Commonwealth spending on contracts with major consultancies including PricewaterhouseCoopers, KPMG, Ernst & Young and GHD has soared in the past two years amid concerns of declining competition in government procurement.
An Australian National Audit Office report shows that a small number of providers are winning the lion's share of contracts by value as government agencies increasingly use procurement panels and limited tender to identify suppliers.
According to the report, more than $2.2 billion worth of contracts were shared between just eight consultancies in 2017-18 and 2018-19.
The biggest beneficiary was KPMG, which won contracts worth around $488 million over the period, followed by GHD ($444 million), PwC ($308 million), EY ($296 million), Deloitte ($295 million) and AECOM ($276 million).
KPMG was a big donor to both major political parties in the year leading up to the federal election, as was PricewaterhouseCoopers, EY and Deloitte.
The ANAO found that spending on consultancies has ballooned since 2013-14, from less than $366 million to $647 million last financial year - a 76 per cent increase.
But this is just a fraction of overall government procurements, which is a massive and lucrative market.
Contracts worth more than $64 billion were reported in 2018-19 alone, and in the past 10 years more than 650,000 contracts worth almost $491 billion have been awarded, including more than $305 billion in the past five years.
Worryingly, the Auditor-General Grant Hehir found that many contracts were being awarded with little competition, raising concerns about taxpayer value for money.
Less than half of non-construction contracts awarded by 71 Commonwealth entities operating as a body corporate were as a result of open tender. The 101 non-corporate Commonwealth entities were even less likely to go to open tender - 62 per cent of the contracts they let were as a result of a limited tender process that involved approaching providers rather than the other way round.
The auditor flagged that many entities using limited tender to procure services or goods may be in breach of government rules.
According to Commonwealth Procurement Rules, contracts above a certain value must go out to open tender.
But the auditor found that 44 per cent of contracts by value were let through limited tender despite being above the threshold.
"Open tender and prequalified tender promote competition, whereas limited tender, as its name suggests, limits competition," the ANAO report said. "While the CPRs emphasise the benefits of open and effective competition, limited tender is the most commonly used procurement approach."
Adding to the competition concerns, the ANAO found that agencies were making increased use of procurement panels, in which a number of suppliers are appointed through a contract or dead of standing offer, to select providers.
It said the number of value of panel contracts has increased significantly in the past decade, from 652 contracts worth $110 million in 2009-10 to 28,560 contracts worth $11.18 billion in 2018-19.
Part of this increase was due to changes in the way panels were reported from 2014, but the ANAO said more than a third of contracts were awarded by panel in 2018-19, from almost nothing nine years earlier.
As with tender arrangements, the Auditor-General found that competition was limited.
"The large majority of panels examined had a relatively small proportion of suppliers that were awarded the majority of contract value," he said.
Of the ten most lucrative panels in terms of contract value, in eight less than a third of suppliers won contracts worth 80 per cent of more of the total value.
The most concentrated segment was in the market for personal and domestic services, which was dominated by the firm Mondial Assist Imprest.
The company, which provides services like falls and accident prevention programs for the Department of Veterans' Affairs, has won almost almost 82 per cent of the contracts on offer by value in the past decade.
Over the same period, Thales Australia had scored almost 75 per cent of chemical and gas contracts, Serco Sodexho Defence Services has a 46 per cent share of the minerals and textiles contracts market, and Caltex has won 45 per cent of fuel supply contracts by value.
Not only do many companies face limited competition in winning tenders, the ANAO has found that often the value of contracts often increases significantly after it is signed.
The number of contracts being amended has grown steadily in the past 10 years, and around 10 per cent in the past five years have had at least one change, often resulting in substantial jumps in value.
According to ANAO analysis, 42 per cent of amendments have resulted in at least a 100 per cent increase in the contracts value, and 20 per cent have resulted in a leap of 200 per cent or more.