A NSW auditor has warned that consultants are not always the answer for the public service. 

According to a performance audit by Deputy Auditor-General Ian Goodwin, NSW Government Agencies do not effectively procure and manage consultants. 

Goodwin's report on the use of consultants by government agencies examined the role of the NSW Procurement Board and NSW Procurement, which is a unit within the NSW Treasury, in supporting and monitoring agency procurement and management of consultants.

“Our review of a selection of consulting engagements indicates that agencies do not procure and manage consultants effectively,” Mr Goodwin said. 

“We found most agencies do not use consultants strategically and do not have systems for managing or evaluating consultant performance.” 

The audit found non-compliance with procurement rules, including contract variations that exceeded procurement thresholds.

Although NSW Procurement had made improvements to the information available about spending on consultants, including additional analysis and reporting, there was no single data source that accurately captured spending on consultants. 

The audit found that four large professional services firms accounted for about a quarter of consultancy expenditure from 2017/18 to 2021/22. 

This concentration increases strategic risks, including over-reliance on a limited number of providers and potential reduction in the independence of advice.

Mr Goodwin stated that it was highly unlikely that NSW Government Agencies would meet the Government’s 2019 policy commitment to reduce consultancy expenses by 20 per cent each year, over four years, from 2019–20. 

Although NSW Treasury advised that to implement this commitment, agency budgets were reduced in line with the savings targets, actual spending on consulting in NSW Treasury’s Reports on State Finances 2020/21 and 2021/22 was almost $100 million higher than the savings targets over the first three years since 2019/20.

Mr Goodwin made seven recommendations, including three to all NSW Government Agencies to develop a more strategic approach to the use of consultants, ensure all consulting engagements comply with NSW Procurement Policy, and improve record-keeping practices.

The full report is accessible in PDF form, here.