The kinds of conflicts of interest that triggered a scandal at global firm PwC are “rife” within the consulting industry, according to former senior officials and independent experts.
The federal government has also been warned consultancy firms may be tailoring their advice to government to earn more money, instead of giving frank and fearless advice in the best interests of taxpayers.
On Monday night, the chief executive of PwC Australia Tom Seymour resigned after the sustained criticism of the firm allegedly profiting from sharing confidential government tax policy with colleagues.
PwC, like many large consultancy firms, is paid by government to provide policy advice and to access confidential or protected information. At the same time, seperate division within the firm charge businesses for their insights and specialist knowledge.
A senate inquiry into the government’s use of consultants was warned last week that this arrangement poses an unacceptable risk of conflicts of interest, which are sometimes difficult to detect and avoid despite best efforts.
Dr Erin Twyford, a senior lecturer at the University of Wollongong who has previously worked for consultancy firm Deloitte, told the inquiry that conflicts of interest were “rife within the engagement of consultants”.
“There is an entrenched relationship between the consulting industry, shareholder-value maximising firms and what I perceive as a hollowed out and risk averse public sector,” Twyford told the inquiry.
“Big consulting firms are secretive partnerships, not companies, and they do not have to disclose where their money is coming from, even though they are the most powerful private institutions in the world.”
Prof Fran Baum, a public health expert at the University of Adelaide’s Stretton Institute, questioned the government’s ability to scrutinise any conflicts of interest given consultancy firms don’t always publicly disclose their clients.
“These consultancy firms are now forming a shadow public service, in effect,” Baum told the inquiry.
“There is now so much work contracted out that it means a whole lot of the work of public servants is on managing those contracts. That’s obviously … detracting from other areas of their work, but also probably pushing their capacity to do so as effectively as they would like.”
Andrew Podger, a former Australian public service commissioner and former health department secretary, said consultants may be influenced by commercial motives when giving government advice.
“There is a [risk], when you become reliant on consultants and the consultants also want to continue to get business, that they may tailor their work in order to ensure that they get future business and they won’t necessarily be as independent as you would desirably want,” Podger told the inquiry.
“I think this does occur from time to time.”
Earlier this year, the federal government awarded PwC an $8.7m contract to collect sensitive data from aged care providers and to create a new pricing framework, despite another unit of the firm charging providers for advice on strategy and pricing.
The government admitted public servants did not have the capability to complete the work before deadline without help from consultants, and stressed potential conflicts of interest were being carefully monitored.
Podger, who is now an honorary professor of public policy at the Australian National University, said an over-reliance on consultants had seriously eroded the capability of the public service.
A recent audit found the Morrison government spent nearly $21bn outsourcing more than a third of public service operations in just one year.
“I think the public service remuneration arrangements that we’ve got at the moment are not designed to attract, develop and retain the best talent,” Podger said.
