This article originally published by Doug Dingwall and Tom McIlroy in The Canberra Times on August 3rd 2017. Click here to read the original.
Federal government spending with Australia’s biggest consultancy firms has more than doubled since the Coalition was elected, costing taxpayers nearly $1 billion since 2013, despite pledges to drive down public service outsourcing.
Amid the axing of more than 15,000 public service jobs, outsourcing contracts with the big four consulting firms – Ernst and Young, KPMG, PricewaterhouseCoopers and Deloitte – more than doubled in value from $196.4 million in 2013-14 to $420.3 million in 2015-16.
The total number of annual contracts grew by more than 300 in the period, passing 1000 in 2015-16 alone.
South Australian senator Nick Xenophon said he would ask the Commonwealth Auditor-General to investigate the processes involved in awarding contracts worth $998.3 million over the period. KPMG received the most government spending to the end of May this year, with 447 contracts worth $158.9 million.
Figures provided to a Senate committee show spending across the government, including major contracts from the departments of Defence, Finance, Health and Social Services.
The spending growth came as the big four firms donated more than $1.5 million to the Coalition and Labor in the same period, including $704,941 in 2015-16.
Price Waterhouse Coopers was the most generous political donor, giving nearly $500,000 to the major parties.
Last year, a Fairfax Media analysis revealed spending on consultants increased by 19 per cent during former prime minister Tony Abbott’s time in office.
The splurge coincided with the Coalition cutting public sector jobs to the lowest level in nearly a decade, leaving the departments to turn to the big four firms.
South Australian independent senator Nick Xenophon said the figures were “staggering and outrageous”.
“The government needs to urgently explain why at a time of belt tightening for practically everyone else, they seem to have let it rip for the big four accountancy firms,” Senator Xenophon said. “This exponential increase to the big four begs a number of serious questions. Surely, there’s enough expertise amongst 243,000 Commonwealth public servants to have provided a lot of these services that taxpayers have forked out nearly a billion dollars for in just three years.
“The anecdotal evidence is that smaller consultancy firms are missing out as a result of the spike in what the big four are getting.”
Senator Xenophon said the government should provide a breakdown of the contracts, including what they are for, why the services couldn’t have been provided by public servants and whether there was a competitive process.
“If the tender process has been short circuited in any way that would be a real concern,” he said.
Consultants are often used to legitimise policy decisions from ministers and departments, or to test ideas being canvassed within the public service.
Under the former Rudd and Gillard Labor governments – when the size of the federal bureaucracy peaked – spending on consultants dropped every year, falling 32 per cent over the life of the government.
Professionals Australia ACT director David Smith said unless the government rebuilt capacity for its public servants to deliver policy and program advice being outsourced to consultants, contractors’ services would come at a premium for years to come.
“It’s almost as if they’ve given away their capacity to grow their skills in-house, particularly in policy and also in engineering,” he said.
“There’s a place for consultants and contractors but this is a bit of madness, and there needs to be a real assessment of many of the contracts for services about whether that work could be capably delivered in-house.”
A Department of Finance spokesman said the government’s use of consultants helped keep government administration flexible and efficient.
“It helps to keep the cost of Commonwealth administration low, by helping to avoid the ongoing costs which would be incurred with the recruitment of additional permanent public servants when the need for specialist skills or additional support is temporary or project specific.
“The government continues to ensure the overall cost of public administration is as low as possible through initiatives like the ongoing efficiency dividend and our rolling program of functional and efficiency reviews.”
The spokesman said in 2013-14 overall departmental expenses represented 7.2 per cent of total government expenses. In 2016-17, the percentage fell to 7 per cent.