WEBVTT - Disgraced consultancy given deal to run government ‘ethics' training

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<v Speaker 1>From Schwartz Media. I'm Ashlin McGee. This is seven am.

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<v Speaker 1>If you're a public service head honcho, when you were

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<v Speaker 1>picking a firm to run ethics training, would one of

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<v Speaker 1>the big four private consulting firms be your first pick.

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<v Speaker 1>They've rightly been under pretty intense scrutiny in the media

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<v Speaker 1>around in the Senate, which will today release a report

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<v Speaker 1>with recommendations to clamp down on the sector. The consulting

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<v Speaker 1>giants had been making billions of dollars from government work,

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<v Speaker 1>but that's all coming to an end today the Saturday Papers,

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<v Speaker 1>Jason katsukis on what that crackdown might entail and why

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<v Speaker 1>the public service still thinks the consulting firm is best

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<v Speaker 1>place to run ethics training for its leaders. It's Wednesday,

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<v Speaker 1>June twelve. Jason, I think we've just got to get

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<v Speaker 1>into the heart of this story straight up. You've been

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<v Speaker 1>looking at the consulting industry. Tell me about this pretty

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<v Speaker 1>extraordinary contract that you found out about so Ashland.

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<v Speaker 2>At the Senate Estimates Committee hearing for the Department of

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<v Speaker 2>Prime Minister and Cabinet last week, one of the key

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<v Speaker 2>witnesses was the people from the Australian Public Service Commission.

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<v Speaker 3>I declare open this hearing of the Senate Finance and

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<v Speaker 3>Public Administration Legislation Committee into the twenty twenty four to

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<v Speaker 3>twenty five budget estimates.

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<v Speaker 2>Today we begin and I was watching the proceedings of

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<v Speaker 2>this committee. Barbara Pocock, the Green Senator, was doing the questioning.

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<v Speaker 2>She's always someone that I'm interested in following because she's

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<v Speaker 2>very forensic in her questions.

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<v Speaker 4>And when she asked.

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<v Speaker 2>A fairly routine question of the Public Service Commission, have

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<v Speaker 2>you got any new contracts with any of the big

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<v Speaker 2>four consultancies?

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<v Speaker 4>And they said yes.

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<v Speaker 2>They revealed that they had engaged KPMG Australia to run

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<v Speaker 2>an Ethics of Leadership course for the Australian Public Service Academy.

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<v Speaker 3>Does the Commissioner have any active contracts with any of

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<v Speaker 3>the big four consulting firms at present?

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<v Speaker 4>So? Have you familiar to take you once?

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<v Speaker 5>So currently we have one active contract with KPMG. They're

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<v Speaker 5>delivering our leadership program delivery support service for the.

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<v Speaker 2>Academy, and which is quite extraordinary when you look at

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<v Speaker 2>the kinds of things that KPMG has been accused of

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<v Speaker 2>over the last four to five years, not just here

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<v Speaker 2>in Australia but around the world. When I spoke to

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<v Speaker 2>Barbara Pocock after the committee hearing, she told me just

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<v Speaker 2>how shocked she was. Barbara Polclock said to me that

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<v Speaker 2>this is the type of public service contract that big

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<v Speaker 2>four firms dream about.

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<v Speaker 3>Commissioner, why do you turn to an external consulting firm

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<v Speaker 3>to teach leadership inside the APS?

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<v Speaker 4>Doctor manages, I will come back, but thank you.

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<v Speaker 2>Too, m sure, And then the subject matter really flawed me.

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<v Speaker 2>The idea that you would get someone like KPMG to

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<v Speaker 2>run a course on ethics of leadership left me feeling,

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<v Speaker 2>you're quite stunned. Why would she turn to KPMG to

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<v Speaker 2>talk about ethics?

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<v Speaker 3>Conflict of interest would be a topic they know a

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<v Speaker 3>lot about. Yeah, tragically, Why you would bring a firm

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<v Speaker 3>in like APMG, with its track record in this country

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<v Speaker 3>and internationally, to teach anything to do with the ethics

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<v Speaker 3>of leadership is shocking proper position to me.

