Chapter 3Reliance on consultants by the Australian government
3.1Over the last several decades, and particularly over the last 10 years, the Australian government has relied increasingly on consultants to undertake work for the Australian Public Service (APS).
3.2During the 1980s and 1990s, the use of consultants increased significantly in English speaking countries. The Australian government expenditure on consultancy services nearly tripled between 1987 and 1993, 'as governments seeking to maximise efficiency turned to external consultants as part of a way to transfer business management ideas and practices into the public sector'.
3.3The use of consultancies in Australia continued to grow from the 1990s to the 2010s. In 2016-17, Australian government spending on consultants was 2.7 times higher than in 1988-89 (adjusted for inflation). Australian Government spending on consultancies then tripled between 2010 and 2020, to over $1 billion.
3.4In 2021, the global consulting services market was valued between $US700billion ($1.06 trillion) and $US900 billion ($1.37 trillion). At this time in Australia, the five largest consultancies secured $2 billion in contracts. In 2024, Australia's consulting industry (both public and private) is the fourth largest in the world. Australia's spending on consultancies is greater than that of any other country by population, and approximately double that of comparable countries like Canada or Sweden.
3.5Australia has not always been an outlier in this respect. According to research by the CPI, the demand for management consultants has surged over the past decade. Indeed, a 2023 analysis of AusTender data by the Australian National Audit Office (ANAO) found that the value for consultancy-related contracts increased from $325m in 2012-13 to $888m in 2021-22.
3.6In 2022–23, the Australian Government published 83, 625 procurement contracts with a combined value of $74.8 billion. Management Advisory Services, typically provided by consulting firms, had a value of $3.272 billion in 2022–23, which represents 4.37 per cent of the total value of procurement contracts.
3.7The Big 4 firms, Deloitte, EY, KPMG, and PwC are in receipt of the largest number and value of consultancy-related contracts.
3.8In this chapter the committee has asked the following questions to understand the Australian Government's use of consultants:
Has this issue been examined previously?
What caused such a dramatic increase in the use of consulting services by the Australian Government, particularly over the last 10 years?
Is the Australian government's reliance on consulting services appropriate?
What are the impacts of the Australian government's reliance on consulting services?
Recent reviews
3.9The increased use and reliance of Australian governments on consulting services is not a new issue. Several reports on the matter have been released in the last 10 years, including the 2018 Thodey Review and the 2021 inquiry into the capability of the APS undertaken by this committee during the previous parliament.
Thodey Review
3.10In May 2018, the Government commissioned an Independent Review of the APS. The independent panel was chaired by Mr David Thodey AO and the Review's Final Report was delivered in 2019 (Thodey Review).
3.11The Thodey Review found that while 'the APS is not broken'—there are many examples of excellence across the service—'the APS is not performing at its best today and it is not ready for the big changes and challenges that Australia will face between now and 2030'. The panel's findings were unequivocal:
…the APS needs a service-wide transformation to achieve better outcomes. It needs short-term change and long-term reform to serve the Government, Parliament and the Australian public more effectively and efficiently — now and in the years ahead.
3.12The Thodey Review identified a program of transformational reforms, designed to ensure the APS is fit-for-purpose for the coming decades, and to guide and accelerate future reform activities. The final report made 40 recommendations and highlighted the need for the APS to have 'ambitious service-wide performance outcomes and targets to provide a focal point for transformation and hold the APS to account'.
3.13The recommendations included proposals to:
undertake regular capability reviews to build organisational capacity and accountability;
build the culture of the APS to support a trusted APS, united in serving all Australians;
harness external perspectives and capability by working openly and meaningfully with people, communities and organisations, under an accountable Charter of Partnerships; and
deliver value for money and better outcomes through a new strategic, service-wide approach to using external providers.
3.14The Thodey Review considered that, when implemented, the full list of recommendations 'will trigger and sustain far-reaching change'.
3.15In relation to consultants, the Thodey Review noted that 'labour contractors and consultants are increasingly being used to perform work that has previously been core in-house capability, such as program management'.
3.16The Review recommended that the Australian Public Service Commission (APSC) and the Department of Finance ensure all agencies extend APS integrity requirements to service providers, long-term APS contractors and consultants.
