As major companies express their delight at Scott Morrison’s re-election, figures show untendered contracts have surged since the Coalition first took office in 2013, with $50 billion awarded in the two months before the election. By Michael West.
Surge in Coalition outsourcing
The votes were still being counted, the final tally of seats in parliament yet to be settled, when the stories started to drop in the financial press, enumerating the list of demands big business has for Scott Morrison.
“A truly outstanding result,” Fortescue Metals chief executive Elizabeth Gaines told The Australian Financial Review, adding she “looked forward to working with the Coalition” on such things as “a competitive tax regime that encourages long-term investment”.
MYOB boss Tim Reed expressed relief, “given Labor made it clear they would push for minimum-wage rises”.
“Stop the regulation and stop the bullshit,” was the call to arms from retailer Gerry Harvey.
“We look forward to working with the new government to deliver the policy settings which allow us to invest in these projects with confidence,” said Origin Energy chief Frank Calabria, hinting at taxpayer subsidies to encourage gas fracking operations in the Northern Territory.
This was of course an idea first floated by Labor during the election campaign, with its promise of $1.5 billion in subsidies to open up the Northern Territory’s Beetaloo Sub-basin for gas exploration. It has been predicted that emissions from the Beetaloo Sub-basin alone, let alone fracking in the north Bowen and Galilee basins, would produce between 4.5 per cent and 6.6 per cent of Australia’s total emissions. It’s a climate bomb that would blow our Paris commitments apart.
But such details were largely lost in the political theatre of the election.
As was the reality of a radical blowout in government spending, which has occurred over the past six years.
Figures obtained by The Saturday Paper and michaelwest.com.au show that since the Coalition took power in 2013, consulting fees paid to the Big Four accounting firms – EY, Deloitte, PwC and KPMG – have exploded.
Spending more than doubled from 2013 to almost $700 million in 2018, and it remains on track for a similar outcome this year. Most of the consultancy spending has come from the budget of the Department of Defence (DoD).
Data expert Greg Bean, who analyses AusTender data, calls 2015 the “standout year”, when fees from the Big Four jumped by almost $200 million, a 60 per cent increase on 2014.
“Fee increases from 2015 to 2018 are such that the total fees for 2018 are double that of 2014, that is $330 million over four years, a 100 per cent increase in Big Four billing for services provided to the Australian government,” Bean said.
KPMG has been the biggest winner from the boom in government outsourcing, overtaking PwC in 2017 to become the largest contractor, with fees totalling $216 million. This rose to $235 million the following year.
In a sign this trend is set to continue, the government announced on the eve of election day that it would cut a further $1.5 billion from the public service.
The money will be used to pay for $1.4 billion of election promises made by the Coalition, and to boost its promised surplus. Despite weakening economic conditions for Australia, the Morrison government is still set on achieving a $7 billion surplus in the 2019-20 financial year.
Few details were given about where these cuts would come from. According to News Corp reports, department secretaries will “be ordered to find efficiencies and value for money, but specific targets for individual departments or organisations have not been set”.
Labor also promised significant cuts to the public sector budget – more than $2 billion in total – however the opposition limited this to spending on consultants, travel and contractors.
During the election campaign, ACT Liberal senator Zed Seselja criticised Labor’s proposed cuts. “Government contractors provide a valuable service, no doubt about it. We’ve always had a mix when it comes to the delivery of Commonwealth services and advice and the private sector plays a role in that,” he told The Canberra Times. “The CPSU [Community and Public Sector Union] might suggest it has no value but it’s simply not true.”
Another spectacular trend in this corporate takeover of the public service is the splurge in zero-tender contracts, mostly military. These are contracts awarded without any competitive public tender process, providing no opportunity for firms to try to undercut one another on price. Having a number of bidders is the accepted practice for government contracts around the world, as it enables governments to get the best value for taxpayer money.
“Out of the $125 billion in amended contracts, the lion’s share – $101 billion – is DoD contracts,” says Bean.
For many years, the value of untendered government contracts each month remained fairly steady, below $5 billion, said Bean.
“In May 2018, a sudden increase occurred, at about the time the Liberal Party started showing signs of replacing Malcolm Turnbull with the very likely possibility that the Liberal government might go to an election between May and August,” he said.
“While an election did not occur in the May to August period, that election threat has been a daily possibility since August, when Turnbull was replaced with Scott Morrison, and exceptionally high untendered contract value has continued through to the end of March 2019.
“And then, with the election announced in April, an explosion in untendered contracts has occurred from April 1 to May 18, 2019,” said Bean.
In this time, $50 billion in contracts was awarded without any tender process.
Many of these were awarded to multinational defence contractors. The top eight firms – including Lockheed Martin and Boeing from the United States, French group Thales and European contractor Rheinmetall – account for more than $42 billion of the $101 billion spent by the Australian government. The remaining $59 billion is spread across 1300 suppliers.
The biggest beneficiary of this defence spending is Lockheed Martin, which is contracted to deliver to Australia the controversial F-35 joint strike fighter, an item of military hardware widely described as a “lemon”.
Such a vast expenditure of taxpayer money, the biggest by far in this nation’s history, on military hardware many experts believe is useless, did not rate a word in the election.
Nor did the sale of 43 Australian hospitals to a Cayman Islands-controlled crew of financial engineers via Brookfield’s $4.5 billion takeover bid for Healthscope. And there was little discussion within the mainstream media of a federal anti-corruption commission, foreign policy or reform to political donations.
It will not be revealed until next year how much business contributed to the election outcome, and who contributed, due to Australia’s lack of real-time political donation disclosures.
Labor insiders say their party did very well out of corporate donations, too. The party was expected to win, and business duly paid upfront for the favours it would call in later.
But it’s the Coalition’s politically stunning victory that has been met with elation in the big business community. And as Morrison won by campaigning against Labor – and Bill Shorten – rather than espousing much in the way of policy itself, there is now a gaping policy vacuum.
This vacuum is likely to be filled with policy that favours large companies – those, that is, with the most money and the most lobbying muscle.
This article was first published in the print edition of The Saturday Paper on May 25, 2019 as "Taking care of business".
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