There is a "woeful lack of professional skills" among senior Foreign Office managers, MPs have said.
Consultants said the Foreign Office was resistant to change
The Commons foreign affairs committee says an internal report into one IT project exposed serious failings.
And it accuses officials failing to take seriously damning criticisms from consultants, calling the attitude of the top civil servant "unacceptable".
But Foreign Secretary Jack Straw said that attack on Sir Michael Jay was "wholly unreasonable".
Cabinet Secretary Gus O'Donnell also sprung to Sir Michael's defence, calling him a "brilliant colleague".
"Since he has been permanent secretary he has really risen to the challenge of driving performance and management improvements in the FCO," said Sir Gus.
A report from consultants Collinson Grant said the Foreign Office was over-staffed, inefficient and resistant to change.
In their annual report, the MPs say the department has not successfully changed some of its management practices and efficiency savings targets or defended them by explaining how the consultants have got things wrong.
"We have concerns about the lack of thoroughness with which the review was carried out and about the lack of seriousness with which the FCO [Foreign and Commonwealth Office] regarded and appears still to regard the project," they said.
The committee criticises the Foreign Office for failing to volunteer to Parliament either the consultants' report or a review by senior official Norman Ling into an information management project at the department.
The episode shows officials have a "disturbing aversion" to proper scrutiny of the Foreign Office, says the report.
The MPs say Sir Michael Jay, the FCO's most senior civil servant, is "part of the problem", with him acquiescing with a situation where some senior managers failed to collaborate with the consultants.
"When asked what he deems to be 'ill-founded' in the recommendations of Collinson Grant, he failed to give a specific example," they say.
"This is all wholly unacceptable from a permanent under-secretary."
Mr Ling's report looked into the new Prism computer system, which caused anger among staff.
The system, which is also being used by MI6, left staff at their "wits' end", say the MPs.
One diplomat wrote that "in the FCO's long history of ineptly implemented IT initiatives, Prism is the most badly-designed, ill-considered one of the lot".
The MPs say: "We conclude that the Ling report has exposed a woeful lack of professional skills and a disturbing series of failings in senior FCO management."!
They praise the Foreign Office's management board for accepting the report and asks them to keep the committee updated on progress on implementing its recommendations. But they say the department needs to catch up with the rest of Whitehall by appointing professionally qualified and experienced staff in human resources, finance and buildings management.
Some survivors of Hurricane Katrina claimed the Foreign Office's response to the disaster was slow and information scarce.
The department's chief official has said that unlike the response to the Indian Ocean disaster the criticisms were unjustified.
The MPs say the response to Hurricanes Katrina and Rita - and the tsunami - was mostly "timely and successful".
They warn: "In recent years excessive and unrealistic expectations have arisen of what the FCO is able to do for people who get into difficulties abroad, including in circumstances such as natural disasters."
Ministers should take a firm line in telling the public there are practical limits to the support Britons travelling abroad are entitled to receive from embassies, they say.
But the report says exceptional help should be provided if there are further disasters on the scale of the tsunami.
The MPs also say the Foreign Office should give full details of any concerns voiced about the decision to move its embassy in the Vatican inside the British Embassy in Rome
They say it is reassuring BBC Monitoring, which keeps tabs on overseas media, has been given the financial stability it wants
And they say that Montenegro's upcoming referendum on independence from Serbia means there should be a full British ambassador in Podgorica.
The foreign secretary said he was glad the report recognised that substantial progress had been made in making his department more effective.
"There is more work to be done, as we of course recognise," he said.
"But I cannot and do not accept the criticism of Sir Michael Jay which I regard as wholly unreasonable. Indeed the report commends much of the important work Sir Michael has driven forward under his effective leadership of this organisation."
Mr Straw also said he was pleased the report had paid tribute to the "admirable work" done by Foreign Office staff in the wake of the tsunami.