The so-called big four consulting firms — Deloitte, EY, KPMG and PwC — have collectively raked in more than $4 billion in federal government contracts over the past decade, funnelling their handsome returns back into recurring political donations to build a culture of policy development co-dependency.
That’s the brutal take from new research released by the Centre for Public Integrity (CPI), an independent governance advocacy think tank that has run the numbers on the extent of political funding extended by the heavily entrenched consulting industry renowned for cultivating political favour.
The report comes as pressure builds for meaningful sanctions against consultancies that play on both sides of the fence when advising government and stakeholders amid bombshell revelations of conflicts of interest that resulted in a PwC partner being booted off the Tax Practitioners Board.
An email trail unearthed by questions on notice put by Labor Senator Deborah O’Neill has subsequently exposed the vast extent of leakage, with the government keeping its powder dry in terms of a possible criminal investigation.
“The big four have jointly averaged donations of over $400,000 to both the Coalition and Labor since 2012-13, though this figure has been closer to $500,000 per year since 2016-17. While there was previously greater equality between donors, PricewaterhouseCoopers (“PwC”) has emerged as the major donor of the big four since 2016-17. Since 2012-13, PwC has donated over $2 million,” the CPI report said.
“The increased outsourcing of crucial public interest policy work to private contractors who are not directly accountable and financially back both parties raises both questions of integrity and public value-for-money.”
The research group noted that the donations, while political, are not partisan in nature. Consultants back whichever horse is in power, or they reckon will win power.
“A peculiar feature of the big four’s donations is that they are largely party indiscriminate. Between 2012-13 and 2020-22, 47.8% of their donations were to the Labor Party, whereas 52.19% were to the Coalition (though the proportion given to the Labor Party steadily increased between 2017-18 and 2020-21 before falling in 2021-22),” the CPI said.
“Analysis of donations going back to 1998-99 reveals that the big four donations tend to move in political ‘cycles’, whereby the firms prefer to move their donations away from incumbent governments and towards opposition parties as presumptive future governments.”
It’s a prudent and lucrative investment according to the CPI, which labels the culture of public policy co-dependence “clientelism” that it says leaches away public service capability.
The phenomenon has previously been referred to as a public sector culture of “learned helplessness” where agencies lose internal policy development and execution capability and cede it to external providers, usually outsourcers, big enterprise software and the consulting firms that hawk their playbooks.
By far the biggest consulting goldmine of the decade (or two) has been the phenomenon of digital transformation and so-called Web 2.0 where large parts of the public sector found themselves left behind as other consumer-facing industries cast their business models to become “online first” so that transactions became primarily digital and often automated.
One of the key reasons the big four consulting firms gained such a foothold in the public sector is that many agencies simply divested their internal information technology capability in the late ’90s and early ’00s in the belief the commercial market offered better outcomes than the public sector could internally develop.
That doctrine was not partisan either, with the Howard government prosecuting whole-of-government outsourcing off the back of the previous Labor government’s push to source commoditised tech products and services directly from the market led by the Department of Administrative Services.
The one element missing from the CPI’s number crunching is to what extent revenue flowing into consulting firms was tech-related, a figure that has been persistently difficult to tease out because of the different ways spend can be accounted for on the AusTender contract reporting system.
What is known, though, is that the big accounting firms have previously been forced to spin out or divest their tech consulting divisions to manage conflicts, the best example being Accenture, which was spun out of Arthur Andersen, the latter imploding after the Enron scandal.
While the figure of $4 billion over 10 years for consulting firms jumps out, if it were split evenly (and it is not) the spend would amount to $100 million per big four firm per year — an amount that is certainly well below the real figure that is more complicated to calculate.
With major tech refreshes in agencies like Centrelink, Defence and Tax now typically costing more than $1 billion apiece, and much of the cost being chalked up by IT contractors the government can’t afford to hire permanently, $4 billion seems almost modest.
Also not visible is what tech firms pay to consulting firms for getting them in the door of government, either by way of “solutioneering” (pre-packaged capability fixes, like transaction processing outsourcing, i.e. immigration visas) or through partnership arrangements.
Also not in the mix are the likes of Boston Consulting Group, McKinsey & Company, Booz Allen Hamilton and the RAND Corporation.
This said, the CPI’s report does throw a spotlight on the well-trodden path of political patronage that becomes even more questionable when the well-established practice of public servants being seconded as political staff is taken into account.
“It is not difficult to see the increasingly close relationship which has developed between the big four firms and their political patrons,” the CPI observes before providing a recent catalogue.
“For example, Christopher Pyne accepted an employment offer from Ernst & Young (EY) while still minister for defence in 2019; former trade minister Craig Emerson joined KPMG as an economic consultant three years after leaving office in 2016; recently elected Labor member for Hawke, Samuel Rae, formerly worked at PwC after having been state secretary of the Victorian Labor Party; former Labor Party national secretary Noah Carroll joined KPMG after the 2019 election loss; and Jamie Briggs, former minister for cities in the Abbott government from 2013-15, joined PwC in 2017.”
