KEY POINTS:
Meet Phil Keoghan. He's just wild about New Zealand. Keoghan hosts The Amazing Race, one of the world's most popular television shows. He takes contestants in the race to exotic locations around the globe, and once even brought the show to his home country, New Zealand. Then he
went on Oprah and talked about the show - and about how much he loved being from New Zealand.
Tourism New Zealand was so pleased with his enthusiasm, they paid him $28,000 of taxpayers' money - a small drop among an ocean of $200 million paid to consultants and examined by the Herald on Sunday in this story. Keoghan told us he would have spoken of his love for his country for nothing - although he possibly wouldn't have used Tourism New Zealand's slogans.
So, was it money well spent? Keoghan is in little doubt that Tourism New Zealand got value for money. The race has been to New Zealand twice, which meant as many as 14 million Americans tuned in and saw exactly what Tourism New Zealand wanted them to see. As Keoghan says, a 30-second advertising slot on the show costs US$250,000 ($345,000). By comparison, millions of viewers were exposed to 44 minutes of "wall-to-wall New Zealand" in four episodes.
"You have to ask, what is the return on that exposure?" says Keoghan. The show is watched by many more millions of people in 85 countries. It has, says Keoghan, topped the ratings in Singapore, a country brimming with tourism candidates.
Tourism New Zealand justified Keoghan's $28,000 payout on three counts - he exposed New Zealand on The Amazing Race programme; hosted Movie Paradise for the Discovery Channel, featuring NZ film locations; and appeared twice on Oprah promoting New Zealand.
Says a bemused Keoghan: "I'd do it anyway - but I guess they wanted to make it more official." Paid or not, Keoghan says he is never going to stop promoting New Zealand in his own way. "They ask me where I come from, and I say 'I come from New Zealand'."
While the value that Tourism New Zealand got from its association with Keoghan is in little doubt, the benefits from other consultancy payouts are less obvious. In the 2005-2006 financial year, the Ministry of Education recently had 18 people in its communications department yet contracted out basic work to pricey private public relations companies. Te Puni Kokiri paid $3000 each for eight "think pieces" on the use of traditional Maori knowledge, written the year after the same government department paid up to $20,000 for essays on Maori development.
Private sector consultants are creaming off the fat from public sector work, and every year the fat gets thicker. Former public servants are earning thousands of dollars for consultancy work, using skills they picked up in the public sector.
The blow-out of consultancy fees was an issue the Labour Party was vocal about when in opposition. Back in the mid-1990s, Helen Clark, then leader of the Opposition, accused parts of the public sector of increasingly lacking a corporate memory because of the over-use of private consultants. Addressing Victoria University's Master of Public Policy Programmes, she said departments relied too heavily on consultants to provide routine policy advice, and there was no continuity with the consultants used.
"Now, responsible positions in departments can be held by people recruited from private sector backgrounds and with no long-term commitment to the public service," Clark said. "For them, policy advice is a theoretical game to be engaged in for a short time as a career move." The following year, she told social workers that there was obvious injustice when their salaries were compared to "the countless millions of dollars that have been squandered on consultants".
Soon after becoming prime minister in 1999, Clark promised to rebuild core government agencies and get rid of consultants. "It probably would require building up [staff] in the strategic areas. I'm not convinced that it would be any more expensive, when you look at what consultants charge," she said at the time.
Yet in the past three years, spending on consultants has accelerated, according to figures obtained by the Herald on Sunday. We asked 60 government departments to provide details of consultants and contractors used in the past three full financial years, and the money paid. We randomly selected 25 government departments and compared their spending totals by year.
We found that in the financial year 2003-2004, $131 million was spent on hiring outside help. By 2005-2006, the level of spending had risen to more than $180 million.
Clark won't be interviewed on the same issue she couldn't stop talking about while in Opposition. In a written statement, she said: "The government expectation is that departments will build capacity, so are not routinely hiring contractors for their core functions."
