A constructive alternative approach to the expensive flood of consultants of the federal government

The acute problem of spiraling consulting costs

The German federal government faces a serious problem that affects both taxpayers and the integrity of the administration: its uncontrolled dependence on external consulting firms. In its latest report, the Federal Court of Auditors sharply criticized the government's lack of a strategy to reduce this costly reliance. The figures speak for themselves and reveal the extent of this problematic trend.

Over the past ten years, the German federal government has spent more than €1.6 billion on external consulting services. This sum is roughly equivalent to the annual salary of 40,000 average employees and illustrates the scale of the financial burden on the federal budget. Particularly alarming is the fact that spending increased by 39 percent between 2020 and 2023 alone, reaching almost €240 million annually.

This development is all the more worrying given that the Budget Committee of the German Bundestag had already called for a substantial reduction in consulting costs in 2020. However, the Federal Government has not complied with these demands, as the Federal Court of Auditors has unequivocally stated. Instead, the government's annual consultant reports show little willingness to change the use of external consultants.

The structural weaknesses of the current approach

Lack of strategic planning

The Federal Court of Auditors' criticism focuses on a fundamental deficiency: To this day, the federal government lacks a coherent strategy for reducing its reliance on external consultants. This lack of strategic planning leads to consulting contracts often being awarded ad hoc, without developing a long-term perspective for building internal expertise.

Most ministries haven't even formulated concrete targets for reducing their reliance on consultants. Even the Federal Ministry of the Interior, which at least presented a 14-point plan, failed to achieve any substantial improvements. Paradoxically, the same ministry even outsourced a core financial controlling function to external consultants as part of the "Federal IT Consolidation" project.

Threat to administrative integrity

The situation is particularly critical in the IT sector, where the federal government has relinquished too much control to external service providers. The Federal Court of Auditors urgently warns that the integrity of the administration is at risk unless in-house expertise is developed immediately. This dependence on external IT consultants makes the federal administration vulnerable and impairs its ability to act in critical areas.

The German government's consultants are often globally operating consulting firms with annual revenues in the billions. These companies, such as McKinsey, Deloitte, KPMG, and PwC, dominate the consulting market and sometimes exert considerable influence on political decisions. In the Chancellor's Office and government ministries alone, at least 112 former employees of the largest consulting firms work.

Quality problems and copy-paste advice

The quality of external consulting services is often questionable. Critics complain about banal PowerPoint presentations as final products, inconsistencies in reports, and even serious errors in handling figures and facts. Particularly problematic are so-called copy-paste consulting services, where reports are partially or entirely verbatim copies from deliverables for other clients.

The innovative alternative proposal: partnership with SME interest groups

The basic idea of ​​direct cooperation

Instead of continuing to transfer millions of taxpayer dollars to expensive external consulting firms, the federal government should establish close cooperation with the interest groups of small and medium-sized enterprises (SMEs). This solution offers several crucial advantages: It is more cost-effective, more practical, and simultaneously strengthens the democratic participation of SMEs in political decision-making processes.

SME associations possess a wealth of practical knowledge and experience from the real world of business. Small and medium-sized enterprises (SMEs) represent 99.3 percent of all companies in Germany, employ 51.3 percent of all employees subject to social security contributions, and are responsible for 96.9 percent of German exports. These figures illustrate the immense importance of SMEs to the German economy.

The established SME interest groups as partners

Germany boasts a well-developed landscape of small and medium-sized enterprises (SMEs) organizations that can serve as competent partners for such collaborations. The German Association for Small and Medium-Sized Businesses (BVMW) connects small and medium-sized enterprises and the self-employed, representing their interests across professions and industries. With over 900,000 contacts per year and 300 regional offices, the BVMW has an impressive reach.

Other important players are the Chambers of Industry and Commerce (IHK), which comprise 79 regional chambers and represent all businesses and companies with the exception of purely craft-based enterprises. The Association of German Chambers of Industry and Commerce (DIHK) acts as an umbrella organization and represents the overall interests of the commercial sector at the national and European levels.

The Chambers of Skilled Crafts, as self-governing bodies of the skilled crafts sector, complement this structure. They represent the interests of the entire skilled crafts sector within their respective districts and possess in-depth knowledge of the practical challenges in the skilled crafts sector.

Practical implementation of the collaboration

Cooperation between the federal government and SME interest groups could take place in various formats. Regular dialogue events would facilitate direct exchange between decision-makers from politics and business. These events could be organized on specific topics to tap into expertise in particular areas.

Working groups on specific policy areas would enable continuous consultation and support for legislative projects. SME representatives could contribute their practical experience and point out potential impacts of regulations before they come into force.

Another innovative approach would be the establishment of SME advisory boards within the various federal ministries. These bodies could meet regularly and comment on current policy initiatives. Members would be appointed from the various SME interest groups and contribute their respective industry expertise.

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The advantages of the alternative model – SME expertise in exchange for consulting costs

Cost efficiency and sustainability

The most obvious advantage of this approach lies in the enormous cost savings. While external consulting firms charge millions of euros for their services, the costs of collaborating with SME interest groups would be a fraction of that. Travel and event expenses for dialogue formats, as well as moderate compensation for advisory board members, would amount to a low million figure.

These cost savings would not be a one-off event, but would be repeated year after year. The funds saved could be used for the urgently needed development of internal expertise within the federal administration. Particularly in the IT sector, the administration could hire and train its own specialists instead of continuing to rely on external service providers.

