Saudi Arabia to consolidate consulting channels into colossal contracts

17 April 2018 Consultancy-me.com

Saudi Arabia is set to kick-start its stalled infrastructure pipeline by consolidating its outsourcing procedures, with individual consultancies to be hired for each of its state agencies and big contracts up for grabs.

According to reports, the Saudi government has drawn up plans to streamline its advisory channels in an effort to improve efficiency, trim budgetary waste and reduce the potential for corruption, with the overall aim of delivering fresh momentum to a number of sluggish infrastructure projects in a programme worth hundreds of billions of dollars.

As part of the revised practices, the government will, over the coming months, consolidate its consultancy roster by contracting individual management firms to oversee the array of projects at each of its concerned ministries and agencies, such as the Saudi health, housing and energy departments – believing that the cross-over of multiple consultancies may be contributing to the slow delivery of projects.

Further to enhancing efficiency, the reports suggest that the government is also seeking to restructure its project management processes, with the awarded consultancies to be given responsibility for monitoring the projects – a task currently undertaken by the government departments – in addition to design and execution.Saudi Arabia to consolidate consulting channels into colossal contractsThe five-year contracts, which could individually carry fees in excess of a $1 billion – with one source from an unspecified ministry telling Reuters of his department’s planned $1.3 billion tender package for services – are expected to fall to the big regional and foreign consultancies with international project management expertise; with the additional capacity-building rationale that the consulting leaders will train the local bodies to manage such future functions internally.

The move forms part of a broader effort to standardise project workflow mechanisms in the Kingdom, with one government advisor to the deputy crown prince Mohammed Al Sheikh having previously stated a belief that the Saudi government was throwing away up to $100 billion annually on inefficient procurement.

One of the measures to address inefficiencies has been the establishment of the National Project Management Organisation (with the government having since appointed the American engineering giant Betchel to manage the entity) – which will act as the overseeing body for the project management offices to be rolled out at each of the state ministries.

As one of the original advisers on the set-up, the consultancy Faithful+Gould predicts the acceleration of processes through the PMO introduction could see up to $35 billion in infrastructure contracts awarded this year – with the total pipeline now at a potential worth of $1.75 trillion after a recent spate of fresh announcements, while the reported consulting packages are expected to be tendered in the upcoming months and finalised by the end of this year.

Do consultants have a legitimising effect in the Middle East?

19 April 2019 Consultancy-me.com

Do the often kowtowing international consultants operating in the Gulf simply grant legitimacy to local rulers? The answer’s not so simple says regional expert Calvert Jones, who has conducted a fascinating research study on the local consulting industry.

Now valued at $3 billion annually in the GCC alone, the Middle East management consulting industry has exploded since the global financial crisis, growing at a heady 20 percent clip up until 2014 when the dive in global oil prices and attendant austerity measures briefly applied the brakes; ‘brakes’, in this context, meaning growth which at its lowest point in 2015 dropped to around 6 percent.

The slow-down was brief. With the plummet in oil prices spurring regional governments to act on economic diversification – captured in a range of ambitious national transformation agendas – together with the emergence of a range of digital advances now sweeping the public and private sectors, fresh impetus was given to the local consulting market; this year forecast to return to double-digit growth.

Of that $3 billion consultancy price tag – with close to half of it handed over in Saudi Arabia – the public sector accounts for approximately a third of the take, the vast majority of that paid to foreign consultancies and in particular the advisory wings of the Big Four and global strategy giants such as McKinsey and BCG. Scrutiny of these practices – especially in the wake of the Khashoggi killing – has also increased.

Copping much of the media flak, McKinsey for its part has backed itself as a force for good in the region, contributing greatly toward local economic, education and healthcare development. But the question remains, even if making a positive difference, do international consultancies confer legitimacy on authoritarian governments – “helping to prop up and even strengthen repressive, illiberal regimes?”Does the Middle East consulting industry have a legitimising effect?One person well-placed to address that question is Calvert W. Jones, an Assistant Professor in the Department of Government & Politics at the University of Maryland and author of ‘Bedouins into Bourgeois: Remaking Citizens for Globalization’. Jones spent 19 months between 2009 and 2017 conducting field research in the region, including into the consulting industry and the notion of conferred legitimacy.

According to Jones, some of the consultants she interviewed themselves expressed this concern, particularly when due a range of market factors they may have grown less inclined over time to voice too strong of an opinion. Yet, whether this is indeed the case is not so clear. Among other findings and areas of research, Jones conducted several experiments on the subject of legitimacy at universities in Kuwait, involving some 650 students.

“Conventional thinking about experts in politics suggests not only that experts rationalise governmental decision-making, but also that they confer legitimacy – meaning that the public may be more likely to support government initiatives when experts with the relevant knowledge, training, and experience are involved. In the Gulf, both experts and ruling elites tend to think along these technocratic lines,” she states in an article for the Harvard Business Review.

Experiments

While not addressing potential international legitimacy or other geopolitical or business and trade issues, Jones sought to test the idea of conferred legitimacy as to public opinion in the local polity. For the experiments, she asked participants to imagine that their country’s leaders were launching a major reform to improve either education or infrastructure, exposing them to a variety of mock news articles outlining the likely benefits from the government initiative.

In the first experiment, half of the reports featured reference to a team of top international experts assisting with the hypothetical reform, including their credentials and extensive experience elsewhere, with this detail absent from the remaining half. She found that subjects who read that experts were involved were far less likely to support the reform – indicating the ‘involvement of experts’ may have led to a significant drop in legitimacy. The results, however, are somewhat murky.

In the second experiment, Jones explored the impact of nationality on opinion, with otherwise identical reports on expert-advised infrastructure reform referring to either American, Chinese, or Kuwaiti advisers. She found two surprising results. Support for the reform did not differ significantly whether led by Chinese or Kuwaiti experts, but did however for the American-led reports, with subjects expressing significantly lower support.

The Chinese were also considered far more capable than their American counterparts, which may in itself provide a clue. “It’s not necessarily evidence of profound anti-Americanism, let alone a new love for Chinese experts,” Jones cautions; “Most likely, it reflects Kuwaitis’ longer experience with American experts, which includes their frustration with the lack of progress on various reforms.” The Kuwaitis, she suspects, are just far less familiar with Chinese consultants.

“This experimental evidence raises doubts about the ability of experts to rationalise and legitimise authoritarian rule,” Jones concludes. “Indeed, my research suggests that international experts can actually undermine legitimacy, potentially reducing domestic support for autocrats and weakening their regimes… In my experience, residents of these countries are increasingly critical of their governments paying hefty fees to foreign experts and consultants for little in return.”