More consistent reporting of contractors and consultants

24 September 2019

The Public Service has for the first time established a consistent, transparent method of measuring and reporting the use of contractors and consultants.

State Services Commissioner Peter Hughes has discontinued the way agencies previously reported data on contractors and consultants, which was inconsistent.

The new method will more accurately show each year how much the Public Service is relying on contractors and consultants. It will measure the percentage of operating expenditure on contractors and consultants as a share of total Public Service workforce expenditure. The Commission will release the information annually.

The Commission will also release the total dollar amount spent on contractors and consultants, operational and capital expenditure.

“This is a benchmark year,” said Mr Hughes. “There is now consistency in how public service departments are measuring and reporting to Select Committees. It is a more consistent and transparent way of measuring the use of contractors and consultants.”

The data, published today, covers the 2017/18 year, which pre-dates the Government’s announcement on reducing the reliance on contractors and consultants by six months. It also pre-dates the establishment of the new reporting method.

Applying the new method of reporting to the 2017/18 data, the share of spending on contractors and consultants as a percentage of spending on the Public Service workforce, is 13.3%. Internationally, there is no benchmark for the right size of contractor and consultancy expenditure.

“It will take a couple of years to affect a downward trend as we re-balance the Public Service,” said Mr Hughes.

“The aim is not to constrain legitimate contractor and consultant expenditure if it is appropriate to deliver value to New Zealand. The reality is that from time to time there is a need to respond to one-off events where contractors, not hiring new staff, is the best solution. What we are trying to achieve is to build more capability within the Public Service so we can reduce the reliance on external capability. That is a sensible approach but that will take time.”

Background

Total workforce spend is defined as the sum of salary expenditure for permanent and fixed-term employees, and operational expenditure on contractors and consultants. For the benchmark year 2017/18, operational expenditure on contractors and consultants of $585.8 million as a proportion of the total workforce spend ($4,402.0 million) is 13.3%.

Contractor and consultant OPEX – this is money spent on contractor and consultant professional services and other operating costs, e.g. professional services, materials, fuel, transport, energy consumption etc.

Contractor and consultant CAPEX – this is the money spent on contractor and consultant services to purchase or build new infrastructure and assets. E.g. Inland Revenue’s transformation project, which included big IT infrastructure change.

Questions and answers

Why count only operating expenditure?

The aim is not to constrain legitimate contractor and consultant expenditure if it is appropriate to deliver value to New Zealand. The reality is that from time to time there is a need to respond to one-off events where contractors, rather than hiring new staff, is the best solution. The objective is to build more capability within the Public Service and reduce the reliance on external capability. This will take time.

What is the total spend for 2018/19?

That information will be collected through the Select Committee process later this year.

What was the total spend for 2017/18?

$585.8 million (opex)

Why is 2017/18 higher than the figure published last year (2016/17)?

The figure released last year of $546.3 million (2016/17) only included information from 22 agencies. Information from the other agencies was not available at the time. The two sets of numbers are not comparable, as the 2016/17 figures predate the new SSC guidance on reporting contractor and consultant expenditure which has standardised reporting across agencies. However, if the same 22 agencies were counted for 2017/18 the total (opex) spend would have been $485.6 million.

How can the 2016/17 data be compared with 2017/18?

It cannot be compared due to the introduction of new SSC guidance on reporting contractor and consultant expenditure.

ends

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