3.17The Thodey Review concluded that the 'APS now needs to be much more joined-up to best deliver government priorities and meet emerging challenges'. The review also noted that this conclusion has been reached earlier in the 2010 Ahead of the Game review.
3.18The government released its response to the Thodey Review on 13 December 2019. The response either noted, agreed in full, or agreed in part with the 40 recommendations. In addition to commenting on the recommendations, the government's response was also set out an APS reform agenda.
3.19However, progress in implementing these recommendations was delayed due to the COVID-19 pandemic.
APS Inc: undermining public sector capability and performance
3.20In 2021, this committee in the last parliament undertook an inquiry into the capability of the Australian Public Service. The committee's report, APS Inc: undermining public sector capability and performance (APS Inc) was tabled in November 2021 and made 36 recommendations.
3.21The former committee expressed its deep concern at the excessive use of consultants within the APS and the relationship of dependence that has formed. It also highlighted its particular concern of the overreliance on external consultants for policy advice:
The role of the public service in providing 'frank and fearless advice' to government is one of the key characteristics of a properly functioning Westminster democracy. When the Government, despite access to a skilled and independent APS, consistently chooses to spend exorbitant amounts of taxpayer money on commissioning strategic policy advice from private consulting firms, public sector capability is undermined.
3.22The former committee also contended that a 'preference for policy advice from private, for-profit firms that operate with an ethos vastly different to that characterised by the values of service, integrity and impartiality which define the APS, is alarming'.
3.23The former committee noted in its report that evidence it received indicated that the ASL cap has led to a systemic overreliance on labour hire and contracting arrangements within the APS. The committee considered that 'this widespread and unnecessary externalisation is eroding workforce capability and leading to poor service delivery outcomes.
3.24Coalition senators dissented from this report, noting that the APS reform agenda underway at the time was already focused on lifting the capability of the APS through a range of initiatives including: financial management and accountability; recruitment and talent acquisition, procurement and grants administration; delivering new operating models and shared services; providing ICT platforms for use across the APS; and supporting APS entities to deliver Government priorities and services at best value.
Factors contributing to the increase in use of consulting services
3.25Governments around the world, including in Australia, rely heavily on consulting firms to provide public services and have done so increasingly over the last 10 years. According to some submitters, the increased reliance on consultants by the Australian government can principally be attributed to neoliberal economic policy or new public management.
3.26This new policy approach led to the downsizing of the APS workforce through the introduction of the ASL staffing cap.
ASL staffing cap
3.27In the 2015-16 Budget, the then Government undertook to maintain the size of the general government sector, excluding military and reserves, at around or below the 2006–07 APS staffing level of 167,596. This measure became known as the APS staffing level cap (ASL cap). The Government stated that this was a necessary budgetary repair measure.
3.28Several submitters considered that the introduction of the ASL cap had a direct effect on the increased use of consultants by the Australian Government. The Australia Institute highlighted that departments and agencies have turned to consultants because staffing caps have prevented them from employing public servants.
3.29The Community and Public Sector Union (CPSU) were also of the view that the ASL cap contributed to the growth in the use of consultants by artificially limiting the supply of public servants.
3.30Per Capita contended that while the ASL cap was described as 'necessary so that the Government can repair the Budget and strengthen Australia's future', in reality, 'it has been a costly own goal, driving up costs for external contractors and consultants'.
3.31Some submitters proposed that the money the Australian Government is spending on consultants would be better spent employing more public servants. Dr Alexia Adhikari, Postdoctoral Research Fellow at The Australia Institute, gave evidence that the money spent on consultancies could instead hire thousands of public servants.
3.32In the October 2022 Budget, the Government removed the Average Staffing Level cap, indicating that abolishing the ASL cap is part of 'a continued focus on reducing spending on external labour'. By decreasing the funding of consultants and increasing that of ASL the total reduction in Budget expenditure is $811 million over the forward estimates. The Budget indicated:
This represents an important rebalancing of the APS workforce to reduce the reliance on external labour where work can appropriately be done by APS staff.
