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The management consultants that ate Canberra

Rick Morton on how private management consultants took over the public service.

Since coming to power the federal Coalition has chipped away at the public service, increasingly outsourcing key functions of government to private companies. 

In the past 18 months everything from the vaccine rollout strategy, to advice on manufacturing the vaccine has been contracted out to management consultants.

The trend has raised important questions about transparency, and the long-term sustainability of government services.

Today, senior reporter for The Saturday Paper Rick Morton on how private management consultants took over the public service. 


Guest: Senior Reporter for The Saturday Paper, Rick Morton

Show Transcript

[Theme Music Starts]

RUBY:
From Schwartz Media I’m Ruby Jones, this is 7am.

 

Since coming to power the federal Coalition has chipped away at the public service, increasingly outsourcing key functions of government to private companies. 

 

In the past 18 months everything from the vaccine rollout strategy, to advice on manufacturing the vaccine has been contracted out to management consultants.

 

The trend has raised important questions about transparency, and the long-term sustainability of government services.

 

Today, senior reporter for The Saturday Paper Rick Morton on how private management consultants took over the public service. 

 

It’s Wednesday, October 13.

 

[Theme Music Ends]

RUBY:

Rick, you've been investigating how the outsourcing of vital public services has impacted the government's response to the pandemic. What have you discovered? 

 

RICK:
So I analysed all of the contracts awarded by the government between January and October this year, and it's just over nine months and found that over $650 million worth of management advisory services, labour hire and consulting work was granted to just six companies. 

 

And those are Boston Consulting Group, McKinsey and Company, Deloitte and Tynion, KPMG and PricewaterhouseCoopers.   

 

Now, earlier this year, McKinsey was awarded more than $6 million to advise the government on vaccine strategy in terms of both the rollout of the vaccine and providing advice around manufacturing that locally, particularly the Mrna vaccines. 

 

Now, a couple of months later, it was handed a further $2 million to provide even more advice on yet another level of vaccine manufacturing here in Australia.  

 

Now that is an enormous amount of money, and really highlights how hollowed out the  public service is right now.

 

RUBY:
So, Rick, we're talking about services that at one point in time would have been conducted largely by the public sector, but now the government is instead paying private consultancies to do those jobs. So what does that mean for the public sector? What do we mean when we say that the public service is being hollowed out? 

 

RICK:
Well, this is something that actually goes right back to the late 1980s, 

 

Archival tape -- Bob Hawke:
“We shall embark upon a range of projects carefully selected to provide the maximum quick boost to employment. The maximum benefit to the private sector. And the maximum value for the long term advantage to this nation for the money spent. It is vital.”

 

RICK:
and that was then reinforced by John Howard when he made a couple of changes to the Public Service Act in the late 1990s and started chipping away at things. 

 

Archival tape -- John Howard:
“You need a certain number of state employees, but I think its fair to say that the number appointed by the present government has got a little bit out of proportion"

 

RICK:
And, you know, after that time, the Australian National Audit Office finally got around to looking at how much money is being spent on outsourcing, and it reported that the work of the public service outsourced to consultancies reduced in value over the years from 2009 until 2013 14, which is exactly when the coalition came to power. 

 

Archival tape -- Tony Abbott:
“Now, the Coalition will get spending down. We will do it in ways which we believe are responsible. ... We will trim back the Commonwealth public sector”

 

RICK:
So when the auditor included all contracts, not just consultancies that are flagged within government systems, eight private firms alone received more than $1.1 billion in work agreements in a single year covering 2018 19. 

 

Now, that makes Australia's consulting industry the fourth largest in the world

 

And at the same time that this is all started happening, the coalition put staffing caps on the public sector. So basically, instead of investing in government services, we're just handing out money to the private sector to do the same thing. 

 

RUBY:
So we’re seeing increasing privatisation at the same time as a shrinking of the public service. What kinds of issues does that raise Rick? 

