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The big four consultancies have nearly tripled their income from federal government contracts since the Coalition won power, while becoming among the nation's most generous political donors. KPMG, PricewaterhouseCoopers, Ernst & Young and Deloitte won contracts worth $562 million last financial year, surpassing the $527 million record set in 2015-16 and taking their total under the Coalition to $2.1 billion. The firms' donations to the major parties were also higher than ever, reaching $915,000 last financial year –almost twice the amount they gave when the government changed in 2013. The government and the consulting firms said the spending reflected changes in the Australian Public Service's work, as it responded to economic trends and the public's shifting demands. However, researchers and crossbenchers pointed to the bureaucracy's shrinking workforce and the Coalition-imposed staffing cap as one of the main causes. Commonwealth spending on the big four firms more than tripled in the Rudd-Gillard years, Austender data shows, peaking at $365 million in 2012-13 before dropping to $210 million in the Coalition's first year in power. Except for 2016-17, the spending grew every subsequent year, while the Coalition cut the public service to its smallest size in 12 years. Last year, government agencies entered into contracts with the big four for audits, IT, budget processing, risk management, logistics, advice and project management, among other work. Centre Alliance senator Rex Patrick said consultants would be unnecessary if the public service possessed enough in-house skills. "Instead of dealing with shortfalls in knowledge, it has been far too easy to contract the work out, which has the general effect of dumbing down the public sector further," he said. "The Commonwealth government is in a knowledge-and-expertise death spiral." Greens senator Peter Whish-Wilson said the Coalition preferred to outsource work to corporate donors than build the bureaucracy's capacity. "Consultancies are more expensive because they take a profit. And the continued use of consultancies hollows out the public service," he said. The Centre for Policy Development, a think tank chaired by a former head of the Prime Minister's Department, Terry Moran, has warned previously that the erosion of the bureaucracy's capabilities was likely to be inflating spending on consultants. The role of consultants in government has attracted growing scrutiny in recent years. A national audit detailing spending on the big four firms and a parliamentary inquiry have raised questions about the effect on public service skills. However, Finance Minister Mathias Cormann denied the increased spending had reduced policy making and administrative skills within government. The overall cost of government administration – including public sector staffing, consultants and contractors – as a proportion of overall spending dropped from 8.5 per cent in 2007-08 to 6.8 per cent in 2017-18, he said. "The government continues to promote a flexible approach to resourcing that strikes the right balance between a talented, core workforce of permanent public servants and selective use of external expertise," the minister said. "When public servants and external specialists work together on projects, there is a two-way transfer of skills and experience." Researchers in public administration say the loss of public service jobs, and a cap on staffing, has created a reliance on consulting firms. An Auditor-General's report has also revealed officials fail to correctly identify spending on consultancies when registering contracts. Melbourne School of Government lecturer Martin Bortz said what the government considered a consultant was "murky". He said consultants could transfer their skills to bureaucrats when managers made training part of their contracts with the companies. "Real consultants have a very valuable skillset to offer which takes years and years to hone. I don't think it can happen through osmosis," he said. Growing donations to the Liberal and Labor parties appeared to be a bid from consultancies to grow their influence and become more involved in policy making, Mr Bortz said. The big four have donated $3.5 million to the Labor, Liberal and National parties since the Coalition came to power. Deloitte said its donations were more commonly in-kind and reflected the facilities the company provided for events attended by the major parties. "Deloitte rejects the suggestion there is a correlation between the support provided to the political process and the level of government spend on consultants," a spokesman said. PricewaterhouseCoopers likened its donations to those from other companies and unions, while KPMG said its contributions represented memberships and sponsorships of business associations and conferences managed by the major political parties. "These provide opportunities for attendance at policy briefing sessions, and invitations to networking events with business and parliamentary representatives," a KPMG spokeswoman said. Ernst & Young declined to comment. Senator Cormann denied any link between donations and government spending on the big four, and said the companies followed government rules for transparency and competition in bidding for contracts.

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