3.33In the 2023–24 Budget, the Government further increased the number of roles converted from external labour to ASL. The estimated ASL figure for 2023–24 is 191,861.
3.34In 2024–25, total ASL in the public service is expected to be around 209,000. This is approximately 17,000 ASL 'below the level that would be consistent with the relative size of the public service in 2006–07 as a percentage of the labour force (which would be around 226,000 in 2024–25)'.
The appropriateness of the Australian government's reliance on consulting services
3.35The committee received evidence from a range of organisations on whether it was appropriate for the Australian government to rely so heavily on consulting services. Submitters broadly fell into two categories. On the one hand, submissions principally from government departments and from consulting firms affirmed that consultants have an important role to play in supporting Australian governments. On the other hand, evidence from academics and other organisations suggested that the way in which consultants are being relied on by Australian governments is inappropriate.
Perspective of government departments and agencies
3.36The evidence received from Australian government departments and agencies considered that the engagement of consultants is necessary in certain circumstances and is always undertaken appropriately. Australian government departments and agencies that made submissions to this inquiry noted that they engage consultants appropriately in line with the Commonwealth Procurement Rules (CPRs).
3.37Some departments specified the circumstances in which they engage consultants—that is where skills which are not available within the department itself are required. This view is supported by ANAO analysis which found that the 'Need for specialised or professional skills' was the most cited reason for consultancy-related contracts.
3.38For example, the Department of Health and Aged Care explained that it engages consultants to provide specialist expertise, independent research, reviews or assessments in relation to:
investigating or diagnosing a defined issue or problem;
carrying out defined reviews or evaluations; or
providing independent advice, information, or creative solutions to assist the department in decision making.
3.39The Australian Taxation Office (ATO) highlighted that when it procures consultants it ensures they represent good value for money and provide a unique or specialised service that cannot be accessed 'in-house'. Often these are services which are not economical for the ATO to retain on an ongoing basis.
3.40The ATO specified that the reasons for which it engages consultants vary from year to year depending on ATO business needs and priorities. However, they may include the following:
the use of experts to provide technical advice such as the application of an accounting standard, a foreign law, a commercial arrangement, or an industry, business or industrial process;
the use of highly specialised expertise such as valuation experts where it would be impractical to maintain such expertise 'in-house';
the engagement of expert witnesses in legal proceedings (noting the ATO is provided legal services by the Australian Government Solicitor (AGS), external law firms and counsel, but these are outside the definition of consulting services); and
the use of experts to provide probity services for complex procurements.
3.41The Department of Education noted that it uses consultants for social and market research, actuarial and audit, assessment and evaluation, policy and project skills that are currently not available within the department.
Perspective of consulting firms
3.42Consulting firms submitted that their engagement by Australian government departments and agencies was appropriate and that they have much to contribute. For example, Sententia submitted that the use of consultants is an important part of ensuring the APS can deliver outcomes to 'the highest possible standard':
While the Australian Public Service at large, and the officials in Australian Government agencies, are highly talented, capable and dedicated, they do not (and cannot) have all of the skills, depth of expertise and experience and breadth of perspective that is necessary to always do everything in the scope of an agency to the highest possible standard. Consultants have a role to bring specific deep expertise and experience as well as a breadth of perspective that comes from working across organisations and sectors, that helps to ensure that public sector outcomes are delivered with quality and integrity.
3.43PwC Australia contended that:
A vibrant and capable APS is vital to enable the government to deliver on its objectives and support Australians' use of its public services. The use of consultants by the Australian Government and APS provides value for money and contributes to the effectiveness of the public sector, particularly where:
The nature of the work requires access to unique specialisations, private sector knowledge or technology not immediately available at scale to the APS;
There is a conscious, informed want from a government entity or APS to seek an independent view, for example program and project assurance;
The work is required in a timeframe that better suits a contingent 'surge' project team;
A Government entity is able to mitigate risk, e.g. of expertise and delivery. by involving an external party; and
Consultants can bring external perspective and innovation to the work of government, for example where they can harness the experience from their global colleagues to bring contemporary ideas to assist in solving complex issues.
3.44Deloitte noted that their core focus in providing services to governments is 'to deliver tangible value and outcomes in a high-quality manner which is complementary and additive to the core capabilities of the public service'.
