The Times Australia
The Times World News

.

How reliance on consultancy firms like PwC undermines the capacity of governments

  • Written by Helen Dickinson, Professor, Public Service Research, UNSW Sydney
How reliance on consultancy firms like PwC undermines the capacity of governments

In the wake of the PwC scandal[1], there is renewed interest in the work of outside agencies within Australian government.

Earlier this year, an audit showed almost A$21 billion[2] was spent on external labour hire in the Australian Public Service in 2021-22.

Contained within this figure is a significant jump in the amount spent on consultants. While some outsourcing will be to fill genuine gaps, there is evidence that overreliance on consultancies can undermine the longer-term capability of the public service.

Read more: Grattan on Friday: the PwC scandal should be ripe for the National Anti-Corruption Commission's attention[3]

Consulting is a global business

Australia is not the only country with an interest in consultants. It is a truly worldwide phenomenon that spans government and private business. In 2023, it is estimated the global management consultants market is worth over $US860 billion[4].

However, Australia’s consulting industry (made up of public and private sector spending) is the fourth largest[5] in the world, and significantly larger than other comparable countries.

External organisations undertake a broad range of functions, including giving advice on strategy, accounting services and IT services. Sometimes entire government functions (for example, operating offshore detention facilities[6]) are outsourced.

The use of outside labour has a long and interlinked history. Their worldwide rise started following a number of reforms from the late 1970s that aimed to introduce more market-based structures into public services. This transformed the corporate structures of governments[7].

Governments were encouraged to outsource a range of functions (such as delivering disability or employment services) on the basis that they could contract this to firms that could do this more effectively and efficiently. Governments could stick to making policy and ensuring this delivered the outcomes consumers wanted.

But the separation of policy design and management from service delivery was not as simple as it might have first appeared. In separating these functions, many governments have experienced a “hollowing out[8]”, losing the knowledge, skills and institutional memory that is key to managing services.

And so this had a snowballing effect, with governments increasingly turning to consultants to carry out the jobs they once did.

Consultants in the Australian Public Service

Over the past decade, the total volume of consultancy work undertaken for the APS by the so-called “Big Four” consultancy firms has increased 400%[9] from $282 million in 2012-13 to over $1.4 billion in 2021-22.

Most often the reason given for contracting consultancies is a “need for specialised or professional skills[10]”. This may be because, the rationale goes, the skills don’t exist within the APS or because an external perspective is needed that can’t be gained from internal employees.

Read more: Consultants like PwC are loyal to profit, not the public. Governments should cut back on using them[11]

But some believe a culture of preferencing advice[12] from consultants over the public service has taken hold. At times, this can lead to governments receiving the advice they want rather than a more rounded view of an issue.

The use of consultants within government doesn’t always mean these skills are not available in the APS. One important issue to consider is the level of APS staffing. After the 2015-16 budget, the previous government constrained the size of the APS to around the 2006-2007 average staffing level of just over 167,500. It is argued[13] this cap on staffing numbers left the APS unable to undertake all the work it needed to do, making it reliant on consultants to fill gaps.

The Australia Institute argues the $1.1 billion spent on consultancy services in 2018-19 could have employed an extra 12,346[14] public servants. It notes that, in reality, consultants are often paid at a much higher rate than public servants.

Implications for public service capability

A number of inquiries and reviews have expressed concern that reliance on consultants has long-term impacts for the public sector.

In 2019, the Independent Review of the APS[15] found labour contractors and consultants were increasingly being used to do work that had been core public service capability, such as program management.

These findings were confirmed in a 2021 Senate Finance and Public Administration Reference Committee report[16] on the capability of the Australian Public Service. It found that when government spends money on policy advice from private consulting firms, this undermines public service capability.

Read more: PwC scandal shows consultants, like church officials, are best kept out of state affairs[17]

The Community and Public Sector Union has argued that consultants are often engaged to do more strategic and complex work[18] that APS employees should be doing. All too often, public servants are asked to provide administrative support to consultants, and therefore miss out on opportunities to develop their skills and expertise.

These issues have also been noted in other countries. Most notably in the UK, Lord Agnew of Oulton noted[19] the UK civil service was “too reliant on consultants. Aside from providing poor value for money, this infantilises the civil service by depriving our brightest people of opportunities to work on some of the most challenging, fulfilling and crunchy issues.”

When consultants undertake entire areas of work, the requisite skills and knowledge are not transferred to the APS. In effect, this sets up a negative feedback loop, where APS employees lose skills and institutional knowledge because of the reliance on consultants, meaning the next project or piece of work needs the input of consultants.

Time for change

Although concerns about public sector capability have been around for more than a decade, there is some sign action might finally be taken. A Senate Finance and Public Administration References Committee inquiry[20] into the management and assurance of integrity by consulting services is due to report by the end of September. It will likely make a number of recommendations about the use of consultants.

The recent federal budget announced the government was committed to rebuilding the capability of the APS, increasing average staff numbers by around 10,800[21]. This figure includes a number of individuals on external labour hire arrangements who will effectively be brought in-house.

