Size, competition and quality in the italian market for consulting services

The quality of consulting services informing project decisions is crucial for the effectiveness of public investments. We analyze the ability of the consulting industry to provide adequate services to government agencies in Italy. At the aggregate level we observe that the value of the public demand for consulting services is a small and highly variable share of revenues of the consulting firms. At the micro level, we analyze the procurement data for some 300 feasibility studies. Although the market for those studies has been reasonably competitive, it has attracted a small fraction of the all consulting sector, and the quality of the studies has been unsatisfactory. We claim that an increasing public demand would provide more incentives for firms to focus their business on the provision of quality consulting services to the public sector.