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NSW bans consultants from core government work
The NSW Labor government has banned the use of consultants and contractors for core work such as policy development, in a move that adds pressure on an advisory industry already suffering from lower demand at the federal level and from the private sector.
NSW public agencies will now only be able to use external advisers in limited circumstances, such as when specialist skills not available internally are needed, for independent advice, or when additional staff are required temporarily.
The move follows the creation of an expert advisory network to make better use of in-house knowledge, which aims to rebuild internal skills within the state government and cut costs.
The state government spent almost $60 million on consultancies and $1.7 billion on contractors in the 2024 financial year, according to the latest available figures, even after making cuts of more than $450 million in contractor spending across the 2023 and 2024 financial years.
Separate government data shows the big four consulting firms earned more than $240 million from the NSW government in the five years to 2023. KPMG earned about $72 million in that time, EY $70 million, PwC $57 million and Deloitte $42 million. PwC has since sold off its public sector consulting arm.
The new rules emulate a similar federal policy put in place in 2023 to formally ban the use of external hires for core work and leadership. The state’s expert advisory network is also a variation on the federal government’s in-house consulting unit, Australian Government Consulting, which was also launched in 2023.
“This policy is about putting the ‘public’ back in public service. It ensures that core work is led by accountable, experienced public servants, not handed off to consultants or private contractors,” said Courtney Houssos, the NSW minister for domestic manufacturing and government procurement.
“This is a critical step in restoring the capability of the NSW public service. We are ending the overreliance on consultants, safeguarding institutional knowledge, and ensuring taxpayer money is spent wisely.”
Under the new policy, agencies will need to prioritise in-house delivery of essential government functions, with external support only considered if internal capacity has been assessed and ruled out.
Agencies will now be expected to be able to develop laws, regulations, policies, recommendations and cabinet submissions using in-house expertise. The same approach will be expected for the design and management of grants programs.
NSW agencies have also been told to identify and define “core work”, develop a plan to reduce the use of consultants and contractors, set annual “capability-building” targets and report against these metrics.
“This policy equips our public service to not just respond to today’s challenges, but to plan, lead and deliver the long-term priorities of the state,” Houssos said.
An example of the type of work targeted by the new policy includes a $9 million contract the Department of Education, entered into under the previous Coalition government, with Deloitte helping create “business cases” for school upgrades.
A 2023 NSW auditor-general’s report found state government agencies “do not procure and manage consultants effectively”, and failed to follow rules on the use of external advisers.