 

RICK:
So one of the concerns is about long term efficiency and, as we said, the hollowing out of the strategic policy expertise in government. 

 

So if you aren’t invested in the public sector in the long term, you aren't building up people who have the experience to develop policy and create responses and provide useful advice to the government, particularly advice that is frank and fearless. But it also raises these questions about transparency and accountability. 

 

The way these contracts are awarded is opaque and poorly governed. It's almost impossible to tell what work is actually being delivered, and the reports aren't always published.

 

So, for example, I wanted to know more information about what was involved in McKinsey's work for what was a so-called interdepartmental workforce task force. 

 

I asked for more detail about this exact tender from the Department of Employment, and they simply told me in an official statement. Information on the contract awarded to McKinsey is available on all this tender, and that is the website where some of the information is published that I had already looked at. 

 

Now there is, of course, no more detail there because there is no requirement for it. This is a pattern that we see over and over and over again.  

 

And this isn't just about the vaccine rollout or any of the economic work that follows COVID 19. This is something that is happening across the whole public sector, including in the agencies responsible for taking care of some of our most vulnerable communities. 

 

RUBY:
Can you tell me more about that, how this is impacting the provision of services to vulnerable communities?

 

RICK:
One illuminating example of this is in an area I've been spending a lot of time looking into, and it's the sheer preponderance of contracts awarded in the past nine months alone to firms for advice, planning and implementation work regarding aged care. 

 

Now this wealth of contracting happened after the release of the final report by the Aged Care Quality and Safety Royal Commission. 

 

Now, of course, some of the recommendations will require detailed work. There is no doubt about that. 

 

But I find it curious that after such a major report, the Department of Health itself would require another nearly half a million dollar piece of work from Boston Consulting Group to quote unquote provide options and findings to enhance aged care governance. That seems wild to me because the entire portfolio responsible for aged care governance is the Department of Health in the Commonwealth. 

 

Now, the National Disability Insurance Scheme is another area where the government has relied heavily on outsourcing. It was actually designed, including within the Productivity Commission, with around 10,000 permanent employees in mind, but it has less than half of that number.

 

So instead, the most recent data we have, which was only published a couple of weeks ago, is we found out now that the National Disability Insurance Agency spent $190 million, $190 million on labour hire, temporary personnel or recruitment support in the last year alone. Another $97 million to its outsourced delivery partners like local area coordinators and early intervention providers, and $30 million on the privatised call centre, which is being run by Serco. 

 

So in the long term, all of this creates a circular kind of a problem. 

 

So as capability declines, the use of external consultants in contracting increases and typically little of this outside knowledge is retained by the public service, which contributes to the cycle of depletion. 

 

So unless this changes, the public service will become more reliant on external advice over time, and that is certainly a trend we've seen in almost the last decade. 

 

RUBY:
Mm and external companies will continue to make more money as well, as part of this cycle.  

 

RICK:
Oh yeah, there's there is a literal fortune involved in it. 

    

RUBY:
We’ll be back in a moment. 

 

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RUBY:
Rick, we’re talking about the outsourcing of key public services.... You mentioned the lack of transparency that arises when this happens, when the government relies on private companies in this way. Can you tell me more about that? 

 

RICK:
Well, you can you can sort of demand accountability from government employees. You can hold Senate enquiries. You can file freedom of information requests as imperfect as they all are, but it's much more difficult to get accountability from private companies like the Big Four.  

 

You can't get them in front of committees in the same way, and certainly you can't FOI a private company. 

 

But there have been attempts to unravel the government's reliance on these big companies. 

 

Archival tape -- Senator Dean Smith:
“Ladies and gentlemen it being just passed the agreed time I declare open this public hearing of this joint committee of Public Accounts and Audit for its inquiry into the 2016 / 2017 major projects report”

 

RICK:
Back in 2017, the Parliamentary Joint Committee of Public Accounts and Audit began an enquiry into the world of Australian government contract reporting.

