ACG helps government save $3.6 million in external consulting spend

One year on since its formation, the Australian government’s in-house consulting arm has saved a grand total of $3.6 million on external spending, while undertaking 15 projects during that time.

Australian Government Consulting – or AGC – was launched late last year as part of the Labor government’s crack-down on external advisory and support spending, pledging to save $3 billion over its first four years in office.

And while the government says it’s already exceeded that target by more than 30 percent to $4 billion in cuts, an update from public service minister Katy Gallagher has revealed AGC’s contribution to be less than 0.1 percent to date.

Led by former McKinsey engagement manager Andrew Nipe, AGC has so far undertaken 15 projects in areas such as strategy, analysis, and policy development for departments including Health and Aged Care, and Employment and Workplace Relations. All up, these engagements had “displaced an estimated $3.6 million in external consulting spend,” Gallagher said.

Launched with a two-year $10.9 million budget and initial staff of 20, the minister added that demand for AGC support had exceeded its capacity, but that the agency was on track to double its headcount “by the end of its second year” – although it’s unclear if this target is behind schedule. Ultimately, the government hopes that AGC can pay its own way and generate broader savings.

“We would like that entity to not be budget funded, but to be funded through the work it does, basically through a user pays arrangement,” Gallagher said. “At the same time, we’re hopeful that we’re convincing agencies that if they are using the skills and expertise and learning from that unit, that they are actually saving money as well by developing their own internal capability.”

Outside of these less quantifiable gains, AGC’s $3.6 million in direct savings over its first twelve months is dwarfed by the overall $4 billion headline figure, which has been achieved in part by shifting work from the bigger, premium-cost consultancies to smaller mid-tiers and boutiques. Gallagher again noted the near $1 billion reduction spent on big firms, cutting the bill by almost half.

In this instance, it’s clear from recent government briefings that ‘big firms’ relates specifically to the Big Four of Deloitte, PwC, Ernst & Young, and KPMG together with Accenture, which have had their take slashed by $891 million over the past two years, dropping to $1.5 billion from previous record highs. The government is also targeting a further $500 million overall reduction this financial year.

Political battle

The release of the annual APS reform statement was accompanied by a politically-pointed speech before senior public servants, with Labor clearly looking to get ahead of what increasingly shapes as a familiar election-year topic; the ideological divide between the major parties on the APS, with the opposition likely emboldened by the recent US election and establishment of the ‘DOGE’.

With the AGC numbers a potential Coalition target, Gallagher concluded; “I'm pretty optimistic on how it’s working, (but) there’s more to do and see. Some departments are working really closely with it and the feedback has been very positive. And now we're at a point where we have to try and recruit to match some of the work they’re being asked to do, which I think is a good sign.”