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Government departments spending up on contractors

Government departments spending up on contractors despite order to cut back

Phil Pennington, Reporter

Bureaucrats are still spending massive sums on contractors and consultants despite the government's orders to cut it back.

Chris Hipkins

State Services Minister Chris Hipkins said he expects to see the results of "a steady downward pressure on contractors and consultants" from next year. Photo: RNZ / Rebekah Parsons-King

The Ministry of Business, Innovation and Employment (MBIE) has spent $95 million this way for the second year in a row.

Inland Revenue's spend has trebled in as many years to $180m, and it's defending its strategy of using contractors more, not less.

Its "large complex transformation programme" demanded critical specialist skills not easily found in this country, but required only for a fixed term," it said in a statement.

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MBIE alluded to the same in trying to explain why - despite a year of programmes to cut contractor spending, and reducing by 180 the contractors on its books, who numbered 2200 - its spending has not gone down.

"Over the same period, MBIE has been required to establish at pace new agencies and functions, which has required the use of contractors, consultants and professional services," it said in a statement.

The government in June ordered a cut in contractor spending, and lifted the cap on core state sector employee numbers to encourage this.

Govt to introduce tighter monitoring on contractor spending

State Services Minister Chris Hipkins now says he expects to see the results of "a steady downward pressure on contractors and consultants" from next year.

A survey by RNZ of a few departments shows not only Inland Revenue but also the Transport Ministry is out of step, budgeting for a 60 percent rise to $8m in consultancy, legal and research fees next year after a slight dip this year.

Mr Hipkins is bringing in tighter monitoring, and the State Services Commission just issued all the departments with guidelines on how to report clearly on contractor spending.

"With the cap ... lifted, we're continuing to work to build more capability within the organisation," MBIE chief financial officer Stewart McRobie said in a statement.

His ministry was caught out earlier this year for confused reporting that suggested spending on contractors was tens of millions of dollars lower than it really was.

Its new, more transparent annual report for the year to July 2018 also shows its spending on professional services is stuck, at a high $48m.

"We know it's an issue and the spending is historical," the ministry said.

Mr Hipkins railed against contractor spending while in opposition, and in June promised to cut it back, after it doubled in a decade across 30-plus departments to half a billion dollars.

Steady demand for part-time, short-term workers, recruitment company says

But for AWF Madison recruitment company chief executive Simon Bennett, the government push strikes him as futile.

"Whatever the minister says, or whatever the CE of a government department says, in the end those people who are managing workflows want that candidate," he said.

"At the moment the candidate is probably controlling this market more than the policymakers."

There was steady demand for full-time permanent staff, he said, but also for part-time, short-term, "when required" workers, especially from agencies undergoing a lot of change in the likes of IT - and the flexibility that gave was a good thing.

AWF Madison supplies many of IRD's temp workers.

Inland Revenue is also planning to hire more fixed-term staff - in fact, those numbers have risen fivefold to 11 percent of its 5000-strong workforce in just two years.

The Public Service Association said the public sector had "unacceptably high" levels of fixed-term and other insecure jobs.

National secretary Glenn Barclay was still waiting to see signs of less use of contractors.

"It might be early to expect a big change at this point but we'd certainly be looking for a big change in the next financial year."

The Ministry of Social Development has managed to cut back, dramatically, more than halving its contractor spend to $15m (though at the same time spending $10m more on professional services).

"I would hope, particularly a year out from now, that they [MBIE] would have followed MSD's example and cut the use of consultants and contractors in half at least," Mr Barclay said.

MSD said its cut back was a "genuine decrease".

It had helped that the last year it faced extra costs from setting up Oranga Tamariki and completing major IT projects, Bruce Simpson, the chief financial officer, said in a statement.

The rise in professional fees spending to $25m was largely due to paying Oranga Tamariki $9m in such fees, compared with less than a third of that last year, he said.

None of the departments nor the minister would give a taped interview.

Spending on contractors and consultants - a snapshot

• IRD - $150m for 10 months in 2017-18; $162m in 2016-17; $55m in 2014/15

• MBIE - $95.07m in 2017-18; $95.7m in 2016-17

• MSD - $15m; $33m

• Justice Ministry - $36.6m; 2016/17 unavailable

• Transport - $5m; $8.2m (covers research and legal fees, too; unclear if covers contractors)

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