North East Lincolnshire Coucil:.

North East Lincolnshire Council:

Scrutiny Report

The Engagement of Consultants

Contents

• • • • • • • • • Page Number

1  Introduction      3

2  Extent of Consultant Use    4

3  Reasons for the Review    5

4  The Scrutiny Review Process   6

5  Recommendations     9

Appendix 1. Schedule of activity     11

Appendix 2. List of Supporting Documents   12

OVERVIEW AND SCRUTINY BOARD

THE ENGAGEMENT OF CONSULTANTS BY NORTH

EAST LINCOLNSHIRE COUNCIL

SCRUTINY REPORT

1. INTRODUCTION

1. 1. Consultant engagement is widespread in local government and North East Lincolnshire Council is by no means unique in making use of the valuable resource that consultants can provide. However, when consultants are used to complement the Council’s existing workforce, it is important that they are used effectively to ensure that they provide good value for money.

1. 1. There are a range of circumstances within a local authority, when it might be necessary or valuable to engage external consultants. A number of the possible reasons for engaging a consultant were identified and discussed by the working group at the beginning of the review process and are outlined as follows;

• • To develop the authority’s own capacity where there is a gap in skills, expertise or human resource capacity.
  • To provide bespoke expertise or knowledge in a specific area where it would not be economic for the council to employ its own officer(s).
  • To provide facilitation or mediation in problematic or challenging areas.
  • To bring into the authority, good practice or knowledge from other local authorities.
  • To provide an external, independent and objective perspective on a project.

1.3 The potential benefits of using external consultants are wide ranging and may include;

• • Enabling organisations to overcome intractable and long standing problems.
  • To deliver specific outputs on a particular project (e.g. producing a regeneration strategy within a set deadline).
  • Accelerating the pace of change or improvement within an organisation.
  • Enabling an organisation to learn from good practice elsewhere.
  • To challenge poor performance or inappropriate behaviour to shift the culture within an organisation.

1.4 Recently consultants have been engaged by the Council to support a local school improvement project and to assist the Council in bidding for external funding. External consultants have also undertaken a range of peer reviews, providing an independent perspective on areas for future improvement and validating progress made to date.

1. 1. The Council is responsible for the delivery of around 450 different services. The need to respond to new requirements is a regular occurrence and the Council is faced with an ever present challenge to improve services, secure value for money and make efficiency savings. From time to time these challenges need to be matched with capacity and expertise not available within the existing workforce. In some cases when the need for expertise is temporary in nature it may not be appropriate or cost effective to meet the need by recruiting extra full time and permanent staff and the use of consultants can be the most effective means of addressing the need.

Accordingly, the focus of the review was not on discouraging or limiting the use of consultants, it was directed at improving the quality of the decision making applied to the business of engaging and managing consultants.

1.6 In order to be able to focus in on ways of improving the quality of consultant engagement it was necessary to be aware of the potential drawbacks of using consultants. The engagement of consultants is not always satisfactory and organisations can be disappointed with the results achieved. The working group discussed the following reasons why such problems may occur:

• • Insufficient challenge at the options appraisal stage
  • Lack of clarity on the outcomes from the consultancy intervention (or needs change through the life of the project)
  • Poor transfer of capacity or skills to the client authority
  • Poor communication between client authority and consultant
  • Poor quality consultancy input (i.e. lack of skills or poor reports)
  • Lack of engagement from the authority with the consultants

1. THE EXTENT OF CONSULTANT ENGAGEMENT

2.1 Prior to the review commencing an exercise had already been conducted to ascertain the extent of consultant engagement for 2006/07. The table below summarises this information

* Does not include consultants covered by the main Children First contract

2.2 In addition Members requested that the review should consider the extent of consultant engagement over the previous 2 years. Although the main focus of the review was on improving the quality of consultant engagement, Members expressed that the spending of taxpayer’s money must always be a primary concern. Therefore, management practices and compliance with procurement guidelines should be of the highest standard to ensure the effective and efficient use of resources.

