(Image: Private Media/Tom Red)

The last few years have been good for KPMG in Canberra. Since 2017, it has earned over $200 million in federal government contracts each year, according to data from the Austender website — and nearly $300 million in 2018-19 and 2019-20. Even over the course of the pandemic, it scored over $230 million. This year, already, it has secured over $90 million in contracts. Another big year beckons for the big four firm.

The contrast with a decade ago, when KPMG earned just $37 million in 2012-13, is remarkable.

Only a small proportion of that revenue is for audit services. The bulk comes from management advisory and consulting services across the public service, reflecting what is in effect a revolution in public policy in Australia, driven by cost-cutting of the Australian Public Service (APS) and the outsourcing of major functions, including policy advice. There aren’t just more contracts, but bigger ones: the average size of contracts used to be $400,000-$500,000; now they’re $700,000-800,000.

The outsourcing of policy advice to consultants has been widely decried as deeply damaging to the APS and to the quality of government, but the criticism has had a nebulous quality, with specific damage hard to identify.

But the revelations of infrastructure expert Brendan Lyon to NSW Parliament about the internal brawl in the NSW Public Service, and KPMG, over the Transport Assets Holding Entity (TAHE), has shed some unexpected light on what outsourcing of policy advice does to government.

Lyon has lifted the curtain on something we aren’t supposed to see — affairs normally hidden from public sight by government secrecy, cabinet confidentiality, commercial sensitivity and resistance to freedom of information laws. It is only because of the way the TAHE brawl erupted between NSW Treasury and the NSW Transport Department that we’ve obtained this rare glimpse.

What Lyon and his extensive documentation reveal is how high-powered consultants are embedded in the most senior positions of the NSW Public Service, play an active role in trying to shape policy, up to and including looking to overturn cabinet decisions, and yet remain unaccountable in a way that normal public servants are.

KPMG partner James Hunter was a crucial figure in the TAHE brawl in September-November 2020, which resulted in Lyon being sidelined from NSW government work in KPMG and Transport secretary Rodd Staples being sacked without explanation. Both had, in effect, called bullshit on NSW Treasury’s rosy financial picture of TAHE and its budgetary impact, as well as raising significant concerns about consequences of its operating model.

Hunter, KPMG’s “Solutions and Growth” partner, wasn’t involved in Lyon’s work for Transport, which was the result of a NSW cabinet decision specifically tasking Transport and KPMG to report back on major issues such as operating licences, the impact on broader transport policy, and a financial model of TAHE. Hunter was already embedded in NSW Treasury on a separate job working on “TSR and Taskforce” issues, as he described it, but has a close relationship with secretary Mike Pratt.

It was Hunter whom Pratt called on the evening of Sunday September 13 to resolve the increasingly fractious conflict between what Transport and Lyon and his team were producing and what Treasury wanted, with Pratt apparently concerned that in a meeting with Gladys Berejiklian, Dominic Perrottet and the head of Premier and Cabinet the previous Friday, he was told to resolve the TAHE problems.

The Pratt-Hunter solution, outlined in an email from Hunter to Lyon, other staff, senior partners and Heather Watson (the KPMG partner working separately for Treasury on TAHE) at 7.47pm on a Sunday, would be in effect to override the cabinet decision. Transport and KPMG would not report back to cabinet on operational and financial issues around TAHE. Hunter suggested that Transport be stripped of its role of “TfNSW leading and writing” the report back to cabinet. Instead, there would be a joint process with working groups in which there would be “joint leads”.

Hunter also wanted Lyon to no longer be “holding the pen” on the report for KPMG and wanted another partner brought in to “support” him. According to Hunter, Pratt and his deputy San Midha agreed that this new approach was better.

The week after, Staples told Treasury he wasn’t having a bar of any integrated response to cabinet — they would be sticking to the process approved by cabinet.

So a consultant, with the encouragement of the NSW Treasury secretary, proposed that a process agreed in a cabinet decision be replaced with one that delivered control back to Treasury — where Hunter was embedded (he signed his email “Partner KPMG | NSW Treasury”, a bizarre and surely contradictory title), and where he had a close relationship with the secretary.

Just who was Hunter working for when he wrote that email? Pratt and Treasury? Or his own firm? His firm working for Transport, or his firm working for Treasury? What role did the public interest in ensuring cabinet was properly briefed on the risks of the TAHE model play in this decision to overturn a cabinet decision by officials and consultants?

Such questions can’t be asked because Hunter can’t be called to estimates or committee hearings unless he is subpoenaed like any other member of the public. He is not a public servant, and not subject to the public accountability requirements of public servants. He is a KPMG partner.

In fact Hunter is just one of an entire race of hybrid public servant/consultants working across government, whose numbers are proliferating as governments outsource public policy — policy advisers that occupy a nebulous space where the accountability rules are unclear and conflicts of interest are widespread, if not universal.

Yet, as the example from September 2020 shows, they potentially wield significant power. They are more than just neutral advisers on policy matters — they are players at the most senior level of decision-making.

Power without responsibility — and they’re richly rewarded for it as well.