Trade deal unlocks government contracts, critics say pay public servants instead

By Jackson Graham

January 18, 2022

G7-Scott Morrison-Boris Johnson-free trade agreerment
The Australia-UK free trade agreement will give consultancies access to more government work. (Peter Nicholls/PA Wire)

The Australia-UK free trade agreement is set to give consultancies in both countries access to more government work, unlocking contracts at sub-national levels such as work for state and territory governments.  

But rising spending on consultants in Australia has drawn criticisms that the practice can hollow out public service capability and bring less economic benefit than simply paying government employees to do the work. 

Both countries already guarantee consultancies access to each others’ government contracts through the World Trade Organization Government Procurement Agreement. 

Yet the new deal will give UK consultants opportunities to bid for more Australian federal government contracts as well as projects with all Australian state and territory governments. The agreement has some exemptions, including barring Queensland’s health, education, training and arts services. 

Australian consultants will also be able to bid for more UK central government contracts and projects from eight sub-central government bodies.

“Both sides have agreed to ambitious new commitments that build on our WTO GPA market access, locking in more government contract opportunities,” a Department of Foreign Affairs and Trade spokesperson told The Mandarin

The Australian government argues that access to foreign markets for Australian goods and services has been key to the nation’s prosperity and high standard of living. 

But economist Dan Nahum, of the Australia Institute’s Centre for Future Work, argues governments can get more economic benefit during the coronavirus recovery from paying public servants to do work currently done by consultants. 

“If you spend money on decent middle-class wages in the public service, that’s going to keep your economic recovery going more than sending money overseas to partners in consultancies,” Nahum says. 

“It’s a much more efficient way to get the public money into the economic recovery.”

Nahum takes issue with how reliant the government has become on consultants rather than on how services are procured, but he believes the deal is “not doing ourselves any favours” in opening up trade to more consultancy firms. 

“We need to do some re-alignment of how the APS is seen by the government, and I think that will remove some of the necessity for consultants’ work,” he says. 

Removing the average staffing level cap, which limits the number of APS employees to 2006-07 numbers, and building information and communications technology are among immediate priorities, Nahum says. 

The free trade deal has exemptions that protect small to medium-sized enterprises, Indigenous-owned businesses, as well as protection of essential security and for health and welfare services. 

It earmarks that the countries should support “participation by suppliers in government procurement, in particular, with respect to SMEs”.

UNSW school of social sciences senior lecturer Elizabeth Thurbon has written of Australia’s previous international obligations that “the Australian government retains a significant degree of scope to discriminate in favour of locally produced goods and services—so long as those goods and services are provided by local SMEs”. 

Nahum says the deal is unlikely to be aimed at the bigger consultancy firms incorporated in the UK that already have a presence in Australia. 

They already have the market power and the presence to essentially do business anywhere in the world that they want to do business,” he says. 

“It might be that there are more mid-tier or maybe small firms that we haven’t seen in the Australian context before who are now able to bid, but once again they have less market power so we might just see the same sorts of large firms continuing to dominate.”


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