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1,981 Big 4 staff hold Defence passes & we know these are critical to land & expand models & lobbying for more contracts. If we're serious about reform, we need to start with a massive cultural shift in the APS around outsourcing & procurement. #auspol
Consultants granted top secret security clearance passes by Defence
By Connor Pearce August 19 2024
More than 100 staff employed by the big four consultancies have the highest level of unescorted access throughout the Department of Defence
This includes 30 employees of disgraced consulting firm PricewaterhouseCoopers and its hived-off government consulting arm Scyne.
The Department of Defence identified 1981 staff employed by the big four consulting firms - KPMG, PwC, EY and Deloitte, as well as IT consultancy Accenture - held Defence Common Access Cards.
Greens senator Barbara Pocock, whose questioning revealed the numbers, said the fact so many consultants had unescorted access was "of serious concern".
The big four consulting firms. Pictures Shutterstock
"Unfettered access enables the land and expand business model used by the big four and promotes a revolving door arrangement between Defence and the consulting firms," Senator Pocock said.
"We know that consultants utilise their status inside the department to lobby for more contracts, and those passes are critical to this."
KPMG, which has received the most outsourced Defence work, had the most staff passes, followed by Deloitte, then IT consultancy Accenture, PwC including Scyne, and Ernst & Young.
Security clearances of yellow pass holders
Selected consultancies as of June 27, 2024
Of those pass holders with the highest level of clearance, known as positive vetting which allows access to top secret classified resources, KPMG employs 61, more than double the next highest, PwC and Scyne.
To gain a yellow pass, applicants have to demonstrate "an appropriate level of integrity", which is defined by Defence as a range of character traits that include honesty, trustworthiness, maturity, tolerance, resilience and loyalty.
In his review of PwC's governance, culture and accountability, respected Australian business leader Dr Ziggy Switkowski found there was a "growth at all costs" attitude, with a focus on revenue above all else.
A key issue for the review was PwC's culture, which included a finding from a 2021 survey the organisation "operates largely from a profit-seeking perspective, sometimes at the expense of ethics and doing what's right".
Greens Senator Barbara Pocock during Senate Estimates. Picture by Elesa Kurtz
Senator Pocock said given these findings and ongoing investigations, PwC staff shouldn't have such access.
"It's untenable for PwC to continue to have access to Defence department information while it remains the focus of a NACC referral, multiple TPB investigations, a Parliamentary inquiry and an AFP investigation," she said.
A spokesperson for the Department of Finance said it was "appropriate and necessary" that consultants had the necessary access for the work they were contracted to do.
"The Australian Government Security Vetting Agency decides whether an individual is suitable to hold a security clearance," the spokesperson said.
A Defence spokesperson added the department then had oversight of who was given a security clearance.
"Defence then processes security clearances once a sponsoring entity has identified individuals that require a security clearance. This applies to all levels of security clearances, from baseline to positive vetting," they said.
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The firm with the most staff with unescorted access, KPMG, has been accused of having conducted power-mapping of public servants based on their access and relationship with the firm's staff and allegedly overcharging Defence.
The revelations come amid increased scrutiny on the role of consultants in the public service, and as departments begin to report against new rules designed to ensure core work is done by APS employees.
During Senate estimates, in response to Senator Pocock's questioning, Senator Jenny McAllister said the government was seeking to bring consultants into the public sector.
"We're seeking to reduce and where appropriate convert some of those personnel into APS personnel," she said.
The Department of Finance spokesperson said the agency had "successfully supported agencies to reduce reliance on external labour and advice".
Overall spending on consultants has dropped by half and Defence spending fell by nearly two-thirds from 2021-22 to 2023-24.
While KPMG won the most Defence contracts by value over the past five years, its fortunes have fallen dramatically from the $10 million heights of 2020-21, to just under $1m this year.
In its place, EY has seen its contracts from Defence soar in value, with over $16 million in work in 2023-24, largely due to a massive cost blowout in its contract to design the naval nuclear power regulator.
From June this year, departments have to set targets to reduce their reliance on external consultants.
When the targets were introduced, Finance Minister Katy Gallagher said, "The core work of the APS must be done by our core workforce - APS employees."
In its annual corporate plan, Defence said it had committed to reduce its contractor workforce by 200, approximately 20 per cent, by the end of 2024.
"The reduction will be focused on contractors who are engaged for skills that would normally be maintained within the Australian Public Service," the report states.
"It will not include consultants with specialist skills or outsourced service providers."
Senator Pocock said each yellow pass holder was a "missed opportunity" for the rebuilding of the Australian Public Service.
"Defence is the biggest culprit when it comes to outsourcing core government work," she said.
"If we are serious about reform we must undertake a cultural shift within the APS around outsourcing and procurement.
"We need to commit to rebuilding the public service, prohibit donations from firms that receive government contracts, and restructure and regulate the consulting industry."