistic support’ to some research studies. The deals cost £7 million and £27 million.
Tussell’s records show that the consulting giant PwC has picked up at least 20 contracts worth £24 million, including a £3 million deal to provide financial analysis to the Cabinet Office and a £1.4 million contract from the Department for Digital, Culture, Media and Sport to run a £200 million fund to distribute money to cash-strapped charities. PA Consulting received £12 million to help design and build ventilators.
McKinsey has 16 contracts worth £3.8 million, including a £1.3 million deal to provide a ‘troubleshooting team’ to fix problems with the Government’s Covid ‘dashboard’ and £307,000 to model scenarios for the Department of Health showing how the pandemic will probably develop in autumn and winter, a period for which it has so far seemed very underprepared.
KPMG trousered £1 million for three months’ work on the Nightingale Hospital in Harrogate. An advertising agency called MullenLowe received £16 million for ‘campaign services’, while another, 23red, was given £10 million for the same thing.
Boston Consulting has signed at least six lucrative agreements besides its test-and-trace contract, including a £4.5 million deal to advise the Department for International Development on ‘economic support’, £458,000 to advise the Department for Environment, Food & Rural Affairs (Defra) on seeking ‘clarity on the Covid-19 situation across the Defra portfolio’, and £427,000 to advise Defra on how to provide food to vulnerable people.
Meg Hillier, chair of Parliament’s public accounts committee, says she is shocked by the cost of many such deals and has launched an inquiry into the Government’s use of consultants. ‘What on earth are they doing?’ she asked. ‘It is a very steep increase in a very short space of time. You cannot just tear up the rules and dish out taxpayers’ money in this way.’
Among the issues her committee will look at is how the Coronavirus Act allowed government departments to award highly lucrative contracts without putting them out to competitive tender. At first, this was seen as a legitimate way to ensure essential work could be carried out at a time of national emergency. But Hillier believes many were poorly drawn up and have since been badly managed.
Ugly headlines have also been generated by deals won by firms with links to senior government figures. For example, Public First, a PR firm, landed an £840,000 contract from the Cabinet Office to run focus groups. The firm is run by close associates of Dominic Cummings and Michael Gove.
Hillier and others are further irked that many of the consulting deals contain no penalties for firms that make a mess of their jobs. Oddly, the junior health minister Helen Whately, whose department has handed out many such contracts, tried to justify this state of affairs by telling Parliament that ‘contractual penalties are often unenforceable under English law’.
In its defence, the consulting industry argues that firms such as BCG have played a key role in helping the authorities respond to a national emergency. ‘Government is dealing with an unprecedented volume of workload and major upheaval due to Covid-19 and using external resources has enabled them to work quickly and with intensity in many areas,’ is how the Management Consultancies Association puts it.
Michael Gove, asked to defend the £7,360 day rates charged by BCG, said ‘it is absolutely vital that we have all the expertise required from the private and the public sector in order to improve testing’, adding: ‘We need to reduce our spend on consultants overall, but in the meantime we’ll do whatever it takes to make sure we protect the NHS.’
The Department of Health argues that the test-and-trace system is the largest in Europe, and says we are testing more people per capita than any comparable nation. They add: ‘Over one million people who might otherwise have been unknowingly at risk of spreading coronavirus have been contacted.’
Yet even before Covid struck, the industry appeared to be wrapping endless tentacles around the government. Overall, government spending on consultancy firms rose from £316 million to £425 million, and then to £459 million in the three years that predated the crisis, with Deloitte alone hoovering up some £150 million each year. Spending on consultants by the Home Office was up by £51 million between 2018 and early 2020, an increase of 788 per cent.
Some say this bonanza reflects the Johnson Government’s distrust of the Civil Service. Rather than relying on Whitehall to improve public services, they are leaning on the private sector. But even within his administration the spending has caused concern.
Last month, in a leaked letter to senior civil servants, Tory Cabinet Office minister Lord Agnew argued that an ‘unacceptable’ reliance on management consultants has ‘infantilised’ Whitehall and deprived ‘our brightest [public servants] of opportunities to work on some of the most challenging, fulfilling and crunchy issues’.
Management consultants are helping to run entire ministries. In 2017, for example, the Department for Business, Energy & Industrial Strategy appointed Stuart Quickenden to serve as a non-executive member of its board of directors.
Today, on its website, the Department reveals that Mr Quickenden’s day job is ‘managing partner leading the Boston Consulting Group in the UK and Ireland’.
And his particular area of expertise? He is apparently a dab hand at ‘cost reduction’.