Govt's consultants' bill $375m and rising

File photo / NZ Herald

Unions fear government spending on consultants could skyrocket after it was revealed that the bill hit $375 million last financial year - and John Key warned of "significant" restructuring to come.

The Government spent more than $375 million on consultants and contractors in 2010-11 as a series of government restructurings made thousands of public sector workers redundant, figures show.

Consultants were paid as much as $275 an hour or $2500 a day, according to figures released by 31 government departments and agencies under the Official Information Act.

Some departments are increasing spending on consultants while getting rid of workers who, across all the departments involved, make an average of $33 an hour based on a 40-hour week.

The $375 million is lower than the $400 million the same departments spent in 2008-09, Labour's last year in power.

Cabinet minister Tony Ryall said consultants were used only when it did not make sense to have permanent staff - for example on short-term projects or schemes needing particular technical skills.

This "expertise" had helped government departments respond to change, he said. "[But] over time I would expect that the costs associated with buying in this expertise would go down."

However, Richard Wagstaff, national secretary of the Public Services Association, said the $375 million was "significantly" higher than the $335 million the same departments had spent in 2009-10, National's first year.

That showed departments had lost "a lot of institutional knowledge" when 2000 public sector workers were made redundant under National, and faced "desperate capability and capacity problems".

The Prime Minister's promise of "significant" restructurings next year would mean further public sector job cuts and even more consultants employed, Mr Wagstaff said.

It was "extraordinary" that some departments were spending more on consultants despite shedding in-house staff, he added.

Since 2008, the Ministry of Economic Development has increased spending on consultants by $12 million - enough to pay for 161 in-house workers - and made 29 staff redundant.

In a statement, the ministry said the increased spending was due to several major IT upgrades and work on new projects including the Rugby World Cup, the national cycleway and the emissions trading scheme.

Similarly, the Ministry of Foreign Affairs and Trade more than doubled its spending on consultants, from $4.5 million to $9.8 million, while shedding 14 staff. Its biggest increases came in HR, information and public affairs, and property management.

Other departments to increase consultancy spending but shed staff included the Ministry of Transport, Te Puni Kokiri and the Ministry of Health.

Mr Ryall said consultants were not used to replace staff made redundant. But Mr Wagstaff said many consultants were former public sector workers "doing the same thing they used to do, but for a lot more money".

Some spending on consultants was appropriate, he said, "but they shouldn't be doing things that departments could do for themselves and which would be cheaper in the long run for departments to do".

The figures released by departments under the Official Information Act show government consulting can be a lucrative business. Department of Internal Affairs figures reveal it paid consultants Citrix $275 an hour for advice on "identity services".

It also paid IT firm Silverstripe $2,500 a day for work on data.govt.nz, a project to give the public easier access to government statistics.

Meanwhile, Housing New Zealand paid accounting firm Deloitte $4.2 million in one year to work on projects including an "affordable housing owners' forum".

In the election campaign, then Labour leader Phil Goff attacked National's plan to pay Australian investment bankers Lazard $100 million for advice on its plan to part-sell state assets.

And the Herald reported in September that the Department of Corrections has hired 18 different firms of advisers for a planned privately run prison in Auckland, at a likely cost of $11 million.

A State Services Commission report from July this year backed some of the concerns expressed about consultancy spending.

The commission's reviews of government departments found that they needed to adopt "an approach of recruiting skilled personnel ... to build internal capability and progressively lessen the reliance on contractors".

Otherwise, they risked losing vital knowledge about how to carry out their work, which they would then have to buy in.