Speaker 1: From Schwartz Media. I'm Ashlin McGee. This is seven am.
Speaker 1: If you're a public service head honcho, when you were
Speaker 1: picking a firm to run ethics training, would one of
Speaker 1: the big four private consulting firms be your first pick.
Speaker 1: They've rightly been under pretty intense scrutiny in the media
Speaker 1: around in the Senate, which will today release a report
Speaker 1: with recommendations to clamp down on the sector. The consulting
Speaker 1: giants had been making billions of dollars from government work,
Speaker 1: but that's all coming to an end today the Saturday Papers,
Speaker 1: Jason katsukis on what that crackdown might entail and why
Speaker 1: the public service still thinks the consulting firm is best
Speaker 1: place to run ethics training for its leaders. It's Wednesday,
Speaker 1: June twelve. Jason, I think we've just got to get
Speaker 1: into the heart of this story straight up. You've been
Speaker 1: looking at the consulting industry. Tell me about this pretty
Speaker 1: extraordinary contract that you found out about so Ashland.
Speaker 2: At the Senate Estimates Committee hearing for the Department of
Speaker 2: Prime Minister and Cabinet last week, one of the key
Speaker 2: witnesses was the people from the Australian Public Service Commission.
Speaker 3: I declare open this hearing of the Senate Finance and
Speaker 3: Public Administration Legislation Committee into the twenty twenty four to
Speaker 3: twenty five budget estimates.
Speaker 2: Today we begin and I was watching the proceedings of
Speaker 2: this committee. Barbara Pocock, the Green Senator, was doing the questioning.
Speaker 2: She's always someone that I'm interested in following because she's
Speaker 2: very forensic in her questions.
Speaker 4: And when she asked.
Speaker 2: A fairly routine question of the Public Service Commission, have
Speaker 2: you got any new contracts with any of the big
Speaker 2: four consultancies?
Speaker 4: And they said yes.
Speaker 2: They revealed that they had engaged KPMG Australia to run
Speaker 2: an Ethics of Leadership course for the Australian Public Service Academy.
Speaker 3: Does the Commissioner have any active contracts with any of
Speaker 3: the big four consulting firms at present?
Speaker 4: So? Have you familiar to take you once?
Speaker 5: So currently we have one active contract with KPMG. They're
Speaker 5: delivering our leadership program delivery support service for the.
Speaker 2: Academy, and which is quite extraordinary when you look at
Speaker 2: the kinds of things that KPMG has been accused of
Speaker 2: over the last four to five years, not just here
Speaker 2: in Australia but around the world. When I spoke to
Speaker 2: Barbara Pocock after the committee hearing, she told me just
Speaker 2: how shocked she was. Barbara Polclock said to me that
Speaker 2: this is the type of public service contract that big
Speaker 2: four firms dream about.
Speaker 3: Commissioner, why do you turn to an external consulting firm
Speaker 3: to teach leadership inside the APS?
Speaker 4: Doctor manages, I will come back, but thank you.
Speaker 2: Too, m sure, And then the subject matter really flawed me.
Speaker 2: The idea that you would get someone like KPMG to
Speaker 2: run a course on ethics of leadership left me feeling,
Speaker 2: you're quite stunned. Why would she turn to KPMG to
Speaker 2: talk about ethics?
Speaker 3: Conflict of interest would be a topic they know a
Speaker 3: lot about. Yeah, tragically, Why you would bring a firm
Speaker 3: in like APMG, with its track record in this country
Speaker 3: and internationally, to teach anything to do with the ethics
Speaker 3: of leadership is shocking proper position to me.
Speaker 2: Judging from the way that the APSC people were responding
Speaker 2: to Senator Pocock's questions, I got the sense that they
Speaker 2: were a little bit embarrassed about what about the contract
Speaker 2: that they'd signed, That they were embarrassed having to explain
Speaker 2: the detail.
Speaker 4: They just looked to me a little bit sheeapish about.
Speaker 3: It, just curious about the KPMG contract. It is teaching
Speaker 3: to supply leadership training in the academy.
Speaker 4: Yes, and I can speak a little bit more about that.