Practical and realistic advice

Representatives from small and medium-sized enterprises (SMEs) offer a different quality of advice than external consultants. They speak from daily experience and understand the real-world impact of political decisions on businesses and jobs. Their recommendations are not based on theoretical models or copy-paste solutions, but on authentic experiences from everyday business.

This practical perspective is particularly valuable in the design of regulations and laws. SME representatives can point out unintended side effects early on and contribute constructive suggestions for improvement. This would avoid costly revisions and corrections that arise when laws are passed without sufficient practical testing.

Strengthening democratic participation

The direct involvement of SME representatives would significantly strengthen democratic participation. Currently, large corporations and expensive consulting firms often have privileged access to political decision-makers. Small and medium-sized enterprises (SMEs), which form the backbone of the German economy, are frequently underrepresented.

Institutionalized dialogue formats would correct this imbalance. The voice of SMEs would be heard and considered more strongly in political decision-making processes. This would not only lead to better policy outcomes but also strengthen the trust of medium-sized businesses in politics.

Building long-term partnerships

Unlike project-based consulting engagements, collaboration with SME advocacy groups would create long-term partnerships. These ongoing relationships would enable a deeper understanding of the needs and challenges of small and medium-sized enterprises (SMEs).

The SME representatives would not only provide advice on individual projects, but could also contribute to strategic planning and the development of long-term policy approaches. This collaborative approach would lead to more consistent and sustainable policy decisions.

Specific application areas and pilot projects

Digitalization and IT modernization

Especially in the IT sector, where the federal government is heavily reliant on external consultants, SME advocacy groups could provide valuable support. Many medium-sized companies have successfully implemented digitalization projects in recent years and developed practical solutions in the process.

An advisory board of IT-experienced SME representatives could advise the federal administration on the digitalization of its processes. These entrepreneurs know the challenges of implementing new IT systems from their own experience and can propose realistic timelines and budgets. At the same time, they could point to proven technologies and service providers that have proven successful in practice.

Bureaucracy reduction and administrative modernization

SMEs face bureaucratic hurdles on a daily basis and have a vital interest in efficient administrative processes. Their experience with various authorities and procedures is a valuable resource for administrative modernization.

A systematic dialogue between government officials and SME representatives could generate concrete suggestions for improving existing procedures. Business owners could point out where processes are unnecessarily complicated and what simplifications would be possible without compromising the quality of administrative services.

Sustainability and climate protection

Small and medium-sized enterprises (SMEs) play a crucial role in the transformation to a climate-neutral economy. Many SMEs have already developed and implemented innovative solutions for climate protection and sustainability. This practical experience is invaluable for shaping climate policy.

A climate protection advisory board comprised of SME representatives could support the German government in developing practical climate protection measures. The business owners could demonstrate which measures are actually feasible and what support they need for the transformation.

Challenges and solutions

Coordination and organization

Collaboration with various SME interest groups requires professional coordination. A central office should be established to organize the different dialogue formats and systematically evaluate the results.

This coordination office could be located within the Federal Ministry for Economic Affairs and Energy, which already has experience working with SME organizations. Close coordination with all relevant ministries would be crucial to ensure that SME expertise is utilized across all relevant policy areas.

Quality assurance and objectivity

To ensure the quality of SME consulting, clear selection criteria for representatives must be developed. Advisory board members should possess proven expertise in their respective fields and be able to represent the interests of their industries effectively.

At the same time, it must be ensured that the advice is objective and in the overall interest. Conflicts of interest must be made transparent and appropriate rules of conduct developed.

Integration into existing structures

The new form of cooperation would need to be carefully integrated into existing political and administrative structures. This requires close coordination with parliament, as SME advisory services are intended to complement, not replace, democratic decision-making processes.

International role models and best practices

Scandinavian models

Scandinavian countries offer successful examples of the systematic integration of business representatives into political decision-making processes. These models could serve as inspiration for implementation in Germany and be adapted to specific circumstances.

Regional pilot projects

The introduction of the new cooperation model could be phased in, starting with pilot projects in selected policy areas or regions. These pilot phases would allow for the gathering of experience and optimization of the model before its nationwide rollout.

End the chaos of consulting fees: This is how small and medium-sized enterprises (SMEs) could make the federal government more efficient

The German government's spiraling consulting fees are not only a financial problem, but also a structural one that threatens the integrity and effectiveness of the administration. The proposed alternative approach of close cooperation with SME interest groups offers a practical and cost-effective solution that simultaneously strengthens democratic participation.

Germany's small and medium-sized enterprises (SMEs) possess impressive expertise and experience that would be of enormous value for policymaking. Instead of continuing to pay millions to external consulting firms, the federal government should utilize these existing resources while simultaneously developing its own expertise.

Implementing this alternative model requires political courage and a willingness to question established structures. However, the potential advantages – both financial and qualitative – justify this effort. It is time for the German government to overcome its dependence on expensive external consultants and instead rely on the expertise and experience of German industry.

The Federal Court of Auditors' criticism should be seen as a wake-up call. The time has come for fundamental reforms in the Federal Government's advisory practices. The proposed model of cooperation with SME interest groups could be the key to more efficient, cost-effective, and democratic policymaking.

Markus Becker

I would be happy to serve as your personal advisor.

Head of Business Development

Chairman SME Connect Defense Working Group

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Konrad Wolfenstein

I would be happy to serve as your personal advisor.

contact me under Wolfenstein ∂ Xpert.digital

call me under +49 89 674 804 (Munich)

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