Exclusive: MoD criticised for failing to look in-house for technical expertise while pressing ahead with 60,000 job cuts.
The number of firms commissioned by the Ministry of Defence for consultancy and support work has ballooned to 380.
The Ministry of Defence spent £290m on specialist consultants last year while making thousands of military and civilian personnel redundant, new figures show.
The money was drawn from the MoD's equipment budget, which is supposed to pay for the weapons, armour and vehicles the military needs in Afghanistan and for other operations.
Last November the Guardian revealed that MoD spending on outside contractors had risen fiftyfold in four years – from £6m in 2006 to a high of £297m in the financial year 2009/2010.
A confidential internal audit last year found the system for awarding contracts was being routinely abused. When the report was leaked to the Guardian, ministers promised to stamp out bad practice to bring the budget under control.
But the latest figures appear to show continued high spending during the first full year of the coalition government at a time when the military has been pressing ahead with a redundancy programme that will eventually result in 60,000 troops and civilians being forced out.
The number of firms commissioned by the MoD for technical consultancy and support work has also ballooned from a handful to 380, prompting unions to express fears the department's redundancy programme is self-defeating. They said it is cutting too far and too fast, forcing senior managers to rely on expensive consultants, some of whom will have worked for the MoD before being taken on by private companies.
"One of the effects of these cuts is that expenditure actually increases as the MoD has to pay consultants to do the work of those leaving the department," said Steve Jary, national secretary of Prospect, a union representing MoD civil servants.
Last week the parliamentary spending watchdog, the National Audit Office, warned the MoD had been in such a hurry to start cutting jobs, it was in grave danger of losing hundreds of in-house specialists it might never be able to replace.
At issue is the money spent by the MoD under a regime called Fats – Framework Agreement for Technical Support. Introduced by Labour in April 2009, this allowed senior defence officials to hire specialist, short-term help for "niche" tasks without needing authorisation from a minister. The aim was to speed-up work on the MoD's large, delay-prone procurement projects by making it easier for managers to hire "highly technical" experts in certain fields if none existed in the department.
However, last year's confidential audit showed project managers weren't bothering to look in-house before bringing outsiders on board. It highlighted numerous flaws and rule-breaking, and warned control of the MoD purse appeared to be "poorly developed or non-existent". The report said there were weaknesses in the robustness of scrutiny by those in charge of the budget, and found that in 75% of cases, contracts were awarded without any kind of competition.
Philip Hammond, the defence secretary, blamed Labour's poor governance for the spiralling costs, but the spending has continued in the last 18 months. The latest figures show the department spent £290m on Fats contracts between January and December last year.
The government insisted it could not provide a breakdown of the costs, but said the department had spent £225m between April and December last year – £5m less than the year before, a fall of 2%.
Jary said the latest figures showed the department was being forced to hire outside firms because it was losing too many of its own experts. "Prospect has been highlighting the impact of the MoD's savage cuts in its specialist staff for years. The Commons defence committee, the public accounts committee and the National Audit Office have all underlined this in recent weeks.
"Two weeks ago, we said the MoD is heading for a cliff-edge. It is now clear that the accelerator is jammed on full-speed and the driver can't see through the windscreen. Unfortunately, the brake-man has been made redundant."
The MoD insisted spending was coming down, and said it had also reduced the money spent on management consultants, which is supposed to come from a separate budget and still requires ministerial approval. Ministers say they have tightened up the rules for Fats and that these will come into effect in April.
"Fats spending has reduced in recent years and spending on management consultancy has also been reduced by from £106m under the last government to £26m over the last year," a spokesman said. "Fats is not the same as management consultancy, it is external technical services providing essential expertise such as independent airworthiness certification that our civil servants cannot provide.
"In many cases we are required to obtain independent advice on the adequacy of safety management arrangements and audit of safety related material for complex weapons. Since July 2010 governance and approval processes for Fats have been improved following an audit and from April a new framework will ensure external technical support services are used even more efficiently."
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