Government open to Christmas cash for scandal-plagued PwC Australia, with a $700,000 job now and possibly more from December

Government open to Christmas cash for scandal-plagued PwC Australia, with a $700,000 job now and possibly more from December
  • PublishedMay 13, 2024

Bureaucrats in charge of the nation’s finances have opened the door to giving scandal-plagued consulting firm PwC Australia new taxpayer-funded contracts by Christmas.

A missive published by the Department of Finance says PwC Australia has agreed not to bid for work until December 1, 2024.

But the news came the same day a company it owns 49 per cent of won more than $700,000 in new taxpayer-funded work.

“It’s a sign that they’re out of the freezer,” says international governance expert Dr Andy Schmulow, who has followed the issues at consulting firms for years.

“That concept, that attitude, that it’s ‘just a storm in a teacup and it’ll all blow over’, is part of the problem.”

PwC Australia said in a statement it has sold off the parts of the business that provided services to state and federal governments and “no longer operates in those markets”.

What went wrong

PwC is an abbreviation of PricewaterhouseCoopers and it’s a global-trotting professional services company that sells accounting and consulting services.

A man sits in between two middle aged women at a long table with small microphones. They are dressed professionally.
PwC Australia executives Catherine Walsh, new chief executive Kevin Burrowes and Jan McCahey at a Senate inquiry in October 2023. The firm spent the year in turmoil after the tax leaks scandal infuriated the public and one of its biggest clients: the federal government.(AAP: Lukas Coch)

It’s one of the ‘Big Four’ firms that do this work, alongside Deloitte, KPMG and Ernst & Young (EY).

Since early 2023, the Australian arm of the consulting firm has been under a cloud over the ‘tax leaks’ scandal.

The Tax Practitioners Board found PwC Australia senior partner Peter-John Collins misused confidential information relating to the government’s plans to tax multinational companies.

Internal emails from Mr Collins on September 3, 2015, read:

“No need to share this because all supposed to be secret … The imported mismatch formulas will blow our mind but be easy to sidestep.”

The firm used the information to reverse-engineer ways to avoid the taxes, and then reaped millions from marketing and selling a ‘fix’ to the very large companies that were set to be taxed more.

One email showed that PwC made at least $2.5 million from having the information, which gloated that it had helped the firm win “brand-defining” clients.

Multiple inquiries

The December 1 date for a reassessment of PwC Australia’s appropriateness to be awarded government work concerns senator Barbara Pocock who, with her colleagues on a cross-party Senate committee, have relentlessly questioned PwC Australia and other firms about conflicts of interest and internal scandals.

A woman with short hair, green shirt and blue blazer speaks at a man while gesturing with her right hand. The man is obscured.
Senator Barbara Pocock quizzes former PwC Australia boss Luke Sayers during a Senate inquiry in October 2023.(AAP: Lukas Coch)

“There are multiple inquiries underway,” she says, somewhat exasperated.

“We’ve got an inquiry by the Australian Federal Police, multiple inquiries still by the Tax Practitioners Board, the certified practising accountants (association, CA ANZ), have inquiries underway in relation to a number of PwC issues. And of course, we’ve got two Senate inquiries still going with their recommendations are yet to be received or acted on.”

The federal government — and, through it, taxpayers — were PwC Australia’s biggest client before the scandal broke.

With so many investigations still underway, Senator Pocock says PwC Australia is not ready to take on new work from government.

“I think neither the Senate nor the Australian people — and certainly the government — should not be satisfied that we’ve got all of the facts on the table, and enough information to draw PwC (Australia) back into consulting. We are a long way from that, in my view.”

Senator Pocock says there are still “many gaps in the story” of what happened at PwC Australia.

“And PwC has yet to really come clean completely,” she says.

“That is reflected in the number of inquiries that still remain underway to hold them to account for what they did wrong.

“And we’re yet to see a comprehensive legislative response from the government that really goes after the behaviour which was so egregious in the first instance.”

‘Divested’ arm

In a statement, a PwC Australia spokesperson said:

“PwC Australia has divested its federal and state government advisory business and no longer operates in those markets.”

The sale of parts of the business that did work for government created Scyne Advisory — where ex-PwC Australia partners and staff work exclusively on jobs for different government agencies. It no longer has any link to PwC Australia. 

In addition, the statement added: “The review being undertaken by the Department of Finance is a matter for the department.”

‘Land and expand’

After the scandal exploded, the tentacles of the firm (and others) were discovered deep inside the work and physical offices of government agencies.

Part of the reason is a consulting firm practice later described as “land and expand”, where the original scope and breadth of work grows over the life of a contract.

For example, the Australian Federal Police (AFP) began investigating Peter-John Collins over potential crimes. 

But the firm was the force’s auditor, held lucrative contracts with it and had staff embedded inside AFP offices.

PwC Australia was by far the AFP’s consulting partner of choice, winning more than $20 million in contracts with it in the two years to 2023, around 39 per cent of the AFP’s spending with the biggest seven of the highly competitive firms.

There is no suggestion of wrongdoing by the AFP.

At the time it said there were “stringent arrangements in place (and) no possible way PwC personnel will be able to access the investigation team or any investigation or operational material.”

Note this note

The Department of Finance missive was posted to remind bureaucrats involved in buying services for government departments and agencies.

Dept of Finance procurement note
A note from the Department of Finance paves the way for PwC Australia to recommence bidding for government work by the end of the year.

It describes a “mutual agreement” where “PwC Australia will not bid for any new Commonwealth work until 1 December 2024”.

But it’s hard to tell whether it was an ‘agreement’ or the obvious result of a firm decision by the Finance Department.

