Why do government agencies need so many consultants?


A public service HR consultant explains his view on why government agencies increasingly need to rely on big firms like the one he works for. It’s a controversial trend, and he sometimes finds himself questioning how his expertise is used.

The use of consultants by government agencies is one of those constantly controversial topics surrounded by perennial questions.

Should private firms be paid to develop public policy? Is the government paying out redundancies and then hiring back the same people at higher cost? Isn’t it better to invest in core public sector capability for the long-term, than to hollow out departments to the point where they can’t fulfil their primary purposes without outside assistance?

“Increasingly I go in … and I become the coach, the mentor to the senior executive, the mentor to the middle management, and I often ask myself why.”

Then there are questions about the outsized influence of the huge firms that provide most of these services in public life. They seem able to turn out a thick report full of impressive figures and charts to justify almost any argument, and also donate plenty to the major political parties.

A familiar argument over the use of consultants to supplement public service capability has broken out this week in New South Wales. Budgetary documents tabled in Parliament show government agencies are ramping up their spending on outside expertise considerably this financial year.

The increases are significant. The Department of Premier and Cabinet plans to spend $10.8 million, roughly triple its consultant spending last financial year, and the Department of Planning and Environment’s $11.1m outlay is 10 times the amount it spent in 2016-17. The TAFE commission will pay out more than four times its last annual consulting budget and several other agencies are following suit to some extent.

The stoush between the government and opposition played out in the typical way, as reported by The Sydney Morning Herald yesterday. Shadow Treasurer Ryan Park said the government was wasting money; Treasurer Dominic Perrottet’s spokesperson said “external expertise held outside the bureaucracy” was required to progress complicated reforms.

“Procurement of any consultant resources is done in accordance with strict government procurement guidelines, and only after ensuring an outside consultant would add value to a project,” the Treasurer’s office added.

Earlier this year, it was reported that the federal government had spent nearly $1 billion on consultants since coming to power in 2013, on a platform of reducing public sector spending through job cuts and a strict approach to enterprise bargaining with its agencies.

Let’s ask a consultant…

Participants at a recent academic seminar got the chance to ask a public service consultant from the massive global firm EY for his take on the issue.

David Schmidtchen

“We store a bunch of resources that the public service can’t afford to store for itself, and we invest in them in a way that the public service could never do,” explained David Schmidtchen, a human resources expert formerly of the Australian Public Service Commission. “The public service then buys those resources back to solve a specific problem in the end.”

He spoke at the Power to Persuade conference on the changing and often misunderstood role of middle managers but was also asked in the following discussion about his own role. One mid-level public servant said consultants being there at the meeting table had become “business-as-usual” while in the past this was rare; it used to mainly be academic experts and sometimes researchers from NGOs who would help inform social policy.

“It’s not in my interests to have a dumb public service, at the end of the day.”

She asked Schmidtchen what impact he thought this had on the capabilities of middle managers — and on the advice that eventually goes to government.

He said the trend “shouldn’t” affect the quality or types of evidence that are brought to bear on public policy and consultants should not be acting as decision makers, at least in theory. But in practice he sometimes privately questions the way agencies use his expertise — boosting capability they should already have.

“Increasingly I go in … and I become the coach, the mentor to the senior executive, the mentor to the middle management, and I often ask myself why,” Schmidtchen said.

“And it’s not on tricksy or difficult things; it’s leadership, management, capability, how do you organise a task, all that sort of stuff.

“There is something missing in that capability; I should not be filling that gap. And yet, routinely, that’s what we do. And that, for me, should already exist.”

Outside experts do often have years of experience, and they can “skate across departments in a way that public servants can’t” looking at information from all levels of the organisation. “My responsibility is to do that in a thoughtful way that doesn’t compromise the organisation and to do that responsibly — to know my role,” said the workforce consultant.

And he agrees that there is something wrong when the same consultants become a permanent fixture in a particular department.

“My view is that if you’re there for a long time, then you’re not doing your job,” said Schmidtchen. “Central to the way that consultants in firms – particularly in big ones like ours, so the KPMGs, PwCs, Deloittes and EYs of the world — should be transferring the knowledge that we store, to the public service.”

Most of the time, he said his own work involved helping agencies “close capability gaps” that training could not solve in the short term. However Schmidtchen also said he told his clients they should never “abrogate the responsibility of knowledge” to consultants.

“It’s not in my interests to have a dumb public service, at the end of the day,” he said.

“I think that the only way that we evolve and adapt and innovate is by staying a half-step ahead of the public service in the areas in which we are experts.”

There is no great mystery behind the increased use of consultants, in the federal bureaucracy at least, the HR consultant confirms: “… I think that the structural reforms to the APS, without the concurrent reduction in tasks or activities that it needs to perform, means that it just doesn’t have the capacity.”

“Some of questions that the public service is being asked, it doesn’t have the capability to answer. It doesn’t have the capability to deliver in some areas. We represent a different source of knowledge and we bring different experience and expertise to the area that is not easy to access,” Schmidtchen said.

EY, he pointed out, has about 250,000 staff around the world, so there is a big brains-trust for him to draw on. “It’s gigantic. There’s not a part of it that I can’t reach out and touch, because of the way it’s organised.”

  • Wilma James

    I find it very interesting that consulting companies have replaced academics at the discussion tables of government. The university sector has been significantly disrupted by consultants particularly in the public policy space but increasingly consultants are becoming “experts” in climate change, environmental issues, entrepreneurship, innovation and ever, quite ironically, research itself. You would think that governments would turn to academia for research – but even in that field, consultants are held as the experts.

    Universities get on government panels but less often they are receiving requests for quote on these panels as consultants are winning this work for many reasons including ease of use, an assumption that they will deliver more commercially than academia, etc. Governments are funding universities to be one of the major drivers of knowledge and innovation in the economy but not then using that resource within its own structures.

    It will be interesting to see where this goes during the next few years. It is ironic that if you look at the front page of a Big 4 consulting groups website it is covered with projects that once would have graced a university’s website (if they were organised enough to display them). Universities only have a few more years left to be able to combat this disruption. I doubt many of them have even realised it is happening.