Four Corners' report has left governments with an enormous task in restoring trust in their relationships with these firms.
Four Corners opened Monday’s program by putting the health sector firmly in the crosshairs of public concern by pointing out that, despite a new Labor government pledging to curb the influence of consultants, it has already appointed three department heads straight from the big firms.
The first of these appointments the program detailed was our new Health Secretary Blair Comley who, the show pointed out, had spent the previous five years with a boutique firm owned by EY called EY Port Jackson.
Comley – also a former special advisor with PwC – comes in for no further specific inquiry by the program. But putting him up front as an example of consultants moving between significant government and private sector consulting roles – and then going on to to trash the credibility of such arrangements – must have some in the Department of Health and Aged Care worried already on matters of transparency.
The other two department heads named by Four Corners included Jim Betts, who was briefly an EY partner, and is now Secretary of the Department of Infrastructure, Transport, Regional Development, Communications and the Arts; and Natalie James, now in charge of the Department of Employment after four years with Deloitte, a firm that comes in for particular criticism for probity issues surrounding its Services Australia contract to overhaul its IT systems following a meltdown of the system early in the covid pandemic.
Labor and Green senators sitting on current Senate inquiries into the consulting firms were interviewed expansively by the program and outlined specific examples of how the consulting firms are operating in a non-transparent and potentially conflicted manner with the federal government.
Labor Senator Deborah O’Neill told the program that there have been significant failures from all the big four accounting-based firms that warrant investigation and potential regulation moving forward.
“We know they share staff; we know that information moves around between them; we know that information moves not only between players in the sector but between government and into the sector and I don’t think that PwC is the only company to have figured out that it might be financially advantaged [by this]”, she said.
A whistleblower alleged that KPMG regularly overcharged for services and charged for services that didn’t occur, and that at one point nearly all invoices issued by the firm had “errors in them”.
KPMG denied all the allegations of the two whistleblowers featured on the program.
But Senator O’Neill was not buying it.
“These companies operate a land-and-expand model where they get in, sometimes underprice the first piece of work … then they expand their reach through familiarity,” she said.
“The whole business model of these companies is billable hours.
“The longer they stay there the less efficiently they do the job.
“It’s about getting very close to government, finding out what is going on, using the contacts and then growing the business.”
The program went on to detail an example of an ex-Defence employee, who although banned for 12 months under existing regulation from working with a group that is engaged by the department, continued to talk to Defence staff and feed information back to key staff in KPMG.
KPMG staff acknowledged in a leaked email that this had been invaluable to them securing more work.
Over the past five years almost 100 former Defence staff have moved to KPMG, according to the program.
Greens Senator Barbara Pocock, who has been a key figure in the PwC tax scandal inquiry, told the program: “Every dollar you spend on a consultant you remove the possibility that a senator can ask a question in [Senate estimates, because] they aren’t exposed to estimates or questions on notice unless they are inside an inquiry.
“So a whole lot of the key transparency devices and tools for our parliament are prevented from looking at the big spend on consultants … [It has] a big impact on our democracy,” she said.
Senator Pocock went on to question not just the commercial motives of the big firms, but the motive of certain governments in using consultants in this manner.
“Is moving so much of the government’s spend outside the public view to give certain governments cover for what they want to do?” she asked.
“Defence [for example] is a black box … we need a lot more transparency.”
The program pointed out that KPMG had at least 12 different business names, which made it very hard to understand from looking at government websites how many contracts they’ve been awarded, what the value of those contracts actually was and what they were called when the contract was awarded.
Adam Evans from Anywise consulting went to the trouble of finding all the contracts and aggregating them to give everyone a better picture of what might be going on.
He found that the last 10 years KPMG had been awarded 3673 government contracts to the value of $1.63 billion with 1908 contract amendments (extensions) amounting to $945.8 million.
That’s a 60% uplift of original contract value being obtained by KPMG, a nice illustration of the “land and expand” strategy.
“Management advisory 101 … get a contract, make it longer and sell more people in,” Evans told the program.
Four Corners outlined several examples of the moral hazard faced by senior public servants in their roles.
The second example from the health sector was that of the appointment of James Downie, past CEO of the Independent Hospital Pricing Authority, a government agency charged with advising on the price of hospital services and medical equipment, to PwC in September last year.
According to the program, Downie had said that in this case there was no requirement from the agency for any cooling-off period before he worked for a past contractor, as had been the case with KPMG Defence example above.
There is no suggestion that Downie did anything illegal by joining PwC and then consulting back to his old employer. Four Corners suggested however that there was a clear conflict of interest.
Another key example of non-transparency in dealings raised by the program was a Deloitte contract to overhaul the myGov website after it was overwhelmed early in the covid pandemic.
Senator O’Neill told the program that “there are lots of probity questions to be answered here”.
According to the program, Deloitte was awarded a $9 million contract in March 2020 with the Digital Transformation Agency, without any competitive tender in place, and that this contract eventually ballooned to $47 million.
The contract was the subject of a scathing report from the Auditor General, which said the contract had failed in 12 key areas of evaluation including “offering taxpayers value for money”.
Four Corners did not land definitive examples of provable corruption on the part of the four big firms.
But that probably does not matter now.
It outlined examples of impropriety, and clear examples of operational business models that seek to exploit weaknesses in governance and regulation on the part of governments. There is very little governments can now do but respond and seek to fix a situation of damaged public confidence in the relationship between these firms and government.
There is no way back.
