Procuring consultancy services

Give preference to internal expertise

Agencies should engage external consultancy services only when the required expertise is not available internally or cannot be provided in a cost-effective manner.

Use prequalified service providers

Agencies should give preference to service providers on prequalification schemes

The Performance and management services scheme is the main scheme for business-related services.

Prequalified providers have gone through a capability assessment. They have also agreed to standard terms and conditions.  

Exceptions and requirements

On occasion, there may be consultancy services not covered by schemes, or providers not prequalified but whose expertise is warranted for an effective engagement.  

In these cases, agencies may engage the appropriate service provider. But they must comply with:

  • their agency's procurement guidelines
  • the Procurement Policy Framework
  • procurement policies covering approved procurement arrangements
  • specific guides on the use of probity advisors and auditors (Board Direction 2013-05).

Agencies must use their approved standard form of agreement for engaging a consultancy service provider.

If that's not available, agencies can use the short form consultancy agreement template (DOCX, 62KB).

Consider special requirements

There are special requirements, delegations and reporting for the engagement of consultancy services. Generally, delegations of authority to engage consultancy services are different from delegations to incur expenditure. Refer to your agency’s delegations manual and policies.  

The agency head or chief financial officer must approve procurement of services over $50,000 (including GST) from a major supplier of consultancy and other services. The engagement must be reported on the Procurement Board’s Major Suppliers Portal. See Board Direction 2015-04 for more information and the list of major suppliers.

Know the difference between consultants and contractors

Many of the service providers engaged will provide consultancy services as ‘consultants’, but others will be contractors.

Consultants are engaged under contract on a temporary basis to provide recommendations or high-level specialist or professional advice to assist decision making by management. Generally, it is the advisory nature of the work that differentiates it from other tasks performed by contractors.

Consultants are different from:

  • skill hire contractors: when an agency engages (usually through a third-party service provider) a person to replace or increase the workforce in the core service delivery of a business unit, where the contractor will be under line manager direction and supervision
  • professional or specialist contractors: where an organisation is engaged to provide a contractor with specialist skills or capability to enhance the service delivery of a business unit.

Skill hire contractors should be sourced from the Contingent workforce prequalification scheme.

The definition does not apply to casual or temporary staff employed under any Act (such as the Government Sector Employment Act 2013) or engaged by an agency.

The difference between consultancy services and services provided by other contractors is not always clear cut. The examples below are offered as illustrations.

Type of services

Consultancy services

Contractor

Training

Provider of advice on training needs and to develop training programs

Provider of the actual training

ICT services

Assisting the development of an IT strategic plan

Undertaking implementation in accordance with the specifications (eg supplying or writing the software and constructing systems)

Finance and Accounting

Advising on the financial viability of a government business activity

Routine auditing or routine accounting services

Other examples of consultancy projects are:

  • provision of advice on new technology and ideas
  • development of performance standards
  • evaluation of activities and programs
  • preparation of marketing strategies
  • conduct of environmental scans and advice on planning
  • development of feasibility studies.

Ensure contractors are not deemed to be employees

Agencies must be careful to avoid establishing circumstances whereby a service provider (usually described as a contractor) can be considered to be an employee and be eligible for employee benefits, such as worker's compensation, despite a contract which suggests the person is not an employee. 

This could happen, for example, by the person being subject to the routine direction and control of the agency.  Agencies should get their own advice to clarify the distinction between employee and contractor.

Note that even though a person may be an independent contractor at law, the law will in some cases grant the contractor rights that would normally only accrue to an employee.  

Depending on the length of the engagement, the engaging agency may be required to pay payroll tax or superannuation contributions.  Agencies should seek their own advice about these types of obligations.

Manage variations during engagement

Variations to the scope of the consultancy work can, at times, be appropriate as a result of unforeseen circumstances. This may result in extra payments to the service provider.

Agencies must be mindful of and avoid variations:

  • being used by a successful low bidder to increase the value of the job
  • being used to avoid the application of threshold values for competitive bidding
  • which significantly increase or change the original scope of the engagement.

In general, proposals for variations require careful consideration, applying the principles of value for money, probity and accountability. 

An independent senior officer should approve changes in work or cost, not employees directly involved in the supervision of the service provider.

Material variations to the engagement during the progress of the project must be reported without delay in line with an agency’s procurement delegations, with prior approval for any proposed significant changes in work or cost.  

Materiality will depend on the project. As a guide, in terms of cost, a material variation would be where the overall value is over $150,000 and the variation exceeds the lesser of $500,000 or three times the original engagement.

Variations may impact the contract disclosure obligations for the engagement, particularly if it increases the total contract value over the $150,000 disclosure threshold under the Government Information (Public Access) Act 2009.  

Disclose engagements in annual reports

Agencies must disclose consultancy engagements in their annual reports. This is set out by the Annual Reports (Departments) Regulation 2010 and the Annual Reports (Statutory Bodies) Regulation 2010 (note: service providers are referred to as “consultants” in the above regulations).  These requirements are in addition to the contract disclosure requirements identified in the Policy Framework. 

Agencies must include the below information on consultancy services engagements in their annual reports:

Consultancy services costing equal to or more than $50,000 (excluding GST)

  • the name of the provider
  • the title of the project, if the provider has been engaged for a particular project
  • the actual cost of engaging the provider.

Consultancy services costing less than $50,000 (excluding GST)

  • the total number of engagements costing less than $50,000 (excluding GST)
  • the total cost of all such engagements.

If there were no engagements of consultancy services during the year, this must be stated in the annual report. 

If expenditure runs over more than one financial year, the amount spent in the year being reported should be stated.

Agencies should also group/categorise services according to the nature of expenditure and describe the purpose of the service.

Costs must be reported against and classified as follows:

  • finance and accounting/tax
  • information technology
  • management services
  • environmental
  • engineering
  • organisational review
  • training.