Dutch government spends 1.1 billion on external consultants and temps

07 June 2016 Consultancy.uk

Last year the Dutch government spent €1.1 billion hiring in external consultants, interim managers and temporary staff. Expenditure was stable relative to the previous year, although it is up more than a quarter since the government’s austerity measures in 2011. Nearly 60% of the €1.1 billion in spending goes to temporary staffing, the rest flows mainly to technology specialists and consulting firms.

With a workforce of 109,000 FTEs, the Dutch central government is the largest 'organisation' and employer in the Netherlands*. To support and monitor the operation of the political apparatus, which spans eleven ministries and thirty agencies, as well as more than one hundred independent administrative bodies (IAB), the government spends around €11.5 billion on administrative costs**.  The expenditure includes costs for staff (€7.6 billion), ICT (€1.4 billion), external support (€1.1 billion) and other expenses (such as housing); however, spending on autonomous administrative authorities, counties and municipalities, and other budgets that are intended directly for citizens and businesses, are not included in the total. The expenditure on external support accounted, last year, for 4.6% of the national budget, which stood at close to €250 billion.

Budget and spending of the Dutch government

An analysis of data released by the Dutch government shows that the use of external hiring by the government has been fluctuating in the past few years. In 2009, for instance, the government paid out nearly €1.3 billion to consultancies, temporary staff agencies and IT companies. By 2011, expenditure had fallen by around €400 million to approximately €900 million. The huge drop in expenses (-32%) was due to the austerity measures the government put in place as part of the package to deal with the country’s economic crisis at the time. In recent years the central government has gradually increased its spending on external consultants and temporary staff to €1.11 billion, although this increase came to a halt last year.

The majority (59%) of expenditure on external staff goes towards operational tasks, activities that require temporary support or backfill, leveraging staffing companies like Randstad, USG People, Adecco and Manpower. 35% of expenditure, accounting for €388 million, is spent on what it calls the government tactical activities, which covers IT consulting (€351 million), accounting and financial advice (€25 million) and legal advice (€12 million). The remaining €71 million was spent on suppliers of strategic advisory services, such as strategy consultants, management consultants and interim managers. Government-wide spending on external staff in 2015 represented approximately 9.6% of total personnel expenses, a decrease of 0.1% compared to the year previous.

Spending on external advisors and temporary staff (2009 -2015)

Ministerial differences
Spending on external staff varies considerably between ministries. The Ministry of Infrastructure and the Environment spent the most, at €242 million, followed by Ministry of Security and Justice and the Ministry of Finance, which had the highest expenditure in both 2013 and 2014. The types of external staff engaged also varies considerably across the 11 ministries. Some departments spend a lot on management consultants, while others spend the majority share of their budgets on staffing agencies. The Defence department for instance is highly reliant on IT consultant, as the unit is currently rolling-out a large ERP programme and several other large technology transformations.

Of the € 1.1 billion spent on external staff, about 90% goes to temporary workers and IT consultants – the total cost of IT hiring may, in practice, however, be higher, since in some cases, ICT services providers are pooled in the €1.4 billion IT budget. Of the remaining 10%, the largest part is spent on management consultancy, accountancy and financial advice, each of which represent a share of 23% of the €108 million pie. Strategic advisors and interim managers each take a share of 15%, and the rest is distributed among communications & PR consultants and legal experts. Demand for strategic advice was up last year (+30%), while the government significantly saved on accountancy & finance spending (-29%).

Government expenditures per spending type

When it comes to height of fees paid to external parties, the Dutch House of Representatives has made agreements with its various ministries. In nearly all cases the ministries kept themselves to the maximum hourly rate of €225 per hour. In 23 cases external parties were allowed to bill a higher rate – in all cases this related to the hiring of strategy consultants and (experienced) interim managers, services that are traditionally pricier than tactical consultancy or operational support. Among the strategy consulting firms serving the Dutch government are McKinsey & Company, BCG, PA Consulting Group, the Big Four (Deloitte, EY, KPMG and PwC) and Strategy&.

Delving deeper into the figures around the developments of external hiring over the years, the data shows that especially the consultancy costs for technology have grown explosively between 2011 and 2015. Spending more than doubled, from €172 million to the current €351 million. This is due to the substantial digitisation agenda that was initiated by the previous administrations, as well as the launch of several mega programmes aimed at boosting efficiency and implementing new (digital) ways of working within the public sector.

Spending on external advisors and temporary staff (2009 -2015)

Whether the money spent on external IT consulting is used wisely, is disputed by many. After a series of failed ICT programmes, which is a recurring theme internationally, politicians have become wary. In 2015 a special committee was established, also known as commission Elias, to investigate the causes of the failed IT projects, and their conclusions were quite harsh. According to the independent panel, the Dutch central government has insufficient grip on its own ICT portfolio, and lacks internal skills and competences in IT, in areas including in project management and functional areas, as well as overall IT programme delivery skills. Currently, the Dutch central government is carrying out around 105 ICT projects with a budget of more than €5 million, of which there are six mega projects (valued at more than €100 million).

Spending on communication & PR, interim management, management consultancy and temporary staff has increased since 2011, while the costs for accounting and financial advice, legal advice and strategic advice have decreased, although the latter showed strong recovery over the past year.

* The data is based on the eleven ministries. When the autonomous administrative authorities, Defense, the National Police and other key organizations in the central government ecosystem are included, then the total number of FTEs reaches more than 260,000. 

** Excludes the Dutch armed forces and the judiciary system.

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