But restricting the use of consultants will be just one step in rebuilding the APS and its capability. Significant investment[22] and a change of culture are both needed if the use of consultants is to decrease substantially.

References

  1. ^ PwC scandal (theconversation.com)
  2. ^ A$21 billion (www.finance.gov.au)
  3. ^ Grattan on Friday: the PwC scandal should be ripe for the National Anti-Corruption Commission's attention (theconversation.com)
  4. ^ $US860 billion (www.ibisworld.com)
  5. ^ fourth largest (australiainstitute.org.au)
  6. ^ operating offshore detention facilities (www.theguardian.com)
  7. ^ transformed the corporate structures of governments (www.theguardian.com)
  8. ^ hollowing out (www.themonthly.com.au)
  9. ^ 400% (publicintegrity.org.au)
  10. ^ need for specialised or professional skills (www.anao.gov.au)
  11. ^ Consultants like PwC are loyal to profit, not the public. Governments should cut back on using them (theconversation.com)
  12. ^ preferencing advice (parlinfo.aph.gov.au)
  13. ^ argued (www.abc.net.au)
  14. ^ 12,346 (australiainstitute.org.au)
  15. ^ Independent Review of the APS (www.pmc.gov.au)
  16. ^ Finance and Public Administration Reference Committee report (parlinfo.aph.gov.au)
  17. ^ PwC scandal shows consultants, like church officials, are best kept out of state affairs (theconversation.com)
  18. ^ more strategic and complex work (www.pc.gov.au)
  19. ^ noted (www.theguardian.com)
  20. ^ Senate Finance and Public Administration References Committee inquiry (www.aph.gov.au)
  21. ^ 10,800 (budget.gov.au)
  22. ^ Significant investment (www.abc.net.au)

Read more https://theconversation.com/how-reliance-on-consultancy-firms-like-pwc-undermines-the-capacity-of-governments-207020

Times Magazine

Headless CMS in Digital Twins and 3D Product Experiences

Image by freepik As the metaverse becomes more advanced and accessible, it's clear that multiple sectors will use digital twins and 3D product experiences to visualize, connect, and streamline efforts better. A digital twin is a virtual replica of ...

The Decline of Hyper-Casual: How Mid-Core Mobile Games Took Over in 2025

In recent years, the mobile gaming landscape has undergone a significant transformation, with mid-core mobile games emerging as the dominant force in app stores by 2025. This shift is underpinned by changing user habits and evolving monetization tr...

Understanding ITIL 4 and PRINCE2 Project Management Synergy

Key Highlights ITIL 4 focuses on IT service management, emphasising continual improvement and value creation through modern digital transformation approaches. PRINCE2 project management supports systematic planning and execution of projects wit...

What AI Adoption Means for the Future of Workplace Risk Management

Image by freepik As industrial operations become more complex and fast-paced, the risks faced by workers and employers alike continue to grow. Traditional safety models—reliant on manual oversight, reactive investigations, and standardised checklist...

From Beach Bops to Alpine Anthems: Your Sonos Survival Guide for a Long Weekend Escape

Alright, fellow adventurers and relaxation enthusiasts! So, you've packed your bags, charged your devices, and mentally prepared for that glorious King's Birthday long weekend. But hold on, are you really ready? Because a true long weekend warrior kn...

Effective Commercial Pest Control Solutions for a Safer Workplace

Keeping a workplace clean, safe, and free from pests is essential for maintaining productivity, protecting employee health, and upholding a company's reputation. Pests pose health risks, can cause structural damage, and can lead to serious legal an...

The Times Features

The Role of Your GP in Creating a Chronic Disease Management Plan That Works

Living with a long-term condition, whether that is diabetes, asthma, arthritis or heart disease, means making hundreds of small decisions every day. You plan your diet against m...

Troubleshooting Flickering Lights: A Comprehensive Guide for Homeowners

Image by rawpixel.com on Freepik Effectively addressing flickering lights in your home is more than just a matter of convenience; it's a pivotal aspect of both home safety and en...

My shins hurt after running. Could it be shin splints?

If you’ve started running for the first time, started again after a break, or your workout is more intense, you might have felt it. A dull, nagging ache down your shins after...

Metal Roof Replacement Cost Per Square Metre in 2025: A Comprehensive Guide for Australian Homeowners

In recent years, the trend of installing metal roofs has surged across Australia. With their reputation for being both robust and visually appealing, it's easy to understand thei...

Why You’re Always Adjusting Your Bra — and What to Do Instead

Image by freepik It starts with a gentle tug, then a subtle shift, and before you know it, you're adjusting your bra again — in the middle of work, at dinner, even on the couch. I...

How to Tell If Your Eyes Are Working Harder Than They Should Be

Image by freepik Most of us take our vision for granted—until it starts to let us down. Whether it's squinting at your phone, rubbing your eyes at the end of the day, or feeling ...