Speaker 2: So, as you would know, many of these firms have
Speaker 2: many different functions, different parts. The Australian Public Service Commissioner,
Speaker 2: Gordon de Brewer, he stepped in to help explain the
Speaker 2: context around this contract. The minister representing Prime Minister and
Speaker 2: Cabinet in this instance, Katie Gallagher, the Minister for Finance.
Speaker 2: She jumped in pretty quickly to try and explain that well,
Speaker 2: there was an open tender process here surrounding the awarding
Speaker 2: of this contract.
Speaker 4: And I got the feeling that she was just a
Speaker 4: bit defensive as.
Speaker 2: Well, that they could see just how this actually looked
Speaker 2: in the cold hard light of day, because they've.
Speaker 6: Gone through they've gone through, you know, a proper procurement process,
Speaker 6: so I think, and I'm trying to just get some information.
Speaker 6: But when it was when I was looking at it,
Speaker 6: there was an argument around why it was important to
Speaker 6: have an external facilitator or an external person.
Speaker 2: In estimates week there's so much going on that everyone
Speaker 2: just missed it. You know, what made this a kreme
Speaker 2: de la creme contract wasn't that it's a one point
Speaker 2: three million dollar contract. It's the fact that it puts
Speaker 2: KPMG in front of three hundred top public servants and
Speaker 2: how they can use that as a kind of farming opportunity.
Speaker 4: That's what Barbara Pocock taught me.
Speaker 2: This is a way for them to find out who's
Speaker 2: doing what and who's good, who's not, who's worth recruiting,
Speaker 2: who can help them win news business, to create a
Speaker 2: brand new power map, if you like, based on what
Speaker 2: they learned from running this course.
Speaker 1: And they call this power mapping, don't they when they
Speaker 1: look at the most influential people in an organization? Tell
Speaker 1: me about that.
Speaker 2: One of the things that got Barbara Pocock into the
Speaker 2: headlines last year was her questioning of the KPMG Australia
Speaker 2: Chief Executive Andrew Yates.
Speaker 7: The hand side record, could you police state your full
Speaker 7: names and the capacity in which you appear today?
Speaker 6: Andrew Yates, I'm the CEO of KPMG Australia, And.
Speaker 2: She'd asked him whether KPMG engaged in this practice known
Speaker 2: as power mapping, where big four consultancies draw maps of
Speaker 2: who's who in the different government departments and they work
Speaker 2: out which public servants they can use to help win
Speaker 2: new buses business and Andrew Yates strenuously denied.
Speaker 7: He said, no, are you responded to a question about
Speaker 7: power mapping and you responded unequivocally that KPMG Australia does
Speaker 7: not engage in powermapping, mapping or any other similar practice.
Speaker 4: You recall an answer I do, Senator.
Speaker 2: Yeah, And then she was able to hold up a
Speaker 2: power map which had KPMG Australia It's brand on the slide.
Speaker 7: Mister Yates, I now want a tender a document that's
Speaker 7: been provided under privilege, so I'll ask that it be circulated.
Speaker 2: You know this slide showed that KPMG had done very
Speaker 2: detailed sort of power mapping in the New South Wales
Speaker 2: public service.
Speaker 7: Can you see that it displays in a high level
Speaker 7: of detail dozens of public servants, including.
Speaker 4: Your photos, Yes, Senator.
Speaker 3: Do you see the box is called relationship.
Speaker 2: Strength, mister Yates, Yes, Senator.
Speaker 7: There appears to describe in those six categories the strength
Speaker 7: of the relationship between particular public servants and the KPMG
Speaker 7: partners and KPMG itself.
Speaker 2: Do you agree, yes, Senator Andrew Yates was put in
Speaker 2: a very difficult situation having his evidence directly contradicted in
Speaker 2: that way, and he immediately tried to backtrack and obfuscate
Speaker 2: and said that, no, this looked like a power map,
Speaker 2: but it wasn't a power map. Senator, given I've just
Speaker 2: seen this document, you need to give me a few
Speaker 2: moments just to respond to that more broadly, because.
