Value for Money Examination 22; Consultancies in the Civil Service Summary

Although the use of external consultancies by government departments has increased significantly in recent years, the amount of available information about the nature and cost of consultancies and the reasons why they are conitnissioned is hinted. Accordingly, this examination set out to gather information about consultancies undertaken by all government departments in the period 1994 to 1996 and to consider the following value for money issues associated with the various stages of a consultancy

  • whether the need for consultants is properly established prior to the engagement process
  • whether consultancy services are acquired in the most economical manner
  • whether consultancies are managed efficiently by departments
  • whether the output and impact of consultancies are adequately assessed.

Consultancies Undertaken in the Period 1994 to 1996

A detailed survey of all departments was undertaken to establish the nature and extent of consultancies in the period 1994 to 1996. Survey returns were received in respect of 983 consultancies commissioned by 28 departments at a cost of ?62.7 million. each costing over ?1million. By contrast, 56% of consultancies cost less than ?10,000 and represented 3% of the total cost.

For consultancies costing less than ?1 million, 66% could be classified as being output related involving the commissioning of professional advice, policy and performance reviews, planning or appraisal studies and market research. A further 26% could be classified as contributing to the development of business processes within departments. These consultancies were typically associated with the development of information technology systems, training and development, organisational reviews and consultancies associated with the Strategic Management Initiative.

The survey showed that 61% of consultancies were undertaken because of either a lack of in-house skills or the unavailability of in-house resources. A further 31% of consultancies were commissioned to obtain an independent or objective view.

There is a clear need for the maintenance of information on the public sector consultancies in an easily accessible form in order to better in for the selection proves and to improve the effectiveness of the management of consultancies.

The Case for Consultants

A detailed examination of 34 consultancies drawn from three departments showed that a formal written business case setting out the objectives, expected benefits and estimated cost of the consultancy was not prepared in any case. The examination found very little documentary evidence that departments gave due consideration to the likely cost-effectiveness of the use of consultants.

The Selection Process

es for the consultancy selection process are documented in guidelines produced by the Department of Finance which take account of European Union requirements. The principal aim is to select the right consultant for the job at the best price while ensuring fairness to all potential candidates, usually through a competitive process. In most respects, departments followed the rules and guidelines.

Single tendering was used in 9 of the 34 consultancies examined in detail. In the evaluation of tenders, concerns of quality or a medium term perspective can outweigh those of cost and in 19 out of 25 tender competitions examined, the contract was not awarded to the lowest bidder.

Management of Consultancies

It is estimated that the cost of departmental staff time applied to acting as a project manager and liaising with the consultants during the performance of the work is equivalent to 19% of the cost of the consultancy. In most cases examined, the role and responsibility of the project manager was not defined in advance and project management responsibilities were additional to the normal duties of the officer. Records of contacts with the consultants were not always maintained and in two cases, there were no records at all of project management activity.

Only 17 of the 34 consultancies examined had activity plans for the delivery of consultancy outputs. In 66% of the consultancies where plans were available, the completion of work was late. While the best way to control the cost of consultancies is to have a fixed price contract, the survey showed that cost overruns occurred in 36% of consultancies costing between ?100,000 and ?1 million, although the department concerned regarded the contract as being on a fixed price basis. In three of the these cases, the additional payment was in excess of ?100,000.

Measuring the Impact of Consultancies

Departments do not have systems, procedures or practices to measure the effectiveness of consultancy assignments. Very little evidence of the preparation of formal evaluations of the impact of consultancy assignments on the operations of departments was found.

Cost savings which were expected to materialise as a result of the consultancies were not computed in some cases where it would have been appropriate to do so.