Consultant spending down ...

...but where are the savings, says the National Audit Office, which says that any reduction may stem from more accurate cost tracking rather than better management control
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Whitehall is too heavily reliant on consultants for basic skills, says the NAO

Government departments are spending slightly less on management consultants and interim managers - but they are still not getting value for money, according to the National Audit Office.

The central government watchdog's report says that spending on external consultants by 17 Whitehall departments has fallen from £904m in 2006-07 to £789m in 2009-10.

But some of that fall is due to more accurate cost tracking, rather than improved management control; the report says the government lacks the information, skills and strategies to manage consultants effectively and that there is very little evaluation of suppliers during projects.

It says departments have not done enough to improve their in-house skills. "Relying on consultants for basic skills is expensive and repeated use suggests poor value for money," says the report, which adds that knowledge generated from central information is not being used to drive improvements across departments.

Yet again, it seems, the public sector is failing to share information in a useful way and this is particularly marked in the case of arms length bodies, which account for at least £700m of spending on consultants, but have not come under the same degree of scrutiny as central departments.

Rigorous scrutiny

It also says the restrictions imposed by the government since the election is not an effective way to manage spending and could lead to costs being "displaced" elsewhere. "There is a risk that rigorous scrutiny of one category diverts spending to other professional services where there is less control," says the NAO.

Before 24 May 2010, when the government announced that it wanted to save £1.1bn on discretionary spending, including the use of consultants, the 17 departments had 478 contracts with consultants.

In June a series of controls were put in place so that any contract above £20,000 would be subject to ministerial sign-off. A further 50 contracts were signed between then and August. While cost tracking has become more accurate, the report is still critical, saying few departments can provide information on their spending by type of consultancy and do not know how many interim managers they employ.

Alan Leaman, the chief executive of the Management Consultancies Association, said the MCA supports several recommendations in the NAO report, particularly the need to define at the outset the expected outcome and benefits of using consultants, and making more use of contracts based on incentives and fixed prices, rather than those based on time and materials and daily rates.

The MCA also agrees that there should be better integration of consultancy use in the government's workforce planning and that "an undue focus on spending" could lead to higher costs elsewhere.

The NAO report. a follow-up to the watchdog's 2006 report on central government's use of consultants, says the price that departments pay is often based simply on time spent on a project, rather than being fixed in advance or related to the achievement of objectives.

"Most departments do not assess the performance of consultants or whether the work done was of benefit," it says.

In June, the MCA launched a report defending the use of consultants in the public sector and last month Leaman called on the health secretary Andrew Lansley to use accurate figures about the use of consultants in the NHS. He also said the NA should require public sector organisations to adopt consistent definitions and reporting standards.

The NAO report says the quality of departmental data on use of interim managers is poorer than information about consultants. "Most departments only started collecting accurate figures for their spending on interims in 2009-10," it says. The data that is available suggests spending on interim managers may be increasing.

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