3.45KPMG considered that 'it is a privilege for any private sector organisation to support the Commonwealth Government in a commercial capacity or advisory role' and that to serve the Australian Government is 'by extension serving the Australian public and committing to put the national interest before any other commercial consideration'. KPMG also stated:
KPMG is proud to assist the work of the APS, supporting engagements with wide-ranging impacts on the Australian community. With the pace and scale of change facing the Australian community, the public sector calls on specialist skills and capabilities from the private sector to complement the resources within the public service in delivering complex, time-challenged projects. This approach provides value for taxpayers and brings best practice expertise to the frontline of public policy. KPMG fully supports the ongoing development of the APS.
3.46EY noted that it is regularly engaged by the Commonwealth 'to ensure that citizens are able to access best-in-class products and services across Australia'. EY also noted that it is most often called on for the specialist knowledge and the skills of its staff when governments are seeking assistance to address increasingly complex issues. These issues often require different skill sets, technologies and capabilities to those that exist within government agencies and departments.
Perspective of academics
3.47Professor Andrew Podger AO, an honorary professor of public policy at the Australian National University and former senior APS officer, was of the view that consultants do have a role to play in the provision of expertise that it is not value for money to have inside a government department or agency. Professor Podger elaborated:
You don't need it all the time, so you don't have permanent public servants who have that expertise. It's not worth your while to invest in that as you only need that expertise from time to time. You'll see that in cases of specialist lawyers, or a range of other people you might need, or specialist engineers if you're in the defence department, where you need that expertise and it's not worth your while to have it on an ongoing basis. That can be value for money.
3.48Professor Marianna Mazzucato and Ms Rosie Collington, authors of The Big Con, recognised that 'it is necessary for governments to work with knowledgeable and experienced organisations in order to develop relevant capacity to meet democratic, environmental and social needs':
The collective intelligence that is necessary for confronting the greatest challenges of our time – from the climate crisis to the COVID-19 pandemic – is created across our economies when governments are able to identify and work mutualistically with these organisations.
3.49Professor Podger also suggested that an external perspective can sometimes be required, for example, when an internal view should be tested. Professor Podger considered that in this circumstance, the engagement of a consultant would be appropriate.
3.50Evidence from some academics and other organisations strongly suggested that the use of consultants by the Australian government is problematic. Indeed, DrAdam Lucas, Senior Lecturer in Science and Technology Studies at the University of Wollongong, said that 'the extent to which state and federal governments now rely on consultancies to formulate policy on a wide range of issues should be a matter of concern to all Australians'.
3.51The Justice and International Mission Cluster, Synod of Victoria and Tasmania, Uniting Church in Australia (the Justice and International Mission Cluster) submitted that it is concerned about what it describes as an overuse and overreliance on external consulting services by the Commonwealth Government. However, Dr Mark Zirnsak from the Justice and International Mission Cluster also acknowledged that consulting firms do play a useful role and can engage in pieces of work that are valuable. For example, KPMG was commissioned to undertake a review of the Illegal Logging Prohibition Act 2012, which he described as 'very good' and produced a 'very constructive, helpful finding'.
3.52The CPSU has been a vocal critic of the increased use of consultants and holds particular concerns over the expansion of consulting services into the provision of day-to-day public sector work.
3.53The Australia Institute agreed that the Australian Government has become 'overly-dependent on consultants to guide and justify its decision-making' and considered that this dependence is 'corrosive to Australian democracy'.
Impacts of the increased use of on consulting services
3.54The committee heard that the reliance on consultants by the Australian government has demonstrated itself to be detrimental in four key ways:
negative impacts on APS capability;
a move away from genuinely frank and fearless advice to the APS;
movement of staff between the APS and consulting firms; and
decreased transparency of APS work.
APS Capability
3.55Submitters to the inquiry contended that consultants are not only being used to supplement the work of the APS by providing specialist skills and knowledge. Rather, consultants are increasingly being used to undertake core APS work, including policy development, and that this is weakening the APS's capability to effectively serve the Australian Government, and in turn, the Australian community.
