Covid bungles show need to end contractor secrecy

The extent of government reliance on major contractors and consultants is now well-known, with frequent reports of the large and growing sums involved (e.g. $1.2 billion on just eight consulting firms in 2018, a three-fold increase in less than a decade). However, experience during the pandemic has brought this dependence into sharper focus. In contrast to the generally excellent performance of established government agencies, such as the Australian Taxation Office and Centrelink, in rolling out new policies, many programs associated with contractors have been botches. The most notable failures have been in the government's Covid-19 vaccination program, which has made extensive use of expensive external providers. Thousands of Australians have experienced the problems first hand and will be asking questions about how the government could spend so much money on contractors to achieve such poor results.

Answers will not be readily forthcoming. Dr Stephen Duckett, a former Health Department secretary now at the Grattan Institute, using the government's own website, AusTender, summarised how the government spent millions on particular consultants for many different aspects of the program, ranging from management services and IT services to distribution and logistics. He pointed out how little detail is known about the nature of these services, making any sensible judgements about value for money impossible (Canberra Times May 11, 2021). While AusTender lists the names of the firms, the sums allocated and a very general description of the services provided, that is the limit of information publicly available.

Journalists who directly approach the contractors get very short shrift. After all, private companies are not in the habit of answering probing questions about their activities. "We don't comment on client matters", a spokesperson for PwC told an inquiry from Crikey. At the same time, government agencies who employ the contractors are also reluctant or unable to divulge relevant information, for instance, to Senate committees or the media. They either hide behind claims of commercial or cabinet confidentiality or declare that the details of program delivery are the responsibility of contractors and therefore beyond their competence to answer. At best they agree to take questions on notice, a device for delaying disclosure or refusing it altogether under unchallengeable ministerial claims of public interest immunity.

Not surprisingly, senators on the COVID-19 and other committees are increasingly frustrated at the inability or unwillingness of bureaucrats to respond to the type of straightforward requests for information that public servants would normally be expected to answer.

The only sure method of scrutinising the activities of consultants is through some form of judicial inquiry. For example, the pivotal role of over-confident and inexperienced consultants in the home insulation fiasco of 2009-10 was not revealed until the Hanger royal commission of 2014. Even then, the discovery was unintended, a fortuitous by-product of the Abbott government's attempt to incriminate Kevin Rudd, the former prime minister, in the deaths of the four young insulators.

The issue of accountability for outsourced goods and services has been a longstanding battleground between governments and the Senate, especially the joint committee on public accounts and audit, and a succession of auditors-general. In the initial enthusiasm for contracting in the 1990s, advocates claimed that competitive tendering would actually improve accountability by sharpening objectives and results. The argument still carries weight in relation to large areas of procurement including the more straightforward services such as cleaning and rubbish collection, the stand-out successes of outsourcing.

But problems emerged with more complex services where public accountability requires not just observation of measurable results but also more nuanced assessment of performance as well as access to the ongoing operations of contractors. Here, private contractors typically resisted transparency on the grounds of normal commercial confidentiality, claims that governments were only too willing to go along with.

In response, auditors-general and others asserted the counter-argument that taxpayers have a right to know whether their funds are being spent on legitimate public objectives. The Senate was able to curb some of the excesses of commercial confidentiality through "the Senate order", established in 2001. This required agencies to disclose contracts valued at more than $100,000, stating whether they claimed commercial confidentiality, and if so, on what grounds. The order was periodically reviewed by the Australian National Audit Office, which found that the number of routine commercial-in-confidence exemptions had gradually declined. The order was later absorbed into the AusTender website, which offers assistance to would-be tenderers for government contracts and also lists contracts that have been awarded. However, the perfunctory nature of AusTender reporting and the lack of effective external scrutiny suggests a return to former patterns of automatically claiming commercial confidence for the details of any contract that governments wish to keep buried for whatever reason.

Experience with the pandemic and revelations of the government's dependence on unaccountable contractors and consultants confirms that the general issue of outsourcing for accountability needs revisiting. Transparency, it should be remembered, is not totally lacking. The AusTender list of contracts awarded, itself the result of earlier parliamentary demands for greater accountability, may be brief and inadequate but it does at least provide a toehold for further scrutiny. It is thanks to AusTender that we now know that the government has spent certain large sums on certain companies and individuals for certain vaguely defined services. These bare facts enable journalists and non-government senators to expose the extravagance of government departments and publicly shame consultants and contractors who would much rather their names remained in the shadows. The government is committed to updating and streamlining its reporting of contracts, with improved transparency one of the stated aims. But it is unlikely to publish the sort of detailed information that would allow proper exposure of consultants' inadequacies.

The need now is to enable external scrutiny to delve into the internal activities of contracting companies and their relation with government. The general principle remains clear: government contracts involve the expenditure of public funds authorised by Parliament. Taxpayers and their representatives have a right to inquire whether these funds are being properly spent. There may be legitimate reasons for secrecy, such as national security, cabinet confidentiality and the right of commercial companies not to disclose information that might damage their competitiveness. But these exemptions are exceptions. The default position should be that the public have a right to know.

For instance, as a condition of taking on lucrative government contracts, all contractors could be made subject to freedom of information legislation, which already includes its own generous set of exemptions. Contractors could also be subject to government audit, with the auditor-general allowed to "follow the money" and conduct performance audits. Representatives of contracting companies could be required to attend relevant parliamentary committees as matter of course.

In some service areas where outsourcing has become institutionalised, such as prisons and social assistance, external contractors have already become accustomed to a greater degree of accountability for their actions. Other contractors dealing directly with government, including the major multinational consultancies, could be made to follow suit.

The major resistance is likely to come from the government side, and not just ministers. Senior public servants have an aversion to transparency, as is evident from their systemic undermining of FOI and their reluctance to give prompt or expansive answers to questions from parliamentary committees. For them, "commercial-in-confidence" is often a cover for "politically embarrassing-in-confidence'" and the secrecy surrounding outsourcing is one of its greatest attractions.

Parliament, particularly the Senate, needs to take the initiative. As contractors are likely to remain an integral part of government, they should, wherever possible, be subject to the same accountability framework as public servants.

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