All above board? Senate Inquiry into the integrity of consulting services for government

By Julian Hammond 

Key takeaways

• The Senate is inquiring into the integrity of consulting services provided to the Federal Government.
• Submissions are due by 21 April 2023 and the final report is scheduled to be published by 26 September 2023.
• The Inquiry may require consulting firms to attend to give evidence or to provide documents. Stakeholders may also engage with the Inquiry voluntarily by providing a submission.
• Firms that provide services to government need to consider how their business might be impacted by changes to government procurement requirements, and whether engaging with the Inquiry proactively could help to shape appropriate policy outcomes.

Context: consultants in the spotlight

We see two key motivators for the Inquiry.

First, the Federal Government is committed to building public sector capability and reducing reliance on external consultants. In October 2022, Finance Minister Katy Gallagher announced plans for the Government to reduce spending on external labour, advertising, travel and legal costs by $3.6 billion over four years.

The Minister also announced the development of an in-house consulting model, and $40.8 million was provided for a pilot in the 2022-23 budget. While the in-house consulting model was reportedly based on the United Kingdom’s Government Consulting Hub that has just been discontinued after less than two years of operation, the Australian model will have the benefit of lessons learned from the United Kingdom.

Second, consulting work continues to hit the headlines for the wrong reasons. More broadly, royal commissions and other inquiries are routinely exposing outsourcing that is subject to public criticism, as exemplified by the Royal Commission into the Robodebt Scheme and the Victorian COVID-19 Hotel Quarantine Inquiry.

What is being investigated by the Senate?

On 9 March 2023, the Senate established an inquiry by the Finance and Public Administration References Committee into the integrity of consulting services provided to government (the Inquiry).

The Inquiry is expected to focus on high-profile examples such as those discussed above. However, the potential scope of recommendations and reform is much broader-see the full terms of reference for the Inquiry below:

The management and assurance of integrity by consulting services provided for the Australian Government, with particular reference to:

1. the management of conflicts of interest by consultants;
2. measures to prevent conflicts of interest, breach of contract or any other unethical behaviour by consultants;
3. enforcement measures taken in response to integrity breaches, such as the inadequate management of conflicts of interest, breach of contract or any other unethical behaviour by consultants;
4. the management of risks to public sector integrity arising from the engagement of consultants;
5. the transparency of work undertaken by consultants, and the accountability of consultants for this work; and
6. any other related matters.

This is not the first inquiry relating to the use of consulting services by government.^[1] However, its narrow focus on integrity (rather than the general virtues and vices of the public and private sectors) suggests the Inquiry may lead to substantive change to the regulatory environment in which consultants do business with government.

Participating in the Inquiry

Stakeholders can voluntarily make a submission to the Inquiry to ensure that their perspectives and insights are understood and to advocate for their interests.

Additionally, the Committee may require the production of documents or attendance to give evidence. While Senate inquiries generally do not have the scope or intensity of a Royal Commission, the reputational and other risks should not be underestimated. Witnesses should ensure they are fully prepared and be cognisant that the questioning could come from any member of the Committee, which includes Senators from crossbench parties.

What might the Inquiry recommend?

While it is difficult to predict the approach the Inquiry will take, recommendations might include:

• more prescriptive requirements for consultants, possibly including a code of conduct like that applicable to the Australian Public Service. Changes could expand criminal liability for misuse of government information to employees of consulting firms;^[2]
• a debarment regime excluding consultants who have committed serious misconduct or been convicted of a criminal offence from providing services to government. A national debarment regime applying to corporations convicted of criminal offences was recommended by the Australian Law Reform Commission in 2020.^[3] However, a national approach appears unlikely to be implemented soon, given Western Australia implemented its own regime in November 2021.^[4] A key issue will be the extent to which firms are sanctioned for misconduct by individuals.

Consulting firms should consider whether submissions to the Inquiry could mitigate the risk of heavy-handed reforms that would impose significant additional costs on industry or particular industry participants.

[1] See Senate Finance and Public Administration References Committee, APS Inc: Undermining Public Sector Capability and Performance (November 2021); Joint Committee of Public Accounts and Audits, Australian Government Contract Reporting – Inquiry Based On Auditor-General’s Report No. 19 (2017-18) (lapsed without a report being issued). See also Laura Tingle’s seminal Quarterly Essay ‘Political Amnesia: How We Forgot to Govern’ (3 May 2016).
[2] Currently, it is a criminal offence for a Commonwealth public servant to disclose, without authorisation, confidential information they acquired by being a public servant: Criminal Code Act 1995 (Cth) s 122.4. While this offence also applies to consultants ‘engaged to perform work for a Commonwealth entity’ it does not apply directly to their colleagues.
[3] Australian Law Reform Commission, Final Report: Corporate Criminal Responsibility (April 2020), Recommendation 15.
[4] See Government of Western Australia: Media Statements, McGowan Government introduces Australia’s first debarment regime (10 November 2021); WA Department of Finance, Debarment Regime.