PRIVATE SECTOR CONSULTANTS The dark art of consultancy, Part 1

Phil Farrell

Phil is a director in the development and public sector consulting team at Lambert Smith Hampton. He works largely for public sector clients, providing support on developer procurement, options analysis, viability, contract negotiations, disposals and general consultancy. Phil has worked in commercial property for over 20 years, during which time he has worked for Homes England, Solihull MBC, JLL, Avison Young, and National Grid.

Now here’s something new for ACES’ Terrier readers – an insider’s perspective on private sector consultancy. While written with some light humour, Phil exhorts councils to see consultants as human beings too. Part 2 will be in the next issue (and I already have it, so I won’t be putting any unreasonable deadlines on Phil). 

If you are reading this and work in the public sector, you will likely have had to employ consultants at some point. If you are reading this and are employed in the private sector, you probably work as a consultant to public sector clients. If neither of those cases apply, you should perhaps consider your choice of reading material. 

The public private interface 

It is no longer expected that local authorities, or other public bodies, will directly employ staff with all of the skill sets and experience that they may possibly need in every conceivable circumstance. In the post-austerity (1) world it is not even universally expected that public bodies should have enough human resources to deal with ‘business as usual’ projects, without bringing in additional private sector support. 

The public sector needs the services of private sector consultants (and vice versa if the consultant wants to remain employed for long), but how many in the public sector really understand consultants and consultancies? If you have not worked in consultancy are you able to get the best from the service you are spending so much taxpayers’ money on? 

I have worked at the interface between the private and public sectors for 20 years, from both sides of the coin, and I wondered whether a brief insight into the world of consultants would allow readers to make the best of this necessary ‘evil’. In this first instalment I will explain how consultancies work and cover a few of the major disconnects between the public and private sectors, and the second instalment in the next issue [Ed – 2026 Summer Terrier] will focus on how to make the most of consultants and their experience. 

I should first explain that by consultancies I am referring to commercial surveying practices, who principally offer services delivered by RICS qualified surveyors, such as valuation, agency, business rates, property management, building surveying, development advice, etc.  There are many other types of built environment consultancies (e.g. engineering, environmental, construction, etc.) and much of what I cover in these articles will be relevant to them as well, but principally I am talking about the world I know best (2): surveying firms. In my career I have worked for a number of consultancies: Avison Young (which was GVA Grimley in my day), JLL, and now Lambert Smith Hampton – LSH. As the BBC would always add in the interests of neutrality: other consultancies are available, though a lot less than there used to be due to a constant round of mergers and acquisitions. 

I have also worked for Solihull Metropolitan Borough Council and Homes England, so feel qualified to comment with a certain inside knowledge on the workings of the public sector. 

Why use a consultant? 

It is useful at this stage to consider why you would use a consultant (ignoring the potential answer that you are under-staffed, run off your feet, and just need some extra bodies to throw at problems). In truth, you don’t (or shouldn’t), appoint a company. You appoint individuals. Senior staff who have significant experience and knowledge of the aspect of commercial property you are facing. I always explain that I offer services (e.g. procurement of developers, viability appraisals, deal analysis and negotiation) that most public sector bodies only need rarely. It would make no sense for them to employ such a person full time, but on those rare occasions they need someone who has the experience to fully protect their interests. You are calling in people who have faced those issues many times, understand the legislation, know the market, have an extensive network of other experts if required, and know how to package up the advice to meet public sector requirements. It is worth your time to check you are getting the right individual, no matter the reputation or marketing power of the firm. 

When you have decided you need external help it should be comforting, and probably surprising, to understand that the private sector operates under very strict restrictions. We and our firms have to comply with a wide range of rules and guidelines from our professional bodies such as the RICS and RTPI. We have to conform to government legislation, both the general laws dealing with money laundering, GDPR etc. but also laws aimed specifically at us such as the 1979 Estate Agents Act. We have very robust internal procedures to avoid conflicts of interest, data management, and money laundering. We also have to maintain (and pay for) very significant professional indemnity insurance, which brings more requirements from our insurers. We even have to achieve certain ISO standards – often as a prerequisite to securing public sector contracts, which involves significant audit processes and a chunky fee. 