Speaker 4: We could get caught up here.
Speaker 5: In a definition about what constitutes of power map.
Speaker 4: I don't need to.
Speaker 2: Certainly, he used all kinds of other euphemisms to try
Speaker 2: and sort of get himself out of it, but it
Speaker 2: wasn't very convincing, and I think he left that committee
Speaker 2: hearing feeling very embarrassed about his testimony.
Speaker 1: So, Jason, this type of incident isn't an isolated incident
Speaker 1: for KPMG, but it's also not an isolated incident for
Speaker 1: the consulting industry as a whole. It's been in the
Speaker 1: spotlight heaps over the past couple of years. Talk me
Speaker 1: through some of the greatest hits for the Big Four.
Speaker 2: The incident that got everyone talking about the Big four
Speaker 2: consultancies and the way they engage with the Australian Public Service.
Speaker 2: In Canberra was the revelation that the Tax Practitioners Board
Speaker 2: had taken action against a senior partner at PwC Australia
Speaker 2: back in twenty sixteen, and that person had used that
Speaker 2: inside knowledge. He'd helped the Treasury write these new tax
Speaker 2: laws and then he'd gone back to PwC and said
Speaker 2: this is what the Australian Government is going to do.
Speaker 2: And PwC used that information and used it to advise
Speaker 2: existing clients that this law was coming into force and
Speaker 2: how to.
Speaker 4: Avoid that new law.
Speaker 2: And then they used the inside information to attract new
Speaker 2: clients and help them avoid paying this new law that
Speaker 2: would be coming into force. So this was an incredible
Speaker 2: breach of trust that PwC had engaged in. Not only
Speaker 2: had they done that, but they then tried to cover
Speaker 2: it up. That information was then leaked to the Australian
Speaker 2: Financial Review. Then some of the members of the Australian
Speaker 2: Senate started asking questions about it, and then once they
Speaker 2: understood the full scope of what had happened in inside PwC,
Speaker 2: they launched this Inquiry into the relationship between consultancies and
Speaker 2: the Australian.
Speaker 1: Government after the break, will the government wheeled a big
Speaker 1: stick or a wil to let us leave when it
Speaker 1: comes to a crackdown on the consulting giants.
Speaker 4: Jason.
Speaker 1: Today a Senate committee will table it's long awaited final
Speaker 1: report into consulting services provided to the federal government. We've
Speaker 1: already had a bit of a taste in the interim
Speaker 1: report that was released last year, but well, today's recommendations
Speaker 1: signal any kind of major crackdown on the consulting industry.
Speaker 2: I think the Senate inquiry is going to recommend new
Speaker 2: ways to regulate the consulting industry. One option is to
Speaker 2: say that big four firms are not allowed to do
Speaker 2: both auditing and consulting, that the conflicts of interest within
Speaker 2: firms that do both of those things auditing and consulting
Speaker 2: are impossible to resolve.
Speaker 4: They're going to have to split because.
Speaker 2: They can't manage the potential conflicts of interest and we've
Speaker 2: seen that happen time and again with consulting firms.
Speaker 1: The government says it's already taken steps to curb the
Speaker 1: influence of consulting firms in politics, talk me through what
Speaker 1: it's done, and I guess is it enough.
Speaker 2: Perhaps the biggest revelation of the last twelve months have
Speaker 2: been the extent to which the Australian public service has
Speaker 2: been hollowed out, so people leaving the public service and
Speaker 2: going to work for the Big Four and taking all
Speaker 2: their expertise with them.
Speaker 4: And this government.
Speaker 2: Back in May twenty two, when Anthony Albinezi came into power,
Speaker 2: one of the first things that they committed to doing
Speaker 2: was rebuilding the public service. And I think the committee
Speaker 2: report that we're going to see released later today is
Speaker 2: going to suggest ways in which the Commonwealth can strengthen
Speaker 2: the public service to keep the focus on rebuilding the
Speaker 2: expertise that the public service has and holding on to
Speaker 2: the talent that it recruits. In the last budget, we
Speaker 2: saw the Albanese government commit to hiring an extra ten
Speaker 2: thousand public servants. This adds to the thousands of extra
Speaker 2: public servants that were added in the first year of government.
