Paddy Gourley, Public Sector Informant | Consultants, contractors and labour hire hurting the APS

And the wounds are self-inflicted, they largely being the consequence of what departmental secretaries and other agency heads, the Australian Public Service Commission and the Secretaries Board have done and not done.

There's an ocean of blame to spread around although in the present self-congratulatory "age of Integrity" those responsible are unlikely to be asked to explain themselves nor will anyone be penalised.

Much of the criticism of the fiasco has centred on the billions of dollars forked out in its cause. That's an important point although it's a secondary one.

The principal point is that thousands of people have been brought into the public service by means other than those mandated by the Commonwealth constitution and the Public Service Act.

These laws, an inheritance of the great 19^th century reform movement in Britain, exist to prevent corruption and nepotism in public service staffing. In the Australian Commonwealth that inheritance has been trashed and the doors have been opened to the very things it sought to prevent.

Thus the compromising of merit recruitment and the restriction of the legal right for people to have a reasonable opportunity to apply for public service positions has made the APS less efficient, effective, fair and inclusive while it's carved out great slabs of its capability, a legacy that will last for many years.

Of course, it's legitimately open to governments to have functions performed other than by the public service, all the way from advice on policy through to cleaning of offices and grounds maintenance.

However, it's another matter to use consultants, contractors and labour hire people to fill positions in the public service on work indistinguishable from other public servants and for them to supervise other staff and exercise financial and personnel delegations.

Members of this shadow workforce are not covered by the Public Service Act's values, code of conduct and disciplinary provisions and they owe primary loyalty to their employers. Their engagements in the public service are inconsistent with the intentions of the act and the constitution and many of them may well be found to be illegal if tested in the courts.

There are no reasons to think that the senior public service architects of this disconcerting mess would have attempted to clean it up. Indeed, the commission had provided no related guidance until 2021 when it issued a "how to do it" document for those "seeking to go beyond the APS employment framework for senior executive capabilities"; that is, how to go beyond the legal requirements of the Public Service Act.

It's much to her credit that the Public Service Minister, Katy Gallagher, has stepped in to stop the rot and reverse it. She has significantly reduced the number of consultants, contractors and labour hire and arranged an audit so as to give a better idea of the dimensions of the problem.

The audit, which has recently been completed, contains much useful information most of which had previously been kept well under wraps. For 2020-21, it shows:

It's likely that the vast majority of Defence's outside service provider arrangements are legitimate, they being used for such things as base/garrison support, health services, cleaning and grounds maintenance, mess services and facilities management. Similar considerations probably apply with other agencies.

Nevertheless, periodic assessments as to where all of these services can most efficiently and effectively be sourced should be made.

In trying now to right the ship, the government is concentrating on consultants and contractors. It should also look closely at labour hire where like concerns of staffing principle and policy also arise.

Greater employment under the Public Service Act will, of course, require the remuneration on offer to be competitive in relevant labour markets. Thus, at this point reducing reliance on the "external labour force" meets up with the government's new industrial relations bargaining policy.

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While the policy has as one of its objectives the admirable cause of evening up remuneration between departments, its expression is deficient in that it cannot bring itself to speak of the need for public service remuneration to be competitive with remuneration in relevant outside labour markets. Rather it slips into meaningless inexactitudes about the APS being a "model employer" and an "employer of choice".

Then the policy saddles itself with the vain and unrealisable objective of being able to "attract and retain the best and the brightest".

The commission negotiators have offered a 10.5 per cent pay increase over the next three years which they say is "tailored to both inflation and wages growth", whatever that might mean. Let's be clear: increases in inflation and measures of community wage movement are entirely unsatisfactory bases for fixing public service pay.

For example, if increases in rates of pay for office workers or engineers in the general community are less than inflation it would be unfair and unjustifiable for such categories in the APS to get the benefit of an inflation-based adjustment.

Equally, the occupational structures reflected in the ABS average weekly earnings index, do not reflect those structures in the APS and therefore is unreliable as a basis for pay fixing.

Moreover, there is no earthly way of knowing if the 3 per cent adjustment promised in three years time will be too much or too little. That is to say, there can be no assurance that the current pay policy and the pay offer will make a contribution to recruiting and retaining anyone.

That will only be so when the policy is based on matching levels of remuneration in outside labour markets for comparable work on an occupational category basis. When that's done, remuneration will make an effective contribution to both the recruitment and retention of a fair share of available staff and play a fuller and proper part in reducing reliance on consultants, contractors and labour hire.

And matching levels of remuneration in outside labour markets will provide a rational basis for "reducing fragmentation" in pay - resort to inflation and wages indexes does not.