Outsourcing crackdown saves NSW $450m


Joseph Brookes
Senior Reporter

A squeeze on external consultants and individual contractors by the Minns government has saved the state nearly half a billion dollars, NSW Finance minister Courtney Houssos announced over the weekend.

The bulk of the savings came from controls to limit the number of individual contractors doing the work of public servants, while an edict to reduce the reliance on firms like KPMG, Deloitte, EY and PwC shaved $72 million of NSW’s annual consulting bill.

Ms Houssos, who is also overhauling the state’s procurement system, pledged to continue the outsourcing crackdown, including a new unit within the Premier’s Department to channel agencies to in house options.

NSW Finance minister Courtney Houssos says more work is needed to arrest a surge in outsourcing

The $450 million savings in Labor’s first full year in government came after a state audit office finding that consultant spending had reached eye watering levels in the final years of the former Coalition government.

The 2023 audit revealed agencies had been breaking procurement rules, failing to manage contracts and using only a handful of global consulting giants while handing more than $1 billion to consulting firms between 2017-18 and 2021-22.

The damning audit landed just before the 2023 NSW election, bolstering Labor’s argument for a crackdown.

A follow-up report last year by the government found that using public servants over outside suppliers is often significantly cheaper and helps retain public sector knowledge and talent.

On Saturday, Ms Houssos revealed the latest figures and said the growth in consultant spending under the Berejiklian and Perrottet governments was “out of control”.

“Delivering on these savings required a forensic approach to the state’s accounts and a culture shift which prioritises harnessing the expertise and knowledge within the existing public service,” she said.

“Instead of wasting money, we’re bolstering the public service’s capacity and focusing their efforts on what matters most to families and households in NSW. Given the scale of the problem we inherited, there is still much work to do.”

Ms Houssos has also committed to defining “core” public sector work and requiring it to be done in house, alongside tighter procurement rules.

At the federal level, the Albanese government has also touted a $4 billion clawback from reduced spending on consultants and contractors, after outsourcing blew out to nearly $21 billion a year under the Morrison government.

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