The leaking of confidential tax info, in breach of non-disclosure agreements, by PwC personnel, and its exploitation by a agency that makes a major chunk of its US$50 billion world income from facilitating tax avoidance, isn’t the primary time PwC has run afoul on battle of curiosity on the Commonwealth stage.
In 2015, whereas implementing the Coalition’s mass surveillance “information retention” program, the Legal professional-Basic’s Division (AGD) employed PwC to develop a costing mannequin for trade implementation of the scheme to pressure communications corporations to bulk-store Australians’ private information, to ensure that trade to be part-compensated by a grants program.
As Crikey has lengthy chronicled, the AGD not merely has a near-total indifference to essentially the most fundamental rights of Australians, nevertheless it is also serially incompetent, particularly in terms of IT.
PwC had, as shoppers, a lot of communications and IT corporations, together with Telstra, maybe the primary beneficiary of any authorities program to offset the trade price of its surveillance program. It additionally had a “strategic alliance” with a serious software program vendor providing an information retention product.
What steps did the AGD and PwC take to deal with this basic battle of curiosity? PwC informed the AGD about Telstra earlier than it was employed, however waited till after it was employed to confess it had web service suppliers as shoppers as nicely. It took one other firm to level out to the AGD that PwC was working with a software program vendor that may find yourself being a beneficiary of the grants.
The AGD didn’t trouble getting battle of curiosity declarations from PwC in regards to the subject as a result of it didn’t assume there was a lot potential for battle of curiosity — and thought it might be coated by generic declarations signed by all consultants. In doing so, it violated its personal tips about coping with battle of curiosity in procurement.
All this was specified by a forensic Australian Nationwide Audit Workplace (ANAO) report in 2018.
The info retention case incorporates little of the excessive stakes and worldwide dimension that characterise the PwC tax regulation leak, so brilliantly detailed by Neil Chenoweth and Edmund Tadros on the Monetary Evaluation all through this 12 months. Nevertheless it demonstrates the paradox on the coronary heart of the big consulting corporations working for governments.
Massive consulting corporations — the massive 4, McKinsey & Firm, BCG — inevitably have giant numbers of company shoppers, many if not most of whom shall be instantly affected by authorities coverage at some stage, whether or not particular trade packages like an information retention grants scheme, or normal insurance policies like tax. So, equally inevitably, once they present recommendation to governments, they’ve a battle of curiosity in a method that no public servant ever does.
And the AGD isn’t the one one poor at managing conflicts of curiosity. It’s a systemic drawback within the public service, one which has naturally worsened as the scale of the federal government’s annual spend on consultants surged beneath the Coalition — greater than doubling over the previous decade, in response to the ANAO, to just about $900 million, together with a complete of over $1.1 billion to the massive 4 for consultancy companies alone. For the ANAO, the failure of the general public service to successfully handle the conflicts of curiosity which are foundational to its use of consultants is a persistent supply of angst, to which it has devoted complete publications explaining what good observe is and isn’t.
It’s not an issue confined to Australia. Final 12 months, a US Congress investigation confirmed that McKinsey had concurrently suggested the US Meals and Drug Administration and opioid producer Purdue. McKinsey ended up paying a US$573 million effective for serving to Purdue “turbocharge” opioid gross sales, killing tens of hundreds of Individuals, whereas working with the FDA to enhance drug security. Certainly, the identical McKinsey companions had been concurrently working with the FDA on drug security whereas advising Purdue on easy methods to fight the FDA’s efforts to enhance drug security.
The worst Australian instance of massive 4 battle of curiosity in current instances earlier than PwC was on the state stage, in KPMG’s disgraceful twin roles in advising totally different NSW departments in regards to the discredited Transport Asset Holding Entity, which led to a senior then-KPMG companion being pressured by KPMG management to alter his recommendation to fulfill the calls for of one other, extra senior consumer.
However what number of instances has the shortage of a parliamentary investigation, or the absence of an ANAO audit, meant giant consulting corporations had been in a position to exploit their twin hyperlinks between governments and company shoppers?
And even when departments do try to deal with conflicts of curiosity by main consultants, the character of enormous consulting corporations defeats them. Earlier this week, in one more report revealing bungling within the Division of Residence Affairs, the ANAO discovered that the division had determined to exclude industrial adviser Deloitte from a serious IT procurement course of, just for one of many related Deloitte companions to start advising one other of the tenderers concerned.
Typically the sheer breadth of consulting agency shoppers defeats efforts to beat conflicts of curiosity: the Australian Renewable Power Company was criticised by the ANAO for utilizing a few of the similar consultants it was paying grants to, or who had been working with grant recipients — together with one of many massive 4 — to guage its packages.
Regardless of “good observe” necessities for battle of curiosity administration in public service departments, and the blithe assurances of enormous corporations about “Chinese language partitions”, battle of curiosity is within the very nature of enormous consulting corporations. It’s central to their enterprise mannequin, fairly than being a bug that may be mounted.
There’ll be extra McKinseys, extra PwCs, so long as giant consultants are utilized by governments. And public servants are both unwilling or unable to forestall it.
