Sunday, November 14, 2010

Owen McShane: Large Scale Cities require Small Scale Advisors

Large multinational consulting and engineering firms have been taking over much of the work that was traditionally done "in house" by public bodies and by local government in particular.

While privatisation was a great idea when first proposed – and still is in many cases – in recent years the privatisation process has been largely taken over by these large consulting firms who have no interest in increasing efficiency and every interest in milking the system.

As Clint Krislov says in the introduction to Aaron M. Renn's Newgeography essay "The Privatization-Industrial Complex":

“I think this is just the latest way for people to make money off state and local governments. This is the new way the investment banks, their lawyers, and consultants squeeze the taxpayers. ... They’re going around making these deals, and it’s very lucrative. It’s like a circus coming to town.” - Clint Krislov

Renn acknowledges that "Traditionally, privatization was used as a tool that subjects government monopolies to competition from the marketplace, driving down costs and improving quality of service".

However, he reminds us, "Today, sadly, privatisation is less about operational effectiveness and more about providing jackpots for financiers who stand at the core of a growing privatization-industrial complex."

While cost escalations of large infrastructure projects within large public organisations are relativley common, the same "multinational takeover" now permeates all kinds of activities, in all manner of public bodies, from the very large to the very small.

Not long ago in New Zealand, most local District Councils employed an in-house engineer (indeed the City Engineer used to essentially share the CEO partnership with the Town Clerk), the District Plan was written by a local firm of surveyor/planners, resource consents were processed by local planning firms, and the City Engineer or an in-house Contracts Manager managed the roading and other construction and maintenance contracts.

Similarly, local contractors carried out the maintenance projects and built the swimming pools or whatever.

The rates that funded these activities stayed within the District.

These days the smallest council is likely to grant a monopoly contract to a major multinational to manage the resource consent process, and to another multi-national to write the District Plans, and even employ a third multinational to negotiate the contracts with these major corporates. These monopoly contractors have no stake in the local community and their rational self-interest lies in generating as much work as possible and collecting as much revenue as possible.

District Plans get thicker and thicker and soon local applicants have to employ multinational planning consultants to prepare the applications now demanded by these massive and complicated plans. Their consultants proceed to bleed the applicants dry while writing applications designed to match the size and complexity of the Planning Documents.

When the music stops the consulting firms swap chairs but just clip a different set of tickets.

Large multinational corporations are much more comfortable dealing with other large multinationals and so inevitably we find that local Councils are soon granting all the construction and maintenance projects to other large corporations most of which operate well outside the region.

Why aren't local companies winning any contracts?

The general solution to this problem of ever-expanding empires, dedicated to clipping the ticket, rather than serving the local community, is to promote genuine local or even sub-local government in those areas where the locals genuinely know best and have to live with the outcomes of decisions, and their impacts on friends and neighbours.


Anonymous said...

Quite frankly, a bit of polemic with no real point except to have a rant against the suppossed excesses of big business.

Now take a serious urban planning project such as the 10 Billion pound Birmingham Big City Plan, which involves the co-operation of the Birmingham City Council with affected local businesses and neighbourhoods at every level, and with some of the world's best international planning consultancies, all with the aim of pushing Birmingham (UK's #2 city) into the ranks of the world's top 20 cities!

What would become of Mr McShane's rant against the the modern phenomenon of involving planning consultancies if the project succeeds in raising the fortunes and quality of life for those living in Birmingham to a significant degree? I say- get some of that forward thinking over here where it is sorely needed in little-old backward anti-business Auckland- a city with a slightly larger population than Birmingham!

To suggest that these private planning consultancies are just there to clip the ticket, and that they have no interest in the welfare of Birmingham communities is more than laughable. The same really applies to the use of consultants anywhere- judge them by their fruits, and not by their business model. There are bad consultants, and there are good ones who you couldn't have pulled the job off without their help. Welcome to the real world!

Owen McShane said...

I am judging them by their results and the results are abysmal.

And their costs are massive.

CPG is drawing 125,000 dollars a week out of the Kaipara District - enough to employ about sixty people. KDC has only about 11,000 ratepayers.
What are the consultants doing? During the boom they were only drawing $55,000 a week. I hope Birmingham is doing better than that.

Anonymous said...

Excellent article Owen. You have obviously hit a raw nerve with anons reaction.