Beyond the Big Four: Former ACCC boss Allen Fels calls for greater competition in the consulting sector

Professor Allan Fels says the competition watchdog should facilitate greater distribution of work between large and small consulting practices. Source: AAP Image/Bianca De Marchi

The Australian Competition and Consumer Commission (ACCC) should have a closer look at the consulting sector and see how greater competition might be facilitated, according to former ACCC head Allan Fels.

Fels told a senate committee looking at government use of consulting firms that there is merit in the ACCC inquiring into how greater competition can be encouraged in the consulting space so that there is a greater distribution of work between practices of varying sizes.

He outlined his long-held view that large firms such as the big-four accounting practices – PwC, KPMG, EY and Deloitte – have inherent conflicts between their audit and assurance functions and the consulting parts of their firms.

Fels repeated his calls for the separation of practices related to audit and broader consulting so that an audit, for example, that is an engagement relied on by capital markets seeking assurance that financial reports are sound is untainted by the profit-seeking practices of consulting divisions.

The former chief of the competition watchdog also noted that there was a place for the competition regulator to look at how consultants are employed in the marketplace and how that shapes competition.

“I believe there is room for someone like the ACCC to look at consulting practices – and particularly the practices of employers of consulting firms – to get more competition into the industry,” Fels said.

“I also just make the point that my own impression is that the private sector is much more skillful in its use of consultants. It tends to get better value for money that governments do, and so governments need to step up to the mark in a whole lot of respects.”

Fels also criticised politicians and public servants for using consultants to get an outcome they desire rather than deal with policy development internally.

He noted it would take some time before the public service was able to regain the capacity to do the policy-making work properly again.

“I don’t think the public service itself should be taken entirely off the hook in this regard,” Fels said. “It is often easier for them to get a job done by external consultants than by themselves.”

This article was first published by The Mandarin.

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