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Senate report reveals billions spent on consultants amid integrity concerns

The Big Four consulting firms in Australia dominate the industry.

The Big Four consulting firms in Australia dominate the industry. Photo: TND

Australia spends more on consultancy services than any other nation proportionally, giving rise to conflicts of interest and transparency issues, a Senate report has found.

A Senate committee launched an inquiry into the management and integrity of consulting services after PwC was accused of abusing its trusted role as an adviser when staff leaked information on proposed federal government tax changes to clients.

The committee’s final report, published on Wednesday, found the Australian government had become increasingly reliant on consultants for public service work.

Growth in expenditure on these services has tripled every decade for the past 30 years and a significant bulk is performed by the Big Four consulting firms – Deloitte, EY, KPMG and PwC.

“Use of consultants has limited the capability growth of the (public service), giving rise to occasions of serious conflict of interest and been accompanied by questions about transparency,” committee chair Richard Colbeck wrote.

“It has also resulted in enormous costs to the (public service) for work that is often opaque and, in some instances, raised genuine questions regarding value for money.”

The committee has made 12 recommendations, including that PwC publish accurate and detailed information about those involved in the breach.

It also recommended the Department of Finance improve training for officials who undertake procurements, review guidance on conflicts of interest and develop a register for these breaches.

A committee should also be established to review consultancy contracts, the report said.

Though she was a member on the committee, Greens senator Barbara Pocock said its recommendations were inadequate and urged the government to do more.

“Australians are now awake to the systemic conflicts of interest built into the consulting sector and they are expecting real solutions,” she said.

Over the previous 10 years, the government spent $8.5 billion on contracts with the Big Four.

Senator Pocock says outsourcing makes government services more expensive, of a lower quality and harder to manage.

Many firms also consult for clients with “direct conflicts of interest”.

For example, US consultant McKinsey was awarded a $6 million contract for net-zero modelling over national science agency CSIRO in 2021.

But the company has also provided advice to at least 43 of the 100 largest corporate polluters such as Chevron, BP and Rio Tinto.

Senator Pocock recommends reducing spending on consultants by 15 per cent a year and offsetting that with growth in public sector capacity.

Any consultants that failed to declare conflicts of interest should be banned from public sector work for five years, she said.

Companies with government contracts should be required to publish client lists and be banned from making political donations for a year before applying for a tender and a year after it is completed.

Senator Pocock recommends PwC be prevented from bidding for government work until all matters arising from various investigations are resolved.

She also recommends establishing an independent regulator for the consulting sector and caps on the number of partners at big consultants.

In January 2023, former PwC tax partner Peter-John Collins was revealed to have passed on confidential Treasury information to boost private sector business for the firm from 2013 to 2016.

The company has since been the subject of investigations by the Tax Practitioners Board and Australian Federal Police.

Responding to the report, PwC Australia said the company was delivering on its commitment to change.

“This includes significant steps to enhance our governance, culture and accountability, and we continue to work hard to rebuild trust and confidence with our stakeholders,” a spokesman told AAP.

“We acknowledge the Senate’s final report into the management and assurance of integrity of government consulting services, and will consider the report’s contents. ”

The company has agreed to cease new contracts with Australian government bodies included under the Commonwealth Procurement Rules until December.

-AAP

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