Zombie Governments: How International Consultancies Hollow Out Government Capability

When governments outsource thinking, they risk losing the ability to govern

Governments today face unprecedented levels of complexity. They are expected to respond to geopolitical instability, climate change, cyber threats, demographic shifts, artificial intelligence, aging infrastructure, and rising citizen expectations—all while operating under increasing fiscal pressure. Against this backdrop, governments have become major consumers of consulting services. International consulting firms advise on everything from digital transformation and tax reform to defense procurement, health care, infrastructure, and national AI strategies.

There is little doubt that these firms have contributed significant value over many decades. They employ highly capable professionals, bring specialist expertise, introduce proven methodologies, and often provide surge capacity when governments face urgent challenges. In many cases, they have accelerated reforms that may otherwise have taken years to deliver.

The strategic question, however, is no longer whether consultants provide value. The more important question is whether governments have become too dependent on them. At what point does external expertise stop complementing the public service and begin replacing it?

This question has become increasingly important as governments across the world spend billions of dollars annually on management consulting while simultaneously reducing permanent policy capability, project management capacity, and technical expertise. The result is a paradox.

Governments may appear larger, more sophisticated, and more digitally advanced than ever before, yet many have become less capable of independently designing policy, managing major programs, or evaluating the advice they receive.

A useful way to think about this phenomenon is the idea of the "Zombie Government." Like a body that continues moving after its vital organs have weakened, a zombie government still delivers services, announces reforms, and commissions strategies. From the outside it appears functional.

Internally, however, much of the institutional capability that once enabled independent decision-making has gradually disappeared. Critical thinking has been outsourced. Institutional memory has faded. Public servants increasingly manage contracts instead of solving problems.

This is not simply an operational issue. It is becoming a strategic challenge affecting national resilience, democratic accountability, economic development, and the long-term effectiveness of government itself.

From trusted advisors to indispensable operators

Consultants have always played an important role in government. Traditionally, they were brought in to provide specialist advice, independent reviews, or expertise that governments rarely needed on a permanent basis. This model made sense. Governments cannot reasonably employ specialists in every emerging technology or every niche industry.

Over the past three decades, however, the relationship has changed significantly.

Many governments embraced reforms aimed at becoming smaller, leaner, and more efficient.

Permanent staffing levels were reduced while outsourcing expanded across information technology, procurement, project management, policy development, organizational design, and service delivery. Rather than filling temporary capability gaps, consultants increasingly became embedded within the machinery of government.

This shift was encouraged by several factors. Ministers demanded faster delivery. Procurement rules often favored external expertise. Departments found it easier to secure project funding than permanent workforce funding. At the same time, consulting firms developed sophisticated engagement models that encouraged long-term relationships rather than one-off assignments.

The result has been a gradual transfer of capability from the public sector into private organizations.

Unlike previous generations of consultants, today's firms frequently move beyond providing advice. They help define problems, design policy options, prepare business cases, manage implementation, evaluate outcomes, and recommend future work. In some cases, the same firms operate across multiple agencies with influence extending well beyond individual projects.

This evolution creates an important governance question. If governments increasingly rely on external organizations to think, plan, implement, and evaluate public policy, who ultimately owns the capability to govern?

Outsourcing the brain

Economist Mariana Mazzucato describes this trend as governments "outsourcing the brain." The analogy is compelling. Just as muscles weaken when they are no longer exercised, organizational capability declines when it is rarely used.

Public servants who once developed complex policy frameworks now manage consulting contracts. Technical specialists become procurement managers. Senior executives spend increasing amounts of time coordinating external providers rather than mentoring future leaders or building internal expertise.

This transformation rarely occurs suddenly. It develops gradually through hundreds of procurement decisions that individually appear sensible but collectively reshape the organization.

The consequences extend well beyond workforce numbers.

Institutional knowledge becomes fragmented across consulting firms. Lessons learned from one project may not remain within government once contracts end. Future projects require additional consultants because the expertise developed during previous engagements has disappeared with them.

