Rein in consultancy spend to make savings

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Consultancy spend is rife with potential savings but one of the final taboos of corporate expenditure, according to procurement experts.

Vicky Panayiotou, global category manager, professional services, at drinks giant Diageo, identified two main obstacles to procurement getting involved in this area. The first, she says, is the fragmented nature of consultancy spend, with different parts of the business owning different budgets and a level of discretionary spend beyond this. “The second one is that it’s often senior directors in the business whom are deciding to spend this money and they’re working with firms that they know and trust,” she says. “Those two reasons make it a challenging category.”

“The value of what you’re buying is only as good as the people that you’re getting,” says Guy Allen, head of Real World Sourcing consultancy. “It’s not like other people-based services, such as cleaning, where the difference between a good company and a bad company is how well they’re managed. With consultancy, you’re not talking about a commodity at all.”

Alan Gotto, director of consultancy Constellia, says the key challenge is for procurement to get into the room in the first place. “Ultimately, you have to secure very senior sponsorship, so go to the CFO and say ‘we need to have a policy that states that we will be engaged in all consultancy spend and we need to track compliance’, so that you can then report it back to that CFO.”

Christoph Marr, group procurement director at healthcare provider Care UK, says internal customers are often happy for procurement to get involved if there is a strong business case.

The catalyst for procurement becoming involved in consultancy spend at BAE Systems was when a managing director of one of its business units sought to get a grip over escalating costs at the start of the economic downturn in 2008. “The mandate was that if people were going to engage with consultants, he wanted to see what they were buying and how it had been tendered,” recalls Nigel Green, category manager for consultancy. “It's not one of those untouchable categories any more.” 

The full feature, Mission Impossible, can be found in the March edition of Supply Business.

Supply Business is an international supply review published quarterly aimed at CPOs and senior stakeholders including CFOs, COOs and CEOs with an interest in procurement and supply operations. The magazine and online access is available on subscription. To subscribe click here or call +44 (0)20 7324 2746.

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