The State Is Still Insufficiently Utilizing Consultant Services

As soon as the state utilizes the services of private consultants, every penny spent is automatically scrutinized, who favored whom (and whether they did) and so on. Former Prime Minister Zoran Milanović abolished the possibility for all (ministries and state-owned companies) to use the services of private PR agencies by decree. How wise that move was is for others to judge, although in many cases it was a completely misguided decision.

PR services are not the only consulting services; there are financial, organizational, and expert services. Every government department can utilize private consultants. But how much do state institutions or companies use the services of private advisors? Have the months of the government in crisis and then the technical government halted contracts with consulting firms? Consultants say that the state is insufficiently utilizing their services, which is evident from the final results that are not being achieved at the speed and intensity that everyone expects.

– More consultants should be involved in the professional placement of state assets in regional and global markets, especially valuable assets with strong tourism potential. It must not happen that due to non-competitive tendering, the state is unable to attract respectable foreign and domestic investors. It is necessary to understand what the global investment standards are in order to shape globally attractive tenders that can then attract the much-needed new foreign investors in tourism – says Siniša Topalović, director of the consulting firm Horwath HTL, noting that every failed tender is just an additional loss of the final transactional value that the state earns, on one hand, but also a missed opportunity for employment and new revenues through taxes and contributions, on the other hand.

Advantage for Reforms Some consultants do not want to do business with the state at all, such as Caper, whose owner Željko Perić says that involving consultants in projects is not always a guarantee that they will be implemented effectively. – Consultants are not doctors who will conduct an examination, make a diagnosis, and prescribe a remedy. Consultants cannot perform any job without quality cooperation with the ‘patient’. If we look at many projects in which consultants were involved, e.g., the monetization of highways, Hitrorez, ‘one stop shop’, privatization of Petrokemija, Badel, which never successfully concluded, we can conclude that the ‘patient’ did not cooperate or did not really want to heal, that there was no determination to actually implement the consultants’ recommendations, or that insufficiently qualified consultants were chosen. There are many challenges ahead for the new government where quality consultants can help a lot, but the basic prerequisite is that there is a real desire to do something, not just to try – notes Perić.

Croatian state institutions in some cases utilize the services of consultants, but it seems that the total number of consulting projects in Croatia is much smaller compared to other EU member states. The reason for this is partly that some consulting contracts have been abused in the past, creating an unfavorable image of them in the public eye. The reason is also that the entire market is still in an early stage of development.

– However, I notice a positive trend; state institutions are increasingly emphasizing quality and expertise when selecting consultants with whom they will cooperate. State institutions in Croatia, like any other state institutions, can potentially benefit greatly from consultants if they are used properly. This is especially important now when Croatia must implement many reforms and increase the use of European Union funds. On one hand, it is very difficult to mobilize and educate the necessary amount of personnel in public administration in a short time, and on the other hand, it does not always make sense to employ or educate many people in public administration for a one-time project. Therefore, the proper use of consulting services can accelerate access to the necessary knowledge and personnel to speed up reforms and draw money from European Union funds – says Tauno Olju, partner in the Consulting Department at EY Croatia.

Stopped Contracts At the level of state companies, consulting services should be used to increase profitability and improve organization.

– This way, state companies are better prepared for the market. From 2008 to 2016, private companies, especially larger ones, have already undergone two cycles of reorganization, increasing efficiency and profitability, which is not visible in state companies – says Božidar Lukša from the consulting firm Texel.

Given that the political situation has been quite unstable in the past year, many initiated projects have stalled. This has also affected consultants whose contracts have been halted.

– This has happened to us, and the damage is immeasurable; I will explain why: the project of implementing controlling lasts for months, in large systems and years. Besides changes in accounting and IT, it is necessary to encourage changes in thinking and working methods. A lot of communication with employees is needed, but also a lot of training, to neutralize resistance to changes and for people to accept the philosophy of controlling. The most important thing is to create awareness that it is not about controlling individuals, but about a management philosophy based on the economic logic of rationality. When you succeed in this, and this should be achieved in the first few months of the project, you are sure that controlling will truly come to life in that place. If you abruptly stop at that crucial moment, everything falls apart and returns to a well-established way of behaving. Every future attempt to change will be increasingly difficult because people get the impression that all efforts will surely fail sooner or later – explains Jasmina Očko, MSc from Kognosko Controlling.

A significant problem for consultants is also the public’s perception because due to past mistakes, which we can freely call criminal acts, the cooperation between the state and private entities is always under scrutiny.

– We could draw a parallel: when something is rotten in the banking system, it is not necessary to abolish money, but to change the bankers. The same is true in this case; the private and public sectors must work together. There just needs to be the right, not merely declarative political will to enable fair public procurement. The public will quickly feel if and when things in that area really start to change, and then it will no longer look askance at it. Effective judiciary, clear and firm laws whose evasion causes nasty consequences is a well-known recipe – says Očko.

The Choice Is Important The new government has the opportunity to significantly accelerate things, make good strategic decisions, and seek the help of consultants.

– Consulting firms can certainly help in better and faster preparation and implementation of large, strategic, and therefore risky projects in the public sector, from larger infrastructure projects to the preparation and implementation of restructuring larger and complex organizations in the public sector, which in many segments of the public sector in Croatia are not adequately prepared or implemented, thus significantly slowing down the further development of the domestic economy. This often implies a consulting contribution in understanding the main practices in the sector or industry, as well as technical knowledge about project preparation and management or methods of financial analysis and management – says Daniel Lenardić, associate partner in KPMG’s Business Consulting Department in Croatia.

Politicians can influence the perspective, i.e., they can clearly demonstrate to the public that consultants are urgently needed.

– One should ask, what does the public have less insight into, what is the loss to the state and the public sector if the necessary steps in restructuring, improving operations, or privatization are not taken? It is always easy to assess that services are expensive, but often the cost of inaction is not taken into account. Every top product and service costs, as does a top project that has seriously set goals, secured duration, and a team of top experts. Unfortunately, due to many ‘consulting’ jobs that have negatively resonated in the public, which were not performed by professional consulting firms but by quasi-consultants, just mentioning consultants in part of the public causes discontent and puts the project under scrutiny. Clients will need to better select consultants in the upcoming period, demanding quality, brand, and expertise – concludes Topalović.