Whitehall spending on management and IT consultants is "crazy" and takes up more than half of some departments' wage bills, MPs have heard.
Public accounts committee chairman Margaret Hodge said one department - transport - was using 70% of its salary outgoings in this way.
She added that government should focus more on developing "in-house skills".
But Cabinet Secretary Sir Gus O'Donnell said consultants were needed to make large-scale projects possible.
During a committee hearing Ms Hodge, a Labour MP, said the Department for Education's spending on outside experts accounted for more than half its salary costs.
She added that the figure for both the Home Office and the Department for Energy and Climate Change was above 40%.
Ms Hodge said there had been "countless reports over the years, all of which say that we should try and grow the competency within the civil service in ICT and project management" but added that this had not happened
'Buying in experience'
She told the committee: "For every £10 spent in the Home Office on staff costs, £4 is spent on consultants. It's crazy."
Sir Gus, who is head of the home Civil Service, said the government had a "grow-your-own" scheme in place to develop its own IT development skills and its ability to manage large projects.
But it was important to use firms on a short-term basis, so that departments were not left with a long-term salary cost.
Sir Gus cited examples such as the 2012 Olympics and the now-abandoned national ID cards scheme, which the last Labour administration had planned to bring in.
He said: "It's important to buy in skills for jobs with a particular start and finish date. The right use is if it fits is where there's a skills gap and we are buying in some experience from outside...
"There are lots of circumstances where we need to get people in that we need for a while and then they go."
With many consultants being much better paid than civil servants, it was often preferable to use them in the short term, Sir Gus said.
He added: "We are probably at a competitive disadvantage for [recruiting] more senior ICT and management staff and that's a reality."
While some "fast stream" trainee civil servants were being trained to focus on managing short-term projects, it would "take 10 years to get them through".
Sir Gus said: "What changed at the election is the desire of the incoming government to become much more centralised and take control these things right from the centre...
"They've stopped a lot of past projects... We've stopped a lot of expenditure in marketing. Paid-for advertising has gone."
Conservative MP Jo Johnson asked whether arm's length bodies set up by government were having their spending monitored properly, arguing: "It appears to me this is a complete black hole."
But Sir Gus replied: "The whole point about these bodies is they were set up by government to be much more independent of government."