This is part three in a series on government outsourcing. Read Bernard Keane’s analysis of outsourcing in offshore detention here and Josh Taylor’s analysis of NBN’s use of contracts to keep secrets under “commercial-in-confidence” here.

Slashing and burning public sector jobs has cost the government (and the taxpayer) dearly, with a vast amount of institutional knowledge lost and millions spent on consultants to do the work the public service used to be able to do itself.

In 2013, then-shadow treasurer Joe Hockey promised to slash the public service by 12,000 jobs in the first two years of the Coalition government. Shortly before the Coalition came to office, the number of public sector employees stood at 167,051, and as of the end of June this year, it was down to 152,430, meaning the government had already surpassed its own target of a 12,000 headcount reduction.

In figures published last week, the Department of Finance revealed that in the last financial year, it signed 69,236 contracts in total, worth over $59 billion. Of these, 18.4% of contracts, or over $10 billion were for management and business professionals and administrative services.

Although much of this category includes the massive Transfield contracts for running offshore detention — which Bernard Keane has already covered — this category includes the consultancy work carried out on the behalf of the government for a range of tasks that the government lacks the skills base to conduct itself, or wishes to seek out third-party advice on.

The figures reveal that another $12 billion, or 21.6% of contracts, was spent on politics and civic affairs services.

In her Quarterly EssayPolitical Amnesia, Laura Tingle argues that extensive outsourcing means thre is a lack of institutional knowledge in the public sector. Former treasury secretary Ken Henry told her:

“I think many departments have lost the capacity to develop policy; but not just that, they have lost their memory. I seriously doubt there is any serious policy development going on in most government departments.”

Sometimes consultancy is used simply to justify government policy and give it an air of legitimacy. In the 2014-15 financial year, NBN spent over $50 million on consultancies. An outsourced and costly six-week review into the NBN in 2013 — to justify the switch from a fibre-to-the-premises broadband network to the “multi-technology mix” (MTM) — was one of six reviews conducted when the Coalition came into government, and overall came in at over $2 million. This review estimated the MTM would cost about $41 billion. But a more detailed internal planning document produced by NBN this year superseded the consultants’ work, showing the MTM would now cost up to $56 billion to complete by 2020.

Aside from the NBN, documents published over the last month in response to questions on notice from the October round of Senate estimates give a small insight into some of what consultancy work is being undertaken by the government, and how much it is costing taxpayers:

  • The Australian Competition and Consumer Commission undertook 57 consultancies in 10 months. It didn’t disclose to the Senate who won those contracts, but said its consultancy work was driven by regulatory and enforcement activities.
  • The Australian Securities and Investments Commission had 30 consultations between January and October this year, for a total value of $2.6 million, including $247,00 for Mediabrands to help ASIC with search engine optimisation. Veldhoven & Co also picked up $248,000 for “workplace strategy consulting”.
  • The Royal Australian Mint paid over $80,000 for consultancy services between January and October this year, with the largest contract going to Colmar Brunton. The mint spent $43,700 on “brand/market research” with the firm.
  • The Productivity Commission, essentially the government’s own consultancy agency, spent $43,778 on consultancies between January and October this year. The commission told Parliament that its consultancy contracts were usually driven by public inquiries or studies commissioned by the government.
  • The Australian Bureau of Statistics spent close to $1 million on 21 consultancies in the first 10 months of this year, including to help the ABS plan for the 2016 census.
  • The Australian Prudential Regulation Authority had five contracts, with the second largest at $129,105 to outsourcing favourite KPMG to conduct a benchmarking review for APRA.

Peter Fray

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