Claims Australian Signals Directorate allowed KPMG to 'mark its own homework' and win big contract

Consulting giant KPMG is under further scrutiny this week following accusations it capitalised on inside information to win a massive contract with the Australian Signals Directorate (ASD).

The cyber spy agency itself is also under fire over claims it awarded KPMG the $46 million contract despite knowing the firm helped design the upgrade project that went to competitive tender.

The upgrade, known as REDSPICE, will triple the ASD’s offensive cyber capabilities.

In her introduction to the report outlining REDSPICE’s aims, ASD director-general Rachel Noble said the project would make the agency more resilient by improving the performance of critical functions nationally and globally.

“REDSPICE is the necessary and timely change needed for ASD to continue its contribution to making Australia secure, in both peace-time and conflict,” she wrote.

“Now more than ever the work we do is at the fore of Australia’s ability to protect its interests and contribute to stability and prosperity in our region and globally.

“This is an incredibly exciting time and opportunity for all of us in ASD, to evolve our organisation in ways which lay the foundation of our success for the next 75 years.”

An ABC investigative report, however, said the ASD quietly published contract details last week, awarding KPMG $46 million to work on the multi-billion-dollar program.

But KPMG had already been advising on the design of REDSPICE.

Bidding on a contract you helped design is known in consulting circles as ‘marking your own homework’.

In a statement to the ABC, ASD said it “undertook a competitive tender process to assist with project management of the REDSPICE initiative” and that “multiple partners were selected, of which KPMG is one”.

REDSPICE was established in 2022 with the aim of creating “1900 new analyst, technologist, corporate and enabling roles across Australia and the world” and “maintaining Australia’s strategic advantage and capability edge over the coming decade and beyond”.

It aims to establish ASD facilities in Melbourne, Brisbane and Perth at an estimated cost of $10 billion.

KPMG worked on the project for two years helping ASD design REDSPICE.

Last week, the spotlight was on KPMG over allegations it was ripping off Australian taxpayers by inflating bills and charging for work never done in its lucrative contracts with the Department of Defence.

An ABC Four Corners investigation cited whistleblowers who said KPMG had free rein in Defence for the past decade while raking in almost $2 billion in government ‘work’.

The whistleblowers alleged there was a ‘cosy relationship’ between the government and KPMG, resulting in the firm’s staff being able to do whatever they wanted inside Defence, even to the point of overriding senior departmental officials.

The term ‘significant influence’ was used.

A retrospective audit found invoices from the consultancy were wrong, with some being grossly overinflated.

Over the past decade, most KPMG consultants working in Defence were former Defence Force members, making it easy for them to exert control over their former departmental colleagues.

Defence has now introduced a new moratorium on entering into contracts with personnel who have left the department’s employ within the past 12 months.

Previously, someone could have left Defence’s employ and walked out the door in uniform on a Friday and be back in the building the following Monday dressed in a suit as a consultant earning substantially more money and with far fewer demands on work/life balance.

In a statement, KPMG refuted the allegations made in the Four Corners program, saying the claims are wrong.