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MP's publish report on government's use of consultants and interims

20 December 2010

The Committee of Public Accounts has published a report on Central government's use of consultants and interims

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

“Despite spending over £1 billion a year on consultants and interim staff, central government departments are largely in the dark about whether this  represents value for money. There are of course legitimate reasons for a department to buy in specialist skills where they are in short supply internally. But departments have become too reliant on buying in core skills rather than developing them in their own staff.

“Some departments depend far more on consultants than others. In itself, that is not surprising. What is unacceptable is the poor understanding of whether the extent of a department’s use of consultants is justified by the nature of its business. Why should the Department for Transport, for instance, be so dependent on consultants?

“It is a mark of departments’ poor understanding of spending on consultancy that some have reacted to cost pressures by cutting that spending in an uninformed way.  This runs the risk that short-term savings could lead to increased costs and poor value for money for the taxpayer in the long term.”

Margaret Hodge was speaking as the Committee published its 12th Report of this Session which, on the basis of evidence from the Cabinet Office on central government’s use of consultants, examined spending and the application of good practice to the use of consultants and interims.

Spending on consultants and interims by central government departments amounted to over £1 billion in 2009-10.  We do not accept the view expressed by the Cabinet Office that it is impossible to assess the value for money of consultancy work, and we are surprised that there is such a poor central understanding of spending on consultancy.  We recognise that there are legitimate reasons to buy in specialist skills where government does not have them internally, but we are concerned that some departments have failed to grow the skills they require, leaving them heavily reliant on consultants. Relying on consultants for commonly required skills is expensive and repeated use suggests poor value for money.

In May 2010, the coalition Government announced immediate plans to save £1.1 billion on discretionary spending. In the first 6 months of 2010-11, the Cabinet Office reports that consultancy spending has fallen by 46% since 2009-10 due in part to new measures it has introduced to control the use of consultants, but due in the main to government stopping certain programmes. We are concerned that this ‘stop-go’ approach to using consultants is not sustainable and does not deliver value for money.

It is unclear why some departments use consultants a great deal more than others: for every £100 spent on staff costs, the Department for Transport spends £70 on consultants, a very high proportion when compared to HM Revenue and Customs which spends only £2. Central government has no oversight of how arms length bodies use consultants, nor does it have any up to date data on their spending. The National Audit Office estimates that arms length bodies spent at least £700 million on consultancy in 2009-10.

The Cabinet Office has not done enough to grow government’s core skills despite repeated recommendations by this Committee in its reports published in 2002 and 2007, and the Cabinet Office’s own report in 1994. We recognise it takes time to grow such skills but there should have been more progress after sixteen years. Indeed we are most concerned that IT and programme and project management consultancy has increased from 50% to 60% of all consultancy spend since 2006-07. Where skills do exist within government, departments lack the knowledge and flexibility to deploy people to where they are needed. Pressure to cut training budgets may affect departments’ ability to develop the internal skills they require, reflecting a short-term financial cut leading to longer term unnecessary expenditure.

Departments do not control and manage their spending on consultants. The price that departments pay for consultants is often based simply on time spent on a project, rather than being fixed in advance or related to the achievement of specific objectives. Departments frequently fail to adequately define the service required or negotiate the most advantageous contractual terms, and therefore cannot assess the performance of consultants or whether the work done was of benefit.