21 May 2020

Public Service expenditure on contractor and consultants for the 2018/19 year has today been released by the State Services Commissioner Peter Hughes.

The Commission last year established a new system for measuring and reporting the use of this expenditure, eliminating previous inconsistencies and introducing more transparency.

“This provides a more accurate and comprehensive picture of the spend so we can ensure it is right-sized,” says Mr Hughes.

“We want to support a shift to build capacity within the public service. Over time, the aim is to reduce the reliance on external capability without constraining legitimate contractor and consultant expenditure.”

The new method measures the percentage of operating expenditure on contractors and consultants as a share of total Public Service workforce expenditure.

The data, published today shows the 2018/19 share of operating spending on contractors and consultants as a percentage of spending on the public service workforce, is 12.8%, down from 13.4% for the previous year.

New Zealand’s population has increased by nearly half a million people between the 2013 and 2018 Census. This represents an 11% increase, the biggest since the 1966 Census. Not surprisingly, this has led to a considerable increase in demand for government services and an increase in the size of the public service workforce. Two new agencies were established in 2018/19 - the Ministry of Housing and Urban Development and departmental agency Te Arawhiti.

In dollar figures, total expenditure for 2018/19 was $914.2 million, with the two new agencies accounting for $15.1 million. This compares with $900.2 million in 2017/18. It is unknown how the Government’s response to Covid-19 will affect expenditure on contractors and consultants in the next 12 months.

Mr Hughes said the objective is to get the balance, between the number of fulltime public servants and the number of contractors, right.

“It’s early days but we are starting to head in the right direction,” said Mr Hughes.

“This is not about putting a lid on legitimate contractor and consultant expenditure. It’s about striking the right balance between the number of fulltime public servants and the number of contractors. It’s a sensible approach but will take time.

“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 to deliver value to New Zealand. What we are also trying to achieve is to build more capability within the public service so we can reduce the reliance on external capability. I know chief executives will continue to exercise vigilance and hire contractors and consultants only when there is good reason.”


Media queries: Grahame Armstrong 021 940 457 or grahame.armstrong@publicservice.govt.nz


Why has spending on contractors and consultants gone up?

This release of information uses a new more consistent and transparent method of reporting, which makes invalid any comparison with earlier years that used different methods. The data published today, for the 2018/19 year, includes data from 32 agencies and uses a more comprehensive definition of contractors and consultants than what was used previously. For example, the figure for 2016/17 ($546 million) only counted 22 agencies and at that time there was no consistent definition for contractors and consultants. The new method of reporting includes both opex and capex expenditure, which did not happen consistently under the old method of reporting.