Pearls and Irritations

On 7 March Pearls and Irritations published my Are all those consultancies really necessary? This dealt with the $129 billion spent by the Commonwealth over the last five years on services the content of which no doubt include a great deal that would traditionally have been regarded as core business for the Commonwealth, and for which both the Public Service Act 1999 and the Public Governance, Performance and Accountability Act 2013 would indicate agency heads have prime responsibility and accountability. Outsourcing on this scale can only be understood in the context of the changing status and powers of agency heads, especially Secretaries of Commonwealth Departments.

 Prior to the Public Service Reform Act 1984, Departmental Secretaries (“Permanent Heads”) had tenure and the Public Service had a near-monopoly of the provision of advice to the Minister. In relation to the functions of the Secretary, Section 25(2) of the Public Service Act 1922 said simply

(2.) The Permanent Head of a Department shall be responsible for its general working, and for all the business thereof, and shall advise the Minister in all matters relating to the Department

The Public Service Reform Act 1984 made two important changes:

• The Permanent Head ceased to be permanent, and became an officer with a term appointment
• The words “under the Minister” were inserted in s.25 (2) so that it read:

(2) The Secretary of a Department shall, under the Minister, be responsible for its general working, and for all the business thereof, and shall advise the Minister in all matters relating to the Department.

The Public Service Act 1999 provided (s.57)

The Secretary of a Department, under the Agency Minister, is responsible for managing the Department.

Regarding tenure, the 1999 Act provided that Department Secretaries would be appointed by the Prime Minister, for a period of up to five years (s. 58) and that the Prime Minister could terminate an appointment at any time (s.59(1)) after receiving a report from the Secretary of the Department of the Prime Minister and Cabinet (s.59(2)).

Under these provisions the Secretary was simply the Department’s manager, and could be removed from office at any time, by the Prime Minister.

The pendulum has swung back somewhat since then. Under the Act as amended the Secretary is once more appointed by the Governor-General, and the removal of Secretaries is an action of the Governor-General, on the recommendation of the Prime Minister. This perhaps raises the bar slightly, but only slightly, for a Department Secretary to be removed from office.

The Secretary has become something more than the Department’s “manager”, but the breathtaking simplicity of the provision that the Secretary was responsible for the Department and all the business thereof, and would advise the Minister in all matters relating to the Department, which stood from 1922 until 1999, has been replaced in s.57 of the current Act by a short essay on the “roles” and “responsibilities” Secretaries (see extract in the Appendix at the foot of this post).

This section raises more questions than it answers. For example, the first-stated role of the Secretary is, “principal official policy adviser to the Minister”. The policy adviser role is governed by two adjectives. Principal policy adviser? The Secretary is simply one among several? Official policy adviser? The Minister has unofficial policy advisers? Who are they? Does the Secretary know about them? Does the Secretary know what advice they (or any other official policy advisers) are tendering? Does the Secretary have the opportunity to debate the advice with which he/she is competing? Who has final responsibility for consolidating these competing streams of advice into a coherent whole that the Minister can assimilate effectively and make decisions about? Who is accountable for the outcome?

Since 2013 it may be that some of the answers to this question may be found in the Public Governance, Performance and Accountability Act 2013, which makes it a matter of law that Department Secretaries are the “accountable authority” for Departments of State, and states (s.15) that the accountable authority has a duty to govern the Department in a way which

(a)  promotes the proper use and management of public resources for which the authority is responsible; and

(b)  promotes the achievement of the purposes of the entity; and

(c)  promotes the financial sustainability of the entity.

The point of all this is that over the period 1984 to 1999 we moved from a situation where there was a single point of accountability, with the requisite standing and powers, for everything that happened under the Minister’s purview, to a situation in which policy formulation, implementation, service delivery, and even organisational design and organisational effectiveness, are a highly contested space. The contemporary APS Department Secretary is a person with ambiguously defined “roles” and “responsibilities” under the Public Service Act, who, notwithstanding being defined as the “accountable authority” under the Public Governance, Performance and Accountability Act, is obliged to compete with a shifting population of advisers and consultancy marketers peddling their wares. This competition takes place against the background that a Department Secretary can be removed from office without explanation within a day or two, and is served by an SES establishment that knows (1) that the Secretary can be removed within a day or two and (2) when that happens there will be a great deal of change of a kind which may or may not be good for any individual SES officer.

In this environment Commonwealth agencies have a dizzying array of reviews inflicted upon them, which reviews can be initiated by central agencies, Ministerial advisers, or the marketing departments of consultancy firms. To take the example of the Department of Defence, in 1996 the incoming Howard Government set up the so-called Defence Efficiency Review (DER), directed to the elimination of “unnecessary administrative practices and duplication”. The DER led to the Defence Reform Program, which it was my task as incoming Defence Secretary in 1998 to implement. Implementation of the review’s recommendations (which included making savings by cutting the size of the ADF!) was supposed to save Defence in excess of $1 billion, which, it was said, would help to pay for urgently needed re-equipment the ADF.

