James Riley
August 13, 2019

Rolled-gold: ServicesAus deal

McKinsey

Rolled-gold: ServicesAus deal

Outsourced: Big-brained consultants and their bigger fees undermining trust

Revelations that the federal government is paying McKinsey a standard “day rate” of up to $16,000 for senior partners to provide strategic advice on the design of government services are extraordinary. And eye-watering.

Government Services minister Stuart Robert’s promise to put “people at the centre of government” is sounding somewhat hollow, given one of his first acts as the new minister was to lock-in this extraordinary outsourcing arrangement.

At $16,000 per day, a senior partner from McKinsey is earning $80,000 per week, or $320,000 per four-week month. That’s $3.84 million for a 48-week year. That’s a stunning run-rate, fully derived from a very deep trough.

These dollars are being spent on management advisory services for the Department of Human Services, which among other things, delivers social welfare payments through programs like Centrelink, Medicare and the Child Support Agency.

To put the McKinsey senior partner day-rate in perspective, it is worth remembering that the maximum a single person Newstart recipient gets via Centrelink is $275 per week.

Given the $80,000 per week the adviser takes home – a mere 290 times more than welfare recipient that McKinsey has been hired to put at the centre of government services – you have to wonder how they relate.

Welfare recipients will be hopeful that these giant and expensive McKinsey brains can figure out a way to deliver a welfare service without having to then follow it up with a punitive and destructive scheme like Robo-debt, putting thousands of $275-a-week Australians under extreme duress.

There is a curious aside to this. McKinsey signed two separate contracts with the Department of Human Services for management advisory services.

The first was worth $5.9 million over three years.

The second contract was worth $858,000 (and includes a sub-contracting role for KPMG) for six weeks work helping Martin Hoffman – who was most recently Secretary to the NSW Department of Finance – to come up with a strategic plan for Services Australia.

Mr Hoffman is leading the Taskforce through a six-week process that will deliver a strategic plan for Services Australia. Mr Hoffman is contracted to the Department of Human Services separately from the McKinsey-KPMG deal.

It is not clear what role Mr Hoffman will take after the strategic plan is delivered to government on August 23, but it will doubtless be watched with great interest.

The liberal use of external consultants at Human Services to do the strategic thinking on service delivery does put a huge question mark over the role of the Digital Transformation Agency. What is its point?

Shadow government services minister Bill Shorten said he was also worried about the use of external consultants in designing the new Services Australia.

“We are concerned about important public services for vulnerable people increasingly being run like they are private profit-seeking corporations,” Mr Shorten told InnovationAus.com.

“Ensuring taxpayers get value for their money should mean watching that outsourced consultants are not ruthlessly profiteering at the expense of the people,” he said.

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