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Press Release - Central government's use of consultants

 

15 December 2006

 

Central government spent around £1.8 billion on consultancy in 2005-06, according to new figures published today by the National Audit Office. Total public sector spending on consultants is estimated at around £2.8 billion for 2005-06. There have been improvements in using consultants, but there is some way to go before good value for money is achieved overall.

 

The new figures show that there has been a slight decrease in central government spending on consultants. This decrease can be attributed to three departments – the Department for Work and Pensions, the Department for Trade and Industry and the Ministry of Defence – rather than a wider trend across government.

 

Spending on consultants across the public sector has risen by 33 per cent between 2003-04 and 2005-06 largely because of increased spending in the NHS. Over the past three years, two of the services most consistently bought in by central government have been programme and project management and IT.

 

It is not possible to make an overall assessment of the benefits that have resulted from the money spent on consultants, partly because departments rarely collect information on what has been achieved.

 

Departments have made good progress in some areas such as involving procurement staff in purchasing decisions and making greater use of framework agreements, which generally reduce procurement costs and produce better prices.

 

However the NAO found that departments, for the most part, do not:

  • make a proper assessment of whether internal resources could have been used instead of consultants;
  • collect adequate information on their use of consultants, such as performance reviews, to improve their buying decisions and understand better the benefits they bring;
  • actively engage with key consulting firms to understand how they work;
  • regularly plan for and carry out the transfer of skills from consultants to internal staff to build internal capabilities.

The Treasury has indicated in the Pre-Budget Report 2006 that “Government will continue to drive value for money” in this area (Pre-Budget Report 2006, 6.30)

 

The NAO considers that efficiency gains of around 15 per cent in the first year, or £270 million, rising to around 30 per cent in the third year, or £540 million against the current baseline, could be made through better use of consultants by central government. This could be achieved through making more use of in-house staff; negotiating better contracting terms; and getting improved results for the money they spend.

 

Priority areas to improve value for money include the following: identifying where core skills gaps exist and recruiting staff or transfering skills from consultants to internal staff where possible; starting from the presumption that a public body’s own staff are the best fit for their requirements; making greater use of different methods of payments, including fixed price or incentivised contracts; and building greater commitment from clients and consultants to make consulting projects a success.

 

Public bodies should also engage with the market earlier to ensure consultants have a better understanding of the requirements and, as such, public bodies would receive more innovative responses to their invitations to tender. They should also stick to OGC guidance on the recommended threshold above which senior level of approval of consulting contracts is needed, and improve their understanding of how consulting firms operate and their incentives to win contracts for further work.

 

Sir John Bourn, head of the National Audit Office, said today:

 

“Consultants can perform a vital role in delivering public services, providing skills which may be lacking in the public sector and helping to bring about improvements which may otherwise have been unattainable. Central government has made good progress in implementing some of the recommendations from a previous examination by the Public Accounts Committee but, on others, the picture is disappointing.

 

“Departments need to think ahead about what skills they should have, so they don’t have to rely on consultants year after year. They should examine whether they really need to use consultants quite as much as they do, a move which could release substantial sums for frontline services.”

 

Notes for Editors

  1. The NAO carried out a survey of the top 28 spending central government bodies, including all central government departments, and a detailed review of five case study departments: the Home Office; Cabinet Office; Ministry of Defence; Department for Communities and Local Government; Department for Education and Skills, plus the Office of Government Commerce.
     
  2. Framework agreements are agreements with suppliers which set out terms and conditions under which specific purchases can be made throughout the term of the agreement.
     
  3. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
     
  4. The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office which employs some 850 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

 

Press Notice 72/06
All enquiries to Mark Anderson, NAO Press Office:
Tel: 020 7798 7558
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