NSW government agencies and consulting services have developed a ‘tick and forget’ culture when it comes to the management of conflicts of interest, a parliamentary committee has found.

The Public Accountability and Works Committee last Wednesday tabled its report into the use and management of consulting firms by NSW government agencies, saying an ‘insidious and creeping expansion of consulting firms into the public service’ lay at the heart of the probe.

“It is my concern, and that of this committee, that NSW government agencies have demonstrated an undue and excessive reliance on the use of external professional services agencies,” Chair Abigail Boyd says.

“In doing so, we have drained our public sector of agency, motivation, and experience, while chaining ourselves to costly private consultants.

“This creeping influence has resulted in a weakened public sector, and beyond merely reducing our contracting of external consultancies it will take some time to rectify this degradation of public sector capacity.”

Lack of senior oversight

The overuse of consultants by departments and agencies is due to a lack of senior managerial oversight in the public sector, the committee says.

It says the government’s inability to readily disclose its total consultant spend raises significant transparency and accountability concerns, and that the lack of consequences for either agencies or consultancies that breach governance rules is letting questionable conduct going unchecked.

The report makes 28 recommendations to improve transparency and contract management by NSW government agencies, including an urgent redesign of the eTender system.

It also recommends investigating the establishment of an in-house specialty consulting team similar to what the federal government is doing.

The report notes the overuse of consultants has been accompanied by an erosion of public sector skill and capability, which means the government will need to boost the public sector at the same time as weaning itself off consultants.

‘Icarian fall from grace’

This inquiry follows a critical 2023 Auditor-General’s report and what the committee describes as the ‘Icarian fall’ from grace of the consulting sector following the PWC tax lead scandal.

The release of the report comes after Treasurer Daniel Mookey flagged measures to cut spending on consultants in the June 18 state budget, saying government research showed the previous government issued more than 10,000 consultant contracts, or one engagement every working hour, in its last five years in office.

Audits showed that Between 2017–18 and 2021–22, NSW government agencies disclosed approximately $1 billion of spending with over 1,000 consulting firms across more than 10,000 engagements, committee said.