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<v Speaker 2>Judging from the way that the APSC people were responding

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<v Speaker 2>to Senator Pocock's questions, I got the sense that they

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<v Speaker 2>were a little bit embarrassed about what about the contract

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<v Speaker 2>that they'd signed, That they were embarrassed having to explain

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<v Speaker 2>the detail.

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<v Speaker 4>They just looked to me a little bit sheeapish about.

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<v Speaker 3>It, just curious about the KPMG contract. It is teaching

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<v Speaker 3>to supply leadership training in the academy.

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<v Speaker 4>Yes, and I can speak a little bit more about that.

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<v Speaker 2>So, as you would know, many of these firms have

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<v Speaker 2>many different functions, different parts. The Australian Public Service Commissioner,

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<v Speaker 2>Gordon de Brewer, he stepped in to help explain the

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<v Speaker 2>context around this contract. The minister representing Prime Minister and

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<v Speaker 2>Cabinet in this instance, Katie Gallagher, the Minister for Finance.

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<v Speaker 2>She jumped in pretty quickly to try and explain that well,

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<v Speaker 2>there was an open tender process here surrounding the awarding

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<v Speaker 2>of this contract.

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<v Speaker 4>And I got the feeling that she was just a

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<v Speaker 4>bit defensive as.

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<v Speaker 2>Well, that they could see just how this actually looked

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<v Speaker 2>in the cold hard light of day, because they've.

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<v Speaker 6>Gone through they've gone through, you know, a proper procurement process,

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<v Speaker 6>so I think, and I'm trying to just get some information.

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<v Speaker 6>But when it was when I was looking at it,

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<v Speaker 6>there was an argument around why it was important to

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<v Speaker 6>have an external facilitator or an external person.

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<v Speaker 2>In estimates week there's so much going on that everyone

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<v Speaker 2>just missed it. You know, what made this a kreme

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<v Speaker 2>de la creme contract wasn't that it's a one point

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<v Speaker 2>three million dollar contract. It's the fact that it puts

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<v Speaker 2>KPMG in front of three hundred top public servants and

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<v Speaker 2>how they can use that as a kind of farming opportunity.

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<v Speaker 4>That's what Barbara Pocock taught me.

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<v Speaker 2>This is a way for them to find out who's

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<v Speaker 2>doing what and who's good, who's not, who's worth recruiting,

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<v Speaker 2>who can help them win news business, to create a

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<v Speaker 2>brand new power map, if you like, based on what

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<v Speaker 2>they learned from running this course.

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<v Speaker 1>And they call this power mapping, don't they when they

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<v Speaker 1>look at the most influential people in an organization? Tell

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<v Speaker 1>me about that.

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<v Speaker 2>One of the things that got Barbara Pocock into the

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<v Speaker 2>headlines last year was her questioning of the KPMG Australia

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<v Speaker 2>Chief Executive Andrew Yates.

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<v Speaker 7>The hand side record, could you police state your full

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<v Speaker 7>names and the capacity in which you appear today?

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<v Speaker 6>Andrew Yates, I'm the CEO of KPMG Australia, And.

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<v Speaker 2>She'd asked him whether KPMG engaged in this practice known

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<v Speaker 2>as power mapping, where big four consultancies draw maps of

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<v Speaker 2>who's who in the different government departments and they work

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<v Speaker 2>out which public servants they can use to help win

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<v Speaker 2>new buses business and Andrew Yates strenuously denied.

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<v Speaker 7>He said, no, are you responded to a question about

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<v Speaker 7>power mapping and you responded unequivocally that KPMG Australia does

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<v Speaker 7>not engage in powermapping, mapping or any other similar practice.

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<v Speaker 4>You recall an answer I do, Senator.

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<v Speaker 2>Yeah, And then she was able to hold up a

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<v Speaker 2>power map which had KPMG Australia It's brand on the slide.

