Australian government criticised for $5 billion consultancy spend

24 July 2017 5 min. read

Australia’s national government have been under increasing media scrutiny following the announcement executive spending on consultancies had hit a staggering A$5 billion. The Liberal/National coalition also faced accusations of conflicting interests, as a number of prominent ex-civil servants and even a former Prime Minister were among consultants hired with tax-payers’ funds, according to global media consortium News Corporation.

Figures compiled by Finance Minister Mathias Cormann reveal that for the past decade the government has consistently spent more than A$370 million a year on consultancy contracts, with the stand-out figure of 2008-2009 breaching A$588 million. Cormann who defended the spending, highlighted what he believed to be the importance of consultancies for ‘modernising’ public services and ensuring value for money on behalf of Australian taxpayers, however he declined to provide detailed answers as to how exactly these funds were assigned. The allocation of the public money therefore remains a mystery – however following allegations from Australian paper The Daily Telegraph that ex-public servants and even a former premier were among the consultants awarded contracts, a Senate inquiry is planned.

New South Wales Senator Sam Dastyari, who led demands for details of where the A$4.8 billion went, was also keen to question specifically why the work couldn’t have been done by department staff already under the employ of the government. “People are angry when they see huge amounts of money spent on consultants but can’t find out what on earth the money is being spent on. This shouldn’t be a secret society. It’s a joke at the expense of families who are forking out with taxpayer dollars,” the Labor party representative said.

The allegations also compounded a recent dispute regarding conflicts of interest between the government and the consultants hired, which had broken out after the former trade minister Andrew Robb, took on a role as an economic consultant with a Chinese company which operates the international port in Darwin. His appointment came less than a year after he left office, and raised questions about whether his role with Landbridge contravened the statement of ministerial standards, which holds that ministers should not lobby or advocate with the government for 18 months after their political retirement. It also forbids them from taking personal advantage of privileged information to which they had access as ministers.

Sam Dastyari and Mathias Cormann

According to analysis of the most recent data available, the Australian consulting industry is estimated as worth A$4.2 billion. The market is led by a demand in the country’s large services sector, worth A$687 million of the total market segment, while the Financial Services sector, where projects in the area of cost-cutting, consumer experience and digital implementation saw the industry’s value grow to A$790 million. Healthcare was also strong – seeing a value of A$150 million according to the most recent data available.

Continued controversy

The controversy is not the first time that Australian governmental spending on external expertise has come under fire. Figures released at the end of 2015 showed the national Finance Department threw A$10 billion the way of pay external professional service firms and their administrative services, while the government laid off thousands of full-time public service workers while imposing austerity cuts. Earlier in 2014 meanwhile it had been revealed that the state of South Australia, which has its own regional government under Australia’s federal system, hired consultants as they sought efficiency savings in the state health system in order to absorb spending cuts, contrarily spending almost A$6.5 million on fees in the process.

The Mid Year Budget Review revealed that McKinsey & Company were the chief beneficiaries of that figure, with the firm being paid A$6.419 million over the financial year for their work to helping the government develop plans for regional budgetary cuts, including a full business case and community consultation. Since then however, the big spending has continued in South Australia, as it was revealed that in the lead up to 2017, the state’s health department continued to pay roughly A$45,000 a day in external consultancy fees, as Big Four consulting industry giant Deloitte were tasked with implementing the changes designed to save money. The international professional services firm had been awarded a A$17.2 million contract to “provide advice and support in the planning implementation and review of the Transforming Health Program” for the 2015-16 year.

The role of consultants in government is coming under scrutiny on a global level too, as well as in the UK. Deloitte were also among the firms to bid for a lucrative contract regarding the implementation of Brexit in the UK in Spring 2017 meanwhile, in a £1.5 million project to sure up the UK’s civil service, itself depleted by funding cuts.

The contract was partially the subject of a Parliamentary report into consulting spending, which saw Members of Parliament warn against rapid hiring out of panic. The committee’s chair Meg Hillier stated that she was concerned the challenges of Brexit will place the short-staffed civil service under increasing strain, while warning Whitehall – the central hub of the national civil service – needed to be “really savvy about how they let and manage these contracts,” or risk being taken advantage of.