Labor vowed to crack down on consultants, but spending is going up

The Albanese government had more than $637 million worth of consulting contracts in the past six months, up more than $100 million on the previous half-year, despite repeated promises to cut back on external advisers.

A biannual statement tabled in parliament on Tuesday revealed the government had 131 consultancy contracts valued at $2 million or more active for at least one day between January 1 and June 30, with some individual contracts worth $30 million alone.

The high spend shows the challenge for Labor after it vowed to crack down on overreliance on private consultants following concerns about outsourcing and the 2023 PwC tax leaks scandal.

Finance Minister Katy Gallagher and Treasurer Jim Chalmers have previously said they would make savings from consultant cuts.Credit: Louie Douvis

Treasurer Jim Chalmers has previously said the Coalition gave core government work to consultants before Labor was elected in 2022, and pledged to restore the public service.

“When we came to office, the public service was hollowed out with too much spending on contractors and consultants,” Chalmers said in April.

The publication of the data will also test Labor’s pre-election pledge in April to save $6.4 billion in four years by reducing spending on consultants, contractors, labour hire and non-wage expenses like travel, hospitality and property.

Multimillion dollar projects with descriptions such as “industrial uplift strategy” and “structural review services” from major firms such as McKinsey and BCG are some examples of department spending on consultancy services.

Governments commonly give contracts to consulting firms because they claim to offer independent advice, have solved similar problems overseas or at a state level, and can provide access to experts with specialised knowledge.

The Department of Health spent the most, with 37 contracts costing more than $137 million, followed by the Department of Climate Change’s almost $82 million on 16 contracts and the Department of Infrastructure which had eight contracts totalling more than $64 million.

Comparatively, the Morrison government spent $688.6 million on consultancy-related contracts across the whole of 2020-21, according to an Australian National Audit Office report.

The audit report and the data released by Labor draw on the same data set but could have been compiled differently because separate agencies may have used different methodologies. There has also been significant inflation since 2020-21.

The new data includes the full value of contracts with consultancies that are active in the six-month period. But those contracts may be for years of work and be paid for by the government in instalments, meaning it is a useful snapshot of Labor’s demand for consulting, but does not reflect how much the government has spent in those six months alone.

During the election campaign, Prime Minister Anthony Albanese justified his government’s decision to increase public service numbers by 41,000 as a correction to the Coalition’s reliance on consultants to deliver services.

Finance and Public Service Minister Katy Gallagher defended the government’s ability to hit its $6.4 billion saving target by 2028-29

“Each department and agency will be responsible for reducing spending on external labour and non-wage expenses, and we have made this expectation clear,” she said.

“In our first term of government, we delivered $5.3 billion in savings by cutting contractors, consultants, and labour hire and other non-wage expenses, while also converting 11,800 external staff into permanent APS employees.”

Former deputy secretary of finance and University of Canberra professor Stephen Bartos said the government’s goal was achievable, but the latest data showed “they’ve got to pull their fingers out and work harder”.

“We’re not seeing a sustained, rapid reduction in the same way that I would have thought Katy Gallagher would have been hoping for,” he said.

Bartos added the lack of progress was likely because rebuilding skills within the public service took time, spending was being carried over from existing contracts, and some projects, such as longitudinal surveys and opinion polls, could only be done externally.

The data has been released by Gallagher after a 2024 inquiry following the PwC tax leaks scandal recommended publication of biannual statements detailing government spend on consultancy contracts worth $2 million or more.

The first biannual statement, for July to December 2024, showed active contracts totalling more than $514 million. Many contracts will overlap between that period and the more recent one.

The biannual statement for the first six months of this year reveals more than $27 million went to Scyne Advisory, the company created after PwC Australia offloaded its government business to distance itself from its tax leaks scandal.

More than $49 million went to EY, $46 million to Deloitte, and $10.7 million to KPMG in the past six months.

The largest contract, of more than $30 million over three years, was with global consulting firm Jacobs Group. It was hired by the Department of Infrastructure for an environmental investigation.

Other big contracts include more than $21 million in spending by the High-Speed Rail Authority to pursue a 2022 election pledge by Albanese for a train from Newcastle to Sydney, before developing into a broader Melbourne to Brisbane line by the second half of this century.

The Australian War Memorial – which has been under major redevelopment in Canberra – spent more than $26 million.

Senator James Paterson said Labor would be judged on the results of proposed consultant cuts.

“Labor talked a big game before the election about the billions of dollars of savings they will make by cutting consultants and contractors without affecting the delivery of government services. Now they have to deliver,” the shadow minister for finance, government services, and the public service said.

“Australians expect government services to be delivered on time and within budget – they don’t share Labor’s ideological obsession for public servants over private sector partnerships.”

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