Better Intelligence Pty Ltd

Optimising APS financial management settings and practices

Recommendation

In order to optimise the long-term efficiency and effectiveness of Australian Public

Service (APS) expenditure on supplementing its capability and capacity with

external expertise and support, we recommend that the APS Review considers:

 The risks that the Commonwealth seeks to mitigate through current financial
management settings and practices

 How well existing financial management settings and practices mitigate these
risks, including the nature and extent of any unintended consequences such
as market distortion through demand-side impacts

 Whether alternate financial management settings and practices would
achieve better outcomes for the Commonwealth.

It is appropriate for the APS to leverage external capability and capacity

The APS has long supplemented its internal capability and capacity with external

expertise and support.

This is entirely appropriate for modern organisations, and particularly appropriate

for the APS given its operating environment continues to evolve and increase in

complexity.

Australia is best served – both now and into the future – by an APS that maximises

the value achieved from sourcing this expertise and support from the marketplace.

However, current financial management settings and practices distort the demand

side of the market, therefore undermining the APS’s ability to do this.

The APS can maximise its return on investment through managing demand for

external expertise and support across annual financial cycles

Notwithstanding the influence of external macro-factors such as election cycles, the

APS’s demand for external expertise and support should be relatively consistent;
that is to say, the APS’s demand curve for external expertise and support should be

reasonably flat.

However, current financial management settings and practices mean that the APS’s

demand for external expertise and support is particularly (and artificially) high in the

lead up to – and around – the end of every financial year.

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This can negatively impact the Government’s ability to maximise return on

associated expenditure for the following reasons:

 Higher prices – The Government effectively pays an end of financial year
premium given increased demand, equivalent to surge pricing.

 Reduced quality – Services commissioned around the end of financial year
can suffer in quality for two main reasons:

 Reduced capacity of consultants given the cumulative effect of
artificially high demand across all APS departments resulting in
reduced oversight of senior consultants and/or reduced overall effort

 Compressed timeframes (e.g. to ensure deliverables are substantively
completed by 30 June) can negatively impact the quality of thinking
applied to projects compared to those undertaken without this
constraint.

Current settings and practices are designed to address specific risks to the

Commonwealth. While these settings and practices may have been appropriate in a

previous context, there may be an opportunity to apply more contemporary

approaches.

Moreover, it may be the case that some existing practices may be deemed to be

required to meet legislative requirements when, in fact, they may not be required
(e.g. local agency lore overriding actual legislative requirements).

In summary

We are encouraged by the APS Review and look forward to its conduct and

recommendations. This presents a significant opportunity to review existing

settings and practices across a range of dimensions, and to help to deliberately

guide the APS in wise directions for the benefit of all Australians for years to come.

Yours sincerely

Adam Rowland

Chief Intelligence Officer | Better Intelligence Pty Ltd

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