Consultants being public servants – The Select Committee

By Chris Johnson

Tuesday August 4, 2020

Malcolm Turnbull has bemoaned it. Our own Bernard Keane has criticised it. The Thodey Review has raised concerns about it. The ‘cult of the consultant’ has a grip on the public sector – like never before.

We have asked members of The Select Committee – The Mandarin Brains Trust exactly what they think about the growing use of consultants in federal, state and territory public services across Australia.

More specifically, we asked:

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What is the appropriate level of the use of consultants in the public service? Has it gone too far? Are consultants doing too much core/routine work or are they providing a vital service? 

While all panel members asked this question agreed consultants have their place and can be productive for governments, each also cautioned about inappropriate reliance on outsourcing.

Opening the comments, Terry Moran AC provided a mini thesis on the topic, offering valuable insights. Noting the remarkable rate at which the spend on consultancies has grown, he adds that in many cases consultants are commissioned to perform work that could have been done by able public servants. “They are not necessarily cheaper nor do they, as consultants, rely on the values and culture of the public service, which emphasises the national interest,” he says.

Helen Sullivan states that the appeal of consultants “rests with their offering seemingly well-researched but simple solutions to complex problems” and that that is something welcomed by governments.

Nicholas Gruen makes a good case for consultancy use but stresses his scepticism for outsourcing higher level ‘strategic’ thinking. “They’re less invested in their clients’ success than insiders,” he says.

Terry Moran AC

Terry Moran AC was, as Secretary of the Department of the Prime Minister and Cabinet, Australia’s most senior public servant, from 2008 to 2011. His current roles include: Chancellor, Federation University; Chair, Centre for Policy Development; Vice President, Walter and Eliza Hall Institute of Medical Research; Director Menzies Foundation; Ambassador, Teach for Australia.

Good government or magical realism

“When the Thodey Review was released last year there was a fork in the road offered with respect to government reliance on consultants and contractors. One was the status quo, which would lead to reduced capability across the public service and continued loss of long-term strategic policy and delivery functions through the 2020s. The better path involved removing the APS staffing caps, being far more strategic in the use of external advice, rebuilding public sector capability and restoring a delivery mindset at regional and local level.

“The Centre for Policy Development warned of rising populism if the Thodey recommendations were not heeded.

“COVID-19 was upon us before the federal government could decide which way to turn. The pandemic has revealed once more the double-edged sword in play when government decides it needs to use consultants or contractors.

“In my experience, government gets the best result from consultants when it is an informed and demanding client. Reliance on contracting out delivery and working with external consultants on strategy has meant that is now rarely the case. There is now confusion over what is best to be contracted for and consulted on, as well as what functions and capabilities should be publicly retained and rejuvenated.

“The best consultants:

  • bring to policy leading edge analytical techniques currently unavailable in the public sector and through this produce new insights and ideas;
  • unearth data from third parties which would otherwise be inaccessible from within government; and
  • identify global best practice and its implications for Australia; offer an independent and credible appraisal of a possible innovation or proposal.

“These consultants can play a valuable role especially if they consult stakeholders as part of their work.

“It is also reasonable for public servants to be involved in a consulting project in order to understand the techniques and approach used and by this means carry back into the public service the basis for new skills.

Terry Moran

“However, the spend on consultancies has grown at a remarkable rate. In many cases consultants are commissioned to perform work which could have been done by able public servants. They are not necessarily cheaper nor do they, as consultants, rely on the values and culture of the public service, which emphasises the national interest. There are two main reasons why work assigned to consultants hasn’t been left with public servants.

“Firstly, the investment in capability development within the public service has been a casualty of incremental funding cuts within departments and many agencies. In general, there is a lack of contemporary capabilities.

“Secondly, the dominance of micro-economics as a basis for policy thinking leaves ministers as recipients of often predictable and narrow advice and little in the way of compelling policy options to consider. Often, ministers have not wanted to be challenged on the costs and benefits of outsourcing.

“Generally, there is a paucity of skill in data analysis and contemporary management techniques beyond the world of economics  When combined with a national public service built around a very narrow experience of the many ways in which the rest of Australia and other countries find solutions to problems, the quality of the advice available is diminished.

“Ministers are deprived of rich, robust advice comparing the efficiency and effectiveness of capably managed public sector institutions (there are quite a few of these surviving still) and outsourced delivery by the private sector.

“Micro economists, given to magical realism when it comes to service delivery, have unfortunately eroded public sector delivery institutions for decades. In pursuit of the dream of creating effective markets for services and harvesting the assumed efficiency benefits of competition within those artificial markets, outsourcing has become the method of choice.

