The increased use of external consultants by the labour government is costing the taxpayer nearly £2bn a year and is failing to ensure value for money, according to the public accounts committee. In a report published on Tuesday, the PAC estimates that in the past three years, spending on consultants in the public sector has risen by a third from £2.1bn in 2003-04 to £2.8bn in 2005-06, with central government accounting for £1.8bn, largely to increases in the NHS.
Central government has made “some progress” in implementing previous recommendations made by the National Audit Office, the report says. These include increased use of framework agreements to cut the costs of buying in consultancy as well as involving qualified procurement staff.
However, the report states that “much more can be done” to improve value for money and identifies several areas where departments across government require “significant improvement”.
These areas include controls on awarding contracts by single tender, planning for and carrying out the transfer of skills from consultants to internal staff and better assessment of whether internal resources could be used instead of consultants.
The PAC praises the Ministry of Defence for using consultants to add “real value” to a government department and helping it make improvements it would not have otherwise achieved.
However, the report notes that departments across Whitehall and the Office of Government Commerce (OGC) do not routinely know how much money is spent on consultants.
The PAC says departments should have comprehensive data to help assess whether benefits obtained are justified by the costs and to judge if the best prices are secured when a consultant has considerable ongoing business.
It also calls for improved sharing across Whitehall and with the OGC on the performance of consultants to minimise the risk of departments being overcharged.
In a veiled challenge to Gordon Brown’s incoming premiership, Edward Leigh, the PAC’s Conservative chairman, said government needed to adopt a “much more intelligent approach” to the use of external consultants and become commercially “much sharper”.
“It is impossible to believe that the public is receiving anything like full value for money from this expenditure. In fact a good proportion of it looks like sheer profligacy,” Mr Leigh said.
Alan Downey, chief operating officer for KPMG Risk Advisory Services, which provides consultancy services to the public and private sector, said that although government expenditure on consultancy had increased over the last three years, more recently it had been declining.
Health Direct has long deplored labour’s waste of voter money- on Sept 12, 06 we posted:
NHS external manager bill soars to over £172m this year.
The NHS in England is set to spend £172m this year on external management consultants – a rise of 83% in two years – the Conservatives have claimed. The Tories warn spending on managers is detracting from clinical services.
Welwyn Hatfield MP Grant Shapps used the Freedom of Information Act to obtain figures from 76% of NHS trusts. The data shows a link between trusts with the biggest debts and most job cuts, the Tories said.
But the Department of Health said the figure should be seen in the context of the annual £70bn NHS budget. NHS trusts are able to employ external consultants for advice on how to run their services and staff.
The government has also enlisted companies like KPMG and Price Waterhouse Coopers to act as “turnaround teams” for some failing trusts.
In their report, the Tories said trusts’ spending on management consultants was increasing, and that the use of consultants was a “reliable yardstick” for job losses and debts. The report added that a total of £93.8 million was spent in 2004/05 on external consultants, rising to £117.9 million in 2005/06.
The projected spend for 2006/07 is £171.6 million.
The figures were calculated using the data returned from trusts, and projections for the remainder.
Mr Shapps said several trusts refused to respond to his request, adding they had an even worse track record than some in the report.
He added: “I think it’s extremely dubious as to how much effect these consultants are having, other than sacking lots of staff. The government needed to look at whether taxpayers were getting value for money when jobs and services were being cut and wards closed.”
The report said 10 of the worst trusts had millions of Pounds of debt, yet had a projected spend each of between £1.9 million and £3.6 million on consultants for 2006/07.
Dr Paul Miller, chairman of the British Medical Association’s (BMA) consultants’ committee, said he would not be surprised if trusts’ total spend was even higher.
He added: “The NHS is wasting hundreds of millions of pounds on management consultants who don’t have the answers. I would like the secretary of state to stop the NHS wasting all this money on management consultants – it takes money away from patient care.”
Dr Miller, who has an MBA, continued: “The NHS needs good management and good managers but that involves people who know the trust, the staff, the locality and the services it provides – not just people parachuted in from outside with no health experience.”
Health Direct agreed with Dr Paul Miller, chairman of the British Medical Association’s (BMA) consultants’ committee, when he said that he would not be surprised if trusts’ total spend was even higher.
On Tue 8 Aug 06 Health Direct noted in Public sector consultants to cost £20bn under Labour’s stewardship that the bill for management consultancy within government is set to top £20bn over the lifetime of three parliaments, according to a former consultant who has carried out an extensive survey of public spending on external advice- David Craig, formerly of Capgemini, the consulting company.