Federal government excessively spent $580 million on consultants

05 February 2019 Consultancy.com.au

The Australian federal government excessively spent more than $580 million on hiring management consultants, according to an analysis from the Institute of Public Affairs. 

The analysis explored the direct cost of the federal government in excess of what is conceived as “regular and required operations” to society and business, also known as the cost of the political class, or swamp as America’s Donald Trump labelled it during his presidential election campaign. The report found that such spending stood at a total of $8.1 billion for the year 2017. The bulk was spent on public sector wage premiums, accounting for $5.5 billion, with the authors further finding that on average, public servants enjoyed average weekly earnings that were “significantly higher” than their peers in the private sector. In 2017, average weekly public sector earnings amounted to $,1410, compared to $1,117 for private sector workers.

Despite the difficulties of comparing pay elements including job roles and seniority across the public and private sectors, the authors highlight that public sector wage growth has been much higher in the two preceding years. “The government would have saved $1.24 billion a year if public servants received 9.5% superannuation instead of the standard 15.4%,” the report states.

Federal government spending: Direct cost of the political class ($ billion)A total of $439 million was spent on international organisations such as the International Monetary Fund and the World Bank, major political parties received $63 million in funding for their political campaigns, while advocacy organsiations such as health, diversity and social welfare groups received $191 million. Among the largest beneficiaries of the latter group are the Cancer Council, which received $39 million, Oxfam ($19.1 million), Australian and State Councils of Social Services ($14 million), AIDS Council of NSW ($13.4 million), the Ethnic Communities Council of Queensland ($11.1 million), Reconciliation Australia ($10.1 million) and Birdlife ($2.9 million).

Public broadcaster received $1.3 billion, while $584 million was paid to consulting firms, of which $254 million was spent by the Department of Defence. Among the firms tapped by ministry heading Australia’s army, navy and special forces include ACIL Allen Consulting, Bechtel, Partners in Performance, Ernst & Young, Deloitte, Rand Corporation, KPMG and PwC. Other firms that are taped by government officials include McKinsey, BCG and Bain – they are typically brought on board to oversee strategic initiatives. According to a previous Institute of Public Affairs (IPA) report, the federal government works with nearly 1,200 different consulting firms, for services such as strategy, organisation, project management, technology, engineering consultancy, financial planning and interim. 

According to a 2018 analysis, the federal government spent a total of $4.6 billion on consultants in 2017 (the IPA reports looked into “excess spending”). However, that amount was questioned by many, with some analysts pointing at systematic failures in defining and recording the fees accrued by consultants, leading to a figure that underestimated the actual situation. The news led to a riot in the government echelons, with the Federal Labor stressing that it would clamp down on consulting spend.

“The nature of the Canberra Swamp perverts liberal democracy, entrenches established special interest and represents a gross misuse of taxpayer money,” the IPA report concluded, calling for “deep-seated, structural reform” to Australia’s administrative state.

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