Over time, departments become less confident in their own analytical capability. Internal teams begin assuming that significant reforms require external validation before decisions can be made.

Eventually, consulting firms are hired not because governments lack intelligence but because they have lost confidence in exercising it.

This dependency creates a reinforcing cycle. As internal capability declines, reliance on consultants grows. As reliance grows, opportunities to rebuild capability diminish.

The hidden costs of dependency

The financial cost of consulting contracts is the most visible aspect of this trend, but it is rarely the most significant.

The greater cost is capability erosion.

Governments that lose experienced architects, economists, engineers, policy analysts, and digital specialists also lose their ability to become intelligent clients. They become less capable of specifying requirements, challenging recommendations, or assessing competing options.

This creates an imbalance in the relationship between government and supplier. The organization providing advice increasingly possesses more information than the organization purchasing it.

Knowledge asymmetry affects procurement outcomes, technology choices, and policy decisions. Governments may struggle to distinguish between recommendations that genuinely serve the public interest and those that expand future consulting opportunities.

The wider economy may also be affected. When a relatively small number of global consulting firms dominate government advisory work, opportunities for universities, local consulting firms, research institutes, and specialist small businesses may diminish. Innovation ecosystems become narrower as procurement increasingly favors firms with established government relationships rather than emerging expertise.

Rather than developing diverse national capability, governments may inadvertently reinforce concentration within a handful of multinational providers.

Conflicts of interest and accountability

One of the most controversial aspects of government consulting concerns conflicts of interest.

Large multinational consulting firms often serve governments while simultaneously advising corporations operating within the industries being regulated. Strong internal governance processes are designed to manage these relationships, and many firms take their professional obligations seriously. Nevertheless, the perception of competing interests can undermine public trust.

Several high-profile controversies have intensified public scrutiny.

In Australia, investigations following the PwC tax information scandal prompted broader reviews of governance across the consulting and audit industry. Allegations involving other firms, including KPMG, further strengthened calls for greater transparency, stronger oversight, and potential separation of consulting and audit functions.

Similar debates have emerged elsewhere. In South Africa, questions were raised when consulting firms simultaneously advised major state-owned enterprises and government agencies responsible for overseeing them. In the United Kingdom and Canada, parliamentary committees have questioned whether excessive consulting expenditure reflects declining internal capability rather than genuine demand for specialist expertise.

These examples should not be interpreted as evidence that consulting firms are inherently unethical. Rather, they highlight the governance risks that emerge when advisory relationships become deeply embedded within government decision-making.

Trust depends not only on actual independence but also on visible independence.

Why governments continue buying consulting services

If the risks are so widely recognized, why do governments continue expanding consulting expenditure?

The answer is straightforward. Consultants solve immediate problems.

They can mobilize experienced teams within weeks, provide specialist knowledge that governments cannot recruit quickly, and operate outside public sector employment constraints.

Political leaders working within electoral cycles often require rapid results, and consulting firms are structured to deliver at speed.

Governments also face genuine capability shortages in areas such as cybersecurity, artificial intelligence, cloud computing, digital engineering, advanced analytics, and large-scale transformation. Maintaining permanent teams across every specialist discipline would be neither practical nor affordable.

Viewed through this lens, consulting firms are not the problem. They are responding to market demand created by government itself.

The challenge arises when temporary capability support evolves into permanent capability substitution.

The innovation paradox

Ironically, excessive dependence on consultants may reduce innovation rather than increase it.

Most consulting firms succeed by applying proven methodologies across multiple clients. This consistency creates value because successful practices can be replicated efficiently.

Governments, however, frequently confront challenges that have no established playbook. Climate adaptation, AI regulation, aging populations, and geopolitical uncertainty require experimentation rather than standardized solutions.

Organizations with strong internal capability are generally better positioned to innovate because they possess deep contextual understanding, long-term institutional memory, and enduring relationships across government.

