Pearls and Irritations

The consultancy-military-industrial complex continues to reveal its sinister nature as serious questions are raised over conflicts of interest in the tender process for KPMG’s $46 million REDSPICE contract with the Australian Signals Directorate.

In recent reports, one of the big four consultancy firms has been implicated in a gross conflict of interest in advising and designing a national security project involving the Australian Signals Directorate (ASD). Again, we see the rerun of the compromised nature of a private corporation that advises, shapes, and oversees the operational side of confidential, even secret government functions.

In 2022, the ASD established the REDSPICE program with the aim of “maintaining Australia’s strategic advantage and capability edge over the coming decade and beyond”. It is billed as the “most significant single investment” in the organisation in 75 years. Its blueprint heralds that REDSPICE “signals the start of the most significant transformation” in the organisation’s history “investing in new intelligence and cyber capabilities.” The program is envisaged as creating 1900 new positions.

That same year, it was also revealed that the multinational accounting giant, KPMG, would be paid $9.242 million in a contract with the ASD running from July 1, 2022 to February 28, 2023 to assist in the shaping and delivery of REDSPICE.

The details of the contract were meagre, being listed publicly as related to “strategic business advice services”, though an ASD spokesman did confirm that REDSPICE was involved, and that KPMG would be supporting the agency’s “delivery and governance activities”. “ASD partners widely with Australian industry on capability delivery,” stated a spokesperson at the time, “and is boosting engagement with industry to deliver REDSPICE objectives. ASD encourages Australian businesses to consider future REDSPICE capability delivery opportunities.”

At the time, the contract should have raised more than a few eyebrows. Denham Sadler, national affairs editor of InnovationAus.com, at least remarked that the contract meant that the accountancy firm would be getting “almost $1.2 million per month into the next year to assist with the delivery of this program.” Instead, there was more concern about what services would be cut to fund REDSPICE.

Last week, the ABC reported that KPMG had secured a $46 million contract with the ASD on the rollout of the REDSPICE program, despite being privy to inside information obtained from its previous work in devising the project. This made any notion of a competitive tender process a nonsense. KPMG was placed in a position to win a contract to implement the design it aided in creating in the first place. “They [the consultancy firms],” remarked Greens Senator Barbara Pocock, “get a foot in the door with a minor contract which then gives them the inside running for a successful bid on related major contracts.”

This whole matter bears a striking resemblance to the conduct of another consulting firm, Deloitte, and a contract with the Home Affairs Department that was signed in September 2020 for $151,800 only to balloon to $1.5 million. The now abandoned contract for the “permissions capability” was intended to simplify and reform the visa processing system, with a stress on technology. In that case, the company was placed in a privileged position regarding the tender process in advising both officials in the department and one of the contract’s bidders, thereby breaching a written undertaking. The contract with Deloitte was subsequently terminated.

KPMG has tried to be the crisp clean linen in a basketful of dirty, soiled laundry. When revelations of PwC’s misuse of confidential government information to boost its client base surfaced, KPMG CEO Andrew Yates took to the podium of virtue and soulfully preached. The actions of PwC had been “disturbing”, he told members of a Senate Committee in June. “Based on the findings of the Tax Practitioners Board, and the more recent revelations from Senate estimates, the conduct of PwC was clearly unethical and unacceptable.”

KPMG’s copy book regarding its role in advising the Australian commonwealth on defence matters can now be said to be truly blotted. Earlier this month, ABC’s Four Corners, using material obtained from a whistleblower, reported that the firm had billed the Defence Department for hours that were never worked, while also inflating invoices. Over the last decade, the company has entered into contracts with the department running into $1.8 billion.

It has also been revealed that KPMG has itself erred in handling material and observing security measures regarding information obtained in confidence. One staff member’s laptop, for instance, was stolen from their driveway in 2019. It contained confidential information from Defence. Another senior KPMG consultant allegedly forwarded, according to the Australian Financial Review, material to colleagues relating to the Future Submarine project, revealing cost estimates over a 10-year projection. Such material should never have been shared.

The firm claims to have promptly “informed” Defence about these incidents, stating that no compromise of sensitive material had occurred. The company has “rigorous security protocols in place”. Despite such rigour, the accountants could not locate any documentation relevant to the second incident. The Defence Department, for its part, claims that it does not track information breaches occasioned to consultants in any thorough fashion. A “security incident report” was created in response to the stolen laptop, simply detailing that the issue had been reported to the police. The staff member, for his part, attempted to diminish the secretive nature of the computer information by calling it unclassified and available “in the public domain”.

The entire edifice of the consultancy-military-industrial complex is crumbling. And it has grave implications for national security. It should be axiomatic that consultants with privileged access to tax policies they advise a government over, are always risky customers in the face of corporate incentives. The lure of profit is all too tempting, as the PwC scandal showed. Why assume, then, that national security will be exempt from the compromises posed by the profit motive?

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