By politics.co.uk staff
The government faced heavy criticism today for spending £1 billion a year on outside consultants with no assessment of their value for money.
The influential public accounts committee today published its report on government 'outsourcing' - and found there was a chronically poor understanding of how and why different departments spend their money on interim staff and consultancy.
In a particularly damning passage, the MPs state: "Departments do not control and manage their spending on consultants.
"The price that departments pay for consultants is often based simply on time spent on a project, rather than being fixed in advance or related to the achievement of specific objectives.
"Departments frequently fail to adequately define the service required or negotiate the most advantageous contractual terms, and therefore cannot assess the performance of consultants or whether the work done was of benefit."
The government spent £1 billion last year on outside expertise. Although that spending fell dramatically in the first six months of this year (by 46%), this is mostly due to government programmes being stopped altogether rather than any coherent examination of consultants' value for money, the committee added.
There was also no explanation of why some departments spend considerably more on consultancy than others. For example, the Department of Transport spent £70 on consultants for every £100 it spent on staff costs, while the figure for HM Revenue and Customs was only £2.
Committee chair Margaret Hodge warned that the spending review measures, in a rush to find savings, didn't include a proper assessment of the costs associated with 'farming out' many of central government's tasks.
She added: "There are of course legitimate reasons for a department to buy in specialist skills where they are in short supply internally. But departments have become too reliant on buying in core skills rather than developing them in their own staff.
"It is a mark of departments' poor understanding of spending on consultancy that some have reacted to cost pressures by cutting that spending in an uninformed way. This runs the risk that short-term savings could lead to increased costs and poor value for money for the taxpayer in the long term."
The Cabinet Office is also singled out for having failed to implement proper cost-benefit analysis of outside consultants in the 16 years since it first raised the problem.
Today's report will cause intense embarrassment for ministers who have been tasked with finding vast efficiency savings as part of the spending review.