3.56The CPSU noted that 'while the issue of the use of consultants eroding public sector capability has recently been a cause for concern in the wake of the PwC scandal, it is not a new phenomenon'.
3.57Professor Marianna Mazzucato and Ms Rosie Collington contended that the use of consultancies at such a large scale and scope present a risk to public sector capacity:
We recognise that this risk is particularly acute in the public sectors of Anglo-Saxon economies, where the public sector reform programme of New Public Management has, at crucial times, led to the increase of outsourcing.
3.58Professor Mazzucato and Ms Collington also considered that overreliance on consultants 'undermines the evolution of capacity internally within organisations, which can render it more challenging for them to adapt in response to evolving policy challenges'.
3.59Professor Podger shared this view and explained that using consultants to do the work of the public service prevents the APS from developing those skills:
In a vicious cycle, an under-skilled public service becomes increasingly dependent on external consultants, and even loses qualified staff who realise they can do the same or more satisfying government work in the private sector for higher pay.
3.60The Australia Institute and the Justice and International Mission Cluster also agreed that the overreliance on consultants was decreasing APS capability because 'once consultants secure a contract, they are difficult to replace because they develop the specific knowledge that the public service lacks'. The Justice and International Mission Cluster described a 'self-reinforcing cycle':
…public servants are forced to go back to the consulting service that has built up the expertise funded by government revenue through the consulting contracts. In our view, it would be preferable to build up the expertise within the public service, where greater levels of accountability and transparency applies.
3.61Dr Adhikari also described the relationship between the APS and consultants as a 'vicious cycle of dependence':
The overuse of consultancies undermines public sector capacity and investment in further developing the skills and knowledge of the APSPublic money invested in public servants to make decisions about the Australian public makes more sense in a strong democratic society.
3.62Submitters also noted their particular concern that the APS lacks the skills and knowledge required to effectively engage consultants, manage these contracts, and ensure value for money. This aspect of APS capability is examined in Chapter 4 of this report.
Frank and Fearless Advice
3.63The APS is required to be apolitical and provide the government with advice that is frank, honest, timely and based on the best available evidence. However, submitters to the inquiry considered that the capacity of the APS to deliver this frank and fearless advice has been diminished. Indeed, Professor Baum noted a large body of literature 'now showing how over the last four decades that notion of an independent, frank and fearless public service has been eroded, and that's been to the detriment of Australian public policy'.
3.64Submitters attributed this erosion in part to the increased use of consultants by the Australian government: because the government is seeking more of its advice from consultants (who are not bound by the APS Values to provide frank advice), the government is instead, at times, receiving the advice that consultants think it wants to hear, or the advice they think will get them the next contract.
3.65Professor Podger warned that 'there is a danger, in using consultants, that they will say what they think is wanted in order to get the next job'. For example, Professor Podger pointed to the Robodebt Royal Commission where concerns were raised about the behaviour of both the consulting firm and the government department:
If [the department is] going to external advice and they want some degree of independence of it, they should accept that independence when it comes in and not feel as if somehow that should now be set aside and not drawn upon at all or revealed. If you're going to pay for advice on the basis that you want an external perspective, you've got to accept what you get, rather than then saying, 'Whoops; that's embarrassing for us.'
3.66Professor Podger highlighted that the Robodebt Scheme example also demonstrates a broader issue about evaluations. He argued that evaluations ought to be objective. If evaluations are tailored to suit a particular outcome or perspective, there was no point in undertaking the work in the first place.
3.67Emeritus Professor Guthrie also considered that the change in the final outcome of PwC's work for the department constituted a contract variation, and that this should have been documented, ensuring accountability for the work the department had commissioned.
Movement of staff between public and private sectors
3.68The committee heard evidence about the movement of staff between the APS and consulting firms often referred to as the 'revolving door' between the public and private sectors.
3.69Dr Adhikari considered that the revolving door phenomenon was a product of the overuse of consultancies:
[It] leads to a vicious cycle of dependence in which an underskilled public service becomes increasingly dependent on external consultants, or qualified APS staff leave to work in the private sector for higher pay.
3.70Dr Julia Anaf highlighted the risks of the revolving door, which included the emergence of conflicts of interest, and the potential for a compromised, and in some circumstances unethical, exchange of information.