Later, the document uses language that changes the implication of the ‘agreement’. 

“PwC Australia has agreed with the Commonwealth that it will temporarily cease new contract engagements with Australian government entities captured by the Commonwealth Procurement Rules until 1 December 2024.” 

Asked about the note, the department released a statement to the ABC, saying the note built on similar advice provided in May 2023:

“Officials must consider, among other things, a potential supplier’s relevant experience and performance history when assessing value for money and factor these into the evaluation of tenders. This could include consideration of any unethical behaviour and/or deficiencies in performance under prior contracts,” it notes.

The most recent note “responds to the latest information on the position between the Commonwealth and PricewaterhouseCoopers Australia (PwC Australia), namely the undertaking from PwC Australia that it will refrain from bidding for new Commonwealth work while the government’s ethical soundness review is underway.

“It is a strengthening of the position adopted in May 2023.”

 Senator Pocock doesn’t think the firm — and those linked to it — are ready.

“They are not back in inside the fold, and should not be allowed back to do consulting work until it’s all tidied up and we’ve really seen a change in the way PwC does business,” she says.

$711,544 gig

The note was published the day that PricewaterhouseCoopers Indigenous Consulting, also called PwC Indigenous or PIC, won $711,544 in new government contracts, revealed by news site The Klaxon

PIC states it is a “majority owned, led and staffed Indigenous operation”, with the Indigenous co-owners holding a 51 per cent share and PwC Australia owning the remaining 49 per cent. It is a “member firm” in PwC’s global network.

Outside of PWC building
PwC Australia has been in turmoil since a Tax Practioners Board report about the ‘tax leaks’ scandal rocked the firm.(AAP: Joel Carrett)

The department’s note clearly states that PwC Indigenous and Scyne Advisory — a company spun-off from PwC Australia that does only government work — are not barred from work. The words “does not apply” are written in bold.

“Finance has separately concluded a review into PwC Indigenous and found that it was appropriate for the Commonwealth to continue engaging with PwC Indigenous,” the note reads.

The department declined to provide the review or its findings.

“The Department has not released a summary of its examination of PricewaterhouseCoopers Indigenous Consulting (PIC),” a spokesperson said in a statement.

“Finance’s examination found that PIC exhibited a significantly different governance and operating structure to that which exists within PwC Australia, with a greater focus on transparency and that PIC has the appropriate structural and cultural standards to contract with the Commonwealth.”

There is no suggestion that any members of PwC Indigenous have been or are involved in the ongoing investigations around the tax leaks matter.

Big work

PwC Australia is busy getting its house in order.

The firm sold off its entire government consulting arm for $1, creating Scyne Advisory, recognising it would be unlikely to be welcomed back as a supplier without radical change.

PwC Australia imported new leadership and is dealing with its own internal issues at the same time as the consulting industry adjusts to a federal government keen to trim in the eye-watering cost of services out-sourced to them by hiring public servants to do the work.

“I think there’s going to be a magnificent array of rearranging deck chairs, and virtue-signalling,” says Professor Schmulow, who is unconvinced about the changes that have been made at the PwC Australia.

He uses the example of the firm’s internal legal service, which he disparages as a “play pretend law firm” used to create the ability of legal professional privilege — protection — for clients, as well as PwC’s unwillingness to hand over a key report about what the global business knew about the scandal.

“They’ll continue demonstrating to the world that they’re as pure as the driven snow, but they’re not.”

Social problem

PwC Australia complained to Professor Schmulow’s employer, the University of Wollongong, lodging a complaint claiming he had broken the institution’s social media policy.

The governance expert uses highly disparaging and personal language in some posts, calling the firm a “racist, sexist, toxic s**thole”, a “cancer” on society and a “parasite”.

He sees it as evidence of the firm’s misplaced priorities. 

“It’s laughable, it’s ridiculous and it’s pitiful. Who am I? I’m an absolute nobody,” he says.

“Instead of getting on with the job, [CEO Kevin Burrowes] comes after me. Not for saying nasty things about him, but for quoting what other people have said about him.”

A PwC logo on a wall seen through a spinning glass door with obscured people in suits in the foreground.
If you’re not involved in business, you might not have heard of PwC and its rivals. But the firms are large – PwC Australia has more than 8,000 staff alone – and have extraordinary reach into the workings of government and business.(Reuters: Lewis Jackson)

During a 45-minute meeting with the University of Wollongong’s human resources department, Professor Schmulow says he substantiated the claims using Senate hearing transcripts, parliamentary submissions and content from the Australian Financial Review and ABC’s reporting of the scandal.

“It was so easy for me to demonstrate that these things had been said on the record … that after about 45 minutes, they said to me, ‘Okay, we don’t want to hear anymore’ and I said ‘I’m not finished. I’ve got more examples’,” he says.

In a response to inquiries about PwC Australia’s pursuit of Professor Schmulow, the firm said it was defending staff from disrespectful remarks that included highly personal insults about their appearance. 

“We will always support constructive, respectful and fair discussion. However where it does not meet this criteria, we believe it’s important to call out.”

Senator Pocock says she’s disappointed to see “how fiercely PwC pursues its critics” in some cases.

Senate consultancy inquiry
Senators Deborah O’Neill (Labor), Richard Colbeck (Liberal) and Barbara Pocock (Greens) at a hearing of the Senate committee examining conflicts of interest in consulting firms.(ABC: Ian Cutmore)

“I think PwC really should be spending its time working out how to renovate its internal practices, how to move towards establishing credibility, and integrity in the eyes of the Australian community,” she says.

“It is still an issue for us as a community and PwC have got more work to do.”

SOURCE: ABCNEWS

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