Revealed: Government’s $190 billion ‘sweetheart deals’ for donors and privileged few

The value of Government contracts grew to $190 billion in the past decade and were overwhelmingly granted to companies that were politically connected, according to research from the e61 Institute, an academic, industry and government-based think tank.

Jul 28, 2023, updated Jul 28, 2023
Signage at the PwC Australia offices in Melbourne. (AAP Image/Joel Carrett)

Signage at the PwC Australia offices in Melbourne. (AAP Image/Joel Carrett)

The report found that only a few firms had seen the vast majority of the contracts.

It follows the scandal that has erupted over PwC and how it used its close links to government to benefit its clients.

Being a political donor was associated with winning just under $1.5 million more than non-donors in contracts in 2014-15, while it was associated with around $11 million more in contracts in 2021-22.

In 2022, 75 per cent of the value of government contracts went to firms that had won a contract in the previous year, the report said.

About 80 per cent of contracts were awarded to firms with more than $100m in annual revenue in 2022, up from around 65 per cent in 2014.

“What do these firms have in common? They’re old, they’re big and they make contributions to political parties,” e61 said.

The institute’s research director Dan Andrews said there were significant barriers preventing new, innovative firms from securing government contracts.

“Increasingly, it’s a few select firms to take on these major contracts, and stifling competition in the process,” he said.

“It shouldn’t be too surprising that large firms are getting more business than their smaller competitors, but even when you take that into account, our research shows that firms that make political donations are increasingly able to more easily secure contracts across the board.

“This report should raise some eyebrows, particularly in the wake of recent scandals where these insider organisations have used their political connections to benefit themselves in illegal or improper ways.

“Frequently these firms are the ones that have secured government contracts in the past.”

According to the research, a substantial share of contracts were allocated to an industry’s existing dominant firms, which were those in the top 10 by revenue and those with more than 1 per cent industry share in 2022.

“These firms win over 40 per cent of contract value in the professional services industry, up from 35 per cent in 2014,” Andrews said.

He said there was a risk that if large firms could successfully quash competition, they could more easily get away with offering sub-par services and higher prices.

“New firms that secure government contracts are more likely to succeed, and thereby increase pressure on existing firms to improve their offerings. But what we’re seeing is a complete entrenchment of a few big players.”

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