We supplied our figures, which Clark reviewed, commenting on only one of the few departments for which she has personal oversight. It's the Ministry for Culture and Heritage, which saw a 58 per cent increase in spending on consultants.
In this case, the spending is fine, she says. "For some small departments, they will have to go outside for specialist advice, which they won't have in house, such as the Ministry for Culture and Heritage project to establish the Tomb of the Unknown Warrior."
Other departments which run major projects inside strict timeframes - Clark named the Census as an example - can "legitimately require contractors to be called in".
Finally, she warned: "If there is questionable expenditure by departments, the PM's Office will be making further inquiries."
Those stung with a hefty consultancy fee joke that a consultant can save you almost enough money to pay the consultants' bill at the end of it all. But not all consultancy work is bad for the taxpayer. Otago University's Dr Vicky Browning, a lecturer in human resources management and organisational behaviour, says the mark of a good consultant is the effort they put into making their job redundant. It's a measure that spells out the type of jobs that a consultants' higher-priced, more specialised help is hired for - temporary, bridging positions with a defined finish point.
Browning says a consultant should have expert knowledge and the means to communicate that clearly. Doing so usually means having an understanding of how businesses operate - another critical area for consultants. They also need to "have wisdom about them", a quality stemming from experience and maturity. And they need to be ethical, taking on the best interests of the business for which they work. Hiring a consultant can bring a different perspective to an organisation or an injection of specialist skills that might not be cost-effective to have in a full-time staff member. There can also be a benefit in bringing in an outsider to handle sensitive business. "The real problem is that if you bring someone in, when they leave, they leave with the knowledge they have acquired," Browning says.
The corollary of leaving a gap is the consultant who becomes a crutch. "When you have a really good consultant, it's like a therapeutic relationship where you become reliant on your therapist." These are familiar battles at the government departments in the Herald on Sunday sample - each body we spoke to that has experienced a sharp rise told of efforts to constrain spending on consultants and contractors. The New Zealand Qualifications Authority is one of four education-based bodies in the Herald on Sunday's sample - all four saw a marked increase in spending on consultants over the period surveyed.
At NZQA, spending went from about $1m to $4.5m in three years. Chief executive Karen Poutasi started in May last year, towards the end of NZQA's record spend on consultants. Since then, she has reported monthly to the qualifications authority's board on efforts to reduce the number of consultants used. In the years before she joined NZQA, many vacancies had been filled with contractors or consultants, something Poutasi doesn't believe enhances an organisation when the positions handle ongoing work. "We want institutional memory. We want people who know the context. Personally, as chief executive, I do want people in permanent jobs." When this financial year ends in July, ask again, she says. The money spent on consultants will have dropped as the number of staff in permanent roles increased. Just before Christmas NZQA advertised a policy role and received about 100 applicants - a relief and reassurance for Poutasi that there is no skill shortage. "I wouldn't want you to think there isn't a role for consultants," she says. "But from my perspective as a chief executive, it is for short-term projects, where either it's a volume thing or there are some pretty unique skills you wouldn't have on staff."
Steve Maharey, once Opposition spokesman on social services, then minister and now education minister, once described the establishment of Work and Income New Zealand as a "gravy train for consultants". The whole government was concerned about consultancy when it came in in 1999, because there was a problem with expenditure around this, he said. That year, when Labour came to power, it followed years of shrinking public service under the National government. The public service was "running down and relying too much on contracted staff", Maharey says.
The institutional knowledge, staff continuity and organisational stability - "that, I think, is what the public pay their taxes for".
Maharey oversees NZQA, the Ministry of Education and the Ministry of Research, Science and Technology. The first two bodies have seen huge growth in spending on consultants, while the latter is likely to use more consultants in the near future, after Maharey instructed it to reduce staff levels no further. He is aware of Poutasi's efforts to switch to permanent staff and also expects lower spending by the Ministry of Education in coming years, reflecting the use of consultants in short-term projects. There are no major projects scheduled for the next few years, bringing a lower consultants' bill, as there will be less need for extra staff and their specialised skills. Maharey says ministry chief executive Karen Sewell has assured him that all the current spending is necessary and that there is no waste.
