The Management Consultancies Association has called for a conference to discuss the future of local government, reporting that some members are struggling to make money from council contracts.
The MCA said that consultants can support councils in becoming digital innovators, helping them optimise the potential of Open Data and reinvent service provision.
However, it said that pressure on margins is increasing due to demands from town halls looking to save money through outsourced contracts.
The MCA said: “Providers attempt to comply with these during procurement, or even during renegotiation of long-term contracts, and are then unable to secure reasonable margins.
“What is needed is genuinely transformational thinking.
“The early model for outsourcing, in which providers accepted TUPE staff and achieved a little more in the way of outputs for some reduction in cost – in effect the creation of a parallel public sector – will no longer work.”
The report called for the government to develop a set of priorities for what outsourcing can and cannot achieve.
“A principled approach, based around clear themes, articulating what the state will do, what citizens can expect, and what the state will not do and what citizens must do for themselves, accompanied by active portfolio management across the public sector as a whole, is now essential to build on the foundations put in place by the coalition,” it said.
As well as promoting the “relentless digitisation” of public services, the government should convene a conference on the future of local government, it added.
This would help give councils authoritative guidance on what it is best placed to do and what it should discontinue, according to the report authors.
The MCA said: “Where the public sector lacks the necessary skills to achieve innovation, there should be training and development, as well as access for officials to the sorts of digital and technology hubs government has made available for business.”
The public sector has until now been limited to understanding its populations through socio-economic indices of need, the report said.
“But consultants are now supporting councils in achieving a significantly better understanding of their populations.
“This allows authorities to personalise services based on individual preferences.”
Consulting, the MCA said, can help local authorities support more sophisticated customer segmentation analyses needed to put citizens at the centre of digital transformation.
Local government made up 9% of the total public sector consulting market in 2014, the report found, with central government making up 28% of the total.
Across all sectors, including private consultancy, MCA member firms rose by 12% in 2014 to around 38,000. Digital and technology consultancy members rose by 26% to just under 10,000.