As that list suggests, the big four’s investments in talent to open doors tend to follow the colour of money rather than ideology, as do their donations.
“Donation behaviour is distinct from most other donors,” the CPI observed. “Most interest groups donate to political parties in furtherance of their own ideological interest to one rather than both major parties.”
“The big four’s persistent donations to both major parties show that their donations are unrelated to any ideological goal or end sought but are rather focused on currying favour with whoever may be in power. This trend in bipartisan donations has been observed among other large industries in Australia and characterised by some as a form of ‘state capture’.”
The report concludes that successive governments made “conscious decisions” over the past decade “to outsource crucial functions to a new ‘para-public service’ while the public service is sidelined.”
The Centre for Public Integrity argues that the role of the Australian Public Service (APS) needs to be re-centred, and makes five recommendations to that effect:
- ReIcentring the APS as the main policy advisory body in government, with resort to external advisers only where there is a demonstrated and acute need for such services;
- Imposing a cap on each department’s use of consultants (with exceptions available for circumstances of national emergency);
- Requiring rigorous reporting by departments to Parliament in respect of the use of consultants;
- Removal of the APS average staffing level cap introduced in 2015-16;
- Implementation of a donation cap and spending caps to reduce the undue influence of well-resourced corporations.
This piece was originally published at The Mandarin.
Hardly an eye-opener……………….
Michael West has been pointing out detailed examples of this rort for ten years.
This report is only scraping the surface of the corruption (and yes, there is no other way to interpret it)
The Public Service has been intentionally undermined by the LNP, coercing members of the APS into resigning their Public Service appointments and signing up with “Labour Hire Companies” to perform exactly the same job – but without all that awkward “impartiality” nonsense.
Also without any security of tenure – say the wrong thing and they can be dismissed on a whim with zero comeback….. the Labour Hire Company simply tells them not to go back to work.
Never mind that all this is totally illegal (Section 6 of the Public Service Act states that “all persons engaged on behalf of the Commonwealth as employees to perform functions in a Department or Executive Agency must be engaged under this Act or under the authority of another Act.” There is absolutely no provision for Labour Hire Companies in the Act. A court case would be a walk-up).
By stripping the APS of its expertise, the Big Four have made themselves indispensable to government, and are making a major quid out of it with no responsibility. The Public Service Act’s code of conduct does not apply to Labour-Hire employees. They do not have a statutory obligation to behave honestly, diligently, avoid conflicts of interest, avoid improper use inside information etcetera. one of the Act’s stated purposes is to ‘establish an apolitical public service’. Labour hire employees, not being bound by the code of conduct, lack any obligation to behave apolitically. This means that the presence of labour-hire arrangements, undermines the Act’s purpose (and potentially acts as a loophole for any future government to explicitly hire staff of a particular political bent).
Time to drag this out into the open and fix this abomination.
All excellent points. Of course while the Big Four ‘are making a major quid out of it’ they are spreading the joy by paying kick-backs out of their ill-gotten gains to the major parties and offering fine sinecures to helpful ministers when they retire, as the article says. So everybody’s happy, it’s a win-win. I’m as keen as you to see this abomination fixed, but nobody should be holding their breath waiting for action. The conflicts of interest will win every time.
The kick-backs and post-political appointments are the “Pro Quo” to go with the “Quid”…………..
……which is why the whole thing is corrupt.
At last the AFP has been told to investigate PwC… and it’s just been revealed that PwC has the contract for auditing the AFP!
Let’s hope they can quietly come to some arrangement to avoid any embarrassment, eh?
After spending the mandatory ten minutes in the naughty corner I have no doubt PwC will be back to the billion-dollar business as usual.
From the tone of the letter you’d think they were out by ten cents in the School Canteen petty cash reconciliation…….
I am sorry my fellow swimmer,to break in with the observation the the current head of the AFP Reece Kershaw, didn’t and couldn’t understand that receiving a disapproving text from a mate and current partner of Pwc, needed to be reported.
Being “mates” with Smirko the dud’s rubbish man, ace gambler and secret part owner of a racehorse who spectacularly didn’t get on the Racing Board, the former “special” NSW Police Commissioner Mick Fuller is a full blown conflict of interest, which needed to be reported.
This by itself makes me doubt that the AFP have been asked to anything except find their elbow in full daylight and bury the controversy.
Evangelical Qld player with 2 fulltime employees 4 parttimerss and 70 volunteers! doing their new “job ready courses” millions … a year … .. mostly online copied and pasted idiocy – irrespective of an individuals prior credentials or education ; oh and the thousands of new blow ins are at it too- 58 million a year – 7 thousand unemployed” in Gosford to Qld – run by a porcine accountant ex mayor … no experience btw in aged care but mskin him and his partners billions
” clients”
sic makin him and his mate directors x3
By the looks of the PWC debacle, non Public Servants aren’t covered by the same Security concerns either.
