Report on the Use of External Consultants by Northern Ireland Departments: Follow-up Report
Committee: Public Accounts
Date: Wednesday, 18 April 2012
Reference: NIA 43/11-15
Mandate Report Number: 2011/15 Fifth Report
Together with the Minutes of Proceedings of the Committee
Relating to the Report and the Minutes of Evidence
The Public Accounts Committee is a Standing Committee established in accordance with Standing Orders under Section 60(3) of the Northern Ireland Act 1998. It is the statutory function of the Public Accounts Committee to consider the accounts, and reports on accounts laid before the Assembly.
The Public Accounts Committee is appointed under Assembly Standing Order No. 56 of the Standing Orders for the Northern Ireland Assembly. It has the power to send for persons, papers and records and to report from time to time. Neither the Chairperson nor Deputy Chairperson of the Committee shall be a member of the same political party as the Minister of Finance and Personnel or of any junior minister appointed to the Department of Finance and Personnel.
The Committee has 11 members including a Chairperson and Deputy Chairperson and a quorum of 5.
1. Northern Ireland Government departments purchase professional services from a wide range of organisations in areas such as management consultancy, financial services and information technology. Aggregate spending on external consultants is significant. Over the period 2005-06 to 2010-11, departments (including agencies, non-departmental public bodies and health trusts) have spent more than £150 million on external consultancy services.
2. During its previous hearing on this subject, the Committee noted that the cost of external consultancy to Northern Ireland Civil Service departments and related bodies had more than doubled in five years and looked like it was out of control. It is therefore reassuring to note that, since then, there has been a significant reduction in the amount of spending on external consultants. The latest annual spend is approximately £14 million, compared with a peak of £42 million in 2006-07.
Ensuring Value for Money in the Use of External Consultants
3. The Committee recognises that some degree of external consultancy will always be necessary and can be beneficial to the public sector under certain circumstances. In the past, however, external consultancy was too often used in an attempt to provide protection for civil servants' decision making. The Committee welcomes the Accounting Officer's assurance that this has now changed. However, it is important that this change of mindset continues and is embedded within the culture of the wider public sector.
4. One of the key reasons for using external consultants is where specialist skills are not available in-house. Where feasible, external consultancy projects should therefore be designed to ensure transfer of skills. However, around two thirds of external consultancy contracts continue to be let without any documented evidence of whether opportunities for skills transfer exist or could be put in place. This represents a missed opportunity for the public sector to increase its own capacity and needs to be addressed, particularly in major projects.
5. Departments are required to prepare full, but proportionate, business cases to ensure that the use of external consultancy is necessary and represents value for money. It is encouraging to note that compliance with DFP guidance in this area has improved. However the absence of business cases in a significant minority of projects and the poor quality of some of those which are produced is unacceptable. This is a basic management tool and must be applied in full. In the absence of business cases, it is not possible to justify the use of external consultants or to show that value for money has been obtained.
6. Post-project evaluations (PPEs) provide an opportunity for departments to assess the performance of external consultants, confirm whether value for money was achieved and identify lessons for future projects. The Committee has concerns about the quality and usefulness of the current process and considers it essential that DFP should use its position at the centre to positively influence the quality of PPEs and to promulgate key lessons.
7. Competitive tendering represents the best means of ensuring that departments achieve value for money and helps demonstrate propriety in the use of public funds. Around one in five of the contracts reviewed in the C&AG's report were single tender actions. This is too high. Single tender actions should be very much the exception and, where they occur, they must be fully justified, subject to a challenge process and reported transparently.
8. The C&AG's report identified that around 40 per cent of the contracts had experienced a cost increase relative to the original contract value. The extent to which some contracts were extended, and the repeated nature of some contract extensions, is a matter of grave concern. The absence of competition when contracts are extended in this way compromises value for money.
The Account NI Consultancy Project
9. Account NI was a major reform initiative within the Northern Ireland Civil Service to implement a centralised accounts processing system. External consultancy expenditure on this project increased from an original contract value of £0.97 million to £9.6 million and was delivered four years late.
10. The Committee is appalled that the DFP Accounting Officer did not accept that the Account NI external consultancy contract represented a cost overrun. The Committee is unambiguous on this matter — this project experienced a huge cost overrun and should have been re-tendered and opened to competition. The lack of competition for almost £9 million of expenditure is unacceptable. This contract spiralled out of control, and the repeated extensions give every impression of providing an open cheque book to the external consultants.
DFP's Central Oversight of External Consultancy
11. The availability of accurate, timely and consistent expenditure data is a pre-requisite for public accountability. DFP gave a commitment to this Committee in 2008 that comprehensive and accurate data on external consultancy expenditure would be available at the touch of a button. This is still not happening. In response, DFP has outlined imminent developments in Account NI which should improve the situation.
12. However, the majority of public spending remains outside Account NI. The Committee therefore remains concerned that there will continue to be difficulties in providing accurate, timely and consistent expenditure data on the use of external consultants, especially for NDPBs and other bodies at arm's length from departments. This is an issue which needs to be considered.
13. In response to a previous Committee recommendation, DFP has introduced an annual Compliance Report on the use of external consultants. This Compliance Report is a useful vehicle for holding departments to account for their use of external consultants. There may now be scope to make the exercise more forward looking. The Committee considers that further value could be added if the report was expanded to focus on the sharing of good practice and the identification of lessons learned.
14. TRIM is the Northern Ireland Civil Service's electronic records management system. In preparing his report, the C&AG had difficulty obtaining key documents, and some departments identified TRIM as a causal factor. This is a matter of great concern, as the integrity of the public record is a fundamental requirement. The move towards electronic records management must not compromise the maintenance of Northern Ireland's public record and the ability of the C&AG to carry out his functions in providing assurance to the Assembly and this Committee on departments' use of resources. This issue must be reviewed as a matter of priority.
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