Central government's use of consultants and interims - Public Accounts Committee Contents

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.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2010
Prepared 21 December 2010