The Australian Signals Directorate (ASD) has found itself embroiled in the widening controversy surrounding consulting firm KPMG. 

The scandal centres around a $46 million contract awarded to KPMG by the ASD, despite the agency's awareness that KPMG possessed inside information from an earlier phase of the project that it could potentially exploit.

The highly sought-after contract for the Australian Signals Directorate's multi-billion-dollar REDSPICE program was secured through a competitive tender process. 

The details of the contract were discreetly released last Friday. KPMG, in the past week, has been awarded a total of 18 federal government contracts amounting to nearly $70 million. Among these, a $21 million deal was struck with the Department of Defence.

But KPMG's reputation has been under scrutiny following allegations that the company overcharged taxpayers through inflated invoices and charged the Defence Department for work that was never performed. 

The controversy deepens as KPMG played a pivotal role in designing the very ASD project for which it later won the implementation contract, a situation sometimes known as “marking your own homework”. 

“Here we have a classic example of the 'land and expand' strategy routinely employed by the Big Four consulting firms,” says Greens senator Barbara Pocock.

“They get a foot in the door with a minor contract which then gives them the inside running for a successful bid on related major contracts.”

Deloitte was excluded from bidding for a Home Affairs contract in 2020 under similar circumstances.
The widespread “land and expand” strategy utilised by consulting firms is facing increased scrutiny. At least $444 million was added to existing government contracts with top consulting firms in Australia in the past year, raising concerns about procurement practices and competition limitations.

The ASD's REDSPICE upgrade has been hailed as the most significant transformation the agency has seen in 75 years, involving the establishment of facilities in Melbourne, Brisbane, and Perth. The project's estimated cost is $10 billion.

KPMG initially clinched a $2 million contract to provide strategic planning and consultation services to the ASD, which later escalated to over $10 million. 

The ASD asserts that it conducted a competitive tender process for its REDSPICE initiative project management and selected multiple partners, including KPMG. 

However, questions persist about the fairness of the tender process and the apparent insider advantage KPMG might have gained from its involvement in the project's design phase.

Despite the headline figure of $46 million, KPMG's compensation for its work with the ASD could potentially exceed this amount, as the project is expected to span at least five years.

The controversy echoes broader concerns about transparency and fairness in government contracting practices.