Not-for-profit aid sector says reliance on contractors such as Palladium ‘a problem for the government and Dfat’

This article is more than 1 year old

This article is more than 1 year old

The not-for-profit aid sector has warned Palladium, the firm Julie Bishop has just joined as a board member, is among a handful of powerful private contractors increasingly dominating Australia’s foreign aid program in a way that undermines the national interest.

Bishop, the former foreign minister, announced on Tuesday she was joining the board of the private aid contractor, prompting immediate criticism from Labor.

Labor’s foreign affairs spokeswoman, Penny Wong, described the appointment as a breach of ministerial standards, despite Bishop saying she was aware of her obligations and would abide by them.

But others in the aid sector have different concerns about firms like Palladium.

Roughly one-quarter of Australia’s total aid spending was outsourced to private firms in 2016/17. That money was shared largely between 10 of the 192 foreign aid contractors. Palladium won 53 aid contracts – the third highest of any firm – worth $99m or 2.8% of the Australia’s entire aid spend.

The Australian Council for International Development, which represents not-for-profit aid groups, has warned the excessive outsourcing of Australia’s foreign aid program was undermining Australia’s national interests.

ACFID’s chief executive, Marc Purcell, said private aid contractors were concerned chiefly with profit and the job at hand, rather than pursuing Australia’s broader national interest.

“You can’t outsource your relationships and your influence but that’s what’s happening,” Purcell told Guardian Australia. “At the end of the day, contractors are not responsible for Australia’s national interest. They are not responsible for our influence and soft power. They are not responsible for achieving the white paper objectives.

“But because of diminished capacity in Dfat, because of a declining overseas development assistance budget, that’s effectively the way Dfat has been forced to go.”

Purcell said the government had been forced into an “over-reliance” on three big contractors, including Palladium.

“I think that’s going to be a problem for the government and Dfat going forward,” he said.

The allegations were rejected by the peak group for private aid contractors, the International Development Contractors Community. The IDCC argues private contractors offer deep expertise in an “increasingly technical business”, which requires the kinds of skills and systems possessed by contractors.

“Despite this, the role of the private sector in aid delivery is often queried, typically on the basis that aid ought be altruistic at all time,” the IDCC says in a briefing paper. “This charity model of aid suits neither Australia’s interests, nor the rapidly changing needs of its partners.”

The IDCC deputy chair, Stuart Schaefer, said Dfat did not deliver the aid program itself, leaving it to either implement aid through contracts or grant funding to various organisations, either private firms or non-government organisations. Both contracts and grant agreements allowed Dfat to dictate its objectives to the organisation implementing the aid project.

“For NGOs, the department of foreign affairs uses grant agreements to achieve its objectives,” he said. “And for contractors, contracts are arguably stronger and more binding agreements to get the outcomes that it wants.”

News of Bishop’s appointment comes just days after revelations that the former defence minister Christopher Pyne would join consulting giant EY to help grow its defence business.

Pyne and EY have flatly rejected any suggestion that the appointment would breach ministerial standards, despite Labor’s allegations to the contrary.

The controversy has prompted Centre Alliance senator Rex Patrick to push for an inquiry into the operation of ministerial standards.

Patrick told Guardian Australia his inquiry was broad enough to consider questions about Bishop’s appointment to Palladium. But he said it was not yet clear whether Bishop’s situation breached the standards, given her precise role for Palladium was unknown.

“If she’s simply working with the organisation using her experience to help them do what they do internationally, that’s different to her sitting in Canberra and advising on how to get access to grant funding,” Patrick told Guardian Australia. “But I think the point is if the inquiry gets up, because there is a question [about Bishop’s role], and an inquiry exists to answer that questions, she could appear or make a submission.”

The current federal ministerial standards require that ministers do not lobby, advocate for or have business meetings with government, parliamentarians or the defence force on “any matters on which they have had official dealings” in the past 18 months. The standards also say that ministers should not use information they have obtained in office for private gain.

Pyne said on Sunday he was aware of his responsibilities under the code and would abide by them. His job was to provide occasional high-level strategic advice, not lobby or use information he had acquired in his portfolio.

Bishop told the Australian Financial Review earlier this week: “I am obviously aware of the obligations of the ministerial guidelines and I am entirely confident that I am and will remain compliant with them.”

The foreign affairs minister, Marise Payne, and the peak body for private aid contractors, International Development Contractors Community, were contacted for comment.