Government urged to rethink reliance on big 4 firms
The PwC scandal highlights significant conflict of interest risks due to the government’s heavy use of consulting firms, a university warns.
RMIT University said the PwC federal tax scandal demonstrates the need for the government to address its over-reliance on the services of big four consulting firms and have clearer guidelines informing their operations.
PwC is currently undergoing an independent review after revelations emerged about breaches of confidentiality agreements over multinational tax changes.
Treasury has referred the matter to the Australian Federal Police to consider the commencement of a criminal investigation.
RMIT associate professor of finance Angel Zhong said it is inevitable that conflicts of interest will arise where private consulting firms advise and assist governments but also provide services to clients in the private sectors on related issues.
Dr Zhong said the PwC event reflects an increasing reliance on consulting agencies by the government and the issues that raises.
“In the final year of the Morrison government, audits found that $20.8 billion was spent on consulting services and outsourcing public services,” she stated.
“This practice reflects a lack of investment in the public sector.
“There are several instances where consulting firms are hired for large contracts despite lack of expertise.”
Federal government to review its outsourcing policy
As part of its response to the PwC scandal, Minister for Financial Services Stephen Jones said the Labor Party plans to have fewer outsourced contracts moving forward and build up the capacity of the public service.
“It’s the right thing to do, but it also costs less. The amount of money we’re spending on contractors makes my eyes water, and I think a lot of that work could be done better in house,” said Mr Jones in an ABC interview last week.
The government will also apply a new ethics test to the letting of any new contract.
“For everybody who’s providing services to the Commonwealth ethics, the way you behave, will impact on the way and your ability to win Commonwealth Government contracts. That’s in the context of us wanting to bring more work back in house,” said Mr Jones told Sky News last week.
“Over a decade, we’ve run down the capacity of the Commonwealth. We need to ensure that we’re rebuilding Commonwealth Government public service capacity, which means we have less reliance on outsourcing.”
Greens Senator David Shoebridge revealed at a senate estimates committee last week that the defence department had signed two contracts with PwC after the tax leak scandal was known about and had several others worth more than $223 million with the firm.
The Greens are also calling on governments at the state level to put a pause on contracts to PwC.
Deputy Leader of the Victorian Greens Ellen Sandell said the Victorian Labor government should freeze any future contracts with PwC, stating that the fundamental conflicts of interest are “hurting Victoria and profiting a wealthy few”.
“There are fundamental conflicts of interest here but the Labor Government keeps burying their heads in the sand,” said Ms Sandell.
“The boys’ club of revolving doors between government and consultancies must end – the Premier should make the right decision in the public interest and freeze all contracts with PwC.”
The Reserve Bank of Australia (RBA) and industry super fund Australian super have both announced they will not enter into any new contracts with PwC as the investigation of the matter unfolds.
Mayowa Babalola, Professor of management at RMIT University said this was a commendable move by the RBA.
“The Australian public is now watching whether the government will move in this direction,” said Mr Babalola.
“Undoubtedly, the Australian government needs to declare its stance on this issue publicly. By not doing so, the government will indirectly signal that such behaviours are acceptable, which is likely to have a ripple effect.
Mr Babalola said there may be other practices within PwC and the other big four consulting firms that have not yet been uncovered.
“Regardless of the outcome of the PwC scandal, there is a need for greater scrutiny and accountability when it comes to the activities of the Big four consulting firms,’ he said.
“The government should work to ensure that these firms are held to the highest standards of transparency and accountability and that their actions are always in the best interests of Australian taxpayers and the public at large.”
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