Government "wastes" £2.8bn a year on consultants

The government's annual bill for using external consultants has rocketed to almost £3bn, with more than half of that going on IT and project-management work.

A report by Whitehall spending watchdog the Public Accounts Committee (PAC) found the public sector spent £2.8bn on consultants for the financial year 2005/2006, a rise of £700m in just two years. Central government alone accounts for £1.8bn of that bill.

It is impossible to believe that the public are receiving anything like full value for money from this expenditure. In fact, a good proportion of it looks like sheer profligacy.

Edward Leigh MP, chairman of the PAC

The PAC slammed the government for wasting "vast sums of money" unnecessarily and said better use of consultants would save £500m a year.

Government IT projects are one of the biggest black holes for spending on consultants. The report found the most frequently purchased consultancy services were IT and project management skills, accounting for 54 per cent of the public sector's total expenditure on consultants for the past three years.

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Much of that expenditure is also concentrated around the same few big suppliers, with central government spending more than £100m on consultancy services with each of its top four suppliers.

MPs on the PAC have hit out at the lack of value for the £2.8bn being spent each year on consultants by the public sector after the report found departments and procurement body the Office of Government Commerce do not routinely know how much is spent on consultants, and that just one per cent of consulting projects use incentive-based contracts rather than time and materials billing.

PAC chairman Edward Leigh MP, said the public sector must become commercially much sharper in procuring consultants and drawing up fixed-price contracts or ones containing incentives for delivery.

He said in the report: "It is impossible to believe that the public are receiving anything like full value for money from this expenditure. In fact, a good proportion of it looks like sheer profligacy. What would we say of anyone in private life who dealt with contractors like this? The consultancy firms are truly on to a good thing."