Labor plans to use in-house teams to slash bills from big four
Labor will look to cut the federal government’s more than $2 billion annual bill for outsourcing to the big four consulting firms, creating portable in-house teams to work across departments.
After promising to significantly reduce spending on corporate labour hire and external management contracts, Finance and Public Service Minister Katy Gallagher will on Thursday detail plans for an internal consulting model within the federal bureaucracy.
Senator Gallagher said the plan – part of modernisation efforts for the 153,000-strong Australian Public Service workforce – would strengthen “core capabilities and functions that have increasingly been contracted out to consultants at significantly higher costs”.
We Similar models are already in use overseas. The British government has an internal consulting hub, established to reduce the cost of outside contracts.
The biggest firms are closely watching Labor’s announcements, as government work forms a major part of their business models.
The biggest consulting firms secured a record $2 billion worth of contracts in 2021-22, with Accenture winning the most work, followed by KPMG, Deloitte, PwC and EY.
Spending on new contracts was up 40 per cent on the prior year, and up from less than $400 million a year when the Coalition came to power under Tony Abbott in 2013.
Deep expertise
The Albanese government has pledged to save $3.1 billion over the four-year forward estimates by cutting consultant spending and labour hire costs, starting with $500 million this financial year.
“There is already deep expertise in the APS. Like data analytics and evaluation, customer service and event management, foreign policy, geoscience, or curating priceless historical collections,” Senator Gallagher will say in a speech to the Institute of Public Administration Australia.
“An in-house consulting model will give public servants the opportunity to develop expertise further, build relationships, collaborate with colleagues, and challenge themselves in new ways. It can create opportunities to work across departments to support one APS.”
The government will consider development of the in-house model by the end of the year.
Senator Gallagher will tell the event Labor must repair years of neglect within public institutions under the Coalition.
“Outsourcing, poor resourcing, clunky systems, and deliberate devaluing by the previous Morrison government has meant that the Australian people are looking at our institutions with a more jaundiced eye.
“The Albanese Labor government’s plans to reform the APS will make it an organisation that is more capable, with greater integrity, placing people at the centre of what we do and a model for other governments and organisations to follow.”
Defence was by far the largest user of federal consultancy contracts in 2021-22, spending almost $700 million on deals with the biggest firms, and extending prior year contracts by at least an additional $100 million.
Major departments including the Australian Taxation Office, Home Affairs and Health all use big four firms for major work, including IT and service design projects.
Prime Minister Anthony Albanese named respected bureaucrat Gordon De Brouwer as his public sector reform chief after the May election. Mr De Brouwer has said business will continue to play a role in plugging skills gaps within the government.
Labor has lifted long-standing staffing caps on government departments and plans to add more than 1000 new permanent jobs at Services Australia, Veterans’ Affairs and the National Disability Insurance Scheme.
An audit of public service employment is also planned.
