Brexit consultancy costs inquiry

Departments have again proved overly secretive with their preparations for Brexit, taking far too long to publish details of their consultancy contracts and then failing to meet their own basic standards of transparency. In February 2018 we reported that the shortage of information in the public domain about what departments were doing to support Brexit, including information on their workstreams, was undermining scrutiny of progress. Even now, 18 months on, departments are taking on average 119 days to publish basic details of their EU Exit consultancy contracts, and in some instances as long as 237 days, compared to a government guideline of 90 days. Some contracts have not been published at all, and at the time of our evidence session those contracts which had been published were all significantly redacted, again despite a government expectation that contracts should be published in full. There were key components of the contracts which were not publicly accessible, despite being advertised as such: it was not until this Committee formally requested that the statement of requirements for each contract was published that the Cabinet Office made them accessible online. The Cabinet Office acknowledges the delay in publishing contract details but attributes this to administrative oversight. Delays coupled with the extensive redactions again demonstrate a marked reluctance by departments to be transparent about how they are preparing for Brexit. Recommendation: The Cabinet Office and the Department for Exiting the European Union should commit to making the government’s preparations for Brexit transparent; this should include making information on the degree of progress made against the various workstreams available and timely publication of details on contracts awarded to support Brexit.

The skills accessed through the Cabinet Office’s consultancy call-off arrangement suggest departments had been more focused on developing strategy than seeking support for practical implementation. We welcome the Cabinet Office’s establishment of a centralised call-off arrangement to facilitate departments’ access to consultancy services so it is quicker, more efficient and lower cost. The call-off framework allows departments to access consultancy services to help think through, shape and deliver Brexit preparations. So far, however, most of the consultancy services accessed have tended to fall under the category of thinking and shaping rather than delivering, despite the former traditionally being considered a strength of the Civil Service. We reported in February 2018 that the Department for Exiting the European Union had not been quick enough to move departments beyond planning for Brexit and onto getting things done, and we are concerned that departments continue to be slow to move into implementation. The Cabinet Office acknowledges that it took some time for departments move into the implementation phase. Recommendation: In its Treasury Minute response to this report, the Cabinet Office should set out the extent to which departments are now using consultants to support implementation and delivery of preparations. It should also include a breakdown of how much has been spent as of July 2019 on Lot 1 (“thinking and shaping), Lot 2 (“further shaping and moving towards delivering”) and Lot 3 6 Brexit Consultancy Costs (“delivery”).

We are concerned that the bulk of Brexit consultancy contracts by value have been awarded to a small group of big firms and that the Cabinet Office seems overly-complacent about this despite previous government commitments to contract with more small and medium-sized enterprises. By value, 96% of consultancy work via the Cabinet Office’s arrangement has so far gone to just six firms. All of these firms are major global companies and the Cabinet Office told us that the distribution is not surprising as these firms possess deep pools of expertise. We have reported previously that the Cabinet Office’s arrangements for procuring consultancy tended to benefit large firms, and that across all contracts there was minimal use of small and medium-sized enterprises (SMEs)—despite government aspirations, led by the Cabinet Office, for much more government work to go to SMEs. It is therefore of concern that almost none of the Brexit consultancy work has gone to SMEs. Recommendation: The Cabinet Office should write to us within three months setting out what it will do to incorporate a wider range of consultancy firms, including SMEs, in future frameworks.

There is a longstanding and widening discrepancy between Cabinet Office and departmental data on consultancy spending across government. There is an increasingly large gap between what departments report they have spent overall on consultancy services, not just on Brexit, and the total based on the Cabinet Office’s analysis of invoices. For 2017–18, the Cabinet Office’s figure of £1.5 billion compares to a total of departments’ figures of just £0.3 billion. The Cabinet Office confirmed that it and departments have not all been working to the same definition of consultancy. We have highlighted issues with the definitions before and suggested action on this in 2016. Despite this finding, the Cabinet Office tells us that it only spotted the problem at the end of 2017, and that in response it revised its criterion for approving consultancy contracts in April 2018. However, its 2018 plans to address the underlying problem of defining expenditure properly did not go ahead, due to work on Brexit taking priority. The data problems have still not been resolved and there is still no clear picture of how spending breaks down across consultancy and related services. Recommendation: The Cabinet Office must urgently address the increasing inconsistencies in the reporting of consultancy and professional services spending across government, ensuring that its own overall spend matches up with that reported by departments. In its Treasury Minute response to this report, the Cabinet Office should clearly set out the reasons for the discrepancies and the accurate figures. The Cabinet Office should work with departments to establish a shared definition of consultancy, ensuring that this is sufficient to exercise effective control over this area of expenditure. Brexit Consultancy Costs 7 EU Exit consultancy arrangements

