‘Outsourcing explosion’ in NSW, department’s cost controls criticized

A new report has shed light on the extent of reliance on consultants in New South Wales, with a new report released by the Labor Party suggesting the previous government hired consultants at a rate of one hire every hour for five years.

The research report, which will be tabled in Parliament next week, reveals that the Liberal-National Coalition government had issued 10,006 consultancy contracts in its last five years in office (2017-18 and 2021-22).

Nine of the top 15 contracts for internal organizational operations and management services were awarded to big four consultancies KPMG, Deloitte, EY and PwC.

NSW Treasurer Daniel Mookhey and Finance Minister Courtney Houssos issued a statement on Monday describing the report’s findings as an example of “waste and mismanagement”.

Under Labour, they added, an election commitment to reduce consultancy spending by $35 million a year was on track to be met.

“It is the Labor Party that has had to clean up its mess and repair the budget, a task made even more difficult by the wasteful spending of the previous Liberal-National government,” Houssos said.

NSW Labor says it has now given government agencies “strong controls and clear instructions” to control the costs of hiring consultants.

In the wake of national scandals involving PwC and other consultancies, the New South Wales government has been forced to implement additional probity measures over the past 18 months.

Among the reforms are fines for “betrayal of trust” for any person or entity found to have obtained information from confidential tax conversations with the government. Penalties for the crime exceed $1.1 million for individuals and $5.5 million for corporations.

Ahead of next month’s state budget, Mookhey and Houssos have also indicated new measures are being considered to reduce over-reliance on consultants and rebuild the NSW public sector.

“Given the magnitude of the previous Liberal government’s waste, it will take time to reverse it,” Houssos said.

“The cost controls and probity measures we have put in place were a necessary step that the previous government should have taken years ago.”

Other insights from the report show that in the last five years of the NSW Coalition government, so-called “generalist work”, including policy design, program evaluation, strategy development and business cases, it was subcontracted in more than 1,523 contracts (15%) for a total of $196.7. million.

The report found that using existing government resources could have halved the cost of some projects, and that at least 87% of spending on external consultants in 2021-22 was with private providers, while only 2% of the spending was with universities.

The treasurer said the Labor Party was committed to building a better public service by investing in the government’s essential workforce.

“We would prefer to invest more in the essential services that communities depend on and pay less to outside consultants. Many of these basic functions can and will be performed by a strong public service,” Mookhey said.

“This is a key part of the government’s ongoing work to clean up the waste we inherited.”

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