It can be exasperating for us to jump through numerous processes and compliance gateways just to register a new instruction on the finance system – I have lost count of the times I have had to justify why a local authority client is a low risk of being  a money launderer and an extremely low risk of not paying its invoices (my assertion that the last time the UK Government defaulted on its debts was in the 1670s under Charles II carries little weight for some reason). My point is that we are regulated, monitored and audited as heavily as our public sector clients, though a lot less publicly, thankfully. 

Requirements to earn fees 

So, like the public sector, we are well regulated professionals. Unlike the public sector we are required to make a financial profit (yes, I know it’s not that simple a distinction anymore, but I don’t have the wordcount to get into that minefield). All consultancies are required by their owners to make a profit, whether that is by the partners, shareholders, or in the case of LSH, the Skipton Building Society. It may be of interest to understand how difficult that can be. 

It is the responsibility of the experienced senior staff to actually win the instructions and bring in the fees. To do this they have to spend time understanding the market, getting to know potential clients, managing existing clients, deciding which opportunities to pursue, and ensuring quality control on all work delivered. They are supported by a range of more junior staff, ranging from fresh graduates up to associates (3).

Supporting these staff are the indispensable teams (sometimes known as ‘support staff’ in a throwback to the relatively recent upstairs-downstairs attitude prevalent in surveying firms) such as IT, finance, HR, legal, compliance, estates, research. 

The reality of this structure is that the senior staff are obliged to secure income to cover their own costs, plus also covering the salaries of all the senior surveyors, surveyors, graduates, apprentices and team administrators, and making a contribution to the salaries of the supporting teams listed above. Then there are office costs, professional fees, insurance etc. before we even come to profit. 

If they don’t achieve the necessary level of income it is not just their jobs at risk, but those of the numerous junior and supporting staff who work with them. And to be very clear, the property industry is cut-throat and there are low level redundancies happening all of the time, not just the high profile cuts seen during national recessions. 

I’m not trying to plead poverty for the poor struggling surveyors, but rather convey an understanding of why fee levels and invoicing are such a priority for the private sector. We have to constantly try to assess whether a project will be profitable. Does it make financial sense as a standalone project, or will it lead to a longer-term relationship or opportunity that may be profitable? Remember, all we have to sell is our time (4) and time is finite. Anything that takes up time that is not productive in some way makes it harder to reach the income levels we need. 

We have to consider ‘opportunity cost’. If I agree to deliver a project as a favour, or for minimal profit, will I have to pass up a future better opportunity because I don’t have the human resources? 

We spend significant time when producing a fee proposal, trying to understand what is needed: what level of staff? How many staff days? Do we need sub-consultants? As a professional I would be embarrassed to admit that I had got my sums wrong at the outset and ask for the client for more fees, and I would be more likely to simply deliver the project at a loss. 

But, I am more than happy to challenge a client against ‘mission creep’. “Can you just do this as well, seeing as we are paying you already?” seems a reasonable request from a client’s perspective, but, if unchallenged, can push a project from profit to loss very easily. 

A worse issue is vagueness in the original instruction, a lack of clarity in the services required. If not clarified (which is the mistake of an inexperienced consultant) this can result in a loss-making instruction, or a fall out with the client, or most likely both. As an example, I have a tender in my inbox currently to dispose of some potential development land for a local authority. It requires a fixed fee proposal, but its not clear if they expect us to secure a planning permission, or just manage third party planners. They require us to sell the land, but its not clear if that is simply through an open market tender process, or through a full procurement process. The difference in cost between the cheapest and most expensive options for just those two areas of uncertainty (and there are others) could be in excess of £150,000. 

