McKinsey paid $2m more for govt digital trade work

Denham Sadler
National Affairs Editor

Consulting multinational McKinsey will be paid nearly $2 million over just two months to continue working on the federal government’s simplified trade system project, bringing its total bill for the work to just under $3 million in six months.

The Simplified Trade System program of work, run by Austrade, involves simplifying Australia’s international trade regulations, modernising outdated ICT systems and strengthening economic resilience.

Austrade recently signed a $1.815 million contract with McKinsey  for work on this project, running from 14 February to 29 April – just 74 days. This equates to the global consulting giant being paid just under $25,000 per day over the course of the contract.

The new contract overlaps with a previous contract Austrade has with McKinsey, worth just over $1 million and running from October last year to April 2022.

The federal government created a Simplified Trade System Implementation Taskforce in June last year, chaired by former Digital Transformation Agency chief executive Randall Brugeaud. The taskforce includes officers from a range of departments, including Home Affairs, Agriculture, Industry, Finance and Austrade.

Last year’s budget set aside $37.4 million over three years to the Simplified Trade System, with most of this money to be spent in the 2021-22 financial year. A further $32.1 million was allocated in the MYEFO to “deliver options to enhance cross-border trade alignment and data sharing and to coordinate reforms across government”.

The project involves “cutting red tape and simplifying border processes”, with an aim to help exporters boost productivity and save time and money by reviewing international trade regulations and modernising outdated IT systems.

A few months after forming the taskforce, Austrade handed McKinsey a $1.001 million contract for a “simplified cross-border trade digital roadmap”. As part of this work, the consultancy will contribute an information and communications technology scoping study and a simplified cross-border trade digital roadmap.

The Opposition scrutinised this contract and asked Trade minister Dan Tehan a series of questions about it, including details on specific outputs, the hours the consultants will work and why it could not be done in-house.

Dan Tehan
Trade Minister Dan Tehan

But Mr Tehan declined to provide any substantial details on it, saying that McKinsey is providing “specialist strategic expertise and support” on the project.

The outputs produced by McKinsey will be handed to the trade taskforce, which reports directly to Mr Tehan and is receiving only “administrative support” from Austrade.

The latest contract will now see McKinsey paid more than $2.8 million over the last six months for work on the Simplified Trade Systems program for Austrade, alongside the newly formed taskforce.

McKinsey’s first digital trade contract was criticised by the Opposition for contributing to a trend of the public service being used as “merely a secretarial service to the minister”.

“This contract is a great example of this approach, where a nearly $40 million taskforce has to outsource all the strategic and policy thinking and the Department is left to provide ‘administrative support’,” Shadow Minister for the Public Service Katy Gallagher told earlier this year.

McKinsey grew its revenue from the federal government by 75 per cent in the 2020-21 financial year compared to the previous year, a jump of $25.2million. McKinsey earned $58.6 million from its Canberra business in the last financial year.

In the 2020 calendar year McKinsey saw its federal government contracts nearly triple in value, and the firm remained steady in the following year, with just over $50 million paid to it in 2021.

McKinsey was recently brought in by the Industry department to provide modelling work for the government’s net-zero emissions plan, and advice on how to increase the supply of rapid antigen tests for Covid-19.

Austrade was contacted for comment on the latest McKinsey contract.

Do you know more? Contact James Riley via Email.

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