Report finds Federal Government spends over $1 billion a year on consultancies

Max O'Driscoll 6 October 2021 17
The Treasury Building

The amount spent on the Big Seven consultancies has almost tripled since the Rudd-Gillard Government. Photo: Michelle Kroll

A recent report from the Australian Institute has found that the Federal Government spends over $1 billion per year on consultancies, funds which could go towards creating an additional 12,000 jobs in the public sector.

The report, Talk isn’t cheap. Making consultants’ reports publicly available via Senate order, found that spending on the ‘Big Seven’ consultancies had almost tripled since the Rudd–Gillard governments, but the results of the consultants’ work are often withheld from the public.

The Big Seven are Deloitte, PwC, EY and KPMG (the Big Four), and the tech-minded professional services giant Accenture, global strategy company McKinsey & Company and Boston Consulting Group.

The report recommends that the Senate encourages greater transparency around the advice received by the Federal Government from these private consultancies as their work is at taxpayers’ expense.

To do so, the Senate would need to use an Order for the Production of Documents, which would see the findings tabled in Parliament and subsequently made public. There are currently 18 orders for the production of documents, most notably the ‘Harradine Order’ which requires Federal Government departments and agencies to produce an indexed list of files every six months to aid Freedom of Information requests and increase government transparency.

Senior researcher at the Australian Institute’s Democracy and Accountability program Bill Browne says the level of current spending suggests the private sector is receiving “unprecedented” levels of public work.

“It is worth reflecting on the rise of consultancy spending by the Federal Government, now exceeding $1 billion a year. Compelling the work done by consultancies to be public would be an improvement on the status quo, although there is still the underlying issue that consultancies are doing an unprecedented amount of public work,” said Mr Browne.

“The $1.1 billion spent on the largest consultancies last year could have employed an additional 12,346 public servants. It is not just jobs being lost to the public sector; knowledge and experience are being outsourced too.

“Our proposal of a continuing order in the Senate for the production of consultancy reports and written advice would go a long way to ensuring that the work being carried out at considerable taxpayer expense is available for the scrutiny of the public. While such an order would not resolve all problems with the spiralling reliance on consultancies, it would serve as a significant first step,” he said.

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The report states that the spending on private consultation demonstrates the futility of the APS Average Staffing Level (ASL) cap, which it says did nothing to reduce government spending. Rather, it directed this spending towards “less accountable and profit-taking companies that lack the public service’s ethical commitment to ‘frank and fearless’ advice”.

The findings of the report were mirrored in the Federal Government’s 2021/22 budget, in which over 5,000 new Australian Public Service jobs were added.

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17 Responses to Report finds Federal Government spends over $1 billion a year on consultancies
jcjordan jcjordan 7:29 pm 07 Oct 21

The vast majority of this work is not advice but doing the day to day activities that are required to be undertaken by the APS to meet deliverables so as soon as they try and make it public it will get closed back up due to classification. Unfortunatly the horse has bolted in regards to in any way bring this back in house as the outsourcing companies now own all the specialist technical expertise and it ongoing devleopment. The APS has been reduced to being nothing more than contract managers.
In addition neither side of politics wants the advice brought back into the APS as the Consultancies/Think Tanks give them the advice they want based on their ideology where as the ASP would provide advice that is evidence based.

Keith Lewis Keith Lewis 6:19 pm 07 Oct 21

My experience is that El1s and EL2s mange downwards; SES manage upwards. EL1s & 2s are unable to manage downwards because the 6s and below will not do what they are told. The solution is to hire contractors who will do as they are told. Alas that is a misconception and the final result is not what was desired. Until the Public Service accept that their current means of promoting or hiring is terribly, terribly flawed then the miasma will continue.

DJA DJA 4:28 pm 07 Oct 21

I am not sure how they made that assessment. By my calculation, the 12,000+ APS members will have an average yearly cost of nearly 90K. This will include additional accommodation (how many more buildings are needed to house the 12K?), training and administration. The promotion pathways for APS can mean that the specialist skills that the consultancies bring will never eventuate. And then there is the ‘effective work’ calculation, which takes into account that APS staff are not just doing what is contracted, but also the administration and training .
Replacing $1.1B of consultancies could end up costing Government $2-3B.

