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In 2005-06 the public sector in England spent approximately £2.8 billion on consultants, with central government accounting for £1.8 billion. Aside from the scale of expenditure on consultants, they are routinely used on key government initiatives such as the Identity programme at the Home Office and the Capability Review programme at the Cabinet Office.
In the past three years spending on consultants has risen by a third, from £2.1 billion in 2003-04 to £2.8 billion in 2005-06, largely due to increases in spending by the NHS. Only two departments have shown a consistent decrease in their spending on consultants over the period. Central government is repeatedly using consultants for core skills, including project and programme management and IT, and is increasingly turning to a select list of suppliers.
Central government has made some progress in implementing previous recommendations and good practice in using consultants but much more can be done to improve value for money. In particular, departments are making good use of framework agreements and qualified procurement staff are regularly involved in the buying process. However, areas where departments require significant improvement are: collection and use of management information; the assessment of whether internal resources could be used instead of consultants; controls on awarding contracts by single tender; completing and sharing post-project performance reviews; actively engaging with and managing the relationships with key consultancy suppliers; and planning for and carrying out the transfer of skills from consultants to internal staff.
Consultants, when used appropriately, can provide considerable benefits for clients. There are examples where consultants have added real value and enabled departments to make improvements they would not have achieved otherwise. For example, the Ministry of Defence is saving on its procurement, having used consultants to help implement a new approach and develop its internal procurement capability. Nevertheless these benefits will only be secured if departments are much smarter in their use of consultants and more commercially astute in how they procure them. Getting a better grip on the use of consultants would lead to efficiency gains of more than £500 million a year.
On the basis of a Report by the Comptroller and Auditor General,[1] we took evidence from the Office of Government Commerce (OGC) on six main issues: using internal resources instead of consultants; the poor quality of information on the use of consultants; gaining a better understanding of suppliers; getting better deals by using different payment methods and making more use of competitive tendering; the effectiveness of OGC's good practice work; and OGC's own use of consultants.
Key terms used in this Report are listed in the Annex.
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