Outsourced consultancy costs blow out Government spending

Outsourced consultancy costs blow out Government spending
Parliament House. Photo by Thennicke via Wikimedia Commons

Since the 2013 federal election, the Coalition has cut jobs from the public sector amidst concerns it has stripped the bureaucracy of specialists. The public service has fallen from 166,139 in 2013 to 152, 095 in 2017, accompanied by an increase of contractors to 64,092. The ongoing staffing caps have been deemed responsible for the carving out of skills in the public service and thus increased use of external consultancy across departments such as the Australian Tax Office (ATO). In the Defence Department, it has been identified that there are more consultants than permanent employees.

The NSW Government is a major buyer of consultancy work, with 90% of the contracts currently shared between 20 suppliers. These firms include a technology consulting firm, Accenture, and the big four accounting and consulting firms –EY, PWC, Deloitte and KPMG. Consequently, this has resulted in a collective $3.1 billion expenditure over five years. It should be noted that a contractor costs 40% more to hire than permanent employees.

Senator Mathias Cormann justified the use of consultants in order to reduce ongoing costs, which would be incurred with the recruitment of permanent public servants. Moreover he supported the use of consultants when in need of specialist skills or when additional support is temporary. Aligning with Cormann’s view, Liberal senator Dean Smith expressed that external consultancy was more value for money and there was credible evidence for use, although a review of reporting structures was needed.

After viewing the analysis of government procurement contracts by the Australian National Audit Office (ANAO), the Parliament’s Joint Committee of Public Accounts and Audit has called for an inquiry as to how the government is using consultants. Moreover, the report indicated alarming gaps in transparency about the quality of government tender data.

Inquiry deputy chairman, Julian Hill shared public concerns about the growth of external spending. Furthermore, acting national secretary, Michael Tull explained that the government’s expenditure was a poor attempt to fill in gaps of its public sector ideology. He went on to add, that the result of outsourcing leads to poorer quality services and more money pumped into the private sector. Consequently, shadow finance minister, Jim Chalmers has renewed Labour’s election pledge to restrict the use of external consultants by the federal government departments.

The main public sector union representing 50,000 jobs, Community and Public Sector Union (CPSU) has called for cuts to the use of outsourced consultants and contractors to help maximise in-house knowledge and jobs. The CPSU estimates more than $380 million could be saved by replacing 5000 contractors with in-house expertise.