Written by: Brett Lyndon – The Pro Forum Community of Practice

There are many questions that have arisen from the PwC tax avoidance scandal, but one question that cuts to the heart of the matter is why it occurred in the first place. As an explanation, people point towards the government’s perceived ‘over-reliance’ on ‘the Big 4’, but what has caused this?

It would be easy to lay the blame on the Big 4 (Deloitte, KPMG, PwC and EY) , but while their conduct may not have been wholly above board, the Big 4 consulting firms are not entirely to blame. They have simply been responding to lucrative government tender opportunities to provide relevant services.

Successive governments have seen Australian Public Service (APS) staff numbers reduced over the years through ‘cost-cutting measures’. Whilst the government must be fiscally responsible, these cost-cutting measures have reduced the APS to a point they are no longer capable of fulfilling their duties without engaging contractors and consultants to make up the shortfall.

Just because a position is cut does not mean the work disappears. That same work either needs to be shared amongst the remaining staff, or someone else must be ‘temporarily’ hired to get it done. These contractors and consultants still need to be paid but as their pay comes from a different bucket of gold, it is not considered government wages, and thus, the government is ‘saving money’.

Reliance on the big consulting firms has developed in part because it is easy and safe with the big firms already having everything the APS needs.  But such a decision is a strategic failure, and it has restricted competition and suppressed any alternatives. Furthermore, the drive to achieve corporate growth at any cost means some consulting companies do not always have the government or public best interest at heart.

Now, there will always be a need for specialist and independent advice and consultation to maintain probity and for governments to be seen as transparent and accountable. The $1.4 billion annually spent on consulting fees with the Big 4 indicates there is a definite need for consulting services. However, this money would be better spent hiring professionals who can provide the same services on a permanent basis for the government. As such, it is vital that some of those cut APS positions, especially for some of the government’s more sensitive activities, are restored.

If the government is really committed to saving money, a good starting place would be the professionalisation of the government procurement and contract management functions. Considering the vast sums of money involved and the regulatory and compliance requirements that need to be met, this vital government function is largely undertaken by people with no formal qualifications or skills. This is despite there being nationally recognised qualifications from Certificate IV to Graduate Certificate level. Having properly trained staff equipped with the necessary knowledge and skills could help the government cut down on consultancy costs.

So, how did the government find itself in this position of being so reliant on consultants? One possible culprit is successive cost-cutting measures so governments can be seen to be ‘reducing government spending’.


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