Lord Agnew Kt DL. Minister of State 1 Hose Guts Hand London SWIA2HQ (ur reference: MCZ020/12586 18 Sepiembar 2020 Dear Finance Director / Chie Operating Officer! Chief Commercial Otfcer, Consultancy spending and data Government spend on consultants and other professional gervices has seen an upward trend ‘ver a qumber of years, and | am concemed about whether depariments are using consultancy services inthe most cosieffectve,effcient and appropriate manne. Assessing the scale ofthe issue‘ challenging, as there are significant disparities in the data recorded on consultancy spend in the cammersial and fance systems. For example, the spend recorded through the Jaggaer system (which captures invoice payments) is consistent ton times higher than spending captured through Crown Commercial Service frameworks, wih financial expenditure data trom OSCAR and captured through annual reports and accounts siting somewhere in te middle. The NAO and PAC have been cftical of the quallty and Fichness of data in previous reperts, noting that II not possible fo get a consistent picture oF develop 2 detaled understanding ofthe use of consutans. In spite of recent efforts to improve and allgn definvons,thedatalseues have no! been resolved (Our ministers are determined to address the data issues and want to review recent changes to the consultancy and professional services spending contrl, which Increased the value of consultancy contracts that departments coulé approve without requifing central contol approval ‘iam £1 milion to £10 milion. In addtion to guidance onthe cassication of spending the spending controls guidance makes ‘lear thatthe Increased delegated approval mits for coneuilancy spend are conditional upon central goverment departments and. bodies. recording. and eporing the following data sccuratly and promptly the amount approved, the supplier, a description of the work ana why it 'S required, the date of te contract and conse approval, the duration of the contract. and the procurement rameworkused. ‘The optimal solution requites join up between commercial and HR. Proposals include ensuring that the el service onl pays for specific consultancy senvces once, Any contract shoud have measures in place to faite knowledge transfer fom consultants at a departmental and ‘unctional level ensuring expertise leamt can be reused across government We need your help in understanding why these arrangements are not working and isenttying ways to improve the qualiy of the data relating to consultancy spend. We need insight ini the Use of constancy across government. In particular, itis cca! that increasing the contol of spend on consultancy does not simply displace tis to otter expensive alteratves outside ofthe control's scope. To guard against this, we need to bettar understand data on the use of contingent labour, individuals or teams bought in on a statement of work, IT services contacts and contract change notices, My ofcats wil be engaging you in work to develop clear, consistent coding systems so that in fufure we can sssure oursalves that consultancy and professional services sperding f= not iisieading or lassifed under categories that are not subject to Cabinet Office send contol approval. We will engage with you to develop guidance on how to treat mixed contracts including consultancy and other types of spend ‘A propotion af the increase can be attributed to Bret, However, four years after voting to leave the Europesn Union itis unacceptable that the cil service stil has not developed the capabilty to deliver this through ur own clvl servants. We are foo raliant on consultants. Aside from proving poor value for money, this infantiises the civl service by depriving aur Brightest people of cpportunties to work on some of the most challenging, fuliling and eruschy isues. For example, we seem to be ineffectual at harassing our Fast Streamers to do work that is ten outsourced to consultants using similar peopie ata vastly inflated cost ‘Tis is unacceptable So, in parallel we will be looking at whether we need to make changes to the consultancy contol to provide minister with confidence that deparments are Dearing down, on unnecessary spend and instead look to build intemal eapabilty. The goal & to ensure consultancy services are only procured when appropriate, are bought in the most cost effective way and ate managed to maximise value for money. Having high qually data on consultancy spending by al canal government bodies is key to this goal, so we wll be working with you to Geveion contls and procedures to hold departmental HR and finances teams to sscount using this data 'At departrental level this means HR. Directors, Finance Directors and Commerdal Directors personally assuring themselves that they have robust, cross cuting controls in plese, and that higher value consultancy is signed of by each functional area, CCould you please nominate a lead to represent your department and work with teams in the Cabinet Ofice and Treasury to develop and Implement proposals to address these issues. We would be grateful fora reply by 2nd October to the controls team at ‘abinetoficecontrols@cabinetofice aov.uk Lord Agnew Kt DL.