The Consultant Scam

By | July 5, 2006

This is nothing to do with technology but it’s something close to my heart: the waste of money that are many aid projects. British charity organisation ActionAid UK has issued a report which reveals the high cost of consultants:

Aid provided by rich governments needs to target poverty. Instead, one quarter of their aid – $20bn a year – funds expensive and often ineffective western consultants, research and training.

This is no truer than in Indonesia and East Timor, where huge amounts of money are spent on projects that go on for years. All these are led by foreigners. The East Timorese government recently collapsed in an orgy of violence, effectively taking the country back to when it first liberated itself from Indonesia in 1999. How much money had been spent in the interim on building up those institutions, and how much of that money went to foreign consultants? As the report says:

A typical cost of an expatriate consultant will be in the region of $200,000 a year. According to the OECD, in typical cases more than one third of this is spent on school fees and child allowances – spending which would not be needed if local consultants were used.

Findings show that in Cambodia, consultants’ fees were $17,000 a month while government salaries were only $40. In Ghana, even relatively inexperienced consultants earned per day what government officials earned in a month. In Sierra Leone, according to one former UK-funded consultant, daily take-home pay was the same as the Auditor General’s monthly salary.

It’s not as if all these consultants actually help:

In Tanzania, Japanese consultants on an irrigation project introduced the use of diesel pumps that have become too expensive for local farmers. A massive increase in fuel costs have made them three times more expensive than other alternatives. The pumps now lie idle and farmers are worse off than before.

This is not a one off. I’ve heard dozens of these kinds of stories.

It has to be said that some projects are excellent and the consultants doing great work. To attract these people so they are willing to commit to a career in this field the rewards need to be attractive; it’s OK to do some voluntary work for a year or two, but not many are going to dedicate a life to it. But too often the money is silly money, and much of it is wasted on mediocre work. And the priorities are skewed: Usually the consultant’s goal primarily to extend the contract, or use his or her final report to argue for extending or furthering the project (which of course means the further hiring of that consultant or his/her organisation.) Rarely does one see a consultant arguing for less projects, less money spent, or simply acknowledgement that their work is not cost-effective and should be canned.

2 thoughts on “The Consultant Scam

  1. Scott_H

    So, who actually hires these consultants?

    As an aside, I wonder how much money the OECD spent on its study?

  2. Graham

    Spot on. I was in Hanoi recently. Bumped into an old friend, a very experienced aid worker. She said, “You remember so and so? Worked for the World Bank in Indonesia? He had to leave. He couldn’t look the Indonesian farmers he was supposed to be helping in the eye anymore.” No idea how much money he saw slide into the rice paddies with little to show for it, but it was clearly more than a little. Like you, I’ve heard too many of these stories. I’m certainly more guarded these days about who gets my donations than I ever was living in the UK.


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