PwC Building Melbourne (Image: AAP/Joel Carrett)
PwC Building Melbourne (Image: AAP/Joel Carrett)

Would you buy used consultancy from this firm? Is turnaround specialist Allegro paying too much for PwC’s government business? Is $1 wildly overvaluing a tarnished brand in a shrinking market for public sector consulting work as governments go off the idea of paying hundreds of millions to just be told what they want to hear?

That’s just three from a list of questions occasioned by PwC’s proposed fire sale of its government consulting business as a pureplay public sector adviser, to be run as a company rather than PwC’s traditional partner-based structure. Of course, other big four audit firms have floated the idea of splitting their audit and consulting arms before, only for the proposed demergers to never happen, so don’t get carried away just yet.

As a purely public sector adviser — that apparently includes universities (which waste billions on consultants with the same enthusiasm as the Morrison government) and public health bodies — the new firm intends to avoid the core problem of the big four (McKinsey, BCG et al) that their very business model is based on a conflict of interest between their even more lucrative corporate clients and their government work.

That doesn’t mean the new firm wouldn’t potentially have conflicts of interest in the public sector. Until PwC tax partner Peter-John Collins and his loose lips became the biggest consultant conflict of interest story going, KPMG held the conflict of interest record, holding two separate contracts with separate NSW government agencies offering contradictory advice on the rail asset holding company, complete with a specialist partner being bullied by other partners to change his work.

Its owner, Allegro, has its own conflicts. Look at the list of assets it currently owns or part-owns — to say nothing of assets it may purchase in the future, with the intent of fixing, growing and then selling them. A law firm, retailers, transport companies, petrol — all areas where government policy at the state or federal level is important.

The new firm will be inherently conflicted due to its ownership by Allegro until it is sold off — indeed, until that happens, will it be any less conflicted than PwC? At least in the case of the latter, its exposure to conflict was primarily in relation to its relationships with corporate clients, not its ownership of private firms.

And will the PwC mothership ban itself from all government consulting work — something Allegro will presumably be keen to settle? Presumably so. In which case, there’s a good question to ask every other major consulting firm: when will you do the same? Especially McKinsey, famous for working with the US government on tackling the opioid epidemic while advising an opioid manufacturer on how to keep the opioid epidemic going.

PwC’s split is a de facto admission that the central charge against big consulting firms about conflict of interest is well-founded and can only be addressed through structural separation — not the “Chinese walls” nonsense that has been part of the self-justification of such firms for decades, or the pro forma conflict of interest declarations that mark the Australian Public Service’s lazy management of the problem.

Maybe it’s time for the government to force all large consulting firms to undertake the same demerger, with a requirement that firms over a certain size must have no corporate clients if they wish to successfully tender for government consulting work.

The best way to ensure that conflict of interest never arises in general policy advice is not to use consultants at all.

Meanwhile, PwC still hasn’t revealed — or sacked — the partners who shared or received confidential tax information from Collins and co. The fire sale won’t distract from the need for accountability and consequences for those involved.