New South Wales Temporarily Bans PwC Amid Ongoing Federal Investigation

The PricewaterhouseCoopers (PwC) offices stand in More London Riverside in London, England, on Oct. 2, 2018. (Jack Taylor/Getty Images)

The government of the Australian state of New South Wales (NSW) has placed a temporary ban on scandal-plaguing consultancy firm PricewaterhouseCoopers (PwC) as it seeks to improve the quality of consultant services provided by third parties.

On June 15, the NSW government announced that it would suspend PwC from getting new government contracts concerning taxation policies for three months in response to the recent leak of confidential federal documents.

PwC has been engulfed in a federal investigation after former partner Peter Collins shared confidential government documents with fellow partners and staff. This allowed the consultancy firm to generate a system that facilitated large companies to avoid paying newly devised taxes in Australia.

Collins himself is now subject to a criminal investigation by the Australian Federal Police.

NSW Finance Minister Courtney Houssos said the ban was meant to protect the community from confidential document leaks.

“I was appalled by the breach of trust that occurred with the Federal Government. As additional evidence comes to light, we will continue to toughen our regime and protect the NSW community from this behaviour,” he said in a statement.

“Suspending PwC from obtaining new taxation-related procurement contracts is a proportionate response and one that safeguards the people of NSW from further exposure to the scandal.”

The NSW government also said PwC would be required to attest each month that no staff member involved in the scandal would handle any state government work.

At the same time, the government noted that it was working to review and strengthen conflict of interest and confidentiality terms for all professional services engagements in the state.

Meanwhile, PwC has confirmed in writing that no NSW government engagement has been worked on by staff implicated in the Collins scandal and that those employees will not deal with any future government work.

It is worth noting that the decision to ban PwC will not affect any existing contracts handled by the firm.

The State of Consultancy Hiring in NSW

According to an Auditor-General report in March, between 2017-2018 and 2021-2022, NSW government agencies spent a total of $1 billion (US$680 million) on external consultants across 10,000 contracts.

Those engagements were handled by over 1,000 consulting firms during the period.

However, the report found eight firms accounted for 50 percent of the spending, of which 27 percent came from the big four consulting firms. The remaining expenses were spread among the other 1,000 companies.

NSW Finance Minister Courtney Houssos speaks in the NSW Upper House in Sydney, Australia, on Sept. 24, 2019. (Brook Mitchell/Getty Images)

This indicated the over-reliance of the NSW government on major consulting firms.

While the amount of spending on consultants was significant, the report found that government agencies did not have a system to manage consultants effectively.

Specifically, there were no clear guidelines for classifying and reporting consulting expenses, nor was there a single data source that accurately captured the total government spending on consultants.

In addition, most government agencies could not provide evidence that they used consultants strategically, and most of the consulting engagements reviewed by the Auditor-General office were not monitored or evaluated by the hiring agencies.

Other problems included gaps in record keeping, contracts exceeding expense thresholds, and government agencies not retaining knowledge and skills from consulting engagements.

Victorian Government Continues to Hire PwC

NSW’s ban on PwC comes after the Victorian government confirmed that it would keep using the consulting firm until the federal investigation concluded.

In May, Victorian Premier Daniel Andrews said his government had sought assurances from PwC and that he was confident no confidential information from his government was leaked.

“We will wait to see what the Commonwealth government does here,” he said.

The Andrews government was reported to spend over $896 million on consultancy since it came to power in 2014.

PwC was the second-highest-paid agency among the consulting firms hired by the state government in the 2021-2022 financial year, with $15.3 million in contract revenue.