The Tax Office is growing its spend on call centre services from two major service delivery companies, raising the value of its contracts with the firms to $330 million.
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Serco and Stellar Asia Pacific will together receive more than $25 million in additional government spending as they help the Australian Taxation Office respond to greater workloads in tax time.
The increase in ATO spending on outsourcing to the companies follows job cuts that reduced the federal agency's internal staffing by 840 in 2019.
Serco will receive $214.5 million and Stellar Asia Pacific $119.2 million for providing private contact centre services in the four years to 2021. Another firm, Datacom, will receive $119.2 million for similar services to the ATO.
An ATO spokesperson said Serco, Datacom and Stellar were critical to the agency's service delivery while it experienced unprecedented customer demand associated with coronavirus-related government measures.
The service delivery companies will also receive $150 million for providing short-term staff to Services Australia as the coronavirus pandemic stretches the government welfare agency's internal workforce.
ATO and Services Australia job cuts were among the largest in the Australian Public Service last year.
Marty Bortz, senior research fellow at the University of Melbourne's School of Government, said the Tax Office's spending on the contracts appeared to continue a decades-long trend of governments turning to private sector organisations to deliver services.
"It reflects an ideology that the private sector is more efficient and effective than the public and so when there is a need for 'bodies', governments turn to the private sector," he said.
"It is based on a view that the private sector knows best, and that governments really should just be setting the broad policy direction for the private sector to follow."
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Dr Bortz said the evidence was mixed on whether private service delivery companies played a useful role in providing government services.
"There are several things to keep in mind here. First, government is not a homogenous beast - it offers multiple things to multiple people in multiple ways," he said.
"Sometimes these will be amenable to outsourcing - particularly when the tasks are simple/routine, do not involve a great deal of skill or complexity, or are analogous to what the private sector might do anyway."
However government outsourcing to the private sector became problematic when tasks were less certain, required more creativity or involved work that should be the sole domain of government, Dr Bortz said.
"There are always costs and benefits in outsourcing, and in some cases the costs might be so significant that it might not be worth it."
Outsourcing did not automatically lower the quality of service delivery, nor did it automatically improve it, he said.
"What often gets missed in these debates is that the quality of your people and organisation matter as well.
"Having the right people in the right job under the right conditions can happen in the public or private sectors - to say otherwise is just pure ideology."
Australian Services Union official representing Tax Office staff, Jeff Lapidos, said it was an "irresistible conclusion" that the agency's job cuts were a cause of its spend on private service delivery firms.
Mr Lapidos said the ATO should hire its own non-ongoing staff instead of spending on contracts with the companies.