The Defence Efficiency Review was supposed to set the Department up for the 21^st Century, but it was succeeded by a series of reviews including:

• the Defence Procurement Review 2003 (DPR) led by Malcolm Kinnaird AO, which recommended inter alia that the Defence Materiel Organisation (former Defence Acquisition Organisation) be established as a quasi-independent agency, which happened in 2005
• the 2007 Defence Management Review led by Ms Elizabeth Proust
• the 2008 Defence Procurement and Sustainment Review
• the Rudd Government’s 2009 Defence White Paper, which led to the Strategic Reform Program, which was abandoned in 2012 after repeated cuts to the budget made it untenable
• the 2011 Review of the Defence Accountability Framework led by Associate Professor Rufus Black
• the Gillard Government’s 2013 Defence White Paper which made further process changes and further budget cuts.

In 2014, four months after the announcement of plans for a new Defence White Paper and a separate Force Structure Review, then Minister for Defence David Johnston announced the establishment of a Panel led by businessman David Peever to conduct a ‘First Principles Review’ of the Department to ‘ensure Defence is fit for purpose and able to promptly respond to future challenges’. Part of the aim was to ‘improve the overall efficiency and effectiveness of Defence while delivering a more commercially astute and focused materiel acquisition and sustainment capability’. The Report was delivered in April 2015. It proposed a series of recommendations that ‘will change the structure, governance arrangements, accountabilities, processes and systems of Defence’. One of its more interesting recommendations was that the quasi-independent Defence Materiel Organisation should be moved back into the Department of Defence (see Mark Thompson, The demise of the Defence Materiel Organisation). Thus ten years after one Panel recommended that DMO be broken out of Defence, another recommended that that move be reversed. These are enormously costly and disruptive changes.

For all of these reviews the cost of the review panel is only part of the cost to the public purse. The panel must be serviced by the agency concerned, will be very demanding of information and comment from the agency, will provide a report to government on which the agency will be required to comment in detail, and then leave the agency with some kind of reform program which the agency must expend time and resources implementing, while attempting to continue to provide without diminution the services for which it has been established. On occasion, a subsequent review comes up with a new template before the implementation of the last review has been completed.

Implementation is always a major task attended by major disruption, because part of the consultancy game is that the consultant must justify the high fees by finding that the way the agency currently does its business is fundamentally flawed and must be changed radically. If anyone can refer me to a consultant’s report that says the agency is well managed and only incremental changes are recommended I would be interested to read it.

The fundamental question which needs to be addressed is where, in this environment, does accountability for the organisational design and organisational effectiveness lie? If the Secretary faithfully implements the recommendations of the consultant and the matter does not end well, is it the consultant or the Secretary who is held to account? I think we all know the answer to that.

In 1974, when I first joined the ranks of what we now call the Senior Executive Service, a Royal Commission on Australian Government Administration, under the Chairmanship of the redoubtable HC Coombs, was just beginning its work. Forty-two years have elapsed since it reported in 1976. I believe it is time for another Royal Commission, to undertake a sober and painstaking assessment of what we want 21^st Century Australian Government Administration to look like, and what its capabilities should be.

Paul Barratt AO was an officer of the Australian Public Service from 1966-91 and again 1996-99. He is a former Secretary to the Departments of Defence and of Primary Industries and Energy.

 APPENDIX: Extract from Public Service Act 199

57  Roles and responsibilities of Secretaries

Roles of Secretaries

(1)  The roles of the Secretary of a Department include, but are not limited to, the following:

(a)  principal official policy adviser to the Agency Minister;

(b)  manager, ensuring delivery of government programs and collaboration to achieve outcomes within the Agency Minister’s portfolio and, with other Secretaries, across the whole of Government;

(c)  leader, providing stewardship within the Department and, in partnership with the Secretaries Board, across the APS;

(d)  any other role prescribed by the regulations.

Responsibilities of Secretaries

(2)  The responsibilities of the Secretary of a Department are as follows:

(a)  to manage the affairs of the Department efficiently, effectively, economically and ethically;

(b)  to advise the Agency Minister about matters relating to the Department;

(c)  to implement measures directed at ensuring that the Department complies with the law;

(d)  to provide leadership, strategic direction and a focus on results for the Department;

(e)  to maintain clear lines of communication within the Agency Minister’s portfolio, as negotiated between the Secretary and the other Agency Heads in the portfolio;

(f)  to engage with stakeholders, particularly in relation to the core activities of the Department;

(g)  to manage the affairs of the Department in a way that is not inconsistent with the policies of the Commonwealth and the interests of the APS as a whole;

(h)  to ensure that the Agency Minister’s portfolio has a strong strategic policy capability that can consider complex, whole‑of‑government issues;

(i)  to assist the Agency Minister to fulfil the Agency Minister’s accountability obligations to the Parliament to provide factual information, as required by the Parliament, in relation to the operation and administration of the Department;

(j)  such other responsibilities as are prescribed by the regulations.

(3)  Subsection (2) does not affect a Secretary’s responsibilities under any other law.

Note:          See, for example, the Public Governance, Performance and Accountability Act 2013.

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