Select Committee on Public Accounts Thirty-First Report

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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Prepared 19 June 2007