3.71Mr Bill Browne, Director, Democracy and Accountability Program at The Australia Institute, recommended that existing provisions around public servants leaving the APS could be clarified and strengthened.
Lack of transparency
3.72Several submitters and witnesses raised their concerns about a lack of transparency associated with the work that consultants do for the Australian government. It was argued that greater transparency would provide oversight and assurance that consultants are providing value for money and enable others to assess this contribution.
3.73Emeritus Professor Guthrie agreed that the transparency and accountability of government contracts with consulting firms is inadequate, particularly given the significant amount of money the Australian Government hands over to these firms each year.
3.74Per Capita noted that although the APS 'requires transparency and accountability in both its core values and in expectations of public servants no such statutory requirement exists for private consulting firms'. Per Capita explained:
While spending within the APS is subject to rigorous oversight and full transparency through the Parliament's budget estimates process, the same oversight is not applicable to private companies. Government contracts with private companies for policy advice and service delivery too often include commercial-in-confidence provisions that prevent the public from knowing what their money is being spent on, and whether the contracts represent value for money or adequately protect against conflicts of interest.
3.75The Justice and International Mission Cluster highlighted that a particular barrier to the transparency and accountability of Australian Government contracts with consulting firms is that Freedom of Information (FOI) requests relating to the contract work are often denied or only partially agreed to. Per Capita noted that 'when the work done by a consulting company becomes the property of the government department or agency by which it was procured, these documents are often not released or not released in their entirety, with the justification that they are subject to commercial in confidence'.
3.76Mr Mark Warburton, a former public servant, drew the committee's attention to one such example which involved Boston Consulting Group (BCG) and the Department of Social Services (DSS). In his supplementary submission, Mr Warburton included a document accessed under FOI. The document is a heavily redacted version of the work undertaken by BCG for DSS.
3.77Sententia noted that the 'transparency of the outputs of consultancy work is largely at the discretion of agencies, who need to manage the risks versus benefits to the agency from disclosing consultancy outputs' and considered that Australian Government contracts typically achieve a 'sensible balance for the management of confidentiality.
3.78Per Capita contended that governments should not be permitted to avoid transparency and accountability by contracting with private sector bodies for policy advice.
3.79EY agreed that greater transparency around contracts is fundamental to ensuring engagements with external service providers are delivering value to the Commonwealth.
3.80However, it is important to recognise that the APS does not automatically share all of its work with the public, particularly policy advice to government. While Ministers and the APS are accountable through a range of mechanisms such as Senate Estimates Hearings, questions in Parliament and the Freedom of Information Act 1982, there is still a range of confidential documents that are not released through these processes (e.g. some early policy work, cabinet documents, sensitive material connected to Australian security will often be withheld through FOI Act exemptions or if a public interest immunity claim is made and upheld by the Senate).
Conclusions
3.81As demonstrated above, the increased reliance of the APS on consultants has reduced the capacity of the APS, leading to a move away from genuinely frank and fearless advice and lessened transparency of some APS work. The difference in culture and motivations between the APS and consulting firms, particularly the Big 4: Deloitte, EY, KPMG, and PwC render these issues more difficult to address. This difference in culture is examined in Chapter 5 of this report.
3.82In assessing the evidence about the need for increased transparency of consulting contracts, a distinction must be made between the product of the work that is performed by consultants, and the detail of the value of the contracts.
Rebuilding APS capability
3.83The committee received limited evidence on approaches to reducing the Australian Government's reliance on consulting services. The prevailing opinion amongst submitters was that the only solution is to urgently rebuild APS capability and redirect funding from the engagement of consultants to the employment of more public servants.
3.84Since the committee began this inquiry, the Australian Government's use of consulting firms has dropped. It was noted in the 2024–25 Budget that 'the use of the largest consulting firms has significantly reduced under the Government, dropping in value by $624 million year-to-date for 2023–24 compared to the same period in 2021–22'.
3.85The 2024–25 Budget also announced that the Government would further reduce spending on consultants, contractors, and labour hire, achieving a saving of $1.0billion over four years from 2024–25.
