Ropy numbers, misclassified contracts: concerns over government outsourcing

Public servants hope ongoing reviews will address increasing government use of consultancies, but analysts warn poor reporting will hinder efforts.  

When Danielle Wood, an economic analyst at independent think tank the Grattan Institute, started looking through AusTender, the “real eye opener” from the Commonwealth’s online procurement repository was “just how ropy” the numbers were.

“It doesn’t seem consistent in how different departments are using the consulting flag,” says Ms Wood, a former economist with the Australian Competition and Consumer Commission.

“I don’t think we actually have a good handle on what’s going on. We need better data to understand how much government is spending on consultants and what they’re getting for that money,” she says.

Mounting disquiet over the Commonwealth’s spend on external consultants, and Australia’s top-tier firms in particular, came to the fore in late 2017 when the national auditor revealed the Federal Government had spent $47.4 billion in 2016–17 on outside advice.

A parliamentary inquiry into government procurement contract reporting, initiated in the wake of the auditor’s report, has been hearing concerns about the lack of transparency and accountability in the outsourcing of government work.

A separate inquiry, the landmark review in the Australian Public Service, is hearing further evidence about the impact of outsourcing on the services’ long-term capacity. The public servants’ union told the review that the capability of the APS is being “hollowed out” by the use of external advisors.

But the outsourcing of government work is not just a concern in Canberra.

NSW’s auditor last month revealed that the State Government had given more than $1 billion in consultancy contracts to just six firms in the past five years.

The auditor found all 12 agencies he examined failed to comply with state requirements around consultancy procurement, though several agencies pleaded ignorance and complained of unclear guidelines.

Ms Wood, who will participate in a panel discussion on governments’ use of consultants at the Institute of Public Administration Australia’s conference on Wednesday, says she saw on AusTender clear examples of contracts being misclassified.

“For example, auditing services, which are in the guidelines are an example of something that should be consulting, were sometimes still not flagged as a consulting contract.

“There may well be some problems with clarity, but there certainly seems to be problems within the departments in terms of their administration,” Ms Wood said.

Room for improvement: commissioner

Given apparent increases in spending on consultancies, it’s more pertinent than ever to ask if governments are engaging with external advisors in the most effective and efficient way, says Paul Grimes, Victoria’s Public Service Commissioner, who is also appearing on the panel.

“Are we investing enough in the professional development of our public servants? Is there enough being done to create flexible and agile workplaces that are attractive for a new generation of workers? And are we really engaging consultants as effectively as we might? I think on all of those areas we have room for improvement,” Mr Grimes told Government News.

Mr Grimes says there will be a number of cases where it makes sense to source external specialist expertise that can benefit the public service.

“But I think it’s a problem if we engage in the external provision of services that could be provided more effectively by investing within the public service,” he says.

As to whether some of the increasing spend on external consultancies would be better re-allocated to greater professional development of the public service, Mr Grimes says there is a need for “better benchmarking and comparison of data across jurisdictions.”

“If we are spending money that would be more effectively invested in the development of our own people then we’re not acting in the best interest of the taxpayers in the longer run,” he says.

Follow up anomalies, overruns

Ms Woods agrees that much more robust data is urgently needed, but she also wants to see the consulting framework “used properly,” and with much greater follow-up to ensure bureaucrats are acting within the guidelines.

“When there is evidence that people haven’t flagged something that looks like consulting, that department should be queried to see what’s going on.”

Conduct that could be attempts to evade procurement guidelines should be checked out, she adds. She refers to the high use of contracts below $80,000 and contract pairs identified in the national auditor’s report.

She also points to the need for better documentation of cost overruns in contracts.

“At the moment we just don’t have a picture from the AusTender data of where certain contracts have gone over the initial contact value, there’s no tracking of contract revisions in the database. It would be really good to have a bit more transparency around that,” she says.

Welcoming the debate

Mr Grimes says he strongly believes there’s a place for a “vibrant consulting community that works well” with government.

“But by the same token it is critical that we maintain our core capabilities and we invest in those core capabilities and do not undertake contracting externally when we have functions that can be performed more efficiently within the public service itself,” he adds.

Of the ongoing review into the Australian Public Service, Mr Grimes says he welcomes the debate of the issues that is accompanying the inquiry.

“It’s an opportunity to ensure we have an APS that’s fit for purpose for many decades to come. I’m sure there will be a lot of things that come out of the review will that will be highly relevant to the way we think about the positions of our state public services for the future as well,” he said.

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