Contractor, consultant spend on track for $500m savings

Friday, 13 December 2024

Public Service Minister Nicola Willis says “the public service has heard the message loud and clear”.

Contractor and consultant spend in the public service will reduce by $500 million for the 2024/25 year, it is estimated.

New figures also show public service positions decreased by about 700 in the last quarter.

Public Service Commission workforce data for the September quarter showed a decrease of 717 full time roles between June and September 2024 ‒ a reduction of 1.1%.

The Public Service Association held its conference in Wellington.

That meant the annual change was a decrease of 1402 ‒ a drop of 2.2%. Comparing the data against years reduced the impact of seasonal variation, the Public Service Commission noted.

Comparatively, between March and June 2024 there was a drop of 1745 roles.

Crown Entity changes had a 1.3% increase for the September quarter.

For public service consultant spend, departments spent $83.7m in its operating expenditure and $70.9 million in capital expenditure on contractors and consultants.

Altogether that was $154.5m.

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

“As a share of workforce spend, operating expenditure (OPEX) on contractors and consultants decreased to 5.0% in the first 3 months of 2024/25, the lowest it’s been since measurement began (2018),” the Public Service Commission said.

Public Service Minister Nicola Willis said the public service had “heard the message loud and clear – the Government wants the public service to reduce the spend on contractors and consultants, and use and develop its internal expertise more”.

“This year the public service is on track, after the first quarter, to achieve savings of about $500m. These savings are forecast to continue over the next three quarters, which means savings over the two-year period could total more than $800 million, according to the update.

“It shows the consultant gravy train is well and truly over.”

In the year to July, the public service saw a $300 million drop in spending on consultants and contractors from the previous year, pulling it under $1 billion for the first time since 2021.

Last year, the previous Labour-led Government made moves to cut consultant spending by $165m a year, while National took aim to the tune of $400m a year in its election promise.

Simeon Brown, then in Opposition as transport spokesperson, accused Labour of creating “a gravy train for consultants through its obsession with working groups, wasteful spending and expensive public sector restructures”.

In office, Willis said in February an average 17% decrease was expected, later saying the 17% guideline was “the minimum reduction they should be delivering”.

Of the 2023/24 $940m contractor and consultant spend, $618.5m was on operational expenditure and $321.5m was on capital expenditure.