2.3 However, there was a significant degree of difficulty in accurately identifying the true cost of consultant engagement retrospectively. To ensure that reliable information can be provided in the future it is important that the financial coding be more rigorous in relation to consultant use and that compliance with the requirements of financial coding be monitored more thoroughly.

3. REASONS FOR THE REVIEW

1. 1. The Council is now financially stable and is progressively improving service provision. During the years leading to its present improved status the Council experienced the need to accept consultants nominated by the Office of the Deputy Prime Minister (now Department for Communities and Local Government) and to engage consultants following procurement exercises unduly but unavoidably influenced by time constraints.

The review was seen as appropriate to ensure that procurement procedures and practices being used now are fit for purpose, having regard to present improved circumstances. Additionally the review was seen as a means of contributing to the progressive overhaul of systems and practices being carried out by the Council.

1. 1. The working group’s terms of reference highlighted the following key aims;

• • Determine the reasons for, and the extent of, consultant engagement by the Council.
  • Evaluate the current effectiveness of consultant engagement by the Council.
  • Consider possible alternatives to engaging consultants and assess the associated risks of other approaches.
  • Make comparisons with other local authorities to identify good practice when using consultants.
  • Propose recommendations to improve the effectiveness of consultant engagement based on the findings of the review.

1. THE SCRUTINY REVIEW PROCESS

4.1 There were a number of stages in the review process, each highlighting a range of issues that the working group considered when drafting their final recommendations. The key aspects of this process are outlined below.

4.2 At the first stage the working group discussed the scope of the review and identified the key aims outlined above (3.2). Members decided to use the definition of a consultant applied by Worcestershire County Council’s Scrutiny Review of consultant use:

“A consultant is a person (not an employee), agency or firm engaged for a limited period of time on a fee basis to carry out a specific task or tasks. A consultant provides subject matter expertise and/or experience to the Council either because it does not possess the skills or resources in-house or because an independent evaluation is required”

It was agreed that the review would focus on consultant engagement as opposed to the Council’s use of interim and agency staff, however, inevitably there was a degree of overlap when discussing the issues involved.

1. 1. Members were satisfied with the quality of the Council’s procurement guidance in the form of the Contract Procedure Rules and were made aware of work being conducted on the Procurement Strategy and a forthcoming Procurement Manual. Members agreed that these developments demonstrated good progress and would contribute to more effective consultant engagement in the future.

1. 1. Furthermore, these procurement guidance documents are supported by an ongoing training programme to increase staff awareness and compliance. Again the working group were fully supportive of such efforts to improve the application and effectiveness of procurement practices.

1. 1. The effectiveness of consultant engagement is not the sole responsibility of the procurement procedure and will also be supported by the Council’s Framework for Successful Projects. This forthcoming project management guidance, assisted by an extensive training agenda and support structure will further strengthen the process of engaging consultants.

1. 1. Members received a presentation from the Corporate Procurement Manager outlining the process for engaging a consultant, this presentation emphasised the four stages (identifying the need; defining the scope; procuring the solution; managing the relationship) that all officers should carry out when procuring a service. Members asserted that officers must ensure they apply this process when engaging consultants, and that this point should be emphasised in all training and guidance provided. To ensure that, as a Council, we know procedures are being followed, the Procurement unit should be responsible for monitoring compliance by examining a range of case study examples each year.

1. 1. Evidence collated during the examination of 5 case study examples of recently commissioned projects involving the use of consultants confirmed the need to strengthen the engagement process. It was evident that to improve the process of using consultants the review working group should focus specifically on the contract specification, contract management/ delivery and the creation and maintenance of an audit trail.

1. 1. The review working group therefore focused on highlighting the weaknesses found, identifying best practice and formulating recommendations appropriate to the circumstances and needs of the Council.

1. 1. Although the focus was on improving the nature of consultant engagement, Members were interested in the development of an internal staff-skills database to promote internal redeployment and secondment rather than external consultant use whenever practicable.

