Council consultants axed for cost-cutting failures

Today councillors were being asked to approve the appointment of another firm of consultants, which is being promised a £12.5 million payment if it can meet the savings target.

The cash-strapped council is aiming to make £9m of savings in 2013-14 and a total of £149m over the next five years through more efficient purchasing arrangements.

Last year, consultants Mott MacDonald were appointed as the council’s “procurement partner” in a bid to identify how the savings could be made. But a report to the full council today said the council had decided not to renew the agreement when it terminates on March 31.

Instead, it proposed appointing another firm, Ernst & Young, which has already been working with the council “in an advisory capacity”.

One source said: “There was an expectation the first consultants would have found areas where they could improve procurement and make a lot of savings, but after six months it became clear they were not producing the goods.”

Under the proposed “gainshare” deal, the council will pay Ernst & Young £12.5m in return for the £149m savings being achieved. But the report added: “This cost could be greater or less as it is entirely performance based.”

Conservative finance spokesman Iain Whyte said he was in favour of the council bringing in help to improve its procurement, but changing consultants after less than a year looked like wasted time and effort.

He said: “It throws into doubt whether some of the big savings projected really are achievable. Is it the case that our procurement is so poor that this can be achieved?

“And if they cannot make these savings then the budget set for this year is at considerable risk with no back up plan to make up the difference.”

Concerns have already been voiced that saving money on purchasing deals could put smaller suppliers out of business and harm the city’s economy. The Federation of Small Businesses warned local firms could be squeezed out of bidding for council contracts.

Green finance spokesman Gavin Corbett said: “Most people accept that the council could make its massive buying power work more effectively and there are huge savings targets ahead of us.

“However, before we enter this agreement with Ernst & Young we need to understand what went wrong with the current contract with Mott MacDonald and be confident that the same problems won’t recur.”

A council spokesman said Mott MacDonald had received some payment from the council in accordance with their contract, which based reward on savings achieved. But he said the amount would not be revealed because of “commercial confidentiality”.