What's Happening?
The UK Cabinet Office has awarded a substantial training contract, valued at up to £456 million, to accounting firms KPMG and EY. This agreement, reported by the Financial Times and citing data from procurement tracker Tussell, is intended to provide
training to civil servants in various skill areas, including artificial intelligence, between 2026 and 2028. KPMG is set to receive up to £319 million, while EY will receive up to £137 million. This contract marks the largest single award to 'Big Four' consultancies since Tussell began compiling records 14 years ago, surpassing a £322 million deal awarded to PwC in 2012. The deal is described as an interim measure until the government establishes an internal training model, known as the national school for government, designed to reduce external costs. The maximum value awarded to KPMG represents nearly a quarter of its annual UK advisory net sales for last year, and EY's allocation accounts for roughly 13% of its UK consulting income over the same period.
Why It's Important?
This significant contract award raises questions regarding the UK government's commitment to reducing external consultancy spending. In 2024, former prime minister Sir Keir Starmer pledged to halve spending on external consultants, aiming to save taxpayers over £1.2 billion by 2026. Despite this pledge, Tussell data indicates that Big Four firms have secured £1.25 billion in government contracts so far this year, exceeding the £1.06 billion total recorded last year. This trend suggests a potential challenge in curbing reliance on external firms, even with stated intentions. The contract's size also highlights the substantial financial impact on the recipient firms, with KPMG's share representing a significant portion of its annual UK advisory net sales. The government's rationale is that this is for training, not advisory work, and is a temporary measure until an in-house training model is established. However, the scale of the expenditure underscores the ongoing debate about the cost-effectiveness and necessity of such large-scale external engagements.
What's Next?
The UK government plans to establish an internal training model, the national school for government, which is intended to eventually replace the need for large external training contracts like the one awarded to KPMG and EY. This initiative aims to lower external costs and bring more training capabilities in-house. A Cabinet Office spokesperson has stated that the government remains committed to reducing consultancy expenditure, with a target of £700 million in annual savings by 2029. The current contract with KPMG and EY is expected to be phased out once the in-house training model is fully operational. The Public Accounts Committee has previously warned about under-reported spending figures due to some consultancy payments being categorized as secondary fees, suggesting that future scrutiny of government spending on external services will likely continue. The effectiveness of the new internal training model and the government's ability to meet its savings targets will be closely watched.
Beyond the Headlines
The awarding of this substantial contract, despite a public commitment to reduce external consultancy spending, highlights a broader tension within government operations: the balance between leveraging specialized external expertise and developing internal capabilities. While the government frames this as a training contract distinct from advisory work, the sheer scale of the investment in external firms for civil servant training suggests a significant gap in internal capacity or a preference for specialized external providers in critical areas like AI. This situation could lead to further public debate about the efficiency of government spending, the role of large consulting firms in public service, and the long-term strategy for developing a skilled civil service. It also raises questions about accountability and transparency in government procurement, especially when large contracts are awarded amidst pledges for cost reduction. The move towards an internal training model, if successful, could represent a significant shift in how the UK government manages its human capital development.