Speaker 2: Another thing the government announced that it would do in
Speaker 2: December was set up its own in house consulting service.
Speaker 2: It's got a name, Australian Government Consulting. It's got about
Speaker 2: seventeen staff now and they've committed to hiring up to
Speaker 2: forty staff by the end of the next financial year.
Speaker 2: And these are forty people who can offer the same
Speaker 2: sorts of consulting services that public service agencies are now
Speaker 2: currently turning to the Big Four to provide. And this
Speaker 2: is projected to save taxpayers about three billion dollars in
Speaker 2: the first term of government, so by the time we
Speaker 2: go to the next election, so I think that's quite
Speaker 2: agniving at change, and so hopefully we'll see the Commonwealth
Speaker 2: relying much less on the Big four four key advice
Speaker 2: functions that the Australian Public Service used to provide routinely.
Speaker 1: So Jason, given how much consulting has changed the face
Speaker 1: of the public service in the way that the public
Speaker 1: service works, can you imagine a world in which the
Speaker 1: government or governments wouldn't rely on consultants.
Speaker 2: I think one of the first things that Tony Abbott
Speaker 2: tried to do when he became Prime Minister back in
Speaker 2: twenty thirteen, he said, well, we're going to cut costs.
Speaker 2: One of the biggest costs is the Australian Public Service,
Speaker 2: so we're going to just spend less on public service advice.
Speaker 2: But of course once they started to make those cuts,
Speaker 2: the government has started to realize that it wasn't getting
Speaker 2: the kind of advice it needs to function, and so
Speaker 2: then they started to outsource. Instead of hiring more public
Speaker 2: servants and adding to that kind of annual public service
Speaker 2: wages bill, they decided to be much easier to hide
Speaker 2: the amount of money that.
Speaker 4: It was spending on advice by outsourcing it.
Speaker 2: And having outsourced some of the key functions of the
Speaker 2: public service has weakened the quality of government that we
Speaker 2: have become used to since federation. I think we need
Speaker 2: to go back to the model that served us so
Speaker 2: well for the first one hundred and twenty years, and
Speaker 2: that is a strong, independent public service. And it's not
Speaker 2: just the quality of government that we're getting, it's the
Speaker 2: value of our taxpayer dollars. We don't want to be
Speaker 2: using taxpayer dollars to make a small group of consultants
Speaker 2: much richer. We want to see our taxpayer dollars being
Speaker 2: used to provide very good advice, and very good advice
Speaker 2: that's truly independent, and that's truly the advice that is
Speaker 2: in our national interests, not the interests of a consultancy
Speaker 2: like KPMG or Deloitte.
Speaker 4: Jason.
Speaker 1: Thanks so much for your time.
Speaker 4: Thanks, Ashlyn, it's always great talking with you.
Speaker 1: Also in the news today, Federal Opposition leader Peter Dutton
Speaker 1: says he'd be committed to reaching their zero by twenty fifty,
Speaker 1: as required by the Paris Agreement, despite announcing his campaign
Speaker 1: to overturn Labour's twenty thirty target. He colected at a
Speaker 1: press conference yesterday, Dutton said that progress on climate didn't
Speaker 1: have to be quote linear, and therefore claimed reducing emissions
Speaker 1: by forty three percent by twenty thirty wasn't necessary to
Speaker 1: reach the twenty fifty goal. In the long promised overhaul
Speaker 1: of the Reserve Bank's board structure may not be complete
Speaker 1: in time for the deadline of July one. The board
Speaker 1: was meant to be split into one board for governance
Speaker 1: and one board of experts that set the interest rate,
Speaker 1: as proposed by a review of the bank last year.
Speaker 1: Reports our negotiations between the government and the opposition have
Speaker 1: broken down and legislation is unlikely to pass in time
Speaker 1: for the deadline. That's all from us here at seven am.
Speaker 1: My name's Ashlin McGee. Thanks for your company and I'll
Speaker 1: see you again tomorrow morning.