Conclusions and Recommendations
1. Central government departments spend over
£1 billion a year on consultants and interims, yet have a
poor understanding of what value they obtain from this spending.
We are not convinced by the Cabinet Office's argument that it
is impossible to measure whether government's use of consultants
represents value for money. The Cabinet Office should require
all departments to record their spending on consultants and interims
on a consistent basis and routinely measure the benefits delivered
against the objectives set, so that a government-wide view of
the value provided by consultants and interims can be established.
2. It is unacceptable that some departments
are so dependent on consultants. The Department for Transport,
for example, spends £70 on consultants for every £100
it spends on its own staff. There are
legitimate reasons for differences between departments but they
and the Cabinet Office both need a better understanding of what
level of use is justified by the nature of the department's business,
the degree of change underway and the department's progress in
developing the in-house skills it needs. The Cabinet Office should
require each department to prepare an annual assessment of need
to support its proposed consultancy budget and should evaluate
spending against this plan at year end.
3. There appears to be a 'stop-go' approach
to using consultants that is not sustainable and does not deliver
value for money. The Department of Health,
for example, appears to be reducing its consultancy spending by
95% in 2010-11, taking it from being the highest to one of the
lowest spenders in Whitehall. The Cabinet Office anticipates a
resurgence in consultancy spending as new policies are developed
and implemented. The Cabinet Office should require each department
to report what consultancy spending has been cut in 2010-11 and
why, so that it understands the impact of recent reductions.
4. There is poor visibility of consultancy
spending by arms length bodies, even though they are estimated
to spend £700 million a year. Providing
transparency about public spending should not be optional, even
for bodies with a degree of autonomy. The Cabinet Office should
meet the commitment it gave us to establish clear categories of
consultancy spending by the start of the next financial year and
should also require arms length bodies to report their spending
against these categories from 2011/12.
5. Departments have failed to develop essential
skills in core areas, leaving them over-reliant on certain types
of consultancy advice. It has long been
acknowledged, for example, that programme and project management
and IT skills across government are lacking. Whilst recognising
the Cabinet Office's argument that it takes time to 'grow your
own' skills, progress has been far too slow given that this Committee
made these recommendations a decade ago, and especially given
that the Cabinet Office studied these issues in depth in its own
report in 1994. Government also lacks the flexibility to re-deploy
people with these skills to the departments and programmes where
they are most needed. The Cabinet Office and departments should
increase the emphasis they place on programme and project management
and IT roles, both to grow these skills within government and
to retain skilled staff. They should also collect better data
on the experience of staff in key roles, such as the Senior Responsible
Owners of major projects, to identify gaps and deploy the best
people where they are most needed.
6. There is a risk that the pressure to find
financial savings will lead some departments to cut training budgets
in an uninformed way, thus undermining government's commitments
to 'grow its own' skills and increasing its reliance on consultants.
In making decisions about where savings should be made, each
department should prepare a robust analysis of the skills it needs
to develop through training and should take into account the cost
of acquiring those skills from elsewhere. Short-term financial
cuts which lead to longer term additional expenditure does not
constitute value for money.
7. Too many contracts are based on the amount
of time the consultants spend working on the assignment. Currently,
70% of contracts are let on this basis. There is a risk that these
types of contract can create incentives for consultants to work
inefficiently. A better balance needs to be found between 'time
and materials' based contracts and those based on a fixed price
or incentive. The Cabinet Office should encourage departments
to increase the proportion of contracts they let on a fixed price
or incentive basis, recognising that to use such contracts effectively,
departments must first improve their ability to define clearly
the output required.
8. Departments and the Cabinet Office lack
the knowledge they need about the performance of consultancy suppliers.
The Cabinet Office should consider how
they could help departments share relevant information about the
performance of suppliers to allow others to learn from their experience,
so that departments become more intelligent buyers and poor suppliers
are not offered repeat business.
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