What you need to know as a public servant about the “PWC effect” on small businesses  

Like everyone else, I have been watching as more and more stories have come out in recent months about the behaviour of the “Big Four” consultancies. What initially began with the PWC exposé has evolved into a broader public discussion fueled by politicians and media, highlighting concerns over the use of consultants within the public service. 

Here is the thing. We aren’t all the same. 

My frustration lies in the fact that media coverage tends to cast all consultants with a single brushstroke—labeling us as profit-driven, ethically questionable, and providers of unnecessary services.

Most of Elm’s clients are government agencies, and I know a lot of small and solo consults who also primarily work with the government. These professionals consistently uphold high levels of integrity, strive to deliver exceptional services, and possess a genuine passion for their work.

Conversations with fellow consultants inevitably circle back to what we’ve termed as the “PWC effect.” The apprehension among public servants about engaging consultants is palpable. Departments are introducing different processes to try to navigate the potential overreliance on consultants (or provide a good answer to the inevitable questions at the next Senate Estimates).  

We are worried, not because of a shortage of work but because of the burden that is being placed on small businesses due to the actions of a handful of consultancies. 

Running a small business is not easy, it comes with challenges that might not be fully appreciated by many in the public service when engaging consultants. I am not advocating for less scrutiny or to discourage ‘testing the market’. But it does need to be easier for small businesses to engage with the government, creating more opportunities and levelling the playing field.

Policy versus reality 

In July, The Hon. Katy Gallagher Minister for Finance, announced changes to the Commonwealth Procurement Rules to “open the door” for small and medium businesses to do more work with government . Minister for Small Business Julie Collins said, “Small businesses shouldn’t be locked out from opportunities to gain government contracts just because they might not have the leverage of bigger businesses.”  

In reality, that is exactly what is happening as a result of the issues with PWC. What we are seeing is an increased procurement burden for small businesses.  

Elm recently had to demonstrate how we would ensure that our supply chains do not engage in modern slavery – as a micro business, my supply chains sit in my house! In a 90 page submission, we had to write about our impact on the Australian economy and demonstrate how we would meet the government’s protective security framework. 

A solo consultant I know told me they missed out on a small contract ($12,000) last week because they didn’t adequately demonstrate their social impact by having an ethical sourcing plan or indigenous procurement policy. They were not told it was worth a fifth of the assessment criteria. 

This isn’t the first time I have heard of this happening. The expectation that a small business must meet the same requirements as a large corporation goes against the intent of the announcement the Ministers made just six weeks ago. 

New Commonwealth Procurement Rules
5.5 To ensure that Small and Medium Enterprises (SMEs) can engage in fair competition
for Australian Government business, officials should apply procurement practices that
do not unfairly discriminate against SMEs and provide appropriate opportunities for
SMEs to compete. Officials should consider, in the context of value for money:
a. the benefits of doing business with competitive SMEs when specifying
requirements and evaluating value for money;
b. barriers to entry, such as costly preparation of submissions, that may prevent
SMEs from competing;
c. SMEs’ capabilities and their commitment to local or regional markets; and
d. the potential benefits of having a larger, more competitive supplier base, including
the disaggregation of large projects into smaller packages, where appropriate, that
maximise competition.

_{https://www.finance.gov.au/sites/default/files/2023-06/Commonwealth%20Procurement%20Rules%20-%2013%20June%202023.pdf}

The other burden for small business that public servants often don’t appreciate is paying invoices on time. While the government has committed to paying small businesses within 20 days, my current average payment is over 40 days. I currently have one invoice that has been outstanding for 70 days. The average payment time across government is 32 days.

Not only does that mean I have less cash to pay my staff and my bills, but more importantly I have to spend time chasing public servants to get them to push my invoice through internal procurement processes. Internally, it is seen as just another process but for my business, that one invoice can make a big impact. 

Commonwealth Procurement Rules

5.8 The Australian Government recognises the importance of paying suppliers on time,
particularly SMEs. Non-corporate Commonwealth entities must make all payments to
suppliers within the maximum payment terms, following the acknowledgement of the
satisfactory delivery of goods or services and the receipt of a correctly rendered
invoice.

_{https://www.finance.gov.au/sites/default/files/2023-06/Commonwealth%20Procurement%20Rules%20-%2013%20June%202023.pdf}

Unrealistic expectations 

What we are also seeing is unrealistic expectations about what can be delivered by a small business. Four times in the last fortnight, my team has been asked to deliver a workshop or project next week. Small businesses cannot be competitive in an environment where public servants expect them to have people sitting around waiting for work. Simply putting out an RFQ doesn’t mean you have tested the market when only large businesses would have the capacity to respond. 

Traditionally, the Big Four consultancies or other large, well-known businesses are seen as ‘a safe pair of hands’ due to their capacity. Small businesses with less staff are seen as more risky as they may be unable to deliver when you need. However, that risk is not balanced by undertaking more planning and preparation within government.

Why are we talking about this? 

I know we normally write about communications and leadership, but this topic impacts my small business daily.  

Increasing the burden on small businesses means we will do less of the work we love because we are too busy navigating different departments’ procurement processes (and yes they are all different!). It means that instead of delivering communication strategies or reports for my clients, my team are writing policies that no one will read, but we need to have to tick a procurement box.

The PWC effect means this year looks different for many small businesses, not just the flow of work but the effort it takes to get it.  

I don’t think anyone reading this can change the apprehension within government or the stigma around consultants, but if this article makes one public servant stop and think before writing that RFQ or putting off paying that invoice, then maybe it will make a little difference.