The Albanese government has halved its spending on the big four firms (Deloitte, EY, KPMG and PwC), to about $600 million a year as part of a plan to beef up skills within the public service.

‘Larger share of a smaller market’

It has also put in place procurement rules to increase the proportion of work handed to small and medium enterprises.

This shift has led to a rush by such firms – including strategy outfit Oliver Wyman, consultancy KordaMentha and mid-tier accounting firm BDO – to set up offices in Canberra.

Grosvenor, which serves mainly public-sector clients at the federal and state level, had been winning more work despite the federal cutbacks, said Mr Macfarlane. “Overall, the spend on consulting [services] with consulting firms is down quite significantly, but ... there are obviously some firms that haven’t experienced that downturn,” he said.

Smaller specialised consulting firms that did not “body-shop” are now seen as a “credible alternative” to hiring the big four consulting firms.

“We’re picking up a larger market share of a smaller market,” Mr Macfarlane said. “So in reality, our revenue with the Commonwealth is probably up slightly.”

Data from the federal contract-tracking system shows Grosvenor, which has eight directors (a partner-equivalent role) and about 40 staff, has entered into contracts worth $4.5 million this year. During the period from 2019 to 2023, the firm won work worth between $1.3 million and $2.8 million.

Mr Macfarlane said the NSW government too had cut back on consulting, but this change was not as noticeable in Victoria.

Rise in in-house consulting

Another change in the market is governments creating in-house consulting teams. The federal government’s Australian Government Consulting (AGS) aims to double its staff to 40 this financial year. Defence and the NSW government are also setting up in-house units.

AGS focuses on shorter projects related to policy consulting and organisational change. The team will also help public servants cut better deals with external consultants and it is setting up a network from across the public service of teams and people with specialist skills.

However, Mr Macfarlane was sceptical that AGS would reduce federal spending on consultants.

“I think it ultimately makes stuff-all difference to the overall consulting spend and I don’t think it really makes any difference to the overall capability uplift of the public sector; I just think it’s a waste of time,” he said.

“They should be actually concentrating on how they get better at procuring and managing consulting advice and building in internal capabilities within the agencies where they’re outsourcing things that really is unnecessary.”