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<v Speaker 7>Mister Yates, I now want a tender a document that's

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<v Speaker 7>been provided under privilege, so I'll ask that it be circulated.

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<v Speaker 2>You know this slide showed that KPMG had done very

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<v Speaker 2>detailed sort of power mapping in the New South Wales

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<v Speaker 2>public service.

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<v Speaker 7>Can you see that it displays in a high level

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<v Speaker 7>of detail dozens of public servants, including.

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<v Speaker 4>Your photos, Yes, Senator.

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<v Speaker 3>Do you see the box is called relationship.

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<v Speaker 2>Strength, mister Yates, Yes, Senator.

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<v Speaker 7>There appears to describe in those six categories the strength

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<v Speaker 7>of the relationship between particular public servants and the KPMG

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<v Speaker 7>partners and KPMG itself.

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<v Speaker 2>Do you agree, yes, Senator Andrew Yates was put in

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<v Speaker 2>a very difficult situation having his evidence directly contradicted in

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<v Speaker 2>that way, and he immediately tried to backtrack and obfuscate

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<v Speaker 2>and said that, no, this looked like a power map,

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<v Speaker 2>but it wasn't a power map. Senator, given I've just

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<v Speaker 2>seen this document, you need to give me a few

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<v Speaker 2>moments just to respond to that more broadly, because.

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<v Speaker 4>We could get caught up here.

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<v Speaker 5>In a definition about what constitutes of power map.

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<v Speaker 4>I don't need to.

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<v Speaker 2>Certainly, he used all kinds of other euphemisms to try

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<v Speaker 2>and sort of get himself out of it, but it

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<v Speaker 2>wasn't very convincing, and I think he left that committee

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<v Speaker 2>hearing feeling very embarrassed about his testimony.

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<v Speaker 1>So, Jason, this type of incident isn't an isolated incident

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<v Speaker 1>for KPMG, but it's also not an isolated incident for

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<v Speaker 1>the consulting industry as a whole. It's been in the

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<v Speaker 1>spotlight heaps over the past couple of years. Talk me

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<v Speaker 1>through some of the greatest hits for the Big Four.

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<v Speaker 2>The incident that got everyone talking about the Big four

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<v Speaker 2>consultancies and the way they engage with the Australian Public Service.

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<v Speaker 2>In Canberra was the revelation that the Tax Practitioners Board

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<v Speaker 2>had taken action against a senior partner at PwC Australia

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<v Speaker 2>back in twenty sixteen, and that person had used that

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<v Speaker 2>inside knowledge. He'd helped the Treasury write these new tax

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<v Speaker 2>laws and then he'd gone back to PwC and said

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<v Speaker 2>this is what the Australian Government is going to do.

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<v Speaker 2>And PwC used that information and used it to advise

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<v Speaker 2>existing clients that this law was coming into force and

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<v Speaker 2>how to.

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<v Speaker 4>Avoid that new law.

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<v Speaker 2>And then they used the inside information to attract new

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<v Speaker 2>clients and help them avoid paying this new law that

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<v Speaker 2>would be coming into force. So this was an incredible

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<v Speaker 2>breach of trust that PwC had engaged in. Not only

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<v Speaker 2>had they done that, but they then tried to cover

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<v Speaker 2>it up. That information was then leaked to the Australian

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<v Speaker 2>Financial Review. Then some of the members of the Australian

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<v Speaker 2>Senate started asking questions about it, and then once they

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<v Speaker 2>understood the full scope of what had happened in inside PwC,

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<v Speaker 2>they launched this Inquiry into the relationship between consultancies and

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<v Speaker 2>the Australian.

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<v Speaker 1>Government after the break, will the government wheeled a big

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<v Speaker 1>stick or a wil to let us leave when it

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<v Speaker 1>comes to a crackdown on the consulting giants.

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<v Speaker 4>Jason.

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<v Speaker 1>Today a Senate committee will table it's long awaited final

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<v Speaker 1>report into consulting services provided to the federal government. We've

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<v Speaker 1>already had a bit of a taste in the interim

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<v Speaker 1>report that was released last year, but well, today's recommendations

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<v Speaker 1>signal any kind of major crackdown on the consulting industry.

