(Bloomberg Law) -- Australian senators on Wednesday will set their sights on KPMG in a growing probe of conflicts of interest and ethical lapses in the government’s use of consultants.

With public outrage over illicit information sharing at PwC Australia, the Senate in March charged the Finance and Public Administration References Committee with reporting on the government’s use of outside consultants. The committee, in addition to focusing on conflicts of interest and ethical concerns, will examine the risks posed to the public sector by the use of consultants.

The broad inquiry—which is focused on contracts awarded to Accenture, McKinsey, and Boston Consulting Group in addition to the Big Four—held its first hearing on May 2. On its second day Wednesday, KPMG Australia and its CEO, Andrew Yates, will be asked to explain how the firm manages conflicts between its service delivery and policy advice arms, according to the office of Sen. Barbara Pocock, a Greens party politician.

The rest of the Big Four—Ernst & Young, Deloitte Australia and PricewaterhouseCoopers—will have a chance to be heard at the next round of hearings, in mid-July.

All can expect similar questions and potentially be asked to respond to allegations of conflicts based on confidential evidence pouring into senators’ offices, lawmakers say.

The scandal erupted following revelations that a top PwC executive breached confidentiality agreements to monetize his inside knowledge of government anti-tax avoidance plans. The daily disclosures are fueling the government’s inquiry into how to reduce its dependency on consultant contracts while continuing to seek their advice and expertise.

Senators also are demanding to know why it took more than six years for PwC to be sanctioned over its staff leaking government information.

Sen. Deb O’Neill, a member of the governing Labor Party and head of the Finance Committee, said she would be questioning officials on the international ramifications of PwC’s global tax transfer pricing teams being involved in pitching the tax avoidance scheme to clients.

“This inquiry was established to investigate the concentrated power of the Big Four consulting firms, who seem to have been allowed to set up a shadow government alongside our public service that is far less transparent, far less accountable and in some cases far less ethical than it should be,” Sen. Pocock said.

The Labor government of Prime Minister Anthony Albanese was elected on a promise to cut consulting contracts and replenish a public service that had been radically culled by the previous conservative administration. Budget cuts across government agencies over ten years led to layoffs, leaving the public service heavily dependent on short-term contract staff and consultants for policy advice and program delivery.

As experienced and skilled public servants left, Big Four and other consultants increasingly stepped into their places, becoming major beneficiaries of the A$565 billion (US$375 billion) in government contracts issued from 2012-2022. PwC won by far the richest contracts, earning A$223.7 billion over the ten years.

Eyes on Contracts

Some businesses and government agencies are not waiting for the outcome of the three separate inquiries and a police investigation into the PwC leak, as the harm spreads to other parts of the company.

Pension fund Australian Super, the country’s largest, has frozen its PwC contracts, and the Australian Retirement Trust has said it will no longer contract with the firm.

The central bank governor, Philip Lowe, said PwC wouldn’t be given new contracts until the leak affair had been resolved, while the Australian Securities and Investment Commission has said it’s reviewing its own contracts with the firm.

Finance Minister Katy Gallagher has said the government can’t end its existing PwC contracts without risk, though her department has introduced a new ethics clause into contracts along with a termination clause for “a material breach”.. The Treasury and the Finance Ministry are working on a supplier code of conduct “off the back of the PwC incident,” officials said.

New South Wales is also reconsidering its Big Four consultancy contracts. The state Parliament began its own inquiry into consulting services’ value for money and integrity on May 31.

To contact the reporter on this story: Deborah Nesbitt in Canberra, Australia, at correspondents@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergindustry.com; David Jolly at djolly@bloombergindustry.com

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