Consultancies ‘adding up to billions of dollars of taxpayers’ money’

By Verona Burgess

Wednesday April 11, 2018

Australian Dollar Puzzle

Two hearings and more than 50 submissions later, the JPCPAA may not be getting far, but the committee leaders are clearly asking intelligent questions. 

The Joint Parliamentary Committee of Public Accounts and Audit’s inquiry into Australian Government contracting has already travelled down some of the highways and byways that beckon whenever the subjects of procurement and outsourcing are raised.

After two hearings and more than 50 submissions into the inquiry, it is not at all clear that it is getting very far yet.

But let’s start with the money, or some of it. The value of federal government procurement contracts notified on AusTender in 2016-17 totalled $47.4 billion.

That doesn’t include contracts below $10,000 with corporate entities; nor contracts with ‘prescribed’ corporate Commonwealth entities worth less than $400,000 for non-construction services and $7.5 million for construction services. Then there are sub-contractors …

To say that departments have come to the inquiry ill-prepared is stretching it, because there is not one that isn’t alive to the difficult and labyrinthine procurement rules under which they operate.

But that doesn’t mean that they have come armed with suggested solutions to the problems that have made the committee members’ frustrations become more and more palpable during the two public hearings.

AusTender is a live stream of data and does not track agencies’ actual expenditure on the contracts it reports, nor the number of people employed by consultants or other contractors, including under labour-hire agreements.

Annual reports are where you are supposed to find out what departments and agencies spent in the financial year; nobody at all counts the bodies outside those hired under the Public Service Act 1999, although in recent times Defence and Human Services are endeavouring to make some inroads into finding some of those figures.

One of the drivers of the inquiry is the extent to which the government has increased its spending on outsourcing and consultants to mask the size of the bureaucracy in the name of ‘small government’, not to mention bypass the unions with which it has been in a toxic stand-off since 2014.

Julian Hill: tough questions

But that’s not the only concern, nor is it a new problem. At one point during the February 16 hearing, when asking Finance (to no avail) about annual spending on the ‘big four’ global accounting firms, the deputy chairman Julian Hill said: ‘This is ridiculous; it’s like an episode of Utopia.’

And that’s saying something, because Hill, who is the ALP Member for Bruce, has had a hybrid career, including as a senior executive in the Victorian public service.

The chairman of the influential JCPAA committee is WA Liberal Senator Dean Smith, who led with independence and distinction during the parliament’s tortured road to marriage equality and has been active on Senate estimates committees since he entered Parliament in 2012. They make quite an interesting combination because they ask intelligent questions, which can’t always be said for members of parliamentary committees.

The inquiry was inspired by the Auditor-General’s Report No 19, 2017-18, Australian Government Procurement Contract Reporting. It contained a number of stinging observations such as this:

“Inaccurate contract reporting has been discussed in numerous ANAO audits. Most recently, the audit of Limited Tender Procurement found that only 41 of 155 contracts examined correctly reported all details on AusTender. Common issues included inaccuracies in contract dates, contract values, procurement method, and categories of procurement.”

Then there is the eternal question of when a consultancy is not a consultancy. The audit identified the largest six product and services sub-categories with contracts that were flagged as consultancies:

  • Management advisory services;
  • Strategic planning consultation services;
  • Information technology consultation services;
  • Research programs;
  • Business intelligence consulting services;
  • Economic or financial evaluation of projects.

“These categories make up approximately 47 per cent of the value of contracts flagged as consultancies,” the report said. “However, almost 85 per cent of contract value in these categories belongs to contracts not flagged in AusTender as consultancy.” Oops.

The inquiry’s terms of reference cover the volume and value of Australian Government procurement contracts; entities’ procurement contract behaviour as it relates to the timing of procurements during each financial year (think the annual June spending binge); and reporting on the number and value of contracts with small to medium enterprises.

But a guide for submissions opened a Pandora’s box of vexed issues relating to contracting trends across the APS, the transparency of contract reporting (or lack of it) and APS capability and capacity. The latter points received an airing at the second hearing on March 23, more of which another day.

To cut a long story short, after grilling Finance (which runs AusTender) for quite a while, Hill asked, “[If] the committee is of a mind to make recommendations to improve the transparency around expenditure, can you then provide us with clear advice, building on the requests earlier, on how we would do that, where we would do that and what the basis of such a system would be?

“You’ve heard the two core concerns. At the moment there’s no transparency across the entire Commonwealth about labour hire contractors—human beings—doing APS work, there’s no transparency about how many billions of dollars are spent on the four large firms and, indeed, their travelling companions, and there’s no transparency about how many former senior public servants with ABNs are wandering around departments on daily rates. None of this is clear, and it’s adding up to billions of dollars of taxpayers’ money.”

It would certainly strike a blow for transparency to get some decent answers to those questions. But let’s not hold our breath quite yet.

Verona Burgess is a long-time reporter and columnist covering the Australian Public Service. Her columns appear each Wednesday in The Mandarin.

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