“This has proved to be an illusion which some consultants found themselves supporting for commercial reasons. As well the obvious strategies for improving public sector service delivery have been neglected. Australian communities are losing faith in private providers and want government more directly involved.

“The magical realism of the economists crowds out any credible analysis of the numerous large service delivery areas outsourced by Canberra. A comprehensive analysis would lead to the view that the privatisation of many areas has been bungled.

“Those dependent on these services have borne the pain and humiliation they inflict. Aged Care is only one example. Public sector institutions excel when the culture and values they embrace help shape delivery and this is not an obstacle to efficiency.

“Fortunately, the miserly and destructive legacy of the Thatcher period which gave rise to this magical realism is now being questioned in Britain by a Tory Government. The approach can be seen through the speech by Michael Gove published recently by The Mandarin and the embrace of the NHS by the Prime Minister. If the person who famously said we didn’t need experts (during the Brexit debate) is now conceding the need for public delivery and capability, informed by expertise, surely we too can change our ways in Australia.” – Terry Moran AC

Helen Sullivan

Professor Helen Sullivan is Director of the Australian National University’s Crawford School of Public Policy. She is a public policy researcher, teacher, advisor, and innovator with a commitment to bridging the gap between public policy research and practice.

“Securing advice from a wide variety of expert sources helps policymakers make good decisions. The risk is that not all sources are treated equally, and politicians will naturally warm to advice that speaks to their priorities and values. This risk increases when public servants, the stewards of the policy process, are not able to fulfill that function because of reduced capacity and/or authority.

Helen Sullivan

“This scenario is usually described in relation to the influence of special interest groups, but it arguably also pertains in relation to the role of management consultants, specifically those with global reach. These organisations identify ‘burning platform’ issues, outline solutions for governments to adopt, and promote these vigorously, including through their public interest arms.

“Their appeal rests with their offering seemingly well-researched but simple solutions to complex problems – something that is understandably welcomed by governments. Over time, these organisations have built up close relationships with public services and have become the ‘go to’ sources of advice, helped perhaps by their employment of numbers of ex-public servants and indeed politicians.

“In the context of the current crisis it is legitimate to ask: to what extent management consultants have created a culture of problem identification and solution that follows a particular way of thinking and crowds out alternatives; what capacity public services should have to be able to identify and propose solutions to policy problems that are appropriate to their context and/or to assess management consultants’ proposals with the appropriate rigour; how do we assess value for money of the use of consultants, and to what extent is that information made public; and are the restrictions on ex-politicians  taking up positions with management consultants strict enough?” – Helen Sullivan

Nicholas Gruen

Nicholas Gruen is a prominent Australian economist and commentator on economic reform and innovation. He is the CEO of Lateral Economics and is the chair of the Open Knowledge Foundation (Australia). Nicholas has a PhD from the Australian National University and he is currently a Visiting Professor at Kings College London’s Policy Institute.

 “One can distinguish between using consultants to inform one’s strategic thinking and outsourcing routine work. Outsourcing the latter can make sense. But I recall a moment of epiphany when the Productivity Commission was being asked to report on what human services could be made more competitive. They proceeded to go about their business as someone trained in economics would, by exploring the characteristics of different sectors, such as how competitive a sector could be made and the extent to which consumers might be well informed and capable of choosing the best services for them.

Nicholas Gruen

“These were sensible questions to ask. But since the government was funding these services, they were not normal markets. So, it seemed to me that a more fundamental question was the extent to which those responsible for running these services understood what they were doing. Did they have arrangements in place so that, as they changed arrangements, they (and ideally the wider world) would know whether things were improving or getting worse as a result? The thing is, if the agency can’t answer those questions, it doesn’t answer the question of whether it should insource or outsource the work. It answers a different and prior question. Which is whether the agency knows what it’s doing.

“As for outsourcing higher level ‘strategic’ thinking to consultants, I’m a sceptic. They’re less invested in their clients’ success than insiders. They have little corporate memory (though this is offset, or even outweighed, by their ability to generalise from experience in other organisations). But the biggest problem is the way in which their output is ‘productised’ and sold. The way consultants make money is by developing some new system which seems appealing and then selling variants of it to one organisation after another. So they sell fads. And because they’re in sales mode, they’re not alive to the downsides of those fads.

“An exception would be where the strategic thinking is supposed to be being provided by independent outsiders. My experience of being such an outsider is that one often needs some high quality analytical and critical skills working alongside the agency’s team to get the best result.” – Nicholas Gruen

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Chris Johnson
Managing Editor

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