While the steady drip of revelations of breaches of confidentiality by major consulting firms gives weight to calls for a major inquiry into the industry, a higher-profile story this week illustrates another area of activity by the big four that warrants greater scrutiny.
Victorian Premier Daniel Andrews’ decision to ditch the 2026 Commonwealth Games has shone a light on the original costing for the Victorian games, estimated to be a mere $2.6 billion, by Ernst & Young.
But the Andrews government also claimed to have modelling showing that the Games “will contribute more than $3 billion to Victoria’s economy and create more than 600 full-time equivalent jobs before the Games, 3900 jobs during the Games and a further 3000 jobs beyond the closing ceremony”.
Who prepared this modelling? When asked to provide some explanation of it earlier this year, the Andrews government — as always a titan of transparency — insisted “the methodology undertaken to determine the benefits and costs associated with hosting the Victoria 2026 Commonwealth Games is cabinet-in-confidence”.
So good luck finding out who managed to estimate benefits just a little bit greater than the cost at the time — perfectly coincidental, of course — and why 3000 jobs would, remarkably, continue in perpetuity after they were finished. Very likely one of the big four consultants is hoping that its role in that modelling will stay cabinet-in-confidence.
And in some hardcore public policy irony, one of the reasons why the Games were ditched is because of blowouts associated with not being able to find workers to fill those pre-Games jobs. We’re all used to hearing about the virtues of proposals that created X number of jobs, but that proves to be no virtue when you’re close to full employment.
We do know who is behind the Pollyannaish modelling used to justify Brisbane raising its hand to host the 2032 Olympics. Step forward, KPMG. In 2019, the Palaszczuk government produced its own preliminary modelling claiming the Olympics would cost $4.5 billion and produce benefits of around $7.4 billion (plus “social” benefits). Two years later, KPMG arrived to advise that the total benefits instead would be $8.5 billion in economic benefits plus another $9 billion in “social” benefits. That was over, ahem, 20 years. KPMG also said it would create a whopping 123,000 jobs.
Presumably we’ll need to increase migration by 123,000 to actually fill those jobs, but anyway.
To be fair, KPMG is only doing what all the big consultants do — tell governments what they want to hear. That’s why they’re relied on so heavily by governments. Major events modelling is a particularly problematic area in which all sorts of imaginative assumptions and concepts, like “social benefits”, get aired. And it’s not always the case that consultants readily fall into line.
The robodebt royal commission found that Human Services secretary Kathryn Campbell didn’t want PwC’s final report examining robodebt because it was too critical — despite Human Services steering PwC away from the issue of debt accuracy. And, speaking of recent revivals of old scandals, remember EY told Barnaby Joyce and his department that moving the pesticides regulator to Joyce’s own electorate would yield very few benefits and come with big risks?
In both cases, consultants were faced with policy disasters driven by ministers — disasters that were too big to paper over with generous assumptions and carefully limited conclusions. And both cases are atypical. External consultants know they won’t continue to get work if they tell clients what they don’t want to hear.
The policy consequences are significant. Apart from rare cases, external consultants often act as enablers of poor and partisan policy that costs taxpayer money and, more rarely, can damage lives. The fact that, as one consulting firm executive acknowledged this week, there are no professional or regulatory standards governing the work of consultants says it all about what taxpayers are getting when they pay consulting firms for advice.
Any major inquiry into the misconduct of big consulting firms should also investigate when they do exactly as they’re paid to do, and serve up faulty advice because it’s what their client wants to be told.
What steps can be taken to mitigate the role of consultants in shaping policy? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
