While Christopher Pyne’s new gig with EY (formally Ernst & Young) warrants an examination of the failure of the purported ministerial code of conduct to halt the revolving door between the ministerial wing and the private sector, any Senate inquiry should focus on a much bigger issue: scrutinising the big four accounting firms’ rapidly growing role in government.
That the government has been handing ever more money in recent years to private companies for management consultant services — i.e. the kind of services traditionally provided by the Australian Public Service — seems undeniable. An Australian National Audit Office (ANAO) report in late 2017 showed a marked increase in consultancy spending under the Coalition. Private analyses like those done by Michael West, who has been the most assiduous investigator of the role of the big four in tax avoidance and government contracts, also shows surging revenue for consultants.
But the government — both at the political level and at the public service level — has persistently either denied any increase or pretended that it’s simply a matter for individual public service managers unrelated to government decisions. The Department of Finance tried to argue that the use of consultancies “has remained relatively stable” by using a peculiar figure for the proportion of consultancies versus all Commonwealth contracts — although even that showed a marked uptick under the Coalition.
That finance submission was in response to a Joint Committee of Public Accounts and Audit (JCPAA) inquiry last year that followed the ANAO report — although the inquiry never reported before the election. The ANAO had identified a number of causes for concern about the surging level of consultancy spending. These include departments rushing out spending right before the end of the financial year, disproportionate numbers of contracts just below the $80,000 reporting threshold (including contracts being broken up into smaller chunks), and a diminishing number of open tender contracts.
A bigger problem — one also identified by the ANAO — is that the primary data source for all government contracts, the Austender site, has significant flaws, including duplicate entries and inconsistent use of categories that makes it very difficult to get an accurate picture across different agencies.
As Danielle Wood argued in the Grattan Institute’s submission to the inquiry,
‘Management advisory services’ is the largest category by value of consulting services provided to the Commonwealth Government. However, most contracts for ‘management advisory services’ are not classified as consulting contracts. Narrowing the analysis to just the ‘Big 4’ consulting firms, only around a quarter of the value of their contracts with the Australian Government are flagged as consulting contracts.
In fact, an entire category of consulting services, probity advice (where independent consultants vet the probity of procurement processes) appeared not to be captured in consulting contract data.
Why is all this worth a Senate inquiry? Because the big four firms represent a systemic threat to effective democratic government.
- The big four are now the largest group of political donors in Australia, meaning that they are being awarded contracts by the politicians they are funding with political donations.
- The big four are a core part of the global system of corporate tax avoidance and profit shifting that deprives countries around the world of hundreds of billions in critical tax revenue.
- The big four are hopelessly conflicted in their joint roles as providers of audit services and providers of management consulting services both to corporations and government agencies, creating an unresolvable tension between the incentive to win contracts and their ostensible role as independent auditors.
- The growth in the provision of consulting services continues the process of infantilising and disempowering governments and extends it into a new area: whereas in the past outsourcing has tended to strip bureaucracies of specialist skills like IT and legal skills, consulting contracts push that process into the core role of provision of policy advice.
- A constant expansion in consultancy contracting creates a virtuous circle for the big four in Canberra — the more contracts they win, the more expertise and contacts they develop within the bureaucracy, the better they are able to win future contracts. Large firms thus become entrenched in what is becoming an oligopolistic market for consultancy services, reducing value for money for taxpayers.
- But there is literally no way for the public, or parliament, to determine if any big four consultancy is delivering value for money for taxpayers, and better value for money than a full-time APS official would have provided in the same role. Only the ANAO can identify poor value for money or service failures, and it has a limited budget and personnel spread across the public service and a range of different kinds of audits.
Any inquiry into Christopher Pyne should pick up where the JCPAA left off, and push for much greater transparency around the most significant development in public sector governance in decades.
Can Australia front up to the influence of the big four? Will Pyne’s new role with EY come under the Senate’s spotlight? Send your thoughts, along with your full name, to boss@crikey.com.au
If Pyne’s new position is not contrary to the so-called “code” it says a lot about the code.
Anyone interested in reading about the malign influence – but also the sham services – provided by these operations should dip into the recent highly readable volume by Australian academics (but also brief moonlighters in that sector), Gow and Kells:
https://www.blackincbooks.com.au/books/big-four
The increasing influence of the consultancies is directly attributable to the Howard Government decision to put a cap on the number of public servants (known in the Fed Gov as the ASL Cap). Any new submission to cabinet must contain offsets against existing numbers, or use contractors. Even doing the business case for a new policy or implementation initiative usually involves armies of smurfs from KPMG or EY or such. Some business cases can cost up to $3m to develop, and that’s before the Government even decides to actually do what’s being proposed in the proposal.
The theory behind the ASL cap ruling was that it would limit the size of government. In practice, it’s hollowed-out the capability of the APS, and hasn’t saved any money at all. In the process, it’s handed untold influence to the partners of the big consultancies, who have far more of a say in how policy and programs are developed than even Ministers do.
In other words it is doing exactly as intended.
Maybe, but it was happening already in the early eighties (and even the Whitlam government began the practice of using consultants). Use of consultants by government has been a problem for over forty years now, and they have expanded into a dizzying array of areas. At the risk of self-promotion see chapter 5 of my book, Mythologies of Change and Certainty in Late Twentieth Century Australia, (Australian Scholarly Publishing, Melbourne, 2000). It deals with the cultural background of consultancy and gives some figures about their rise in the mid nineties. Since then it has only got much worse. It is time all levels of government ceased using consultants for anything.
Maybe you could do an updated edition Gregory. Such corrupt behaviour and it’s not illegal. I guess that’s what you get when you set the fox to guard the chickens.
He was always a bit of a smart-arsed crook in the House. Now we have an affirmation that he hasn’t restricted this opportunism to his Parliamentary career.
Myself and colleagues have been interested in the Big Four predations on Australian higher ed in recent years.
The following may be of interest – about EY’s efforts to undermine faculty and degree structures, and turn university education into the provision of a load of meaningless micro-units – presumably to be delivered by them. Of course, university administrations are up for all this – and as per the Pyne move, some of our retiring leaders find there is a nice little earner awaiting them in the ranks of Big Four.
https://www.academia.edu/38593132/Review_Ernst_and_Young_University_of_the_future.pdf