Ministry of Education leads government spending on contractors and consultants

Friday, 26 May 2023

Across the 2021/22 year, the spend on contractors and consultants was $1.2 billion.

The Government spent almost $900 million on contractors and consultants over nine months, new figures show.

The spend occurred while the size of the public service increased. In the nine months to March 31 this year, the public service workforce grew by 3.9% (2330 full time positions) to 62,710.

Before the increase, officials had warned the Government that if growth did not occur, delivery could be impacted and it could lead to an even greater reliance on contactors and consultants.

During the nine-month period, total spend on contractors and consultants was $881m, made up of $232m capital expenditure and $649m operational expenditure.

Despite earlier forecasting that operational spend this year could drop by 15% compared to the 2021/2022 year when it reached almost $927m, operating expenditure on consultants and contractors is now projected to be almost $900m for the 2022/2023 year.

Capital expenditure goes towards developing assets of the agency, while operational expenditure goes towards the everyday running of the agency.

The Ministry of Education had the biggest spend total at $187m across the nine months – almost $100m of that was on forecast capital expenditure.

Public Service Minister Andrew Little says there are initially 66 employers in scope for the public sector pay adjustment, covering about 250,000 employees through 153 collective agreements.

The Ministry of Social Development, one of the largest agencies, spent $108m; the Department of Internal Affairs spent $86m; while the Ministry of Business, Innovation and Employment spent $74m in total.

It is the first time the Public Service Commission has released quarterly figures in this form of contractor and consultant spend.

Across the 2021/22 year, the spend on contractors and consultants was $1.2 billion. That was made up of $927m on operational expenditure (a huge 52% jump from the previous year) and $318m in capital expenditure (down 4.1%).

It was mainly driven by the Covid-19 vaccine rollout, large reforms such as health, and IT projects.

A December 2022 workforce forecast to then-Public Service Minister Chris Hipkins said the public service had only grown 0.3% from June last year to September 2022 – with officials warning if workforce growth did not occur it could impact delivery and could result in an increased reliance on contractors and consultants.

Contractor and consultant operating expenditure was previously forecast to drop by 15% compared to 2021/22. However, the briefing stated that “if spending at 2022 September levels continues, we project that operating expenditure could be closer to $890 million in financial year 2022/23 (compared to $927m in 21/22)”.

Prime Minister Chris Hipkins said the overall trajectory now “is heading back down”.

Overall, the 2022/23 spend on contractors and consultants was forecast to be $1.19b.

In a briefing to Public Service Minister Andrew Little on March 7, it said Cyclone Gabrielle and cost pressure bids could increase contractor and consultant spend in the short term.

Prime Minister Chris Hipkins said on Wednesday that as a proportion of government spend on the public service, “the spend on consultants and contractors is going down”.

National MP Simeon Brown said that “while Labour has been spending up large on increasing the bloated bureaucracy in Wellington, outcomes have only gotten worse for New Zealanders”.

“During the Covid period, we did see a particular escalation in consultant and contractor speed as no doubt we will see here as well in the Hawke's Bay.

“When you're dealing with big unprecedented events where you have to surge workforces in to do particular jobs in response to unexpected events, often that's going to be a temporary workforce.

“It is going to involve consultants, contractors and so on. But the overall trajectory now is heading back down as a proportion of what the government spending on the core public service.”

National's public service spokesperson Simeon Brown said “while Labour has been spending up large on increasing the bloated bureaucracy in Wellington, outcomes have only gotten worse for New Zealanders on the frontline, with health, education, and law and order outcomes all worsening”.

Brown said Hipkins needed to take responsibility ”for the significant increase in bureaucrats, and the blow out in spending on consultants, that have taken place under his watch”.

“National will cut Labour’s wasteful spending on growing the Wellington bureaucracy.

“We will cut government spending on consultants by $400 million and restore fiscal discipline to the public service.”

Budget 2023 put $2.3b aside for the public sector to go to pay after lifting the years-long Covid pay restraint earlier this year. It came on top of existing funding agencies had set aside for pay increases.

Little said there were initially 66 employers in scope for the public sector pay adjustment (PSPA), covering about 250,000 employees through 153 collective agreements.

“Delivery of the adjustment to different workforces depends on the outcomes of collective agreement bargaining. Some bargaining has been concluded in recent months and some is ongoing.”

Little said they had been “upfront and prudent by recognising hardworking public servants have the same cost of living pressures as other workers, and have made provision for a reasonable pay adjustment in tight budgetary circumstances”.

A spokesperson from the Public Service Commission said 36 collective agreements had been settled and ratified as part of the PSPA.

“More are nearing this stage, and the PSPA has also been implemented for Individual Employment Agreements at a number of public sector employers where there is no collective agreement.”