1. 1. Among the weaknesses, Members expressed a concern that occasionally officers may consider consultants to be different from other procurements and, consequently, may approach consultant contracts differently to other procurements covered by the CPR’s.

1. 1. Members were also concerned that officers do not always maintain satisfactory audit trails and this was assumed to be due to a lack of awareness and limited understanding of the requirements made by the procurement guidance. The purpose of maintaining a comprehensive audit trail is to safeguard the officer involved as well as to act as a performance tool and is, therefore, fundamental to the procedure of engaging consultants. Members identified good practice in the ‘Project Definition Forms’ completed by all consultants commissioned through Children First and in the ‘Criteria for use of externally purchased support’ pro forma produced by Worcestershire County Council’s Social Services Directorate.

1. 1. The review working group were informed of an existing database for sharing information on contracts engaged in by directorates. Although currently this resource is not being used effectively, this issue is being addressed by an ongoing training programme. Members identified good practice in the development of an informal Consultant’s Network (and supporting database) to assist services in identifying suitable consultants by Cheshire County Council and agreed that an archive of Consultants’ reports may also be useful.

1. 1. The working group also asserted that staff learning should be an important consideration for officers when designing a consultant contract brief. Encouraging consultants to involve staff, either through learning workshops or a shadowing scheme, will contribute to better outcomes from consultant engagement by improving the Council’s long-term capacity.

1. 1. Members agreed that whilst procurement procedures should be robust and compliance should be thorough, this should not overburden officers unnecessarily. Therefore, guidelines should be tailored to the level of contract, so as not to waste Council resources on an unnecessarily exaggerated process.

1. 1. It was highlighted in the early stages of the review that effective benchmarking with other local authorities would be valuable to inform the working group’s investigation. Unfortunately there were concerns over the reliability of the benchmarking information that was collated due to the lack of consistent data. Furthermore, subsequent requests for more reliable benchmarking information were unsuccessful. Nevertheless, any such data would be of limited value to the Council as consultant engagement in previous years has been against a unique background of financial difficulty, central government intervention and some marked problems regarding skills/staff retention and recruitment. Nonetheless, further work is necessary, in conjunction with other Local Authorities, to resolve the issue of poor benchmarking activity and to develop guidelines and principles for the collation of robust information relating to consultant use in the future.

1. 1. As already alluded to, the work of the review group coincided with some related work being carried out within the Council, this included;

• • The updating of the Council’s Contract Procedure Rules to comply with current legislation and best practice guidelines.
  • The updating of the Council’s Procurement Strategy.
  • The production of a forthcoming Procurement Guidance Manual for use by officers and Members.
  • Preparation for a procurement training programme to be provided for relevant officers and Members to enhance awareness of the Council’s Procurement guidelines and the function of the Procurement Unit.
  • The strengthening of the Procurement Unit resource and the widening of its remit.
  • Work under way to create a database of existing staff skills.
  • The Council-wide implementation of the Framework for Successful Projects and the associated project management training programme.

4.17 Accordingly, many of the observations/recommendations that follow serve to confirm and endorse the need for, and value of, the work being carried out by officers as distinct from bringing to the fore new matters requiring attention.

5. RECOMMENDATIONS OF THE REVIEW

5.1 An important point that must be understood and accepted by all involved in the business of procurement is that the engagement of a consultant is the procurement of a resource/service and the relevant guidance should be complied with accordingly. The procurement process outlined by the current guidance, as well as the forthcoming manual and training programme should emphasise this point.

5.2 The following recommendations are designed for the attention of any officer responsible for engaging a consultant. The Procurement Unit is considered to be ideally positioned to promote and monitor compliance with these recommendations and are thus requested to report to Overview and Scrutiny Board on progress. This progress report should be based on an examination of a range of case examples of consultant engagement, to be conducted by the Procurement Unit each year.