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<v Speaker 2>I think the Senate inquiry is going to recommend new

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<v Speaker 2>ways to regulate the consulting industry. One option is to

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<v Speaker 2>say that big four firms are not allowed to do

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<v Speaker 2>both auditing and consulting, that the conflicts of interest within

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<v Speaker 2>firms that do both of those things auditing and consulting

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<v Speaker 2>are impossible to resolve.

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<v Speaker 4>They're going to have to split because.

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<v Speaker 2>They can't manage the potential conflicts of interest and we've

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<v Speaker 2>seen that happen time and again with consulting firms.

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<v Speaker 1>The government says it's already taken steps to curb the

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<v Speaker 1>influence of consulting firms in politics, talk me through what

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<v Speaker 1>it's done, and I guess is it enough.

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<v Speaker 2>Perhaps the biggest revelation of the last twelve months have

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<v Speaker 2>been the extent to which the Australian public service has

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<v Speaker 2>been hollowed out, so people leaving the public service and

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<v Speaker 2>going to work for the Big Four and taking all

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<v Speaker 2>their expertise with them.

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<v Speaker 4>And this government.

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<v Speaker 2>Back in May twenty two, when Anthony Albinezi came into power,

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<v Speaker 2>one of the first things that they committed to doing

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<v Speaker 2>was rebuilding the public service. And I think the committee

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<v Speaker 2>report that we're going to see released later today is

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<v Speaker 2>going to suggest ways in which the Commonwealth can strengthen

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<v Speaker 2>the public service to keep the focus on rebuilding the

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<v Speaker 2>expertise that the public service has and holding on to

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<v Speaker 2>the talent that it recruits. In the last budget, we

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<v Speaker 2>saw the Albanese government commit to hiring an extra ten

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<v Speaker 2>thousand public servants. This adds to the thousands of extra

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<v Speaker 2>public servants that were added in the first year of government.

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<v Speaker 2>Another thing the government announced that it would do in

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<v Speaker 2>December was set up its own in house consulting service.

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<v Speaker 2>It's got a name, Australian Government Consulting. It's got about

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<v Speaker 2>seventeen staff now and they've committed to hiring up to

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<v Speaker 2>forty staff by the end of the next financial year.

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<v Speaker 2>And these are forty people who can offer the same

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<v Speaker 2>sorts of consulting services that public service agencies are now

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<v Speaker 2>currently turning to the Big Four to provide. And this

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<v Speaker 2>is projected to save taxpayers about three billion dollars in

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<v Speaker 2>the first term of government, so by the time we

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<v Speaker 2>go to the next election, so I think that's quite

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<v Speaker 2>agniving at change, and so hopefully we'll see the Commonwealth

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<v Speaker 2>relying much less on the Big four four key advice

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<v Speaker 2>functions that the Australian Public Service used to provide routinely.

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<v Speaker 1>So Jason, given how much consulting has changed the face

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<v Speaker 1>of the public service in the way that the public

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<v Speaker 1>service works, can you imagine a world in which the

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<v Speaker 1>government or governments wouldn't rely on consultants.

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<v Speaker 2>I think one of the first things that Tony Abbott

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<v Speaker 2>tried to do when he became Prime Minister back in

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<v Speaker 2>twenty thirteen, he said, well, we're going to cut costs.

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<v Speaker 2>One of the biggest costs is the Australian Public Service,

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<v Speaker 2>so we're going to just spend less on public service advice.

0:14:52.160 --> 0:14:55.640
<v Speaker 2>But of course once they started to make those cuts,

0:14:56.000 --> 0:14:59.440
<v Speaker 2>the government has started to realize that it wasn't getting

0:15:00.040 --> 0:15:03.480
<v Speaker 2>the kind of advice it needs to function, and so

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<v Speaker 2>then they started to outsource. Instead of hiring more public

0:15:08.600 --> 0:15:12.000
<v Speaker 2>servants and adding to that kind of annual public service

0:15:12.040 --> 0:15:15.320
<v Speaker 2>wages bill, they decided to be much easier to hide

0:15:15.320 --> 0:15:16.240
<v Speaker 2>the amount of money that.