Jason Duarte Jason Duarte 2:40 pm 07 Oct 21

I'm unclear how anyone can think this is a good thing?

    Daniel Oyston Daniel Oyston 4:40 pm 07 Oct 21

    1. It needs to be considered in light of ROI

    2. It needs to be considered in light of whether the skill required would want to work in the PS. For ecmple, I consult and help with consultancy, where those skills are not in the PS, and there is no way I'd work in the PS, even if you paid me double.

    3. It still contibutes to employment, just like PS jobs would.

    Jason Duarte Jason Duarte 4:49 pm 07 Oct 21

    I don't disagree Daniel but sadly the APS has lost a lot of corporate knowledge, capability and skills. Consultants are excellent at bringing a specialised skill set to help get a job done thereby improving ROI and mitigating risk. Doing an APS job and being there for 5yrs makes little sense or providing advice that isn't either adopted, learned from or shared is unfortunate.

    Daniel Oyston Daniel Oyston 5:17 pm 07 Oct 21

    Jason Duarte The last point is interesting because would anything change in terms of adoption, learnings, or sharing simply because the person is an employee. I suspect not. I often think that sounds like a good point but is actually contradictory to the whole 'bring it inhouse' argument. There are just too many people who don't want to work for the PS. That's on the PS.

    Warwick Alsop Warwick Alsop 7:57 am 08 Oct 21

    Daniel Oyston most consultants hired by the public service aren't actuaries, molecular biologists or theoretical physicists. Mostly its just the PS hiring back staff it used to have in house before John Howard gutted it.

    Daniel Oyston Daniel Oyston 9:08 am 08 Oct 21

    Warwick Alsop they are welcome to employ those people.

    Warwick Alsop Warwick Alsop 9:17 am 08 Oct 21

    Daniel Oyston if the Labor party ever has a decent run they will, and the savings will be an added bonus.

    Mark Whithear Mark Whithear 9:20 am 09 Oct 21

    At least the consultancy firms don’t have a box ticking mentality. We need direct employees but the firms give us evidence based results and strategies.

    Jilly Beans Jilly Beans 5:28 pm 09 Oct 21

    Daniel Oyston there is a tendency for senior public servants to prefer the advice of consultants over employees, even when the employees advice is spot on and/or more nuanced than that of consultants. It's both a cultural thing (the notion that external is always more skilled becoming firmly entrenched since the Howard years) and political (it's easier to dismiss advice from the outside for a range of reasons if it doesn't suit the agenda of the day). For this reason highly skilled/knowledgeable public servants are frequently either not included, or their advice is not 'required'. Over time, these skilled and capable public servants go elsewhere, and the dumbing down of the service continues.

    Daniel Oyston Daniel Oyston 5:30 pm 09 Oct 21

    Jilly Beans True, totally true. Just another reason smart people don't want to join/stay in the PS

    Angela M J Brown Angela M J Brown 3:16 pm 10 Oct 21

    Daniel Oyston at an exorbitant cost that could well pay for a lots of permanent positions and employ people in fulltime, secure work. Good try at fluffing your way to a reason money hungry firms are licking up all the money they can from taxpayers

    Angela M J Brown Angela M J Brown 3:16 pm 10 Oct 21

    Warwick Alsop and Abbott

    Angela M J Brown Angela M J Brown 3:20 pm 10 Oct 21

    Daniel Oyston there are a lot of people in the APS that stay because of the the very reason that they care about the taxpayers $ and are there as witnesses to the destruction of the 'public service' and try as much as they can to hang on for a change of gov. This is typical LNP management of any service, Run it in to the ground, say oh dear it is useless let's privatise it. It is the LNP methodolgy

Stephen Saunders Stephen Saunders 8:36 am 07 Oct 21

Plus which, the big ole revolving door that draws in the politicians, the mandarins, and the big seven.

This is the kind of “soft corruption” that’s very difficult to handle, even with an ICAC. Especially when Menacing Wallpaper routinely suppresses the contracts and the outcomes.

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