The Cabinet Office and other departments have failed to follow the guidance on publishing contracts for consultancy in support of EU Exit. For the 40 contracts awarded across government, the average time taken to publish contract information was 119 days, which exceeds the target of 90 days and compares with an average of 82 days for all consultancy contracts. For the nine contracts which made up the initial phase of the Cabinet Office’s central framework, it took 237 days to publish details of the contracts. The Cabinet Office offered no explanation for the delays other than it being an administrative oversight and expressed disappointment that it had let itself down by not publishing them earlier.5

Where departments have published details of contracts, they have still often failed to meet expected levels of government transparency. Government guidelines set out that departments are expected to publish contracts in full, although redaction is permitted in line with exemptions that are set out by the Freedom of Information Act. For work on EU Exit preparations, departments have published information about the award of contracts but often not published the contract itself. Where they have published contracts, these are frequently heavily redacted. The Cabinet Office told us that the redactions it 1 C&AG’s Report, Departments’ use of consultants to support preparation for EU Exit, Session 2017–2019, HC 2105, 7 June 2019 2 C&AG’s Report, para 3.6, 3.10–3.11 3 Q 13; C&AG’s Report, para 2.4, 2.11 & Figure 2 4 C&AG’s Report, para 3.15 5 Qq 1–5; C&AG’s Report, paras 3.16, 3.17 8 Brexit Consultancy Costs requires are for example personal details, supplier rates and in some cases some specific details of the proposals. However, the redactions we saw had made some of the documents meaningless.6

After the evidence session, the Cabinet Office submitted further evidence, pointing to revisions to the published versions of its contracts which now provide further information on the work covered by the contracts. However, the details of many contracts from other departments are still not publicly available to the extent required by government guidelines. And those guidelines do not require departments to publish details of the individual engagements covered by the contract framework, making it difficult for taxpayers to find out what public money is actually being spent on.7 The Committee has requested confidential sight of these individual engagement letters, in the interest of sufficient public scrutiny.

Until the Committee raised it with the Cabinet Office, there were also key components of the contracts which were not publicly accessible, despite being advertised as such. For example, it was not until we formally requested that the statement of requirements for each contract was published that the Cabinet Office made them accessible online.

We have reported previously on the shortage of information in the public domain about what departments are doing to prepare for EU Exit. In February 2018, we expressed concern that Parliament had been given no information on the government’s EU Exit workstreams, which of these were high priority or when projects were expected to be implemented by.8 The Committee had to push for this information and faced resistance. The Cabinet Office told us that its approach was to be as open as possible and pointed to the information available on gov.uk.9 The Cabinet Office agreed to let the Committee see non-redacted copies of the consultancy contracts.10 The focus on ‘shaping’ rather than doing

In February 2018, we reported that it would be critical that the civil service had the right people, skills and resources in place to manage the UK’s exit from the EU. We found that the Department for Exiting the European Union (DExEU) and the Cabinet Office did not have a robust enough plan to identify and recruit the people and skills needed quickly, and that DExEU needed to pick up the pace of work and move other departments on to getting things done.11

In April 2018, the Cabinet Office set up a framework to provide departments with rapid access to additional consultancy skills to support their preparations for EU Exit.12 The call-off arrangement includes three ‘lots’ for different purposes. Lot 1 is for thinking and shaping, Lot 2 for further shaping and moving towards delivering, and Lot 3, which was only introduced in February 2019, is for delivery. Up to April 2019, departments had 6 Qq 6–10; C&AG’s Report, para 3.18 7 Letter from John Manzoni, Cabinet Office, to Chair of the Committee, letter dated 24 June 2019, Letter from John Manzoni, Cabinet Office, to Chair of the Committee, letter dated 10 July 2019; C&AG’s Report, para 3.18 8 HC Committee of Public Accounts, Exiting the European Union, Eighteenth Report of Session 2017–19, HC 467, 7 February 2018 9 Qq 36–38 10 Qq 39–41 11 Committee of Public Accounts, Exiting the European Union, Eighteenth Report of Session 2017–19, HC 467, 7 February 2018 12 Q 11 Brexit Consultancy Costs 9 used the framework lots 151 times for engagements for consultancy support; this included 18 times for Lot 1 engagements and 131 times for Lot 2 engagements. Lot 3, the delivery- focused stage of the framework, had been used only twice.13

