Conclusions and recommendations
1. Only half of the recommendations in the
Committee's 2002 Report, Better value for money from professional
services, have been properly implemented.
Lack of progress has meant the government is still not achieving
good value for money from the £1.8 billion spent on consultants.
OGC initially worked with departments but in 2003 left departments
to implement the Committee's recommendations themselves, despite
its own review showing that progress was still required. Departments
should develop early action plans for implementing the recommendations
from this Report, assigning responsibility for implementation
to a senior official. OGC should use its new programme of procurement
capability reviews to determine whether departments are getting
a better grip on how they use consultants.
2. Departments and OGC do not routinely know
how much money is spent on consultants. Without
such information departments cannot be sure whether value for
money is achieved. Departments need to have comprehensive reliable
data on consultancy expenditure, including the types of service
provided and the suppliers used. This data should be used to assess
whether the benefits obtained are justified by the costs, and
whether the best prices are secured where a consultant has considerable
on-going business. OGC should use the information to determine
whether collectively government is making best use of its buying
power to get competitive prices.
3. Consultants are often used when in-house
staff have the necessary skills and are less expensive. Internal
staff can provide better value for money than using external suppliers,
for example if the requirement is long-term or generalist. Departments
should always routinely consider whether they have the skills
in-house before turning to external consultants. If consultants
are the only option departments need to define from the outset
the added value they expect to receive.
4. Departments do not routinely assess the
value of the work they receive from consultants.
Project specifications agreed with consultants and contractually
binding should set out the intended benefits which should whenever
practicable be defined in a way that is capable of measurement.
Post project evaluations which capture the lessons learned and
assess the performance of suppliers should be routinely used.
Higher value assignments should be assessed as part of Gateway
5—Benefits Realisation.
5. The capability of departments to be intelligent
customers is weakened by insufficient sharing of information on
consultants' performance. A consultant
may not perform well for one department but still be employed
by another, charge a significantly higher price for the same service,
or redesign a similar process from scratch which they have successfully
implemented elsewhere in the public sector. To minimise these
risks departments need reliable and easily accessible market intelligence
on the use of consultants and their performance. OGC, working
with departments, needs to develop communication channels such
as on-line customer forums to make it easier for departments to
share information and experience.
6. 40% of clients consider they have used
consultants when it was not necessary.[2]
A feature of both the public and private sector is a tendency
sometimes to use consultants for inappropriate reasons. At worst
these can include, for example, employing them as a means for
deflecting blame for failure should a project under-perform. The
reasons for employing consultants need to be clearly articulated
and transparent in rigorous business cases, which should be subject
to independent challenge such as peer or professional review to
test their validity.
7. For the last three years the most frequently
purchased consultancy was IT and project management skills, accounting
for 54% of government's total expenditure on consultants.
Consistently relying on consultants for basic skills is expensive
and repeated use suggests poor value for money. Departments need
to identify where core skill gaps exist in relation to medium
to long term programme requirements, determine the most cost effective
division of work between internal and external resources and plan
their recruitment and training accordingly.
8. Departments do not regularly plan for,
or achieve, the transfer of skills from consultants to their staff
to build internal capabilities. Three
of the five departments examined by the Comptroller and Auditor
General had made only limited progress in transferring skills
which would reduce the need to rely on consultants in the future.
Departments should identify where there are opportunities for
skills transfer through for example, consultants providing training;
making skills transfer a specific requirement of the contract
with appropriate financial and non-financial incentives; and having
in-house staff work alongside consultants either formally in joint
teams or informally as observers.
9. Some consultant charges lack transparency,
making it difficult to verify that all costs are justified.
Consultancy contracts need to be clear about the basis on which
departments will be charged for costs such as travel and subsistence,
fees and other expenses, and how they will be reimbursed for rebates
firms may obtain for travel and accommodation, and for time not
worked or where lower graded staff are used. Departments' finance
teams need to be more vigilant in checking the appropriateness
of expenses which consultants charge.
10. Only 1% of consulting projects use incentivised
contracts and much work is still paid for on a time and materials
basis. Departments, where practicable,
should base payment to suppliers on what they produce through
fixed price or incentivised contracts, instead of based on the
amount of time they spend working which carries the risk of being
open ended. Key to using these payment types is having well-defined
outputs and outcomes when engaging consultants.
11. Departments are appointing some consultants
through single tender, which puts value for money at risk.
Single tender reduces the potential to secure competitive prices
and get a broader range of approaches. Departments should reduce
the amount of contracts awarded by single tender by routinely
involving procurement staff in the buying process to provide commercial
expertise and making use of framework agreements which provide
for competition while generally reducing procurement costs and
securing better prices.
12. Central government spends over £100
million with each of its top four suppliers, yet does not take
full advantage of that spending power.
In its new more strategic role OGC should work with public bodies
to identify key information and then aggregate this information
to provide a pan-government view. OGC should also co-ordinate
cross-government meetings to help government act as a single customer
to its key consultants and in particular use its buying power
to secure the best deals for the taxpayer.
2 Public and private sector clients as reported in
Perceptions of consultancy in 2005 (MCA,2005). Back
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