• Recommendations:

1 To ensure compliance with the procurement guidance and the recommendations of this report, officers engaging a consultant should create and maintain a comprehensive audit trail. The audit trail should include evidence of identifying the need, options appraisal, risk assessment, contract details, specified outcomes, performance monitoring and finally, the delivery of agreed outcomes. The creation of an audit trail is an essential and integral part of the procurement process and the associated Contract Procedure Rules. The Procurement Unit should be responsible for emphasising the necessity of creating an audit trail in the forthcoming manual and training.

Identifying the Need and Derfining the Scope

2 Prior to deciding to engage a consultant, the responsible officer should first seriously consider the following options for providing the required resource:

1. Internal staff secondment
2. Seconding staff from other/adjoining authorities
3. Training existing staff

The consideration of these options should be supported by Human Resources. The responsible officer should work with the Procurement Unit and HR to ensure that these alternatives have been considered prior to a consultant being engaged. The officer should evidence this activity in the audit trail.

Procuring the Solution

3 Having decided to engage a consultant, the responsible officer should consider joint commissioning with other directorates, other local authorities and/or external partners. The Procurement Unit should provide guidance and support to assist this process. The officer should evidence this activity in the audit trail.

4 Officers should ensure that all consultant contracts  are rigorous and include details of agreed outcomes together with timescales, performance monitoring arrangements and final delivery confirmation arrangements and when appropriate these details should be linked to stage and final payment of fees. To this end, outcomes should be specific, measurable, achievable, relevant and time limited. Each consultant contract should be authorised by the Procurement Unit and recorded.

5 Officers should consider whether it would be appropriate and cost effective for the contract to include the provision that the consultant should train/be shadowed by council staff. The officer should evidence justify the decision in the audit trail.

6 Responsible officers should contact their respective accountancy support to ensure that they code expenditure on consultants correctly and consistently.

Learning from consultant engagement

7 Officers should provide the Procurement Unit with information to ensure that any learning and value added by a consultant contract is shared with staff and Members across the council as appropriate. The Procurement Unit should work together with PPD to improve information sharing regarding the use of consultants.

8 The procurement unit should maintain a register of the use of consultants to include: value of contract, purpose and outcomes so as to be in a position to prevent duplication of effort and, to this end, the team should be notified of all proposals to engage consultants. This information will also be of value for benchmarking purposes.

9 Managers and other officers should anticipate the potential need to engage consultants and plan accordingly. Consideration of engaging consultants should take place annually during the budget setting process and then throughout the year as new initiatives, central government requirements and legislative obligations are announced or are flagged up. It is likely that options other than the use of consultants will be available and appropriate the earlier the need is identified and considered.

10 Further work should be conducted, in conjunction with other Local Authorities, to resolve the issue of poor benchmarking activity and to develop guidelines and principles for the collation of robust information relating to consultant use in the future. This should be the responsibility of the Procurement Unit supported by PPD.

OVERVIEW AND SCRUTINY BOARD REVIEW OF CONSULTANT ENGAGEMENT

SCHEDULE OF ACTIVITY

OVERVIEW AND SCRUTINY BOARD REVIEW OF CONSULTANT ENGAGEMENT

SUPPORTING DOCUMENTS

Initial review scoping document

Notes form working group meetings:

• 29 June 6:30 pm
• 17 July 1:00pm
• 21 August 2pm
• 13 September 10am

Presentations from working group meetings

• • Beverley Compton ‘setting the scene for the review of consultant engagement’
  • Neil Shaw ‘using consultants effectively’
  • Caroline Barley ‘current procurement guidance’

Questions to assist Member/officer meetings

Notes from Member/officer meetings

• • 27th July 2pm – Cllr Beasant / Michael Dennison
  • 17th August 9am – Cllr Eastwell / Victoria Henshaw
  • 17th August 9:30am – Cllr Eastwell / Phil Glover

Project Definition Form (For consultants used by Childrens Services)

Contract Procedure Rules

Procurement Strategy

Procurement Manual (forthcoming)

Framework for Successful Projects

Detailed information on the extent of consultant use 2006/07

Worcestershire County Council Scrutiny Report

Bromsgrove Council Scrutiny Report

Torbay Council Scrutiny Report