Section 23 Report
“Central government's use of consultancy services—How government works”
Item 2 is consideration of the section 23 report "Central government's use of consultancy services—How government works". I invite Caroline Gardner to make some introductory remarks.
Caroline Gardner (Audit Scotland):
This section 23 report, which was published on 15 January, considers the planning and management of and spending on consultants by the Scottish Government, non-departmental public bodies and central Government agencies.
I draw to the committee's attention a couple of key areas in the report. First, central Government spends £114 million a year on consultants. Although using consultants can be a good way of bringing in required specialist skills and expertise, it can also be expensive. As a result, it is important that it is properly planned and managed. We estimate that, with better planning and management, the Government could save up to £13 million a year out of the £114 million that it is currently spending.
Our £114 million estimate is the best available and is derived from a new database that the Government created as part of its public procurement reform programme. The database is very useful, but at the moment it provides only broad estimates of consultancy spending. Planned improvements should allow better monitoring of that expenditure in future.
Different people use different definitions of consultancy. We have included expenditure on consultancy services from management consultants brought in for specific projects, spending to fill temporary staff vacancies and spending on outsourcing routine services such as human resources support. A number of case studies in the report give examples of how consultants are used and help to highlight some of our key points, and we will be happy to answer questions about them.
Turning to improvements that we think can be made in planning, managing and using consultants and to where our estimate for potential savings comes from, I draw members' attention first to the fact that central Government does not have enough information to identify why consultants are used. There is always the option of using the Government's own staff, but if consultants are brought in, the reasons for doing so must be recorded. However, clearly, that is not always done. The new database will help to improve the situation, but at the moment we can be clear about what is happening only by examining individual case studies, which is what we have done. Secondly, we think that central Government needs to link its use of consultants much more clearly to its own priorities and to the financial and workforce plans that govern the way in which its work is carried out.
By taking those two approaches, not only would the Government be better placed to ensure that consultants' skills and knowledge were used where they offered best value for money, but it would be able to examine other ways of doing the work by recruiting or training staff or developing contracts for skills that it buys repeatedly from consultants. With better workforce planning, public bodies could make savings by reducing the number of times that they use consultants simply because their staff do not have sufficient time or skills. Exhibit 4 on page 12 of the main report, which shows the savings that can be made from that kind of improved planning, is based on a survey that we carried out of 103 consultancy projects. The survey found that central Government could have completed about 5 per cent of the projects without consultants and with little risk of affecting the outcome. Scaling that up across the whole of Government, we estimate that better planning could lead to annual savings of up to £10 million.
Moreover, we estimate that central Government can make savings of up to £3 million a year by changing the way it buys consultancy services and increasing its use of contracts for frequently bought skills. The potential savings from those areas are summed up in exhibits 11 and 12 on pages 19 and 20 of the main report. Such savings will not be easy to achieve in the short term, and careful planning will be required to ensure that such activity does not adversely affect the work that staff are already carrying out.
Page 7 summarises a number of recommendations that are aimed at the Scottish Government and public bodies. We also refer to the Scottish Government's revised guidance on the use of consultants, which was issued in December 2008. We welcome that revised guidance, which emphasises the need to use consultants effectively and sparingly and complements many of our recommendations.
I hope that those comments have helped to set out the report's main themes. The team and I will do our best to answer members' questions.
I note your point about the difficulty in achieving some of the potential savings and that that will require careful management and a bit of time. However, the savings—the £10 million from better workforce planning and another £3 million from changes in buying consultancy services—represent a substantial amount of money and surely make the effort worth while.
In putting the report together, were you able to quantify how many consultants were ex-senior civil servants who had left the service over the past four or five years through early retirement or with enhanced financial packages?
It is not possible to generate that level of detail about individuals at the moment. The new database is a step forward, but it refers only in broad terms to the type of consultancy work carried out and the firms involved.
To your knowledge, does employing ex-senior civil servants as consultants happen?
We are aware of anecdotal evidence of cases in which that might have happened, but we are not aware of the specific arrangements for the individuals or the financial impact. The matter relates to individual employment contracts.
My attention is drawn to paragraph 25 of the short summary report, which is reflected in paragraph 70 in the main report, on post-project evaluation and consultants' contribution. It comes as a surprise to read that projects were evaluated
"less than half the time and a third of the projects were not evaluated at all."
Does that suggest that quality standards are not being adopted in the public sector? Post-project evaluation is very much a part of any quality standard worth its salt. Are quality standards not used in the public sector, or is it just that evaluations are not being carried out?
There is real room for improvement. If people spend money on consultants, it is important to evaluate what they got for their expenditure.
I ask the team to answer the specific question on quality standards.
Dick Gill (Audit Scotland):
We found that projects were rarely evaluated. Paragraph 25 says that they were evaluated
"less than half the time and a third of the projects were not evaluated at all."
I do not think that central Government takes a systematic approach to quality management. I am not aware of anything that would provide assurance on that.
Andra Laird (Audit Scotland):
When we looked into this, we found that the guidance that the Scottish Government was working to suggested that evaluations were carried out. That has been strengthened in the new guidance.
I draw Mr Coffey's attention to exhibit 13 on page 22 of the main report, which summarises good practice on managing consultants. The source of the information is the Scottish Government's procurement policy manual. The final bullet point is the requirement to
"report on the outcomes of the assignment, the quality of the consultant's work and the extent to which the envisaged benefits are likely to be achieved."
That is a way of talking about the need for evaluation, and it is clearly part of good practice. However, we found that such practice was not uniformly applied. There is certainly scope for improvement.
I am interested in knowing how many public sector organisations adopt formal methods and standards. Considering the outcome and trying to determine better practice for the future are fundamental parts of project management. Post-project evaluation is a big part of that. It seems that we might be missing something. Formal standards might not be in place throughout the public sector. I wonder whether there will be an opportunity to follow up on that.
Willie Coffey is right to raise that point. Over the past few months, we have discovered that there can be a fairly casual approach. For example, problems in capital projects were identified only when people bumped into and spoke to each other. This report is telling us that work is being done but its effectiveness is not being evaluated.
It is possible that someone could leave the civil service early with an enhanced financial package, then be brought back in and asked to do work at fairly high rates, without the value of the work being scrutinised. It is just bizarre.
Project evaluation requires a consistent approach, so that a standard can develop across Scotland. That seems to be missing in a few of the key areas that we have examined over the past few months.
There is probably not a lot that we can do with the report. I am prepared just to note it. However, I am interested in learning from the permanent secretary about the level of tracking that is carried out. We can consider that when we consider our approach to the report.
As there seem to be no further questions for Caroline Gardner, I thank the witnesses for their contributions.