3.86Ms Rosie Collington gave evidence that one of the biggest challenges is how the importance of the public sector can be recognised again. She contended that there has been an undermining of confidence in the public sector and in civil servants which creates a self-fulfilling prophecy. She stated:
…if we don't believe that there is talent to take on the 'crunchy issues' of today within the public sector, and just go externally for them, that public sector is not going to be able to learn by doing.
3.87The committee received evidence that as a starting point, this could simply involve employing more public servants with the funds saved by reducing the number of consultants engaged.
3.88Professor Podger and others warned that APS capability cannot be rebuilt over night by simply cutting the work given to consulting firms—it will be a long process to rebuild. Ms Collington considered that investing in the public sector does not necessarily mean increasing spending—it means reconfiguring the spending that is currently going to external consultants, recognising that this is critical for governments to be able to adapt and respond to these evolving needs and demands that are acting on it.
3.89The committee heard that APS careers also need to be seen to be attractive. Professor Frances Baum submitted that the value of serving the public good in the APS was promoted at business schools—not just consultancy companies. She stated:
I know many business schools now focus on how many people get into consultancy companies. It would be great to see them competing with how many people or graduates get into the public service. They could make it seem like an exciting place to work, where career development is encouraged but also where there is a strong public-sector ethic: 'We are here for the public good. We are here to create as good a society as we can,' emphasising that it's not just about the bottom line, the dollar, but also about what the constituents of a good society are and how the public service can work towards those.
3.90The gap in remuneration between consultancy roles and the APS will also have an impact on recruitment and retention. Professor Podger observed that the current renumeration arrangements in the public service are not 'designed to attract, develop and retain the best talent', and pay arrangements do not reflect what the markets require.
In-house consulting capability – Australian Government Consulting
3.91Although not raised in evidence, the committee is aware of the new Australian Government Consulting (AGC), 'an in-house consulting capability to reduce over-reliance on external consultants'. From July 2023, the Australian Government committed $10.9 million over 2 years to create AGC.
3.92AGC is led by Mr Andrew Nipe, Chief Consulting Officer, who has previously worked at Bain & Co in Australia, and McKinsey & Co in the United States. Prior to joining AGC, Mr Nipe was the Victorian Chief Data Officer. Mr Nipe indicated that AGC currently employs 20 staff and will grow to 38 staff in2024–25.
3.93The government intends that AGC will benefit the public service through three related functions:
delivering core strategic consulting projects;
strengthening APS capability through consulting practitioner skillset transfer and leveraging existing APS capability through a Specialist Network; and
supporting agencies to achieve better value when engaging external consultants.
3.94AGC is also intended to take the following approach:
AGC will apply a rigorous, structured problem-solving methodology combining the best of public sector expertise and private sector approaches to quickly bring clarity to a client's challenges.
Clients will have the opportunity to practise and implement in-house consulting methodologies through a collaborative approach to project delivery. Over time, the tested approaches to capability uplift can be rolled out across the APS.
The AGC's Specialist Network of existing APS specialist services also allows experts to be seconded into project teams, bringing relevant expertise together on a particular problem.
3.95Ms Liz Hefren-Webb, Deputy Secretary, Social Policy Group, Department of Prime Minister and Cabinet, gave evidence to the Senate Finance and Public Administration Legislation Committee at Estimates that:
…the 'buy better' element of the [AGC's] work, which is about helping departments and agencies, if they are procuring from the private sector, with how to do that well and how to do it in a way that highlights some of those issues around conflicts of interest, and also how to get good value for money.
3.96During the most recent estimates hearings the committee heard that the scale of projects that AGC is currently undertaking is relatively small compared with those contracted to other consulting firms including the Big 4. Mr Nipe commented that a standard sized project for AGC is one that 'requires three to four people for three to four months'.
3.97Relatedly, it was announced in the 2024–25 Budget that the Department of Defence will also commence its own pilot program (Australian Defence Consulting) to provide internal consultancy support across Defence using public service and Australian Defence Force staff. This measure is similarly aimed at reducing the department's need for external support and build the capability of its public sector workforce.
3.98It is too early for the committee to assess the effectiveness of AGC.