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

3  Managing consultants' work

12. At the time of the hearing, 70% of government contracts were let on the basis of how much time a consultant works on a project, 29% were let on a fixed price, and just 1% on an incentive basis.[33] Departments have been unable to reduce the number of 'time and materials' contracts because they do not adequately define the output required and therefore are not in a position to let more contracts on a fixed price or incentive basis.[34] Letting contracts where you pay the consultant for just their time creates an incentive to add complexity and to work inefficiently, as the longer it takes a consultant to deliver a project, the more money they can earn.[35]

13. We understand that there may also be negative incentives through letting other types of contracts. For example, under fixed price contracts consultants may use the minimum effort required to deliver a project for the agreed fee. Under incentive based contracts it may be difficult to attribute whether improvements in performance were due to the consultant or the department as in many instances consultants' work is within the context of the wider department's projects and programmes.[36] The Cabinet Office told us it was aiming to get a better balance of the type of contracts let and acknowledged that there should be a mixture of rate-card based consulting and performance related contracts.[37]

14. Departments do not have a good grasp of their spending on interims in particular. Three central government departments did not know the cost of the interims they employed and 12 did not know the seniority of interims that they did employ.[38] The Cabinet Office explained that the poor understanding was partially due to the lack of a consistent definition for an interim, and that it had established the same definitions across all Departments.[39]

15. The overall finding from the NAO report was that government was not achieving value for money from its use of consultants and interims.[40] Some departments are potentially using consultants when there is no need to do so, as they have not checked whether they have in-house staff with the relevant skills before opting to use consultants.[41] Furthermore, although there were key performance indicators put in place for departments to report on their performance in improving the use of consultants, fewer than half of them reported back using them.[42] The Cabinet Office told us that due to an increase in centralisation, it now had a greater ability to mandate departments to perform certain actions, thus giving central government more authority to control performance measurement.[43]

16. The Cabinet Office stated that it is difficult to measure the value achieved from consultancy because government can currently only measure the value of the inputs and not the outputs.[44] We were not convinced that it is impossible to measure whether government's use of consultants and interims represents value for money. Whilst it may be difficult to quantify the added value gained from a consultant, there are ways to get a better understanding of the benefits provided by consultants.[45] For example, by regularly checking throughout the contract whether the consultants are delivering what was specified, and by making an assessment some time after the contract has been completed of whether and how the consultants output was used.[46]

17. The NAO report found that departments are concerned about the legality of sharing information on the past performance of suppliers in order to inform future decisions on the appointment of consultants.[47] The Cabinet Office explained that European Union law prevented departments from sharing information on how well or poorly suppliers have performed for them[48], creating a risk that poorly performing suppliers will be offered repeat business across government.[49] The Cabinet Office told us it has regular meetings to discuss supplier performance across all departments and is building a much better understanding of the performance of each of the companies with whom government does business. It told us that by using this information it had renegotiated contracts with major government suppliers, saving £800 million.[50]

33   Qq 43 and 52: C&AG's Report, para 2.18 Back

34   Q 42: C&AG's Report, para 10 Back

35   Q 42 Back

36   Qq 28, 43, 52 Back

37   Qq 43 and 56 Back

38   Q 23: C&AG's Report, para 1.13 Back

39   Q 23 Back

40   Q 27: C&AG's Report, para 16 Back

41   Qq 33 and 71; C&AG's Report, para 2.10 Back

42   Q 35: C&AG's Report, para 2.4 Back

43   Qq 23 and 38 Back

44   Qq 27-29 Back

45   Q 96 Back

46   C&AG Report, para 10 and 15c Back

47   Q 93: C&AG Report, para 2.36 Back

48   Q 94 Back

49   Q 93 Back

50   Q 95 Back

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Prepared 21 December 2010