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<v Speaker 4>It was spending on advice by outsourcing it.

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<v Speaker 2>And having outsourced some of the key functions of the

0:15:24.360 --> 0:15:28.880
<v Speaker 2>public service has weakened the quality of government that we

0:15:29.320 --> 0:15:33.760
<v Speaker 2>have become used to since federation. I think we need

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<v Speaker 2>to go back to the model that served us so

0:15:36.520 --> 0:15:40.160
<v Speaker 2>well for the first one hundred and twenty years, and

0:15:40.200 --> 0:15:44.840
<v Speaker 2>that is a strong, independent public service. And it's not

0:15:45.000 --> 0:15:48.240
<v Speaker 2>just the quality of government that we're getting, it's the

0:15:48.360 --> 0:15:52.800
<v Speaker 2>value of our taxpayer dollars. We don't want to be

0:15:52.880 --> 0:15:56.880
<v Speaker 2>using taxpayer dollars to make a small group of consultants

0:15:57.040 --> 0:16:00.640
<v Speaker 2>much richer. We want to see our taxpayer dollars being

0:16:00.720 --> 0:16:04.240
<v Speaker 2>used to provide very good advice, and very good advice

0:16:04.280 --> 0:16:08.520
<v Speaker 2>that's truly independent, and that's truly the advice that is

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<v Speaker 2>in our national interests, not the interests of a consultancy

0:16:11.960 --> 0:16:13.800
<v Speaker 2>like KPMG or Deloitte.

0:16:14.320 --> 0:16:14.640
<v Speaker 4>Jason.

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<v Speaker 1>Thanks so much for your time.

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<v Speaker 4>Thanks, Ashlyn, it's always great talking with you.

0:16:32.840 --> 0:16:35.680
<v Speaker 1>Also in the news today, Federal Opposition leader Peter Dutton

0:16:35.760 --> 0:16:38.880
<v Speaker 1>says he'd be committed to reaching their zero by twenty fifty,

0:16:39.080 --> 0:16:43.000
<v Speaker 1>as required by the Paris Agreement, despite announcing his campaign

0:16:43.040 --> 0:16:46.760
<v Speaker 1>to overturn Labour's twenty thirty target. He colected at a

0:16:46.760 --> 0:16:49.920
<v Speaker 1>press conference yesterday, Dutton said that progress on climate didn't

0:16:49.960 --> 0:16:53.800
<v Speaker 1>have to be quote linear, and therefore claimed reducing emissions

0:16:53.800 --> 0:16:57.000
<v Speaker 1>by forty three percent by twenty thirty wasn't necessary to

0:16:57.160 --> 0:17:01.160
<v Speaker 1>reach the twenty fifty goal. In the long promised overhaul

0:17:01.200 --> 0:17:04.040
<v Speaker 1>of the Reserve Bank's board structure may not be complete

0:17:04.040 --> 0:17:07.159
<v Speaker 1>in time for the deadline of July one. The board

0:17:07.359 --> 0:17:09.800
<v Speaker 1>was meant to be split into one board for governance

0:17:09.880 --> 0:17:12.640
<v Speaker 1>and one board of experts that set the interest rate,

0:17:13.160 --> 0:17:15.720
<v Speaker 1>as proposed by a review of the bank last year.

0:17:16.359 --> 0:17:19.399
<v Speaker 1>Reports our negotiations between the government and the opposition have

0:17:19.480 --> 0:17:22.960
<v Speaker 1>broken down and legislation is unlikely to pass in time

0:17:23.000 --> 0:17:26.240
<v Speaker 1>for the deadline. That's all from us here at seven am.

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<v Speaker 1>My name's Ashlin McGee. Thanks for your company and I'll

0:17:28.600 --> 0:17:29.760
<v Speaker 1>see you again tomorrow morning.