This is a rate of 1 engagement every working hour for 5 years straight.
Previous analysis by the NSW Auditor-General from the same period found that the previous Liberal-National Government spent more than $1 billion on external consultants and was done with inadequate procurement and management policies in place.
This type of waste and mismanagement characterised the poor fiscal planning and insufficient cost controls placed on departments by the previous Liberal-National Government. It has directly contributed to the state’s current dire financial situation.
The NSW Labor Government went to the election pledging to reduce consultant spend by $35 million per year. The government is on track to deliver the savings identified in last year’s budget and meet its election commitment.
The new research reveals that between 2017-18 and 2021-22, the previous Liberal-National Government:
- Engaged external consultants 10,006 times.
- The average contract price increased 58.6% from $75,180 in 2017-18 to $119,246 in 2021-22.
- More than 15% (1,523) of contracts with external consultants were engaged for ‘generalist work’ and totalled $196.7m. This work can usually be done in-house and includes work on policy design, program evaluation, strategy development and business case development.
- Of the top 15 contracts for internal organisational operations and management services, nine were from a Big 4 consultancy firm (KPMG, Deloitte, EY and PwC).
- At least 87% of spending on external consultants in 2021-22 was with private suppliers, while only 2% of spend was with universities.
As part of the research, it was also revealed that using the existing resources of the public service could halve the cost of some projects.
For example, a single job with an external consultant could cost $309,000 and utilise five staff for a 30-day project. Using the internal resources of the NSW public service, a similarly experienced fiveperson team may only cost $147,450, a saving of 52%.
Doing work in-house also means the public sector can retain knowledge and talent, further reducing the costs and improving the quality of future similar projects.
The NSW Labor Government has implemented tight controls and issued clear instructions to agencies around the use of external consultants. This has been done to bring costs under control and re-build capacity in the public sector.
The government has also introduced additional probity measures following scandals involving PwC and other consultancies that have come to light over the past 18 months.
NSW was the first state to legislate ‘betrayal of trust’ fines for disclosing information gained during confidential tax discussions with the government, with fines exceeding $1.1 million for individuals and $5.5 million for corporations.
Ahead of the 2024-25 Budget, the Government is considering further measures to reduce overreliance on consultants and rebuild the NSW public sector.
The report will be tabled in Parliament next week.
Quotes attributable to Minister for Finance Courtney Houssos:
“It’s Labor that has been left to clean up their mess and repair the budget, a task made all the more difficult by the profligate spending from the previous Liberal-National Government.
“Whether it is outsourcing work to corporations that could be done by the public service, or sending major transport contracts offshore instead of manufacturing them locally, the Liberal and National parties have shown their lack of faith in the people and businesses of NSW.
“Given the scale of the previous Liberal-Government's waste, it will take time to unwind. The cost controls and probity measures we have put in place were a necessary step that should have been taken years ago by the previous government.”
Quotes attributable to Treasurer Daniel Mookhey:
“The NSW Labor Government is building a better public service by investing in our own essential workforce.
“We’d rather invest more into the essential services that communities rely on and pay external consultants less. A lot of these core functions can and will be done by a strong public service.
“This is a key part of the government’s ongoing work to clean up the waste we inherited.”