Use of Consultants

A report published today by John Dowdall CB, the Comptroller and Auditor General for Northern Ireland, concluded that there is considerable scope for Government departments to improve their procurement and management of consultancy services.

The report noted that the Northern Ireland Civil Service (NICS) recorded spend of some £18.6 million on consultancy in 2002-03, an increase of more than 75 per cent since 1998-99.

A review of a sample of 100 contracts revealed that departments are failing to comply with guidance issued by the Department of Finance and Personnel (DFP) on the use of consultants. Contrary to the guidance, departments are undertaking the majority of projects without formally assessing the need to use consultants and without undertaking post-completion evaluations to learn lessons and share good practice. A relatively high proportion of contracts are let by single point tender, rather than being competitively advertised, and consultancy projects are often extended so that the final costs significantly exceed the original contract value.
 

Main Findings

On compliance with DFP guidance

Departments are failing to produce the business cases required by the guidance and consequently are undertaking inadequate appraisal of their spending on consultancy. It is estimated that about £10 million per year is spent on consultancy services without departments having established a clear business need, quantified the costs or benefits, reviewed alternative delivery mechanisms or specified the management and implementation arrangements (paragraphs 2.6 to 2.14).

Around a third of contracts examined had been awarded by single point tender rather than being openly and competitively advertised as required by the guidance. In a large number of consultancy projects, the original contract was extended and the final payments significantly exceeded the original fees agreed. The additional payments represented an increase of 65 per cent over their original, agreed costs (paragraphs 2.15-2.26).

Over 90 per cent of the sample of contracts did not comply with the requirement to undertake post-project assessments after the use of consultants. It is estimated that departments may be incurring expenditure of £17 million a year on consultants without subjecting it to any formal assessment of the benefits of the work, whether it met its objectives and whether there are any lessons for future projects (paragraphs 2.27-2.35).

Departments are failing to systematically share information on proposed projects, fee rates, the performance of suppliers or lessons learnt. There was little evidence that they identify opportunities to collaborate or harness their collective purchasing power (paragraphs 2.36-2.39).
 

On the role of DFP

In its procurement role, DFP has developed a Framework Agreement with external consultancy suppliers. Although appropriate use of this Framework Agreement offers departments the benefits of compliance with European Union procurement regulations, reduces their internal processing costs and provides access to competitive fee rates, less than one quarter of departmental expenditure on consultants was let under the Agreement. It is estimated that departments may have failed to secure savings in excess of £2 million a year as a result (paragraphs 3.4 to 3.9).

Current guidance on the use of consultants was issued in 1995. While it addresses a number of good practice issues, there have been recent developments in procurement best practice. Consequently, we consider there is scope for DFP to enhance and update its guidance to, for example, improve management information systems across the NICS and harness its collective bargaining power (paragraphs 3.11 to 3.14).

DFP maintains a database of consultancy expenditure by department and by category of consultancy. It is important that the information is consistent, comprehensive and clearly-defined. A number of areas were identified where the accuracy and completeness of the database needs to be improved to meet the standards required. DFP’s database excludes some types of consultancy (for example where consultants are employed to undertake a feasibility, design or supervisory role on specific work projects). In 2001-02, two NICS Agencies alone incurred over £19 million expenditure on consultancy of this nature (paragraphs 3.15-3.29).