Thursday, December 21, 2023

Spending on consultants at 10-year low: Gallagher


Auditors should be banned from providing any type of consulting services to their audit clients and the corporate regulator should resume naming and shaming companies with poor audit quality, former competition watchdog Graeme Samuel says. 

Samuel’s big four fix: ban firms consulting to audit clients

Spending on consultants at 10-year low: Gallagher

Ronald MizenSenior reporter

Finance Minister Katy Gallagher says spending with the big four consulting firms along with Accenture and Scyne is down $240 million so far in 2023-24 – and at the lowest level in 10 years.

Senator Gallagher said she expected further falls in 2024 as the Albanese government’s concerted effort to rebuild public services capability meant more work was done in-house and not by external consultants.

“We’re tracking pretty well in this financial year,” she said, noting the savings were partially being offset by an increase in public servants who were now doing jobs that had been left to contractors and labour hire.
“I’m not pretending there aren’t additional costs that come with that,” she said, adding it was all part of rebuilding the capability of the Australian Public Service, and in particular its ability to develop government policy.
“I would say we’ve now done the major uplift in the APS … there might be some movement at the edges, but on the capability front, I think we’ve addressed a lot of agencies’ areas of pressure.”
Labor is pushing to shave $3 billion off outsourcing over five years by cutting spending on consultants, advertising, lawyers and labour hire. The target was initially over four years but was pushed back after department heads expressed concern the time frame was too short.
Defence and Social Services are being asked to make the biggest cuts, with the May budget allocating each $600 million in savings over the period, while Treasury is having to find $450 million – largely at the Tax Office.
The big four firms – KPMG, PwC, EY and Deloitte – plus Accenture inked just under $1.2 billion in contracts with federal government clients in 2022-23, which was below the almost $1.7 billion secured the previous financial year when spending on contractors hit a record level.
At least $444 million worth of work was tacked on to existing contracts, adding 25 per cent in billings or $1.2 million a day more, in what has been dubbed the “land and expand” strategy.
As part of the insourcing push, Senator Gallagher has banned all arms of government using consultants to write submissions to the federal cabinet, as well as working in department executives.
Treasury has ended its practice of offering secondments to private sector consultants, which had in the past seen senior members of the big four consulting firms slot into senior executive positions for periods.
But that doesn’t mean Senator Gallagher wants to cut off the APS from outside experience.
“Secondees are not a problem in themselves. In fact, part of some other work I am doing is to try and look at genuine partnerships with business, industry, academia, etc., to second in and out of the public service,” she said.
“A lot of feedback you get particularly from business and the community sector is why can’t we help you with the problem-solving early on, but then you have to have some structure around it. I don’t have a problem with that where there are guard rails around it.”
Speaking more broadly around the process under way for next year’s budget, Senator Gallagher said while she would continue to look for savings in her role as finance minister, much of the low-hanging fruit had been picked.
“It’s going to get harder,” she said, but she said there would be more to say about what type of savings people should expect in the first quarter of next year.
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Ronald Mizen reports on the intersection of politics, business, economics and the law from Parliament House, Canberra. Connect with Ronald on Twitter. Email Ronald at