Rising consultancy spend 'suggests underlying problems have not been fixed', says NAO

13 January 2016

The government’s approach to reducing spend on consultants and temporary staff has been one of short-term reduction rather than a sustainable strategy, according to a National Audit Office (NAO) report.

The NAO said spending on consultants and temporary staff was around £2.7bn in 2009-10, but this fell by £1.5bn in subsequent years through better scrutiny of staffing proposals by government departments.

However, annual spending has increased by between £400m and £600m since 2011-12 as government departments have reduced their permanent workforces, the report found. In 2014-15 spend was between £1bn and £1.3bn.

The report said the rise was the result of under-developed strategic workforce planning and a lack of assessments of current staffing and skills against future needs in some government departments, leading to short-term decision-making.

In particular, the internal approval process of using "resource boards" within departments to review requests for consultants and temporary staff was found to be “weak”. The Department for Environmental Food and Rural Affairs only set up its board in May 2015. And the Cabinet Office, which originally made the recommendations for resources boards in 2010, did not follow its own internal procedures, with two out of 10 cases examined not going through the approval process.

The use of single tenders and extending existing contracts for 43% of consultancy work in 2014-2015 meant that limited competition for assignments was generated. Just half of consultancy and temporary staff were hired through Crown Commercial Service (CCS) agreements. In many cases departments still used long-standing and local arrangements, which were sometimes more expensive, and this reduced the CCS’s ability to negotiate fees by combining departmental spending power.

In addition, in 2014-2015 only half of consultancy assignments were paid according to a fixed price or on delivery of pre-agreed programme. The rest were paid a daily rate.

Head of the NAO, Amyas Morse, said that when used well, consultants and temporary staff can be an important source of specialist skills and capabilities for departments that need to transform how they do business.

“But such specialist staff can be expensive, costing twice as much as their nearest permanent staff counterpart. Government spending on these staff has reduced significantly since 2010, when strict spending controls were introduced, but is now increasing once more,” he added.

“This suggests that the underlying issues have not been fixed. Professional workforce planning to address skills and capacity gaps in key areas is essential to drive down dependency on consultants and temporary staff.”

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