Modi government's latest move threatens domination of 'Big Four' consultants
What's the story
The Indian government's Finance Ministry has issued a memorandum that could change the game for government consultancy contracts. The directive asks central government departments to revise their tender rules for hiring consultants. The new guidelines aim to eliminate high turnover and workforce requirements, ensuring that eligibility criteria are in line with actual project needs. This move could level the playing field for smaller Indian consulting firms against global giants like the Big Four (Deloitte, PwC, EY and KPMG).
Scope of application
Rules applicable to central government tenders
The new rules will apply to all central government tenders issued through the Government e Marketplace (GeM) portal. However, it won't be applicable to state government tenders.
The move comes as the Indian government is actively working toward creating homegrown 'Big Four' consultancy firms.
This is part of a larger strategy to reduce dependence on global consulting giants and keep sensitive strategic data within national borders.
Potential impact
Smaller firms can now bid for projects
The new rules could be a game-changer for smaller firms that were previously disqualified due to stringent net worth or minimum headcount criteria.
These boutique agencies can often deliver projects at lower costs, enabling them to easily undercut larger rivals once allowed to bid.
Amarjit Chopra, former ICAI President, said this change would certainly make a difference for medium-sized Indian firms, and they need to create multi-disciplinary partnerships (MDPs) to reap benefits from it.
Barriers addressed
Barriers that were keeping smaller firms away from bidding
The Finance Ministry memo highlights three high entry barriers that have been putting boutique consulting services at a disadvantage.
These include higher net worth criteria for eligibility, more weightage given to a consulting firm's experience over qualifications and experience of key executives, and higher minimum staff strength on payroll than what is actually needed for project execution.
All these factors often disqualify smaller firms from bidding.