I would have thought that the first item off the rank with the current fiasco would be to nail the bastards for beaches of confidentiality, which back in the day were covered by Criminal Legislation, with jail terms threatened.
Oh, apparently we can’t expect the private sector to be held to the same standards as the former tea ladies were.
I’m not sure what prize examples of this extraordinary belief in action Australia has to offer, but it is prevalent in the UK too. Among the various resulting catastrophes are:
After an inquiry into the Lorenzo debacle Richard Bacon MP, a Conservative member of the committee
… said the report was further evidence of a “systemic failure” in the government’s ability to draw up and manage large IT contracts. “This saga is one of the worst and most expensive contracting fiascos in the history of the public sector. “Yet, as the much more recent universal credit project shows, there is still a long way to go before government departments can honestly say that they have learned and properly applied the lessons from previous contracting failures.” Previous IT-related government problems have included a breakdown of the child support agency, which left thousands of families without money; chaos within the passport agency; a tax credit system which was left vulnerable to fraud; late payments from the rural payments agency; and difficulties in tracking foreign national prisoners.
uk company under new labor 2008 – still operating here – same same different worse
whilst this week the horrific abused by bile Fordham maybe the worst media shock jock abuse of UWU fellow who dated question unemployment contractor delivery and abuse of clients – the separate company personality of the uwu as a charity was printed at Courier rag – 175 in running assets they printed this put and the online abuse and harrasdmeny of the poor bloke is criminal
sic horrific abuse
sic dared question sorry bum thumbs
sic but horrific abuse, 175 g harrassment
Wait a minute. That’s not saying anything.
If this is the quality of work that comes out of The Centre for Public Integrity it’s no wonder our public service has been hijacked by spivs.
I’m all for integrity and accountability, and I believe that expertise in government belongs in the public service, not in corrupt consultancies that are rorted by ex-politicians.
But this is a difficult fight, and if the good guys are going to win, they’ll have to be more competent and more cunning than this report suggests.
The report is a wish list without a strategy. If it were a better example of competency it might sell itself but unfortunately it does the opposite.
At least it is a start. The donations data is informative.
The difficulty is that both major parties are in on the rort, as confirmed by the data presented in the report. So how are voters going to bring about change?
It would be a more compelling report if it presented ways that ordinary people have missed out and been rorted as a result of PWC’s takeover of the public service. For example, it could highlight the consequences of the PWC tax reform scandal. Instead of just describing the outcome as $2.5m of billings for PWC, which is miniscule, it could further expose how ordinary Aussies missed out on hundreds of millions of tax dollars as a result of the tax avoidance strategies that PWC’s clients implemented.
There are lots of examples that would resonate with the public. For example, didn’t Morrison pay PWC et al millions to develop a COVID strategy? And what was the outcome? Didn’t it appoint gas company executives to develop a strategy to lead Australia out of the pandemic through gas initiatives? And didn’t that lead to crazy gas prices? How much did that cost ordinary Aussies?
If some PR genius could link these dire outcomes with the PWC public service rort, we might stand a chance of getting our public service back. But without some campaign that strikes a chord, expect more of the same.
that old show Yes Minister could not write this abject horror shi! show- i have been suicidal this week due to the cruelty and gaslighting since being casy into the horror coalface – forced into indentured then told too old at 50
you articulate well that and the answer its only scrapes the surface is due to both parties MO – they like the status quo currently -David Pocock seems ethical enough and clear – Max Chandler very good – id get that vallsy angry accountant in this weeks Q&A audience to put back the ” Red Tape” Abbott dismantled from rules regarding such public service abominational change and destruction
sic: it and ballsy
Time to hold Abbott to account.
I don’t consider that it was Abbott by himself, he isn’t smart enough to have pulled this off.
Voters can bring about change very easily. Vote for someone else.
Has anyone considered the Synergy 360 lobby group with its successful contracts for Unisys.
Unisys belongs to the UK PM’s wife and family.
She avoided paying tax on 800,000,000 pounds in the UK under the “non domiciled” section.
“One of the key reasons the big four consulting firms gained such a foothold in the public sector is that many agencies simply divested their internal information technology capability in the late ’90s and early ’00s in the belief the commercial market offered better outcomes than the public sector could internally develop.”
This started in the late 1980s, when Kim Beazley as either Treasurer or Finance Minister, I couldn’t be bothered looking up, started the outsourcing of Commonwealth IT services. When us IT people pointed out the loss to the Commonwealth, Beazley commented that “we were just looking after our jobs”. That we were, we also had a bucketload of Corporate memory, so understood why stuff happened, we also did many other many IT related tasks that popped out of the woodwork and hadn’t been addressed.
Come some decades down the track, we are now paying through the nose for this political stupidity and is obvious we not getting the Services we used to get when Public Service IT work was done in-house by permanent Employees. And I suspect Australia doesn’t have that strong IT base it should.
And they didn’t want Morrison. Oh how i would have loved to have seen Smirko’s “face when he opened that email.
I never want to see his face again. He disgusts me.
so daft he would not care