The public sector unit saving Canberra millions on private consultants
A strategy of targeting “rare but repeatable” work across the public sector has helped the federal government’s fledgling in-house consulting service displace almost $7 million of work that would have been done by external advisors, says chief consulting officer Andrew Nipe.
Australian Government Consulting (AGC), which has 32 staff, has now completed almost 30 projects across 13 federal agencies. The unit, which has been running for almost two years, was established as part of a Labor government push to build up skills within the public service and reduce the unnecessary use of external advisors.
Nipe said the unit, which is also helping public servants become better at buying professional services, could become an established part of the bureaucracy in the same way as the more than century-old Australian Government Solicitor.
“The comparison institution that I look to quite a lot is AGS, the Australian Government Solicitor, because that is a really good example of where departments have the capability. They’ll have in-house legal advice; they’ll also go to AGS, but a lot of the time they’ll [also] go to the market [for legal advice],” he told The Australian Financial Review Government Services Summit on Tuesday afternoon.
Having an in-house consulting unit – a move being emulated by the Queensland and NSW governments and the Department of Defence – is part of the federal Labor government’s push to ensure that external advisers are used more effectively. Labor accused the previous Coalition government of hollowing out skills within the public sector through the use of a cap on public servant numbers. The Coalition said the cap helped keep the cost of the public service in check.
The government’s push to rebuild the public sector has led to the rehiring of thousands of public servants, cuts to the value of contracts inked with major firms such as KPMG and EY, and the effective banning of external advisers doing public service core work.
The federal government has signed about $470 million worth of contracts in 2024-25 with Deloitte, EY and KPMG, down from a peak of $1.4 billion in 2021-22. PwC has exited the public sector advisory market following its tax leaks scandal.
‘Rare but repeatable’ work
Nipe said his unit was particularly interested in “rare but repeatable” work such as organisational design, because it allows his team to spot patterns and “share capability and expertise and insights” across departments and agencies.
“That means that it’s a problem that the agency is working on rarely, but is repeated frequently across the public service,” he said. “And the reason that those two things are important is, if it’s ‘rare rare’, then we’d probably suggest you go to market. There’ll be a private sector consulting firm, there’ll be an expertise in Australia or around the world that is able to be expert at that thing because you’re doing it rarely and the public service is doing it rarely.”
He said the unit measures its effectiveness using a range of financial and non-financial metrics.
“So in terms of how we measure our impact, the first one would be on displaced spend … and that’s looking at what we estimate it would have cost if you’d gone to market,” Nipe told the summit. “We’re [also] increasingly measuring cost recovery. We want to get to cost neutral, so that we’re essentially self-sufficient.”
He said every client so far has said AGC services are “at least as good” as the private sector and “about 75 per cent say we’re better than the private sector”.
Nipe said the positive response is due the team being public servants themselves, which means “what we’re solving for is public value exclusively”.
Edmund Tadros leads our coverage of the professional services sector. He is based in our Sydney newsroom. Email Edmund at edmundtadros@afr.com.au
Are consultants really just a waste of human skin?
Some interesting findings from Belgium (really)
Robin Wigglesworth
Published 29 July 2025
Journalists, telemarketers, used car salespeople and human traffickers can console themselves that there is one profession even more widely detested: consultants.
After all, most people have had at least one direct or indirect interaction with the professional class of pseudo-managers churned out by business schools and hoovered up by the likes of McKinsey, Deloitte or BCG — and most of them unpleasant, frustrating, or simply baffling.
Sure, sometimes they get involved in high-profile projects like ambitious mass relocation programmes or daring pharmaceutical sales initiatives. But most of the work seems to revolve around 30-something MBAs too dim for private equity being parachuted into multinational businesses or sprawling government departments to tell the bosses what they should already know. And that seems to be a generous interpretation.
Nonetheless, it is estimated that consulting globally generated revenues of about $400bn last year. How can something so widely mocked as an utter waste of time and money be so profitable?
As it happens, three academics have recently had a stab at measuring whether consultants actually add any value, which the National Bureau of Economic Research published this month. And lo:
We document that consulting take-up is concentrated among large, high-labor-productivity firms. For TFP and profitability, we find a U-shaped pattern: both high and low performers hire consultants. New clients spend on average 3% of payroll on consulting, typically in episodic engagements lasting less than one year. Using difference-indifferences designs exploiting these sharp consulting events, we find positive effects on labor productivity of 3.6% over five years, driven by modest employment reductions alongside stable or growing revenue. Average wages rise by 2.7% with no decline in labor’s share of value added, suggesting productivity gains do not come at workers’ expense through rent-shifting. We do observe organizational restructuring with small increases in dismissal rates, and higher services procurement but reduced labor outsourcing. Our heterogeneity analysis reveals larger productivity gains for initially less productive firms, suggesting improvements in allocative efficiency.
How did the three authors — Gert Bijnens of the National Bank of Belgium, Princeton University’s Simon Jäger and Benjamin Schoefer of Berkeley — calculate this? Through a pretty nifty dataset.
They combined two decades worth of granular value-added-tax data from the Belgian tax authorities, confidential and anonymised firm-level data provided by the National Bank of Belgium, and public financial accounts to create what they reckon is “the first comprehensive dataset of major strategy consulting relationships in an entire economy”.
The tendency of consulting work to be episodic — typically lasting for about a year and a half — allowed them to examine the subsequent impact on employment, wages and productivity. To focus squarely on classic consulting, Bijnens, Jäger and Schoefer excluded the “Big Four” accountancies Deloitte, EY, KPMG, and PwC, where most of the revenues come from audits and tax advice.
Lots of fancy equations later, and they found that:
. . . consulting events are associated with labor productivity growth, appearing to stem from mild reductions in employment against mildly growing revenue and value added. We find positive effects on average wages, no effect on the labor share, and a reduction in a proxy for outsourcing and if anything a shift towards managerial labor.We find a mild increase in dismissals, against an overall modest or insignificant employment effect, consistent with some restructuring activities that overall increase productivity. Hence, overall, our findings point towards consulting being associated with positive or neutral outcomes for firms and, arguably and in a more complex picture, workers.On average, our results are more in line with a productivity-enhancing view of consulting and reject a view of consulting as a rent-shifting institution. We do not find strong profitability effects — perhaps in part because the moderate productivity effects are “eaten up” by wage boosts (although we cannot rule out compositional effects driving both margins).
This probably won’t assuage the baying hordes of management consultant critics, nor is the report glowing enough to constitute a full-throated endorsement of the consulting business model. But it was interesting enough to warrant a midweek post in late July.