We questioned why consultants had been more used often to support thinking and shaping, which is traditionally considered a civil service strength, rather than delivery. The Cabinet Office told us that the preparations for EU Exit had taught government a lot about bringing policy making and delivery together. It defended the use of consultants to think and shape preparations, citing for example the need to think through the arrangements for the stockpiling of medicines and setting up the associated governance and accountabilities. It acknowledged however, as it had done previously before this Committee, that it had taken some time for the civil service more generally to get to the doing phase.14 SME access to consultancy contracts

In 2016, we found that the Cabinet Office’s procurement agreements for consultancy tended to benefit large firms, and that there was minimal use of small and medium-sized enterprises. At the time we found that the largest six suppliers had received three quarters of assignments let through the Crown Commercial Service’s consultancy agreements. In contrast, small and medium-sized enterprises (SMEs) had received only 9 per cent of work through the agreements.15 Also in 2016 we reported on how momentum had been lost in Cabinet Office-led efforts to increase government procurement spending as a whole with SMEs, and how it remained too difficult for SMEs to access government business.16

Large consultancy firms have since taken an overwhelming share of the consultancy work in support of EU Exit. By April 2019, six large consultancy firms had received 96% by value of EU Exit work under the Cabinet Office call-off arrangements. Six of these firms were primary suppliers to which the Cabinet Office allocated most of the work: Deloitte (22%); PA Consulting (19%); PricewaterhouseCoopers (18%); Ernst & Young (15%); Bain & Company (11%); and Boston Consulting Group (10%).17 The Cabinet Office told us it was not surprised by this as these are global firms with deep pools of expertise. It told us that other firms had had the chance to bid. It suggested that the firms included in the third, and most recent, lot were different from the major global consultancies, reflecting a shift to more specialist requirements.18 Data discrepancies

We questioned the Cabinet Office on a widening disparity between its analysis of overall spending on consultancy services, not just on EU Exit, and the spending reported by departments. The Cabinet Office analyses spending on consultants across all government work as part of its wider oversight of spending on consultants.19 Its analysis of invoices 13 Qq 13–15; C&AG’s Report, Figure 4 14 Qq 12–16 15 Committee of Public Accounts, Use of consultants and temporary staff, Thirty-sixth Report of Session 2015–16, HC 726, 22 April 2016 16 Committee of Public Accounts, Government spending with small and medium-sized enterprises, Forty-second Report of Session 2015–16, HC 882, 18 May 2016 17 Q17; C&AG’s Report, Figure 7 18 Qq 17–20 19 C&AG’s Report, paras 1.5–1.9 10 Brexit Consultancy Costs across government suggested that spending on consultancy during 2017–18 was £1.5 billion, compared to the £0.3 billion reported by departments in their annual reports.20 The gap between these data sets has widened in recent years. The Cabinet Office told us that it had noted the problem at the end of 2017 and had made changes to its process for approving consultancy contracts in early 2018 in response, but it had been unsuccessful in closing the reporting gap.21

We asked the Cabinet Office whether departments were under-reporting their expenditure on consultancy services. The Cabinet Office attributed the disparity to departments and the Cabinet Office using different definitions of what is a professional service, of which consulting is a sub-heading.22 We have highlighted issues with the definitions before and suggested action on this in 2016.23 The National Audit Office found departments using different definitions in both 2010 and 2016.24 The Cabinet Office told us it had to solve this issue and assured us that it is now onto it. It had intended to sort out the issue by mid-2018 but EU Exit work had taken priority.25 20 C&AG’s Report, Figure 3 21 Qq 22 & 23 22 Qq 26–28 23 Committee of Public Accounts, Use of consultants and temporary staff, Thirty-sixth Report of Session 2015–16, HC 726, 22 April 2016 24 C&AG’s Report, Use of consultants and temporary staff, Session 2015–2016, HC 603, 13 January 2016; C&AG’s Report, Central government’s use of consultants and interims, Session 2010–2011, HC 488, 14 October 2010 25 Qq 21–23 Brexit Consultancy Costs 11