Australia’s consultancy industry is effectively unregulated and unaccountable to its peak professional organisation, a parliamentary inquiry has heard.
Representatives of the Institute Management Consultants of Australia (IMC) were giving evidence to the Senate’s Finance and Public Administration References Committee hearing on the integrity of consulting services used by the federal government.
The hearing comes amid the deepening scandal surrounding PWC’s leaking of confidential tax information.
National President Peter Westlund told the committee IMC is the nation’s peak professional organisation for management consultants.
The IMC’s role was to promote excellence and integrity and encourage high proffessional standards and ethics, he said. However it has no supervisory, regulatory or enforcement capacity, apart from disciplinary powers for members including warnings and expulsion.
Senator Deborah O’Neill said “forgive me if Australians might think when they read the name ‘Institute of Management Consultants Australia’ that you would have some supervisory role, but to be clear … you have no enforcement capacity, do you you Mr Westlund?”
“No, we don’t,” he replied.
89,700 unregulated consultants
Mr Westlund also revealed that only 300 of Australia’s 90,000 consultants were IMC members, and that none of the big four consulting firms including, including PWC, were registered members.
“How many of the staff at PWC, KPMG. Deloitte and EY have registration in your organisation,” Senator O’Neill asked.
“As far as I’m aware, none,” Mr Westlund said.
“None of the big four consultancies have anybody registered with the Institute of Management Consultants?” she asked.
“As far as I’m aware, that’s correct,” Mr Westlund said.
“So your reach into the big consultancy industry in Australia… with nearly 9,000 at PWC, thousands at KPMG, Deloitte and EY – and that’s before we get to any of the other consultancies – your reach is 300 out of 90,000?” Senator O’Neill said.
“Yes,” he replied.
Senator O’Neill asked if the IMC could have had any impact on the practices revealed in the PWC scandal.
Mr Westlund replied “No, because they were not doing management consultant services”.
‘Land and expand’
Witnesses were also grilled on an under-bidding practice known as ‘loss leading pricing’ or the ‘land and expand’ model, where companies bid as little as $1 for work that might actually cost hundreds of thousands of dollars to get embedded in a department and as an investment in future work.
Jenifer Fredrick, representing the IMC’s ACT Chapter, told the committee that “loss-leading pricing is certainly a tactic used by larger firms that can afford it to get people on board… internal audit services in my experience have been loss leaders,” she said.
The committee also heard PwC was paid $1 million for a six-page power point presentation presented to three people.
The inquiry, which is looking to the management of conflicts of interest by consultants, measures to prevent unethical behaviour, transparency and accountability of consultants and of risks to public sector integrity, is scheduled to report by September 26.
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