 

It received bipartisan support at the time both Labour and the Coalition were on board. It was chaired by Liberal Senator Dean Smith. They held public hearings on three occasions in early 2018

Archival tape -- Senator Dean Smith:
“I believe outsourcing on the scale documented in the report is an indication that something is going systemically wrong and that the system is in need of a health check.”

RICK:
There were more than 50 submissions, including from government departments and some of the major consulting firms, and they were published by the committee 

 

And then it just stopped. 

 

Like, it stopped, the enquiry is now officially recorded as lapsed, it never resumed, and in a statement from the committee in April 2019, Senator Smith, the chair, simply declared the committee has decided not to issue a report. 

 

Archival tape -- Julian Hill MP:
“..and thinking about the issues of governance and funding which were published in the report ...and ohhh…what on earth is that...hmm..it’s a very large cockroach. Let the record show. Ummm, ahhh….”

 

RUBY:

Hmm. And what does all of this mean Rick for the future of the public sector? Because as more of these contracts are handed out, there's presumably less public servants who have less knowledge. So is that a problem? What does it mean to take our trust from the public sector and place it in private companies? 

 

RICK:
It's a really insidious distortion of of knowledge and talent, I think. So what we're seeing is this vicious cycle which we're talking about before where, you know, the more you have a declining capability in the public service, the more you need to rely on external advice and not just advice, but actual policy creation work, which is being done by these private companies. But of course, all of these contracts are awarded to companies, and they tend to favour, you know, economies of scale. 

 

The larger you are as a company, the more likely it is that you're able to undercut other people, particularly, you know, small and medium enterprises. And the more likely it is that you'll start winning multiple sets of contracts, as McKinsey has done for the same kind of work. Because once you've done the first one and a department needs an update or it needs a little bit more work done, of course they're going to go back to you because you did the original work. And so it just makes sense. And then that becomes a limited tenders that's not open so there's no competition and it just keeps going and going and going. 

 

In fact, a few people when I was writing this story said to me that, you know, if we decided to fix this now properly and did all the things that needed to be done, it would still take a decade to restore the public service to at least a similar standing that it has had in the past. Because the other problem, of course, the other side of that coin is that ministers don't trust them, particularly ministers in coalition governments. You know, they think they're all lefties. 

 

And you know, I was talking to one former senior ranking public servant had a really interesting insight because I worked at quite a high level and it was like sometimes the outsourcing was done because there was no way that the evidence would ever have backed a policy that the government wanted to implement. 

 

And so, you know, there were multiple examples where the government then outsourced to a private firm and even the private firm came back saying, Actually, you can't do that, but that's the kind of stuff where they don't trust the leaders, don't trust the public service. And it's a self-fulfilling prophecy because the more you got them of talent and skills than the less you can trust them in even the day to day business. And that's a problem. 

 

RUBY:
Rick, thank you so much for your time. 

 

RICK:
Thanks, Ruby We appreciate it. 

 

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RUBY:
Also in the news today…

The federal Labor leader Anthony Albanese says he won’t order one of his MPs - Anthony Byrne - to stand down… after an investigation into corruption and branch stacking heard that Byrne had been manipulating votes in the party’s Victorian branch. 

 

In a hearing of Victoria’s Independent Broad-based Anti-corruption Commission on Monday, Byrne admitted that he and others within the Victorian Labor party had spent thousands of dollars over the years, to pay for membership fees in order to win internal party votes.

 

On Monday state Labor MP Luke Donellan resigned after being implicated in the investigation. The public hearings are set to continue for the rest of the month. 

 

And the ACT government has confirmed that Canberra will come out of lockdown at midnight on Thursday after the territory recorded 28 new Covid-19 cases on Tuesday.

 

While outlining a roadmap out of lockdown, the ACT Chief minister Andrew Barr said that 72 percent of people over 12 are now fully vaccinated but warned case numbers would rise as restrictions eased.

I’m Ruby Jones, See ya tomorrow.

[Theme Music Ends]

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