NAO criticises Whitehall on consultants

A National Audit Office report says central government is not using consultants efficiently

The report has possible implications for Whitehall's relationship with IT consultancies, which account for the largest share of its spending in the field.

Titled Central government's use of consultants and published on 15 December 2006, the report identifies some improvements, such as using OGCbuying.solutions' framework agreements and involving procurement staff in purchasing decisions. But there is some way to go before good value for money is achieved overall.

It finds that generally departments 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;
• 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 NAO says there is scope for efficiency gains in the area. Against the current baseline these could amount to £270m in the first year (15 per cent), rising to £540m (30 per cent) in the third year. 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.

Recommendations include: 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.

IT accounts for the leading share of central government's spending on consultants, even though its share declined over the past financial year. The report shows that IT consultancy cost Whitehall about £560m in 2005-06, accounting for almost a third of the £1.8bn total.

This placed it well above the project management category, which was the second largest with about £315m. But the IT figure declined from over £900m in the previous financial year.

This was largely due to a slight decrease in Whitehall spending on consultants, due to reductions at the Department for Work and Pensions, the Department for Trade and Industry and the Ministry of Defence.

Sir John Bourn, head of the NAO, emphasised the need for departments to deal with consultants more effectively.

"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," he said.

"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."

Edward Leigh MP, chair of Parliament's Public Accounts Committee, expressed some skepticism over the outlook.

"Consultants can provide an effective service to government, but too often departments hand over a signed cheque to consultants without first looking to see what skills they have in-house," he said. "However, perhaps the most damning finding is that, time and again, departments fail to keep an eye on how these companies perform or if they are delivering.

"I welcome the chancellor's announcement last week, a whisker ahead of the NAO's revealing the full cost of the government's use of consultants, that the government will issue guidance to all central departments to tighten up on the use of consultants. But whether that will enable departments to kick their external consultancy habit is another thing."

This article was originally published at Kablenet.

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