The Federal Labor party vows to cut down on consulting spend

12 August 2018 Authored by Consultancy.com.au

In another episode of the clash between public service and private business in Australia, the Labor party has said that it would rein in the use of consultants and contractors and give projects to public servants where possible, if it wins the next election. 

There has been a lot of talk in Australia recently of the overspending on private contractors and consultants to fulfil the government’s objectives. One of the objectives of the most recent Liberal government, originally spearheaded by Tony Abbott, was to cut public spending and cap public service jobs. 

As a result of these policies, the government has successfully shed 15,000 jobs from the public service and in turn more than doubled its private sector spend. This may seem like a win to some and a loss to others, depending on what side of the political spectrum you stand, but it is in line with the policy with which the Liberal Government won the election.

“The use of contractors where appropriate is an efficient way to keep the overall cost of government administration low when the business need to access relevant skills and expertise is temporary or the expertise and skills are more efficiently obtained and maintained in the private sector,” said Finance Minister Mathias Cormann. 

The Federal Labor party vows to cut down on consultants spend

“The overall cost of government administration continues to fall as a proportion of overall government expenditure, which itself is also growing more slowly than it has in the past. It has fallen from a high of 8.5 per cent in 2007/08 to 7.1 per cent in 2015/16, and is projected to fall to just 5.6 per cent by 2020/21,” Cormann said.

Cormann went on to claim that the only way to judge the efficiency of public services is to look at the pay-check to the Australian taxpayer. However, efficiency is a measurable concept beyond money. The services which the government either chooses to provide or outsources can be judged through the same lens which includes cost-benefit, progress, output, productivity, etc. 

The question of efficiency will always exist whether the administration is done by the public or the private service. It is this kind of language with a successful spin on it from the Labor party that has created an election issue around contractor spending. 

Cormann says that, “The government has been appropriating between external consultants and permanent experts within government agencies, as appropriate to different projects. There has been no prejudice in these choices.” 

“Your agency must comply with this cap, regardless of actual staffing needs…”
- Average Staffing Level cap

The Labor party argues that this is inherently untrue, as the public service cuts have made that decision for the government. The less money, the less able the government to attract quality talent and compete with the private sector. This is the basis of the shadow finance minister Jim Chalmers’ argument; an enforced average staff level cap and funding cuts has forced the government to rely on contractors and consultants.

This is what Chalmers will bring to the table at the recently initiated review of federal bureaucracy. The government is open to suggestions regarding the public service in any regard in the most wide-ranging reviews since the 1970s. This comes off the basis of technological change and global public policy changed.  

As it stands, Australia is far behind Europe in regards to its use of e-government services – think the postal vote on legalising gay marriage in comparison to Estonia’s totally digital government – and has been paying consulting firms to bring them up to speed. A recent example of this is the contract tender to digitalise Australia’s visa application system – which also had the Labor party up in arms. 

In its current form, the government’s public services could not compete with a consulting firm in terms of digital architecture or IT strategy. Chalmers sums it up nicely; “Blind adherence to an arbitrary cap hasn’t just compromised services and advice. The average staffing level (ASL) cap is now a perverse incentive for more spending on external providers.”

Finance Minister Mathias Cormann and Shadow Finance Minister Jim Chalmers

“There’s no point hitting an arbitrary short-term headcount target if it just means building higher consultancy costs into the budget in the future,” he continues. “It’s not a radical idea to say that public service work should predominantly be done, where possible, by public servants.”

This question is now the part of the hustle that will fundamentally divide the two parties and the answer is a matter of opinion. Are private companies better at implementing public policy than public servants themselves? This is a contentious issue and the consulting industry as a whole is not too preoccupied by the answer. 

The big consulting firms know that they have a global network stretching to almost a million brains combined and can draw on any of this expertise if they please. The Australian government, whichever party is in charge, does not have the same option. So when it comes to competing with consulting firms, the Australian government must fundamentally change the way that it operates. It must innovate and create from within, as consulting firms have done.

Labor say that they will “save taxpayers hundreds of millions of dollars that would otherwise go to consultancy firms for work that public servants with expertise and experience can – and should – do.” If it comes to it, consulting firms will accept this and innovate themselves into a position that the government will need them again. It’s in their nature.

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