I know I am putting the advice in the second instalment of this article, but it is appropriate to ask my public sector colleagues at this point to please really focus on the schedule of services in a tender. Do you know exactly what you need? Could it change? Is it reasonable to ask for a fixed fee commitment for a project that is far from fixed? Could you consider a phased instruction with the definable work being on a fixed fee, and the less certain elements being subject to later agreement? 

Tenders and procurement 

Now that I have mentioned tenders and procurement, we might as well jump straight into that can of worms. To be absolutely clear, as a tax payer I fully understand the purpose and importance of procurement legislation (unlike many of my colleagues, but more of that in the next instalment). Like many things in a civilised society, we must have it, but we all bemoan the paperwork involved. 

There are two important points for the public sector to consider when issuing tenders: 

1. They are very expensive to respond to 

2. Consultants are people too. 

Addressing these points in order: If you know who you want to appoint and have a procurement compliant means (and they exist) of doing a direct appointment, then please seriously consider using it. Producing a tender takes a huge amount of time (and thus cost) for a consultant. If they never had a chance of winning the work anyway, please don’t ask them to produce a tender just to ensure your compliance box is ticked. A client who tells me that they have issued a tender, but not to bother submitting a response (wink, wink) gets my everlasting respect. 

A new, and even worse, horror is the open tender that requires bidders to complete the full Invitation to Tender (ITT) to accompany their Sifting Brief/Pre-Qualification Questionnaire (PQQ). However, if the consultant does not get through the sifting brief/PQQ stage, their ITT won’t even be assessed. Consultants are being asked to produce lengthy and detailed ITTs that will never be read. 

Re-read that last sentence and take a moment to consider it. Does that seem fair? 

I have received two such tenders in the last year. Needless to say, I did not submit a response. I assume the purpose of this is to speed up the tender process, but there are other ways to do this. 

On the second point, I will ask if you have ever started the August break or Christmas holidays with a feeling of relief that your desk is clear after having issued that tender? Did it cross your mind that the consultant would then have to spend their holiday time responding to your tender, not being with their family? 

This happens with depressing regularity. As a prime example, I was called a couple of years ago on 22 December by a procurement officer from a county council I did not have a connection with. She told me a tender was being e-mailed to me that day, and could I confirm I would be responding by 6 January. I suggested it had been a long year and I, and probably all my competitors, would be taking Christmas off, so it would be best if she issued the tender in early January if she wanted a good response rate. Her reply was that the timing could not be changed as the appointment had to be agreed by Members in early February and the officers would need 3–4 weeks to score the responses and get it in the board papers. It simply did not register that consultants might have plans over the Christmas holidays that did not involve writing a tender response to cover the fact that officers wanted a leisurely scoring period and had made a premature promise to their Members. 

Just out of basic humanity, don’t issue tenders at the beginning of any of the major school holidays with a response date for the end of the holiday. 

So, in summary, consultants are there to provide you with a service. They can provide expertise, experience, a new perspective, or just resource, and by doing so they can pay their own salaries and those of many of their colleagues. A simple process, but one that can be much more satisfactory for both sides with a little mutual understanding. 

In the second instalment of this article I will pass on my advice of how to achieve the best results from consultants. 

Notes 

1. A policy described by the comedian Alexi Sayle, as, “The theory that the global financial crisis was caused by there being too many public libraries in Wolverhampton.” 

2. One of the requirements that the RICS puts on qualified surveyors is that we should only advise clients on subjects where we have sufficient knowledge. Sounds obvious, but how many people in life generally limit their opinions and advice to areas in which they are experts? 

3. All firms have slightly different hierarchies, with differing numbers of staff levels, and differing names for the positions. Very generally apprentices, graduates, surveyors and senior surveyors are learning the ropes, and help the more senior staff process work. Directors manage the teams, bring in the work and make the strategic decisions. Associates sit somewhere in between 

4. The cost of which should be based on the experience, reputation, connections and ability of the individual surveyor.