Australian government spending on global consultant companies jumped 23 per cent or $225 million during the 2020 pandemic year compared to 2019. But the increase was not unexpected given the demands of the health crisis, and nor was it incompatible with building public sector tech capability, the industry’s peak body says.
While critics of government’s reliance on outside consultants say the big increase in spending accelerates the existing trend toward outsourcing technology work – further eroding internal capability – the Australian Information Industry Association (AIIA) said the uptick was the result “extenuating circumstances” created by COVID-19.
This did not undermine the government’s overall aim of building public sector tech capability.
“There will always be a need for outsourcing, especially when there’s a need for rapid deployment or [skill] depth that we don’t have readily available internally,” AIIA chief executive Ron Gauci told InnovationAus.
“But I do believe that it is the intent of the public sector to build internal and domestic capability and capacity, and we’re supportive of that.”
Analysis by InnovationAus showed just how much the floodgates opened for global consulting firms last year, now taking more than $1.2 billion dollars a year in government contracts.
In response to the reports, Mr Gauci said he had not seen evidence the huge amount of taxpayer money going to a small group of consultants for ICT projects had “slowed down or distracted from the other investments” in building domestic capability and capacity.
“We can tend to get lost in some of the larger outsourcing projects and forget that [it] appears there’s a fair bit of investment at the smaller project end as well, where domestic organisations are winning contracts as well.”
The AIIA chief also points to the shortage of ICT skills generally in Australia, a challenge affecting both public and private organisations and driving outsourcing.
“Even our member organisations can’t get enough skills and resources. So, the AIIA itself is working with other associations and other industries to determine what that demand is going to look like.
“We have a capacity and capability situation across the whole country that needs to be addressed by the entire economy, not just the public sector.”
Mr Gauci acknowledged, however, the Prime Minister’s goal to grow Australia to a leading digital economy by 2030 is now likely off track.
An “ambitious” goal when it was set has been pushed further afar by a pandemic and slow progress on understanding even the current digital capabilities and demands, Mr Gaucci said.
He said digital initiatives would need to be accelerated to have any chance at meeting the mark.
University of Canberra Law School assistant professor Dr Bruce Arnold agrees that the jump in contracts to large consultants was not surprising and likely necessary in several cases.
But he warned that the practice was part of an ongoing “hollowing out” of the Australian public sector that is now set to accelerate.
In that sense, he said, the increased reliance on consultants is “profoundly concerning”.
“What we’re seeing is basically ongoing erosion of capacity right across the public sector in a range of ways,” Dr Arnold told InnovationAus.
The recent surge in projects to big providers was not surprising, Dr Arnold said, because the firms offer a “safer” option for public servants and the ministers they report to.
“Going for a collection of smaller projects [and] smaller providers [creates] perceptions that say you haven’t managed risks and therefore you’ll get into trouble when you get grilled by an estimates committee.”
The risk now, according to Dr Arnold, is the uptick in consultancy use would reinforce their grip on government agencies and a preference for “mega projects” that only the big firms can deliver. That meant local SMEs would get even less of a look in.
“There are [more] rationales there for thinking big. And small competitors basically just won’t be competitive.
“They don’t have scale, they don’t have the track record. So, when you’re going for a big project, you’ll go for a big provider.”
Government departments, entities and statutory authorities are increasingly reliant on consultants, Dr Arnold said, creating a skills “bleed” from within the public sector. Technology workers in the sector were leaving it in favour of the higher paying and at times less scrutinised jobs offered by the consultants and tech giants.
According to Dr Arnold, the bleed “is problematic during Black Swan events like the pandemic where domestic capability comes to the fore. But also, when the government ostensibly harbours ambitions to elevate Australia amongst the world’s leading digital economies.
“We’ve had a lot of rhetoric in the last couple of years about digital leadership, digital transformation and so on. But at the same time, we’re seeing very much a hollowing out of capacity right across government.”
“We’re in the stage where in some areas where basically you don’t have a choice, you’ve got to go outside.”
He said the public sector skills bleed, on top of often poor project design, low levels of transparency and accountability is “a recipe for a very expensive mess” that Australia will struggle to get out of.
“What we see is sort of noise from say the DTA about grand strategies, plans, integration of services, breaking down silos [and] the data transparency and availability regime.
“But in practice it’s ‘We’re hooked on it’ – hooked on the big service providers.”
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