National's education spokeswoman Katherine Rich is not so sure. While she says the ministry is using consultants wisely in some areas - recruitment, information technology and legal advice - she questions other spending. One area concerning Rich is spending on communications and public relations staff. She cites - accurately - that the ministry had 18 permanent or contracted staff working in this area in 2005-2006. Yet, with a staff larger than most newspaper newsrooms, it continued to contract out similar work.
For example, the ministry has contracted a writer to produce articles for the Education Gazette for about $1300 a month. It's ongoing work - projected to continue through 2007 - yet nothing that internal communications staff couldn't manage. Other consultants hired to write "specialist education" material are paid about $85 an hour - about three times the equivalent internal cost.
"The question should always be, has this made a difference to learning in the classroom? A lot of it wouldn't pass that test. A lot of it, you wouldn't notice if it didn't exist."
As always with large sums of money, some spending will be questioned. At Te Puni Kokiri, former government minister John Tamihere was signed up for $30,000 to start work just days after being voted out. The contract was not required to be tendered - it was under the $50,000 limit - and his duties were non-specific, beyond advising on assisting the growth of small to medium Maori businesses. In the 2005-2006 financial year it paid $5000 to have an in-house chaplain and $3260 to produce 1000 CDs, which were given to staff and last week could be found for sale on TradeMe. HistoryWorks Ltd was paid $5600 for a review and assessment of the Crown in New Zealand, although there is no accompanying note as to whether Te Puni Kokiri's consultant found that the Crown had failed or not.
Meanwhile, at the Ministry of Health, staff left and signed up as consultants. In the 2004-2005 year, former ministry policy adviser Barbara Nicholas was paid $17,000 to provide advice. She left the ministry in 2002.
Similarly, in 2005-2006 a company owned by the ministry's former policy manager Sue Scobie was contracted to draft new maternity legislation. Scobie is highly regarded in health circles - perhaps the sort of talent the ministry hoped to attract when it reached beyond its large policy pool to tender out the contract in the private sector.
Laura Lambie also provided advice on maternity services. She left the ministry in December 2004, was hired as a consultant to provide the advice between April and June 2006, and by July she was back fulltime as a public health acting manager in the non-communicable diseases field.
But consultancy fees have come under the spotlight in a bid to tighten costs at the Ministry of Health. Director-general of health Stephen McKernan says the ministry currently costs 1.9 per cent of the $11 billion of taxpayer cash spent on health. He is aiming to bring this down to 1.5 per cent in four years, and reducing consultant and contractor costs is part of that.
Another marker pointing to high spending on consultants is usually staff turnover. When it's high, extra help can be necessary to cover gaps. At NZQA, staff turnover was 25.5 per cent for 2005. The Ministry of Health's was 20.7 per cent for 2006.
At Te Puni Kokiri a few years ago, staff turnover sat around 26 per cent, according to Craig Owen, general manager for corporate services. There, this year's bill for consultants is tracking about $1.5m lower than the year before. In keeping, staff turnover is also currently below 10 per cent - an impressive achievement, when set against previous years, which Owen partly attributes to the new Maori Potential framework giving the ministry a strong direction.
While the departments where we found increases are looking at trimming consultants, Tourism New Zealand chief executive George Hickton sees the trend going the other way. There must be a distinction between contractors and consultants, he says. The former are more likely to be employed in roles similar to permanent staff. Hiring temporary staff gives a business flexibility it doesn't have with permanent employees. It doesn't bring a need for the same structure, office space or even the "permanent ongoing liability" that comes with staff who have finished the jobs for which they were hired. "It's the way of the world of the future."
Indeed. So, what have we got for our money now? Spending of more than $180m across 25 state bodies, up nearly 40 per cent on three years earlier. Rodney Hide, Act leader, economist and erstwhile consultant, says a spending surge like this should accompany a time of "massive reform". But there's little sign of it in most government departments.