Consultants can undoubtedly contribute to innovation, but sustainable innovation usually requires knowledgeable public servants capable of adapting ideas rather than simply implementing external recommendations.

Investing in government capability

The solution is not to eliminate consultants. Such an approach would be unrealistic and counterproductive.

Instead, governments should redefine how consulting services are used.

External expertise should complement permanent capability rather than replace it. Consulting engagements should include explicit knowledge transfer requirements, mentoring programs, and capability-building objectives alongside project delivery.

Governments should also invest in high-performing internal advisory units capable of supporting departments with strategy, digital transformation, commercial management, and organizational reform. Germany's publicly owned PD consultancy offers one example of how governments can develop internal consulting capability while maintaining accountability to the public sector rather than private shareholders.

Chile's government innovation laboratories similarly demonstrate how governments can create environments where experimentation occurs within the public sector instead of relying exclusively on external providers.

Procurement policies also deserve attention. Contracts should reward measurable capability transfer rather than simply project completion. Agencies should assess whether repeated consulting engagements indicate unresolved capability gaps requiring permanent investment.

Leadership is equally important. Senior executives must view workforce capability as strategic national infrastructure rather than an administrative expense. Building institutional knowledge may appear slower than outsourcing, but it creates resilience that compounds over decades.

The counter narrative - why consulting firms remain essential

An honest assessment must acknowledge that many criticisms directed at consulting firms confuse cause with consequence.

Consultants did not decide to reduce public sector capability. Governments made those choices through workforce policies, budget decisions, and procurement frameworks.

Nor are consulting firms solely responsible for dependency. Businesses naturally respond to demand. If governments repeatedly purchase strategic advice, implementation support, and operational management, consulting firms will understandably expand those services.

Many transformative government programs have benefited enormously from external expertise. Large infrastructure projects, digital modernization initiatives, cyber resilience programs, and health reforms have often succeeded because governments combined internal leadership with external specialist capability.

The real issue is therefore balance.

Healthy governments maintain sufficient internal capability to act as informed clients while selectively purchasing expertise that genuinely adds value. Weak governments gradually lose the ability to distinguish between essential external support and unnecessary dependency.

The objective should not be fewer consultants. It should be stronger governments.

The road ahead

The next decade will place extraordinary demands on governments. Artificial intelligence, energy transition, national security, demographic change, and fiscal pressures will require faster decisions and more sophisticated public institutions than ever before.

Ironically, these same pressures may tempt governments to outsource even more capability.

That would be a mistake.

Nations that invest in rebuilding policy expertise, digital capability, commercial acumen, and institutional leadership will become more resilient, more innovative, and better equipped to navigate uncertainty. External advisers will continue playing an important role, but they should strengthen government capability rather than substitute for it.

The measure of a successful consulting engagement should not be how indispensable the consultant becomes. It should be how much stronger the client is after the engagement ends.

Governments exist to create public value, safeguard democratic institutions, and deliver services that markets alone cannot provide. Those responsibilities require enduring capability that cannot simply be rented whenever needed.

The challenge for policymakers is therefore not whether to use consultants, but how to ensure that every engagement leaves government stronger than it was before. If governments fail to make that transition, they risk becoming increasingly sophisticated organizations that possess impressive strategies, world-class presentations, and extensive advisory networks—but lack the internal capability to govern independently.

That is the defining characteristic of a zombie government: an institution that continues moving forward while its strategic capacity quietly fades away.

References

Collington, R., & Mazzucato, M. (2023). The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes Our Governments and Warps Our Economies. Allen Lane.

Organisation for Economic Co-operation and Development. (2023). Government at a Glance.

Organisation for Economic Co-operation and Development. (2020). The Innovation Imperative in the Public Sector.

World Bank. (2023). GovTech Maturity Index.

Public Accounts Committee (UK). Various reports on government use of consultants.

Australian Treasury. Consultation papers on the regulation of accounting, auditing, and consulting firms.

Australian National Audit Office. Reports on procurement and the use of consultants in the Australian Public Service.

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