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Actions for Procurement and reporting of consultancy services

Procurement and reporting of consultancy services

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Agencies need to improve their compliance with requirements governing the procurement of consultancy services. These requirements help agencies access procurement savings. Also, some agencies have under-reported consultancy fees in their annual reports for the 2016-17 financial year, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. The report examined twelve agencies' compliance with procurement and reporting obligations for consultancy services. It notes that it is difficult to quantify total government expenditure on consultants as agencies define ‘consultants’ differently.

NSW Government agencies engage consultants to provide professional advice to inform their decision‑making. The spend on consultants is measured and reported in different ways for different purposes and the absence of a consistently applied definition makes quantification difficult.

The NSW Government’s procurement principles aim to help agencies obtain value for money and be fair, ethical and transparent in their procurement activities. All NSW Government agencies, with the exception of State Owned Corporations, must comply with the NSW Procurement Board’s Direction when engaging suppliers of business advisory services. Business advisory services include consultancy services. NSW Government agencies must disclose certain information about their use of consultants in their annual reports. The table below illustrates the detailed procurement and reporting requirements.

  Relevant guidance Requirements
Procurement of consultancy services PBD 2015 04 Engagement of major suppliers of consultancy and other services (the Direction) including the Standard Commercial Framework
(revised on 31 January 2018, shortly before it was superseded by 'PBD 2018 01')
Required agencies to seek the Agency Head or Chief Financial Officer's approval for engagements over $50,000 and report the engagements in the Major Suppliers' Portal (the Portal). 
  PBD 2018 01 Engagement of professional services suppliers
(replaced 'PBD 2015 04' in May 2018)
Requires agencies to seek the Agency Head or Chief Financial Officer's approval for engagements that depart from the Standard Commercial Framework and report the engagements in the Portal. Exhibit 3 in the report includes the key requirements of these three Directions.
Reporting of consultancy expenditure Annual Reports (Departments) Regulation 2015 and Annual Reports (Statutory Bodies) Regulation 2015 Requires agencies to disclose, in their annual reports, details of consultants engaged in a reporting year.
  Premier's Memorandum 
'M2002 07 Engagement and Use of Consultants'
Outlines additional reporting requirements for agencies to describe the nature and purpose of consultancies in their annual reports.

We examined how 12 agencies complied with their procurement and reporting obligations for consultancy services between 1 July 2016 and 31 March 2018. Participating agencies are listed in Appendix two. We also examined how NSW Procurement supports the functions of the NSW Procurement Board within the Department of Finance, Services and Innovation.

This audit assessed:

  • agency compliance with relevant procurement requirements for their use of consultants
  • agency compliance with disclosure requirements about consultancy expenditure in their annual reports 
  • the effectiveness of the NSW Procurement Board (the Board) in fulfilling its functions to oversee and support agency procurement of consultancy services. 
No participating agency materially complied with procurement requirements when engaging consultancy services. Eight participating agencies under reported consultant fees in their annual reports. The NSW Procurement Board is not fully effective in overseeing and supporting agencies' procurement of consultancy services.
All 12 agencies that we examined did not materially comply with the NSW Procurement Board Direction for the use of consultants between 1 July 2016 and 31 March 2018. 
Eight agencies did not comply with annual reporting requirements in the 2016–17 financial reporting year. Three agencies did not report expenditure on consultants that had been capitalised as part of asset costs, and one agency did not disclose consultancy fees incurred by its subsidiaries. Agencies also defined ‘consultants’ inconsistently.
The NSW Procurement Board's Direction was revised in January 2018, and mandates the use of the Standard Commercial Framework. The Direction aims to drive value for money, reduce administrative costs and simplify the procurement process. In practice, agencies found the Framework challenging to use. To better achieve the Direction’s intent, the Board needs to simplify procurement and compliance processes. 
The Board is yet to publish any statistics or analysis of agencies’ procurement of business advisory services due to issues with the quality of data and systems limitations. Also, the Board’s oversight of agency and supplier compliance with the Framework is limited as it relies on self reporting, and the information provided is insufficient to properly monitor compliance. NSW Procurement is yet to develop an effective procurement and business intelligence system for use by government agencies. Better procurement support, benefit realisation monitoring and reporting by NSW Procurement will help promote value for money in the engagement of consultants.