The Consulting Industry Gets Paid to Be Slow
How Time-and-Materials Billing Kills Government AI Innovation
The consulting industry's billing model is fundamentally misaligned with delivering AI value. When you get paid by the hour, speed is your enemy. Here's why outcomes-based pricing changes everything.
The Fundamental Misalignment
Here's the dirty secret of government consulting: the billing model is fundamentally misaligned with delivering value. Time-and-materials means you get paid more when things take longer. Speed is literally the enemy of revenue.
No consultant will admit this openly. But the incentive structure is clear. A 5-person team billing £1,200 per day generates £30,000 per week for their firm. Finish in 3 months? That's £360k. Stretch it to 12 months? That's £1.44M. Same work. Four times the revenue.
The Billing Problem
Move the sliders. Watch how time-and-materials billing makes speed the enemy of profit.
At 12 months, the client pays £1.6m - that is 2.0x what a 6-month engagement would cost. The supplier has zero incentive to finish early. Every extra month is £132k in revenue.
The AI Speed Problem
AI makes consultants faster. That should be a good thing. But under time-and-materials billing, it's a revenue problem. If AI helps your team deliver in 4 months what used to take 12, you've just cut your own revenue by two-thirds.
This creates a perverse incentive: don't use AI effectively, or if you do, don't let the client see how fast it could be. Pad the timeline. Add "quality assurance" phases. Discover "additional complexity." The client pays for the slow version while the fast version exists.
The Speed vs Revenue Problem
Two teams, same problem. Watch what happens when only one of them is incentivised to use AI.
The Relationship Problem
Under T&M, the supplier-client relationship is inherently adversarial. The client wants it done fast and cheap. The supplier wants it slow and expensive. They're working together while wanting opposite things.
Switch to outcomes-based pricing and everything changes. Now the supplier wants to deliver fast - because their margin improves the faster they finish. The client wants fast delivery too. Suddenly you're aligned. Both parties win when AI makes things faster.
The Incentive Problem
Same supplier, same client, different contract. Watch how incentives shape the entire relationship.
Everything's great. Team is onboarded. Status reports look healthy.
What AI Actually Compresses
AI doesn't just speed things up uniformly. It collapses certain phases almost entirely while leaving others unchanged. Discovery that used to take 8 weeks can happen in days when AI analyses existing documents and data. Requirements gathering that needed dozens of stakeholder interviews can be augmented with AI analysis of historical feedback.
The traditional consulting project timeline - discovery, requirements, design, build, test, deploy - gets radically compressed. Not because the work isn't needed, but because AI handles the repetitive parts that used to fill consultant timesheets.
The AI Compression Effect
Pick a government task. See what happens when delivery speed isn't the enemy of profit.
Select a government task above to see the compression effect.
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