Pearls and Irritations

Every Australian who has sweated over a grant for a modest sum, or who pays taxes and thinks they should get value for money, must be asking questions about a huge swindle that has been growing over the past two decades under our noses. One thing is certain: our parliament needs to act.

All over Australia there are people who write applications for public money: to paint a silo, run a community event, expand a foodbank, conduct research on diabetes or the changing nature of work.

I’ve written plenty myself. They require detailed accounts of every dollar that is to be spent, evidence of need, lengthy applications setting out organisational history, structure, personnel, incorporation, past budgets and capability. Conflicts of interest must be named.

These applications are often written by volunteers, or by modestly paid frequently overworked service providers or researchers over their weekends or holidays. Their applications are rigorously assessed against multiple criteria, with success rates often around 20%.

If successful, they are subject to staged payments dependent on evidence of progress. When they end, final reports are required, showing how funds were acquitted, and demonstrating outcomes.

But there is another world: the alternative universe of big consultancies doing government work. A recent audit found that in 2021/22 close to $21 billion was spent by the Australian Public Service on external contractors and consultants. That is equivalent to 54,000 fulltime workers, remembering that there are 144,000 directly employed public servants.

This is a world where very large sums of public money are paid to big consultants for sometimes very vague projects. Outcomes are often unclear and unavailable for public scrutiny, and very large ‘variations’ to projects frequently follow initial allocations. In this world, consultants employed to deal with a problem often come up with solutions that require – surprise – more consultancies, or perhaps create opportunities for profit for their client list.

This is an opaque world of ‘partnerships’ without public accountability, and one where the big consultancies make large political donations. According to the Centre for Public Integrity, the Big Four consultants PwC, KPMG, EY and Deloitte donated $4.3 million over the past decade to the major parties. Their ‘investment’ paid off big time with a 400% increase in federal business over the decade. PwC was the biggest donor: $2.1 million from July 2012 to June 2022.

These organisations rub shoulders with decision makers at expensive elite events and rotate through the revolving doors that connect the consulting and political worlds. They live in a dense ecology of relationships that shape political decisions and capture the state. They are motivated by money: consultancy partners are paid a great deal and retire on very large ongoing income streams, and many politicians leaving parliament, join them.

One of the largest streams of government contracts occurs in Defence. Consultancies like PwC have been actively positioning themselves to reap the consulting bounty of AUKUS. PwC currently holds more than $220 million in contracts with Defence, making up around half of all their government work at present. These existing contracts reach into the highly sensitive Defence realms of strategic planning and IT and data infrastructure. What confidence can we have in the probity, security and value of billion-dollar consultancy spends by Defence – at a time of massive expansion?

In the words of Mariana Mazzucato, the big consultancies are part of ‘The Big Con’ – the title of her latest book, written with Rosie Collington, where these entities, now the biggest in the world, shape public economic, defence and social policy, and monetise their frequently inflated claims of ‘independent’ advice and expertise.

Successive Australian Governments have drunk this cool aid in very large gulps – a $21 billion gulp in 2021/22. They are milking profit from work that would be properly conducted by a robust public sector. Procurement, outcomes, conflicts of interest and value for money are not properly scrutinised. They are a far cry from the kind of probity that ordinary Australians and smaller organisations are subject to.

Every Australian who has sweated over a grant for a modest sum, or who pays taxes and thinks they should get value for money, must be asking questions about a huge swindle that has been growing over the past two decades under our noses. A swindle that has been fostered by governments of both political colours – and which pays significant sums into their election budgets.

We are seeing before us perceived and actual conflicts of interest – what some academic researchers call ‘walking both sides of the street’. These are widespread and – to put it mildly – poorly monitored in the multi-billion dollar world of big consulting.

And this is all without mentioning the out-and-out corruption that has emerged at PwC following their use of confidential information about prospective multinational tax changes to advise very large multinational clients on how to avoid tax. This was first described by its now exiting Ex-CEO as a ‘perception problem’ confined to a single bad apple, and now widely seen for what it is: subterfuge, executed at scale, reflecting a failed internal culture. A culture which earned PwC at least $2.5 million in fees, and may have cost the Australian public an unknown amount in lost tax revenue. A matter that should be pursued by the Federal Police and rank high on the new Anti-Corruption Commission’s work plan.

This is, without doubt, an egregious example of bad behaviour. But for anyone thinking it is unusual, read page 191 of The Big Con, which discusses very similar behaviour in the UK in 2013 resulting in an Inquiry by the UK parliament’s Public Accounts Committee into the Big Four consultants’ use of insider knowledge to help clients pay less tax. These entities have form.

Is it necessary to say that not all consultants are bad? I hope not. Good consultants must share the outrage of ordinary Australians at what we are seeing – and its contamination of their craft. There is a role for deep expertise to fix public problems. The public sector is not perfect (and it is certainly very lean after years of ‘efficiency’ dividends – while consultancies flourished). But to pay consultants extraordinary sums to craft core policy while failing to manage conflicts of interest or to transparently evaluate outcomes, and at the same time to allow them to curry political favour through donations: these are costly failures of governance.

We need new forms of control and accountability, and public sector management of the big consultancies if we are to put a stop to tax-payers like nurses and retail workers – and all the community grant writers, so tightly held to account – from financing the super-profits of the captains of consultancy. This includes the deep and opaque nether regions of Defence at the moment of its greatest expansion.

It’s very often the honest people who work in our universities and not-for-profit organisations who know the subject matter better, have lived experience of the problems and are in contact with the people most likely affected, who will be committed to better outcomes and who will operate with the interests of the general public in mind.

I hope our Senate Inquiry will continue to throw light on what has happened, what needs to change, and how we get there. It is certain: our parliament needs to act.

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